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Equitycompass Tactical Risk Manager ETF | AMEX:TERM | AMEX | Exchange Traded Fund |
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0.00 | 0.00% | 22.1546 | 0 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
W. Scott Jardine, Esq.
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORT TO STOCKHOLDERS.
The registrant's semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:
FIRST TRUST
First Trust CEF Income Opportunity ETF (FCEF)
First Trust Municipal CEF Income Opportunity ETF (MCEF)
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1 Fund Performance Overview First Trust CEF Income Opportunity ETF (FCEF)............................. 2 First Trust Municipal CEF Income Opportunity ETF (MCEF)................... 5 Notes to Fund Performance Overview........................................... 8 Portfolio Management......................................................... 9 Understanding Your Fund Expenses............................................. 10 Portfolio of Investments First Trust CEF Income Opportunity ETF (FCEF)............................. 11 First Trust Municipal CEF Income Opportunity ETF (MCEF)................... 13 Statements of Assets and Liabilities......................................... 15 Statements of Operations..................................................... 16 Statements of Changes in Net Assets.......................................... 17 Financial Highlights......................................................... 18 Notes to Financial Statements................................................ 19 Additional Information....................................................... 24 CAUTION REGARDING FORWARD-LOOKING STATEMENTS |
This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund VIII (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its investment objectives. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in a Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance and investment approach.
The statistical information that follows may help you understand each Fund's performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information, and other Fund regulatory filings.
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First Trust CEF Income Opportunity ETF ("FCEF") and the First Trust Municipal CEF Income Opportunity ETF ("MCEF" and together with FCEF, the "Funds"), each a series of the First Trust Exchange-Traded Fund VIII, which contains detailed information about the Funds for the six months ended February 29, 2020.
To say that much has transpired over the past six months would be an understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China this past December, my message to investors would have sounded quite bullish, focusing on such accomplishments as the progress in the trade negotiations between the U.S. and China, where a "Phase One" deal was signed into law on January 15, 2020. The main takeaway from the deal is that China agreed to purchase an additional $200 billion of goods and services from the U.S. over the next several years in exchange for the U.S. cutting some of its tariffs on Chinese goods. The deal marked the first breakthrough since the Trump Administration launched its new tariff initiative in March 2018. On top of that news, the S&P 500(R) Index was setting new all-time highs all the way up through the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213 countries, areas or territories, had infected 1,991,562 people (confirmed cases) and was responsible for 130,885 confirmed deaths, according to the World Health Organization. These numbers are expected to trend higher in the days and weeks ahead. A growing number of U.S. state governors and foreign leaders have issued shelter in place orders to their citizens to help slow the spread of this new virus. The primary objective in doing so is to slow down the number of cases so that hospitals and health care workers are not overwhelmed by too many patients. The cost is high because it requires shutting down large chunks of the economy, which in turn negatively impacts the financial well-being of workers and companies. In the U.S., Congress passed a financial stimulus package valued at $2.0 trillion to help backstop workers and companies in the near-term. The faster we can end the shutdown, consistent with general health and welfare, the better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience a modest decline in real gross domestic product of 1.5% (annualized) in the first quarter of 2020, followed by a massive decline of 20% (annualized) in the second quarter. The good news is that he sees the economy growing at a 3.0% and 3.5% annual pace in the third and fourth quarters of 2020, respectively. In other words, we are expecting a healthy rebound in the second half of this year. As I noted earlier, the stock market was still at a record high in the third week of February. From February 19 through March 23, however, the S&P 500(R) Index posted a total return of -33.79%, putting it in bear market territory (price decline of 20% or more from the most recent peak). Sorry to say it, but the nearly 11-year bull market is no more. While we do not have a projection for where stocks will be at year-end, we do know this: excluding the current bear market, the S&P 500(R) Index has never failed to recoup all the losses sustained in any sell-off, pullback, correction or bear market. So, while I am understandably not bullish on the first half of 2020, I will be a bull once again after we put the worst of COVID-19 behind us. I continue to urge investors to stay the course. This too shall pass.
Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months.
Sincerely,
/s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. |
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
The First Trust CEF Income Opportunity ETF (the "Fund") seeks to provide current income with a secondary emphasis on total return. Under normal market conditions, the Fund seeks to achieve its investment objectives by investing at least 80% of its net assets (including investment borrowings) in a portfolio of closed-end investment companies that are listed and traded in the United States on registered exchanges. The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on The Nasdaq Stock Market LLC under the ticker symbol "FCEF."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 6 Months Ended 1 Year Ended Inception (9/27/16) Inception (9/27/16) 2/29/20 2/29/20 to 2/29/20 to 2/29/20 FUND PERFORMANCE NAV -1.64% 3.37% 6.62% 24.50% Market Price -1.69% 3.61% 6.62% 24.50% INDEX PERFORMANCE Prior Blended Benchmark (1) (2) N/A N/A N/A N/A Russell 3000(R) Index 1.81% 6.90% 11.31% 44.33% Blended Benchmark (3) -2.69% 2.40% 5.77% 21.18% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 8.)
(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.
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF) (CONTINUED)
---------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ---------------------------------------------------------- PIMCO Dynamic Credit and Mortgage Income Fund 4.58% BlackRock Science & Technology Trust 4.36 Cohen & Steers REIT and Preferred and Income Fund, Inc. 4.33 Eaton Vance Tax-Advantaged Global Dividend Income Fund 4.20 Ares Dynamic Credit Allocation Fund, Inc. 3.93 Eaton Vance Tax-Advantaged Dividend Income Fund 3.77 Nuveen Credit Strategies Income Fund 3.71 Cohen & Steers Infrastructure Fund, Inc. 3.70 John Hancock Tax-Advantaged Dividend Income Fund 3.36 PGIM Global High Yield Fund, Inc. 3.26 -------- Total 39.20% ======== ---------------------------------------------------------- % OF TOTAL LONG-TERM WORLD REGIONS INVESTMENTS ---------------------------------------------------------- North America 77.46% Europe 11.84 Asia 10.70 -------- Total 100.00% ======== ---------------------------------------------------------- % OF TOTAL LONG-TERM MARKET CAPITALIZATION INVESTMENTS ---------------------------------------------------------- Mega 29.09% Large 37.10 Mid 24.09 Small 7.78 Micro 1.94 -------- Total 100.00% ======== ---------------------------------------------------------- % OF TOTAL LONG-TERM CREDIT QUALITY (4) INVESTMENTS ---------------------------------------------------------- AAA 7.49% AA 0.39 A 1.75 BBB 14.68 BB 27.11 B 33.02 CCC-D 8.60 NR 6.96 -------- Total 100.00% ======== ----------------------------- |
(4) The ratings are by Standard & Poor's except where otherwise indicated. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations except for those debt obligations that are only privately rated. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher. "NR" indicates no rating. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change.
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT SEPTEMBER 27, 2016 - FEBRUARY 29, 2020 First Trust CEF Income Russell 3000(R) Blended Opportunity ETF Index Benchmark 9/28/16 $10,000 $10,000 $10,000 2/28/17 10,698 11,058 10,693 8/31/17 11,348 11,637 11,267 2/28/18 11,572 12,853 11,410 8/31/18 12,267 13,993 12,041 2/28/19 12,044 13,502 11,833 8/31/19 12,657 14,176 12,452 2/29/20 12,450 14,433 12,117 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period September 28, 2016 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 9/28/16 - 8/31/17 178 13 0 1 9/1/17 - 8/31/18 137 0 0 0 9/1/18 - 8/31/19 143 1 0 0 9/1/19 - 2/29/20 93 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 9/28/16 - 8/31/17 42 0 0 0 9/1/17 - 8/31/18 115 0 0 0 9/1/18 - 8/31/19 105 1 0 0 9/1/19 - 2/29/20 31 0 0 0 |
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
The First Trust Municipal CEF Income Opportunity ETF (the "Fund") seeks to provide current income. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of closed-end investment companies that are listed and traded in the United States on registered exchanges which invest primarily in municipal debt securities, some or all of which pay interest that is exempt from regular federal income taxes. The Fund may also invest in exchange-traded funds. The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on The Nasdaq Stock Market LLC under the ticker symbol "MCEF."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 6 Months Ended 1 Year Ended Inception (9/27/16) Inception (9/27/16) 2/29/20 2/29/20 to 2/29/20 to 2/29/20 FUND PERFORMANCE NAV 2.10% 12.11% 3.06% 10.86% Market Price 2.20% 12.29% 3.06% 10.85% INDEX PERFORMANCE Morningstar US National & High Yield Municipal CEF Index (1) (2) N/A N/A N/A N/A Bloomberg Barclays Municipal Bond Index 3.04% 9.46% 3.90% 14.01% First Trust Municipal Closed-End Fund Total Return Index (3) 2.08% 13.95% 3.94% 14.15% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 8.)
(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.
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF) (CONTINUED)
---------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS INVESTMENTS ---------------------------------------------------------- Nuveen AMT-Free Municipal Credit Income Fund 5.15% Nuveen AMT-Free Quality Municipal Income Fund 5.13 Nuveen Quality Municipal Income Fund 4.61 BlackRock Municipal 2030 Target Term Trust 4.59 Nuveen Municipal Value Fund, Inc 4.11 BlackRock Muni Intermediate Duration Fund, Inc. 3.97 BlackRock MuniYield Quality Fund III, Inc. 3.80 Invesco Quality Municipal Income Trust 3.80 Nuveen Enhanced Municipal Value Fund 3.61 Nuveen Municipal Credit Income Fund 3.54 -------- Total 42.31% ======== ---------------------------------------------------------- % OF TOTAL TOP STATE EXPOSURE INVESTMENTS ---------------------------------------------------------- Illinois 11.74% California 9.80 Texas 8.42 Florida 8.13 New Jersey 7.04 -------- Total 45.13% ======== ---------------------------------------------------------- % OF TOTAL CREDIT QUALITY (4) INVESTMENTS ---------------------------------------------------------- AAA 8.71% AA 28.52 A 26.72 BBB 18.50 BB 5.31 B 2.62 CCC-D 1.66 NR 7.96 -------- Total 100.00% ======== ----------------------------- |
(4) The ratings are by Standard & Poor's except where otherwise indicated. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations except for those debt obligations that are only privately rated. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher. "NR" indicates no rating. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change.
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT SEPTEMBER 27, 2016 - FEBRUARY 29, 2020 First Trust Municipal CEF Bloomberg Barclays First Trust Municipal Income Opportunity ETF Municipal Bond Index Closed-End Fund Index 9/28/16 $10,000 $10,000 $10,000 2/28/17 9,433 9,758 9,359 8/31/17 9,919 10,128 9,978 2/28/18 9,415 10,003 9,399 8/31/18 9,613 10,178 9,693 2/28/19 9,889 10,416 10,017 8/31/19 10,859 11,066 11,182 2/29/20 11,087 11,402 11,415 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period September 28, 2016 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 9/28/16 - 8/31/17 207 17 0 0 9/1/17 - 8/31/18 188 0 0 1 9/1/18 - 8/31/19 169 0 0 0 9/1/19 - 2/29/20 95 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 9/28/16 - 8/31/17 10 0 0 0 9/1/17 - 8/31/18 63 0 0 0 9/1/18 - 8/31/19 81 0 0 0 9/1/19 - 2/29/20 29 0 0 0 |
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.
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
INVESTMENT ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment advisor to the First Trust CEF Income Opportunity ETF ("FCEF") and the First Trust Municipal CEF Income Opportunity ETF ("MCEF" and together with FCEF, the "Funds"), each a series of the First Trust Exchange-Traded Fund VIII, and is responsible for the selection and ongoing monitoring of the securities in the Funds' portfolios and certain other services necessary for the management of the portfolios.
PORTFOLIO MANAGEMENT
Ken Fincher, Senior Vice President of First Trust, and Jordan Ramsland, Vice President of First Trust are the Funds' portfolio managers and have responsibility for the day-to-day management of each Fund's investment portfolio. Mr. Fincher has nearly 30 years of experience in financial markets. His current responsibilities include management of two First Trust exchange-traded funds and separately managed accounts that invest primarily in closed-end funds. He has also helped develop new product structures in the closed-end fund space. Mr. Fincher has been named Outstanding Individual Contributor to the Closed-End Fund Sector in 2007, 2006, 2005 and 2004 by financial analysts and his peers in the closed-end fund community and served on the Closed-End Fund committee of the Investment Company Institute. Mr. Fincher received a B.A. in financial administration from Michigan State University and an M.B.A. from Loyola University Graduate School of Business. Mr. Ramsland joined First Trust in 2013, and his current responsibilities include research and management of strategies that invest primarily in closed-end funds. He is responsible for updating and maintaining First Trust's proprietary closed-end fund models as part of the investment process for the First Trust closed-end funds, exchange-traded funds and separately managed accounts. Mr. Ramsland graduated from Palm Beach Atlantic University in 2011 with a B.S. in finance.
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of First Trust CEF Income Opportunity ETF or First Trust Municipal CEF Income Opportunity ETF (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended February 29, 2020.
ACTUAL EXPENSES
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
------------------------------------------------------------------------------------------------------------------------ ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX MONTH SIX MONTH SEPTEMBER 1, 2019 FEBRUARY 29, 2020 PERIOD (a) PERIOD (a) (b) ------------------------------------------------------------------------------------------------------------------------ FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF) Actual $1,000.00 $ 983.60 0.85% $4.19 Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27 FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF) Actual $1,000.00 $1,021.00 0.75% $3.77 Hypothetical (5% return before expenses) $1,000.00 $1,021.13 0.75% $3.77 |
(a) Annualized expense ratio and expenses paid during the six-month period do not include fees and expenses of the underlying funds in which each Fund invests.
(b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (September 1, 2019 through February 29, 2020), multiplied by 182/366 (to reflect the six-month period).
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- CLOSED-END FUNDS -- 97.5% CAPITAL MARKETS -- 97.5% 43,911 Advent Convertible and Income Fund $ 635,392 5,661 AllianzGI Artificial Intelligence & Technology Opportunities Fund 100,313 27,901 AllianzGI Convertible & Income 2024 Target 255,015 22,770 Apollo Tactical Income Fund, Inc. 331,303 88,086 Ares Dynamic Credit Allocation Fund, Inc. 1,281,651 36,703 Barings Global Short Duration High Yield Fund 596,424 25,101 BlackRock Corporate High Yield Fund, Inc. 261,301 9,250 BlackRock Health Sciences Trust II 185,000 42,419 BlackRock Income Trust, Inc. 254,938 28,313 BlackRock Multi-Sector Income Trust 439,984 45,712 BlackRock Science & Technology Trust 1,421,643 30,330 BlackRock Science & Technology Trust II 584,762 53,049 Blackstone / GSO Strategic Credit Fund 718,814 11,316 Central Securities Corp. 337,217 52,840 Cohen & Steers Infrastructure Fund, Inc. 1,206,337 65,804 Cohen & Steers REIT and Preferred and Income Fund, Inc. 1,413,470 54,605 DoubleLine Income Solutions Fund 1,018,383 11,973 Eaton Vance Enhanced Equity Income Fund 163,791 47,059 Eaton Vance Short Duration Diversified Income Fund 601,414 55,950 Eaton Vance Tax-Advantaged Dividend Income Fund 1,231,459 87,280 Eaton Vance Tax-Advantaged Global Dividend Income Fund 1,370,296 32,007 Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund 727,199 50,141 Gabelli Dividend & Income Trust (The) 932,121 19,645 General American Investors Co., Inc. 659,483 10,940 John Hancock Financial Opportunities Fund 322,621 47,932 John Hancock Tax-Advantaged Dividend Income Fund 1,094,767 11,316 KKR Income Opportunities Fund 162,724 14,229 Lazard Global Total Return and Income Fund, Inc. 207,032 37,801 Macquarie Global Infrastructure Total Return Fund, Inc. 820,660 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- CAPITAL MARKETS (CONTINUED) 16,672 Morgan Stanley China A Share Fund, Inc. $ 308,432 174,790 Nuveen Credit Strategies Income Fund 1,211,295 64,361 Nuveen Preferred & Income Opportunities Fund 601,132 31,303 Nuveen Real Asset Income and Growth Fund 508,361 21,193 Nuveen Short Duration Credit Opportunities Fund 300,305 43,785 Nuveen Tax-Advantaged Dividend Growth Fund 668,159 74,795 PGIM Global High Yield Fund, Inc. 1,065,081 63,526 PIMCO Dynamic Credit and Mortgage Income Fund 1,492,861 36,787 Principal Real Estate Income Fund 712,196 18,295 Royce Micro-Cap Trust, Inc. 142,884 43,987 Royce Value Trust, Inc. 570,951 16,392 Source Capital, Inc. 591,751 35,964 Tekla Healthcare Investors 682,237 58,417 Tekla Healthcare Opportunities Fund 972,059 21,659 Tekla Life Sciences Investors 343,945 24,607 Templeton Emerging Markets Fund 338,838 33,710 Tortoise Pipeline & Energy Fund, Inc. 332,381 33,515 Tortoise Power and Energy Infrastructure Fund, Inc. 493,006 31,369 Tri-Continental Corp. 794,577 52,660 Western Asset Emerging Markets Debt Fund, Inc. 724,602 52,811 Western Asset High Income Opportunity Fund, Inc. 254,021 15,284 Western Asset Inflation-Linked Opportunities & Income Fund 177,447 ------------- TOTAL CLOSED-END FUNDS -- 97.5% 32,622,035 (Cost $35,421,325) ------------- MONEY MARKET FUNDS -- 2.5% 838,880 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.44% (a) 838,880 (Cost $838,880) ------------- TOTAL INVESTMENTS -- 100.0% 33,460,915 (Cost $36,260,205) (b) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (13,723) ------------- NET ASSETS -- 100.0% $ 33,447,192 ============= |
See Notes to Financial Statements Page 11
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF) PORTFOLIO OF INVESTMENTS (CONTINUED) FEBRUARY 29, 2020 (UNAUDITED) |
(a) Rate shown reflects yield as of February 29, 2020.
(b) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $321,998 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $3,121,288. The net unrealized depreciation was $2,799,290.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------ Closed-End Funds* $32,622,035 $ -- $ -- Money Market Funds 838,880 -- -- ------------------------------------------ Total Investments $33,460,915 $ -- $ -- ========================================== |
* See Portfolio of Investments for industry breakout.
Page 12 See Notes to Financial Statements
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- CLOSED-END FUNDS -- 95.9% CAPITAL MARKETS -- 95.9% 12,887 BlackRock Florida Municipal 2020 Term Trust $ 186,862 18,750 BlackRock Investment Quality Municipal Trust, Inc. 292,313 18,636 BlackRock Long-Term Municipal Advantage Trust 240,591 26,806 BlackRock Muni Intermediate Duration Fund, Inc. 387,883 18,396 BlackRock Municipal 2030 Target Term Trust 448,127 12,893 BlackRock Municipal Income Investment Quality Trust 185,144 17,412 BlackRock Municipal Income Trust 243,768 12,701 BlackRock Municipal Income Trust II 187,721 15,816 BlackRock MuniHoldings Investment Quality Fund 217,470 15,233 BlackRock MuniHoldings Quality Fund, Inc. 195,135 13,007 BlackRock MuniYield Quality Fund, Inc. 200,828 21,021 BlackRock MuniYield Quality Fund II, Inc. 281,091 26,330 BlackRock MuniYield Quality Fund III, Inc. 371,253 11,416 DTF Tax-Free Income, Inc. 173,523 10,971 Eaton Vance Municipal Bond Fund 144,159 14,170 Eaton Vance Municipal Income 2028 Term Trust 296,436 17,163 Eaton Vance Municipal Income Trust 223,119 13,157 Invesco Municipal Trust 165,910 7,386 Invesco Pennsylvania Value Municipal Income Trust 95,870 29,108 Invesco Quality Municipal Income Trust 370,545 14,111 Invesco Trust for Investment Grade Municipals 182,737 6,682 MainStay MacKay DefinedTerm Municipal Opportunities Fund 140,322 7,922 Neuberger Berman Municipal Fund, Inc. 124,296 30,184 Nuveen AMT-Free Municipal Credit Income Fund 502,865 34,132 Nuveen AMT-Free Quality Municipal Income Fund 500,716 22,923 Nuveen Enhanced Municipal Value Fund 352,556 7,049 Nuveen Intermediate Duration Municipal Term Fund 98,757 7,341 Nuveen Intermediate Duration Quality Municipal Term Fund 103,802 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- CAPITAL MARKETS (CONTINUED) 21,239 Nuveen Municipal Credit Income Fund $ 345,983 16,110 Nuveen Municipal Credit Opportunities Fund 246,483 22,123 Nuveen Municipal High Income Opportunity Fund 315,695 37,790 Nuveen Municipal Value Fund, Inc. 400,952 30,276 Nuveen Quality Municipal Income Fund 449,901 4,764 Nuveen Select Tax-Free Income Portfolio 74,604 23,669 Western Asset Intermediate Muni Fund, Inc. 220,344 4,442 Western Asset Municipal Defined Opportunity Trust, Inc. 94,126 9,342 Western Asset Municipal High Income Fund, Inc. 73,113 21,581 Western Asset Municipal Partners Fund, Inc. 328,894 ------------- TOTAL CLOSED-END FUNDS -- 95.9% 9,463,894 (Cost $9,371,541) ------------- EXCHANGE-TRADED FUNDS -- 3.0% CAPITAL MARKETS -- 3.0% 4,547 VanEck Vectors High-Yield Municipal Index ETF 298,374 (Cost $292,163) ------------- TOTAL INVESTMENTS -- 98.9% 9,762,268 (Cost $9,663,704) (a) NET OTHER ASSETS AND LIABILITIES -- 1.1% 104,464 ------------- NET ASSETS -- 100.0% $ 9,866,732 ============= |
(a) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $166,489 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $67,925. The net unrealized appreciation was $98,564.
See Notes to Financial Statements Page 13
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------ Closed-End Funds* $ 9,463,894 $ -- $ -- Exchange-Traded Funds* 298,374 -- -- ------------------------------------------ Total Investments $ 9,762,268 $ -- $ -- ========================================== |
* See Portfolio of Investments for industry breakout.
Page 14 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST FIRST TRUST MUNICIPAL CEF CEF INCOME INCOME OPPORTUNITY ETF OPPORTUNITY ETF (FCEF) (MCEF) --------------- --------------- ASSETS: Investments, at value.................................................. $ 33,460,915 $ 9,762,268 Cash................................................................... -- 56,465 Receivables:........................................................... Dividends........................................................... 80,909 23,228 Investment securities sold.......................................... 4,715 30,509 --------------- --------------- Total Assets........................................................ 33,546,539 9,872,470 --------------- --------------- LIABILITIES: Payables: Investment securities purchased..................................... 72,750 -- Investment advisory fees............................................ 26,597 5,738 --------------- --------------- Total Liabilities................................................... 99,347 5,738 --------------- --------------- NET ASSETS............................................................. $ 33,447,192 $ 9,866,732 =============== =============== NET ASSETS CONSIST OF: Paid-in capital........................................................ $ 34,520,705 $ 9,600,002 Par value.............................................................. 16,050 5,000 Accumulated distributable earnings (loss).............................. (1,089,563) 261,730 --------------- --------------- NET ASSETS............................................................. $ 33,447,192 $ 9,866,732 =============== =============== NET ASSET VALUE, per share............................................. $ 20.84 $ 19.73 =============== =============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).............................. 1,605,000 500,002 =============== =============== Investments, at cost................................................... $ 36,260,205 $ 9,663,704 =============== =============== |
See Notes to Financial Statements Page 15
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST FIRST TRUST MUNICIPAL CEF CEF INCOME INCOME OPPORTUNITY ETF OPPORTUNITY ETF (FCEF) (MCEF) --------------- --------------- INVESTMENT INCOME: Dividends.............................................................. $ 1,501,683 $ 199,492 --------------- --------------- Total investment income............................................. 1,501,683 199,492 --------------- --------------- EXPENSES: Investment advisory fees............................................... 172,522 36,749 --------------- --------------- Total expenses...................................................... 172,522 36,749 --------------- --------------- NET INVESTMENT INCOME (LOSS)........................................... 1,329,161 162,743 --------------- --------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments......................................................... (31,419) 6,635 In-kind redemptions................................................. 1,242,383 213,867 Distribution of capital gains from investment companies............. 211,253 913 --------------- --------------- Net realized gain (loss)............................................... 1,422,217 221,415 Net change in unrealized appreciation (depreciation) on investments.... (2,730,161) (215,734) --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (1,307,944) 5,681 --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ 21,217 $ 168,424 =============== =============== |
Page 16 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST CEF INCOME MUNICIPAL CEF INCOME OPPORTUNITY ETF OPPORTUNITY ETF (FCEF) (MCEF) -------------------------------- -------------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED YEAR 2/29/2020 ENDED 2/29/2020 ENDED (UNAUDITED) 8/31/2019 (UNAUDITED) 8/31/2019 --------------- --------------- --------------- --------------- OPERATIONS: Net investment income (loss).............................. $ 1,329,161 $ 1,498,152 $ 162,743 $ 350,546 Net realized gain (loss).................................. 1,422,217 1,123,865 221,415 (229,273) Net change in unrealized appreciation (depreciation)...... (2,730,161) (1,972,125) (215,734) 883,685 --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations........................................ 21,217 649,892 168,424 1,004,958 --------------- --------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................... (1,041,300) (2,101,900) (141,250) (340,376) --------------- --------------- --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................. 7,977,511 7,834,038 2,985,800 1,919,382 Cost of shares redeemed................................... (10,594,835) (15,050,996) (3,931,633) (5,252,800) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions.......................... (2,617,324) (7,216,958) (945,833) (3,333,418) --------------- --------------- --------------- --------------- Total increase (decrease) in net assets................... (3,637,407) (8,668,966) (918,659) (2,668,836) NET ASSETS: Beginning of period....................................... 37,084,599 45,753,565 10,785,391 13,454,227 --------------- --------------- --------------- --------------- End of period............................................. $ 33,447,192 $ 37,084,599 $ 9,866,732 $ 10,785,391 =============== =============== =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................... 1,705,000 2,055,000 550,002 750,002 Shares sold............................................... 350,000 400,000 150,000 100,000 Shares redeemed........................................... (450,000) (750,000) (200,000) (300,000) --------------- --------------- --------------- --------------- Shares outstanding, end of period......................... 1,605,000 1,705,000 500,002 550,002 =============== =============== =============== =============== |
See Notes to Financial Statements Page 17
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST CEF INCOME OPPORTUNITY ETF (FCEF)
SIX MONTHS ENDED YEAR ENDED AUGUST 31 PERIOD 2/29/2020 ---------------------------- ENDED (UNAUDITED) 2019 2018 8/31/2017 (a) ------------- ------------- ------------- ------------- Net asset value, beginning of period............................ $ 21.75 $ 22.26 $ 21.66 $ 20.05 --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss).................................... 0.77 0.82 0.78 1.02 Net realized and unrealized gain (loss)......................... (1.09) (0.18) 0.93 1.61 --------- --------- --------- --------- Total from investment operations................................ (0.32) 0.64 1.71 2.63 --------- --------- --------- --------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income........................................... (0.59) (0.96) (1.01) (0.79) Net realized gain............................................... -- (0.19) (0.10) (0.12) Return of capital............................................... -- -- -- (0.11) --------- --------- --------- --------- Total distributions............................................. (0.59) (1.15) (1.11) (1.02) --------- --------- --------- --------- Net asset value, end of period.................................. $ 20.84 $ 21.75 $ 22.26 $ 21.66 ========= ========= ========= ========= TOTAL RETURN (b)................................................ (1.64)% 3.18% 8.09% 13.49% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)............................ $ 33,447 $ 37,085 $ 45,754 $ 31,517 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (c)............... 0.85% (d) 0.85% 0.85% 0.85% (d) Ratio of net investment income (loss) to average net assets..... 6.55% (d) 3.92% 3.14% 5.99% (d) Portfolio turnover rate (e)..................................... 1% 13% 15% 23% |
FIRST TRUST MUNICIPAL CEF INCOME OPPORTUNITY ETF (MCEF)
SIX MONTHS ENDED YEAR ENDED AUGUST 31 PERIOD 2/29/2020 ---------------------------- ENDED (UNAUDITED) 2019 2018 8/31/2017 (a) ------------- ------------- ------------- ------------- Net asset value, beginning of period............................ $ 19.61 $ 17.94 $ 19.20 $ 20.05 --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss).................................... 0.33 0.62 0.64 0.61 Net realized and unrealized gain (loss)......................... 0.08 1.65 (1.24) (0.80) --------- --------- --------- --------- Total from investment operations................................ 0.41 2.27 (0.60) (0.19) --------- --------- --------- --------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income........................................... (0.29) (0.60) (0.64) (0.61) Return of capital............................................... -- -- (0.02) (0.05) --------- --------- --------- --------- Total distributions............................................. (0.29) (0.60) (0.66) (0.66) --------- --------- --------- --------- Net asset value, end of period.................................. $ 19.73 $ 19.61 $ 17.94 $ 19.20 ========= ========= ========= ========= TOTAL RETURN (b)................................................ 2.10% 12.96% (3.09)% (0.81)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)............................ $ 9,867 $ 10,785 $ 13,454 $ 13,441 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (c)............... 0.75% (d) 0.75% 0.75% 0.75% (d) Ratio of net investment income (loss) to average net assets..... 3.32% (d) 3.49% 3.54% 3.59% (d) Portfolio turnover rate (e)..................................... 5% 20% 11% 18% |
(a) Inception date is September 27, 2016, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(c) The Fund indirectly bears its proportionate share of fees and expenses incurred by the underlying funds in which the Fund invests. This ratio does not include these indirect fees and expenses.
(d) Annualized.
(e) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.
Page 18 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on February 22, 2016, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of sixteen funds that are offering shares. This report covers the two funds listed below. The shares of each fund are listed and traded on The Nasdaq Stock Market LLC ("Nasdaq").
First Trust CEF Income Opportunity ETF - (Nasdaq ticker "FCEF") First Trust Municipal CEF Income Opportunity ETF - (Nasdaq ticker "MCEF")
Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed in-kind for securities in which the Fund invests, and in certain circumstances, for cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund and principally invests in a portfolio of closed-end investment companies that are listed and traded in the United States on registered exchanges ("Closed-End Funds"). FCEF's primary investment objective is to provide current income with a secondary emphasis on total return. MCEF's investment objective is to provide current income. Each Fund seeks to achieve its investment objective(s) by investing, under normal market conditions, at least 80% of its net assets (including investment borrowings) in Closed-End Funds. MCEF invests in Closed-End Funds ("Municipal Closed-End Funds") which invest primarily in municipal debt securities, some or all of which pay interest that is exempt from regular federal income taxes ("Municipal Securities"). MCEF may also invest in exchange-traded funds. Closed-End Funds issue shares of common stock that are traded on a securities exchange. Because the shares of Closed-End Funds cannot be redeemed upon demand to the issuer like the shares of an open-end investment company, investors seek to buy and sell shares of Closed-End Funds in the secondary market.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows:
Common stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV per share.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect the value of the security.
The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly.
o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates).
o Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investments.
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of February 29, 2020, is included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid monthly, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually.
Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The tax character of distributions paid by each Fund during the fiscal year ended August 31, 2019 was as follows:
Distributions Distributions Distributions Distributions paid from paid from paid from paid from Ordinary Capital Tax-Exempt Return of Income Gains Income Capital ------------- ------------- ------------- ------------- First Trust CEF Income Opportunity ETF $ 1,678,056 $ 423,844 $ -- $ -- First Trust Municipal CEF Income Opportunity ETF 3,749 -- 336,627 -- |
As of August 31, 2019, the components of distributable earnings on a tax basis for each Fund were as follows:
Accumulated Net Undistributed Capital and Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) ------------- ------------- ------------- First Trust CEF Income Opportunity ETF $ -- $ 6,642 $ (76,122) First Trust Municipal CEF Income Opportunity ETF 10,170 (86,293) 310,679 |
D. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year.
In addition, the First Trust Municipal CEF Income Opportunity ETF intends to invest in such Municipal Closed-End Funds to allow it to qualify to pass through "exempt dividends" as defined in the Internal Revenue Code.
The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ending 2017, 2018 and 2019 remain open to federal and state audit. As of February 29, 2020, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions.
Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At August 31, 2019, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the table below, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to each applicable Fund's shareholders.
Non-Expiring Capital Loss Carryforwards ------------- First Trust CEF Income Opportunity ETF $ -- First Trust Municipal CEF Income Opportunity ETF 86,293 |
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended August 31, 2019, the Funds had no net late year ordinary or capital losses.
E. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds.
Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of the Funds' assets and is responsible for the expenses of each Fund including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees (if any), but excluding fee payments under the Investment Management Agreement, interest, taxes, pro rata share of fees and expenses attributable to investments in other investment companies ("acquired fund fees and expenses"), brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, which are paid by each respective Fund. FCEF and MCEF have each agreed to pay First Trust an annual unitary management fee equal to 0.85% and 0.75% of its average daily net assets, respectively. In addition, each Fund incurs acquired fund fees and expenses. The total of the unitary management fee and acquired fund fees and expenses represents each Fund's total annual operating expenses.
The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended February 29, 2020, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows:
Purchases Sales ------------ ------------ First Trust CEF Income Opportunity ETF $ 1,303,109 $ 531,286 First Trust Municipal CEF Income Opportunity ETF 696,912 468,888 |
For the six months ended February 29, 2020, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
Purchases Sales ------------ ------------ First Trust CEF Income Opportunity ETF $ 7,668,322 $ 10,243,402 First Trust Municipal CEF Income Opportunity ETF 2,935,164 3,869,782 |
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). In order to purchase Creation Units of each Fund, an Authorized Participant must deposit (i) a designated portfolio of securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before December 31, 2020.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there was the following subsequent event:
Beginning in December 2019, the outbreak of the respiratory disease designated as COVID-19 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short-term or may last for an extended period of time and, in either case, could result in a substantial economic downturn or recession. Management is continuing to monitor this event.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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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 TCW Opportunistic Fixed Income ETF (FIXD)
First Trust TCW Unconstrained Plus Bond ETF (UCON)
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1 Fund Performance Overview First Trust TCW Opportunistic Fixed Income ETF (FIXD)..................... 2 First Trust TCW Unconstrained Plus Bond ETF (UCON)........................ 5 Notes to Fund Performance Overview........................................... 8 Portfolio Management......................................................... 9 Understanding Your Fund Expenses............................................. 10 Portfolio of Investments First Trust TCW Opportunistic Fixed Income ETF (FIXD)..................... 11 First Trust TCW Unconstrained Plus Bond ETF (UCON)........................ 34 Statements of Assets and Liabilities......................................... 53 Statements of Operations..................................................... 54 Statements of Changes in Net Assets.......................................... 55 Financial Highlights......................................................... 56 Notes to Financial Statements................................................ 57 Additional Information....................................................... 67 CAUTION REGARDING FORWARD-LOOKING STATEMENTS |
This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and/or TCW Investment Management Company LLC ("TCW" or the "Sub-Advisor") and their respective representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund VIII (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their respective representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in a Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance and investment approach.
The statistical information that follows may help you understand each Fund's performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the Advisor and/or Sub-Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings.
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the Taxable Fixed Income Funds of First Trust Exchange-Traded Fund VIII (the "Funds"), which contains detailed information about the Funds for the six months ended February 29, 2020.
To say that much has transpired over the past six months would be an understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China this past December, my message to investors would have sounded quite bullish, focusing on such accomplishments as the progress in the trade negotiations between the U.S. and China, where a "Phase One" deal was signed into law on January 15, 2020. The main takeaway from the deal is that China agreed to purchase an additional $200 billion of goods and services from the U.S. over the next several years in exchange for the U.S. cutting some of its tariffs on Chinese goods. The deal marked the first breakthrough since the Trump Administration launched its new tariff initiative in March 2018. On top of that news, the S&P 500(R) Index was setting new all-time highs all the way up through the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213 countries, areas or territories, had infected 1,991,562 people (confirmed cases) and was responsible for 130,885 deaths, according to the World Health Organization. These numbers are expected to trend higher in the days and weeks ahead. A growing number of U.S. state governors and foreign leaders have issued shelter in place orders to their citizens to help slow the spread of this new virus. The primary objective in doing so is to slow down the number of cases so that hospitals and health care workers are not overwhelmed by too many patients. The cost is high because it requires shutting down large chunks of the economy, which in turn negatively impacts the financial well-being of workers and companies. In the U.S., Congress passed a financial stimulus package valued at $2.0 trillion to help backstop workers and companies in the near-term. The faster we can end the shutdown, consistent with general health and welfare, the better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience a modest decline in real gross domestic product of 1.5% (annualized) in the first quarter of 2020, followed by a massive decline of 20% (annualized) in the second quarter. The good news is that he sees the economy growing at a 3.0% and 3.5% annual pace in the third and fourth quarters of 2020, respectively. In other words, we are expecting a healthy rebound in the second half of this year. As I noted earlier, the stock market was still at a record high in the third week of February. From February 19 through March 23, however, the S&P 500(R) Index posted a total return of -33.79%, putting it in bear market territory (price decline of 20% or more from the most recent peak). Sorry to say it, but the nearly 11-year bull market is no more. While we do not have a projection for where stocks will be at year-end, we do know this: excluding the current bear market, the S&P 500(R) Index has never failed to recoup all the losses sustained in any sell-off, pullback, correction or bear market. So, while I am understandably not bullish on the first half of 2020, I will be a bull once again after we put the worst of COVID-19 behind us. I continue to urge investors to stay the course. This too shall pass.
Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months.
Sincerely,
/s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. |
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
The investment objective of the First Trust TCW Opportunistic Fixed Income ETF (the "Fund") is to seek to maximize long-term total return. Under normal market conditions, the Fund pursues its objective by investing at least 80% of its net assets (including investment borrowings) in fixed income securities. The Fund's investments principally include securities issued or guaranteed by the U.S. government or its agencies, instrumentalities or U.S. government-sponsored entities; Treasury Inflation Protected Securities (TIPS); residential and commercial mortgage-backed securities; asset-backed securities; U.S. corporate bonds; fixed income securities issued by non-U.S. corporations and governments, including issuers with significant ties to emerging market countries; bank loans, including first lien senior secured floating rate bank loans; municipal bonds; collateralized loan obligations (CLOs); Rule 144A securities, and other debt securities bearing fixed, floating or variable interest rates of any maturity. Shares of the Fund are listed on The Nasdaq Stock Market LLC under the ticker symbol "FIXD."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS Inception Inception 6 Months Ended 1 Year Ended (2/14/17) (2/14/17) 2/29/20 2/29/20 to 2/29/20 to 2/29/20 FUND PERFORMANCE NAV 3.30% 11.74% 5.30% 16.98% Market Price 3.16% 11.62% 5.31% 17.02% INDEX PERFORMANCE Bloomberg Barclays U.S. Aggregate Bond Index 3.39% 11.68% 5.17% 16.57% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 8.)
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD) (CONTINUED)
---------------------------------------------------------- % OF TOTAL ASSET CLASSIFICATION INVESTMENTS ---------------------------------------------------------- U.S. Government Agency Mortgage- Backed Securities 35.12% U.S. Government Bonds and Notes 23.75 Corporate Bonds and Notes 14.53 Money Market Funds 6.88 Mortgage-Backed Securities 6.64 Asset-Backed Securities 5.74 Foreign Corporate Bonds and Notes 3.77 U.S. Treasury Bills 2.40 Foreign Sovereign Bonds and Notes 0.67 Municipal Bonds 0.48 Capital Preferred Securities 0.02 -------- Total 100.00% ======== ---------------------------------------------------------- % OF TOTAL CREDIT QUALITY(1) INVESTMENTS ---------------------------------------------------------- Government/Agency 61.27% AAA 8.55 AA+ 0.70 AA 0.27 AA- 0.39 A+ 0.58 A 0.49 A- 2.49 BBB+ 3.26 BBB 5.11 BBB- 4.62 BB+ 0.86 BB 0.63 BB- 0.19 B+ 0.51 B 1.13 B- 0.22 CCC+ 0.11 CCC 1.77 CCC- 0.02 CC 0.61 D 0.28 NR 5.94 -------- Total 100.00% ======== ---------------------------------------------------------- % OF FIXED- INCOME TOP TEN HOLDINGS INVESTMENTS ---------------------------------------------------------- U.S. Treasury Note 1.63%, 12/31/21 4.38% Federal National Mortgage Association, Pool TBA, 2.50%, 03/15/35 4.01 U.S. Treasury Note 1.38%, 01/31/25 3.02 U.S. Treasury Note 1.13%, 02/28/25 2.87 U.S. Treasury Note 1.13%, 02/28/22 2.72 U.S. Treasury Bill 0.00%, 04/21/20 2.51 Federal National Mortgage Association, Pool TBA, 3.00%, 04/15/50 2.49 U.S. Treasury Bond 2.38%, 11/15/49 2.46 U.S. Treasury Bond 2.00%, 02/15/50 2.01 Federal Home Loan Mortgage Corporation, Pool SD8044, 3.00%, 02/01/50 1.85 -------- Total 28.32% ======== ----------------------------- |
(1) The ratings are by Standard & Poor's. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO), of the creditworthiness of an issuer with respect to debt obligations. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher. "NR" indicates no rating. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the fund, and not to the fund or its shares. U.S. Treasury, U.S. Agency and U.S. Agency mortgage-backed securities appear under "Government/Agency." Credit ratings are subject to change.
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT FEBRUARY 14, 2017 - FEBRUARY 29, 2020 First Trust TCW Bloomberg Barclays Opportunistic Fixed U.S. Aggregate Income ETF Bond Index 2/14/17 $10,000 $10,000 2/28/17 10,068 10,066 8/31/17 10,323 10,342 2/28/18 10,130 10,117 8/31/18 10,265 10,233 2/28/19 10,470 10,437 8/31/19 11,325 11,274 2/29/20 11,698 11,657 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period February 15, 2017 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 2/15/17 - 8/31/17 117 0 0 0 9/1/17 - 8/31/18 180 1 0 0 9/1/18 - 8/31/19 224 0 0 0 9/1/19 - 2/29/20 119 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 2/15/17 - 8/31/17 21 0 0 0 9/1/17 - 8/31/18 71 0 0 0 9/1/18 - 8/31/19 26 0 0 0 9/1/19 - 2/29/20 5 0 0 0 |
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
The investment objective of the First Trust TCW Unconstrained Plus Bond ETF (the "Fund") is to seek to maximize long-term total return. Under normal market conditions, the Fund pursues its objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of fixed income securities. The Fund's investment sub-advisor, TCW Investment Management Company LLC, manages the Fund's portfolio in an "unconstrained" manner, meaning that its investment universe is not limited to the securities of any particular index and it has discretion to invest in fixed income securities of any type or credit quality, including up to 70% of its net assets in high yield (or "junk") securities, up to 60% of its net assets in securities issued by issuers with significant ties to emerging market countries and up to 50% of its net assets in securities denominated in non-U.S. currencies. Pursuant to the investment strategy, the Fund may invest principally in the following types of fixed income securities: securities issued or guaranteed by the U.S. government or its agencies, instrumentalities or U.S. government-sponsored entities; Treasury Inflation Protected Securities (TIPS); residential and commercial mortgage-backed securities; asset-backed securities; U.S. corporate bonds; fixed income securities issued by non-U.S. corporations and governments, including issuers with significant ties to emerging market countries; bank loans, including first lien senior secured floating rate bank loans; municipal bonds; collateralized loan obligations (CLOs); Rule 144A securities, and other debt securities bearing fixed, floating or variable interest rates of any maturity. The Fund may also invest in preferred stock and common stock. Under normal market conditions, the Fund's average portfolio duration will vary from between 0 to 10 years. Shares of the Fund are listed on The NYSE Arca, Inc. under the ticker symbol "UCON."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS Inception Inception 6 Months Ended 1 Year Ended (6/4/18) (6/4/18) 2/29/20 2/29/20 to 2/29/20 to 2/29/20 FUND PERFORMANCE NAV 2.16% 6.16% 5.42% 9.60% Market Price 2.35% 6.70% 5.62% 9.97% INDEX PERFORMANCE ICE BofA US Dollar 3-Month Deposit Offered Rate Average Index 1.03% 2.35% 2.42% 4.24% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 8.)
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON) (CONTINUED)
---------------------------------------------------------- % OF TOTAL ASSET CLASSIFICATION INVESTMENTS ---------------------------------------------------------- Corporate Bonds and Notes 33.72% U.S. Government Agency Mortgage-Backed Securities 23.38 Mortgage-Backed Securities 10.71 U.S. Treasury Bills 10.63 Asset-Backed Securities 8.81 Foreign Corporate Bonds and Notes 6.99 Money Market Funds 3.05 Foreign Sovereign Bonds and Notes 1.51 Municipal Bonds 0.83 Commercial Paper 0.25 U.S. Government Bonds and Notes 0.12 -------- Total 100.00% ======== ---------------------------------------------------------- % OF TOTAL CREDIT QUALITY(1) INVESTMENTS ---------------------------------------------------------- Government/Agency 34.13% AAA 3.14 AA+ 2.01 AA 0.35 AA- 0.88 A+ 2.68 A 1.63 A- 5.79 BBB+ 7.93 BBB 10.18 BBB- 8.74 BB+ 1.78 BB 1.38 BB- 0.69 B+ 0.78 B 1.79 B- 0.88 CCC+ 0.23 CCC 7.24 CCC- 0.75 CC 1.73 D 0.56 NA 4.73 -------- Total 100.00% ======== ---------------------------------------------------------- % OF FIXED-INCOME TOP TEN HOLDINGS INVESTMENTS ---------------------------------------------------------- U.S. Treasury Bill 0.00%, 04/14/20 2.72% U.S. Treasury Bill 0.00%, 04/21/20 2.36 U.S. Treasury Bill 0.00%, 07/16/20 2.06 U.S. Treasury Bill 0.00%, 05/14/20 1.91 U.S. Treasury Bill 0.00%, 04/09/20 0.83 Morgan Stanley, Global Medium-Term Note 3.70%, 10/23/24 0.80 U.S. Treasury Bill 0.00%, 03/17/20 0.75 JPMorgan Chase & Co., 4.20%, 07/23/29 0.73 Conseco Finance Corp., Series 1999-3, Class A8, 7.06%, 02/01/31 0.70 Federal National Mortgage Association, Pool BL1857, 3.53%, 04/01/29 0.66 -------- Total 13.52% ======== ----------------------------- |
(1) The ratings are by Standard & Poor's. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO), of the creditworthiness of an issuer with respect to debt obligations. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher. "NR" indicates no rating. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the fund, and not to the fund or its shares. U.S. Treasury, U.S. Agency and U.S. Agency mortgage-backed securities appear under "Government/Agency." Credit ratings are subject to change.
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT JUNE 4, 2018 - FEBRUARY 29, 2020 First Trust TCW ICE BofA US Dollar Opportunistic Fixed 3-Month Deposit Offered Income ETF Rate Average Index 6/4/18 $10,000 $10,000 8/31/18 10,106 10,057 2/28/19 10,323 10,185 8/31/19 10,728 10,318 2/29/20 10,960 10,424 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period June 5, 2018 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 6/5/18 - 8/31/18 50 0 0 0 9/1/18 - 8/31/19 203 0 0 0 9/1/19 - 2/29/20 110 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 6/5/18 - 8/31/18 13 0 0 0 9/1/18 - 8/31/19 46 0 0 1 9/1/19 - 2/29/20 14 0 0 0 |
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.
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust") is the investment advisor to First Trust TCW Opportunistic Fixed Income ETF ("FIXD") and First Trust TCW Unconstrained Plus Bond ETF ("UCON") (each a "Fund"). First Trust is responsible for the ongoing monitoring of each Fund's investment portfolio, managing each Fund's business affairs and providing certain administrative services necessary for the management of each Fund.
SUB-ADVISOR
TCW Investment Management Company LLC ("TCW" or the "Sub-Advisor"), serves as investment sub-advisor. In this capacity, TCW is responsible for the selection and ongoing monitoring of the securities in each Fund's investment portfolio. TCW, with principal offices at 865 South Figueroa Street, Los Angeles, California 90017, was founded in 1996, and is a wholly-owned subsidiary of The TCW Group, Inc. ("TCW Group"). TCW, together with TCW Group and its other subsidiaries, which provide investment management and investment advisory services, had approximately $225.5 billion under management or committed to management, including $191 billion of U.S. fixed income investments, as of February 29, 2020.
PORTFOLIO MANAGEMENT TEAM
TAD RIVELLE, CHIEF INVESTMENT OFFICER OF THE FIXED INCOME GROUP OF TCW
STEPHEN M. KANE, CFA, GENERALIST PORTFOLIO MANAGER IN THE FIXED INCOME GROUP OF TCW
LAIRD LANDMANN, CO-DIRECTOR AND GENERALIST PORTFOLIO MANAGER IN THE FIXED INCOME GROUP OF TCW
BRIAN T. WHALEN, CFA, GENERALIST PORTFOLIO MANAGER IN THE FIXED INCOME GROUP OF TCW
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of First Trust TCW Opportunistic Fixed Income ETF or First Trust TCW Unconstrained Plus Bond ETF (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended February 29, 2020.
ACTUAL EXPENSES
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
---------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX MONTH SIX MONTH SEPTEMBER 1, 2019 FEBRUARY 29, 2020 PERIOD (a) PERIOD (b) ---------------------------------------------------------------------------------------------------------------------- FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD) Actual $1,000.00 $1,033.00 0.55% $2.78 Hypothetical (5% return before expenses) $1,000.00 $1,022.13 0.55% $2.77 FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON) Actual $1,000.00 $1,021.60 0.75% $3.77 Hypothetical (5% return before expenses) $1,000.00 $1,021.13 0.75% $3.77 |
(a) These expense ratios reflect an expense waiver. See Note 3 in the Notes to Financial Statements.
(b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (September 1, 2019 through February 29, 2020), multiplied by 182/366 (to reflect the six-month period).
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 40.8% COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.9% Federal Home Loan Mortgage Corporation $ 248,000 Series 2017-4656, Class EZ....................................... 4.00% 02/15/47 $ 295,603 Federal National Mortgage Association 3,306,477 Series 2012-20, Class ZT......................................... 3.50% 03/25/42 3,624,290 2,932,809 Series 2012-84, Class VZ......................................... 3.50% 08/25/42 3,259,046 1,230,686 Series 2018-38, Class PA......................................... 3.50% 06/25/47 1,303,637 3,328,026 Series 2018-43, Class CT......................................... 3.00% 06/25/48 3,429,437 1,394,780 Series 2018-86, Class JA......................................... 4.00% 05/25/47 1,468,557 543,706 Series 2018-94, Class KD......................................... 3.50% 12/25/48 567,435 607,651 Series 2019-1, Class KP.......................................... 3.25% 02/25/49 640,927 940,607 Series 2019-20, Class BA......................................... 3.50% 02/25/48 987,321 336,456 Series 2019-52, Class PA......................................... 3.00% 09/25/49 348,532 5,424,178 Series 2019-67, Class FE, 1 Mo. LIBOR + 0.45% (a)................ 2.08% 11/25/49 5,410,046 Government National Mortgage Association 584,181 Series 2018-115, Class DE........................................ 3.50% 08/20/48 612,413 548,395 Series 2018-124, Class NW........................................ 3.50% 09/20/48 578,302 2,852,152 Series 2019-12, Class QA......................................... 3.50% 09/20/48 2,949,529 820,595 Series 2019-71, Class PT......................................... 3.00% 06/20/49 852,210 4,360,024 Series 2019-119, Class JE........................................ 3.00% 09/20/49 4,491,491 -------------- 30,818,776 -------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.7% Federal National Mortgage Association 1,245,000 Series 2018-M1, Class A2 (b)..................................... 2.98% 12/25/27 1,360,303 3,750,000 Series 2018-M14, Class A2 (b).................................... 3.58% 08/25/28 4,310,344 Freddie Mac Multifamily Structured Pass-Through Certificates 5,150,000 Series 2014-K038, Class A2....................................... 3.39% 03/25/24 5,548,280 83,546 Series 2016-KF16, Class A, 1 Mo. LIBOR + 0.63% (a)............... 2.29% 03/25/26 83,451 6,963,000 Series 2017-K068, Class A2....................................... 3.24% 08/25/27 7,735,389 66,374 Series 2017-KJ18, Class A1....................................... 2.46% 03/25/22 66,797 965,784 Series 2017-Q006, Class APT2 (a)................................. 2.51% 09/25/26 1,021,433 1,250,000 Series 2018-K155, Class A2....................................... 3.75% 11/25/32 1,463,927 1,520,000 Series 2018-K157, Class A2 (a)................................... 3.99% 05/25/33 1,823,018 1,000,000 Series 2018-K158, Class A2 (a)................................... 3.90% 12/25/30 1,188,300 JP Morgan Structure Products 2,120,000 Series JPM-2598 (c).............................................. 2.46% 04/25/40 2,114,700 -------------- 26,715,942 -------------- PASS-THROUGH SECURITIES -- 37.2% Federal Home Loan Mortgage Corporation 228,689 Pool C91981...................................................... 3.00% 02/01/38 237,440 143,734 Pool G07961...................................................... 3.50% 03/01/45 153,575 157,751 Pool G08692...................................................... 3.00% 02/01/46 165,165 4,657,479 Pool G08715...................................................... 3.00% 08/01/46 4,869,198 91,949 Pool G08721...................................................... 3.00% 09/01/46 96,292 1,062,346 Pool G08726...................................................... 3.00% 10/01/46 1,110,612 2,483,972 Pool G08732...................................................... 3.00% 11/01/46 2,596,318 1,147,673 Pool G08737...................................................... 3.00% 12/01/46 1,197,807 344,663 Pool G08738...................................................... 3.50% 12/01/46 363,699 597,638 Pool G08741...................................................... 3.00% 01/01/47 624,864 386,154 Pool G08747...................................................... 3.00% 02/01/47 403,500 361,310 Pool G08748...................................................... 3.50% 02/01/47 381,751 1,265,961 Pool G08750...................................................... 3.00% 03/01/47 1,321,078 |
See Notes to Financial Statements Page 11
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) PASS-THROUGH SECURITIES (CONTINUED) Federal Home Loan Mortgage Corporation (Continued) $ 533,690 Pool G08766...................................................... 3.50% 06/01/47 $ 562,633 1,339,608 Pool G08788...................................................... 3.50% 11/01/47 1,412,321 3,595,701 Pool G08791...................................................... 3.00% 12/01/47 3,726,548 1,229,125 Pool G08795...................................................... 3.00% 01/01/48 1,276,014 611,402 Pool G08800...................................................... 3.50% 02/01/48 643,866 1,228,405 Pool G08816...................................................... 3.50% 06/01/48 1,287,281 242,388 Pool G08833...................................................... 5.00% 07/01/48 263,025 43,033 Pool G08838...................................................... 5.00% 09/01/48 46,661 931,088 Pool G08843...................................................... 4.50% 10/01/48 996,658 200,848 Pool G08844...................................................... 5.00% 10/01/48 217,862 580,089 Pool G08849...................................................... 5.00% 11/01/48 628,977 816,974 Pool G16085...................................................... 2.50% 02/01/32 846,522 584,113 Pool G16350...................................................... 2.50% 10/01/32 605,011 869,852 Pool G16396...................................................... 3.50% 02/01/33 914,568 2,342,867 Pool G16524...................................................... 3.50% 05/01/33 2,479,327 946,145 Pool G16598...................................................... 2.50% 12/01/31 979,107 2,612,418 Pool G18622...................................................... 2.50% 12/01/31 2,696,345 297,770 Pool G18670...................................................... 3.00% 12/01/32 309,635 104,902 Pool G18691...................................................... 3.00% 06/01/33 109,067 356,799 Pool G18713...................................................... 3.50% 11/01/33 374,788 764,023 Pool G60080...................................................... 3.50% 06/01/45 824,455 499,241 Pool G60440...................................................... 3.50% 03/01/46 538,744 1,705,566 Pool G60582...................................................... 3.50% 05/01/46 1,819,828 1,300,877 Pool G60658...................................................... 3.50% 07/01/46 1,413,548 824,993 Pool G61556...................................................... 3.50% 08/01/48 881,120 1,458,199 Pool G67700...................................................... 3.50% 08/01/46 1,570,680 3,278,232 Pool G67703...................................................... 3.50% 04/01/47 3,537,025 8,774,137 Pool G67706...................................................... 3.50% 12/01/47 9,419,671 2,673,399 Pool G67707...................................................... 3.50% 01/01/48 2,908,286 2,625,572 Pool G67708...................................................... 3.50% 03/01/48 2,798,783 3,127,941 Pool G67709...................................................... 3.50% 03/01/48 3,373,476 3,037,885 Pool G67710...................................................... 3.50% 03/01/48 3,238,218 4,428,518 Pool G67714...................................................... 4.00% 07/01/48 4,827,495 6,187,208 Pool G67717...................................................... 4.00% 11/01/48 6,736,881 6,180,318 Pool G67718...................................................... 4.00% 01/01/49 6,681,749 332,102 Pool Q44452...................................................... 3.00% 11/01/46 347,122 886,226 Pool Q50135...................................................... 3.50% 08/01/47 934,259 6,365,169 Pool RE6029...................................................... 3.00% 02/01/50 6,516,391 8,923,613 Pool SD7511...................................................... 3.50% 01/01/50 9,510,234 16,442,127 Pool SD8016...................................................... 3.00% 10/01/49 16,952,018 30,926,309 Pool SD8044...................................................... 3.00% 02/01/50 31,909,419 514,824 Pool U90772...................................................... 3.50% 01/01/43 548,632 706,601 Pool U99114...................................................... 3.50% 02/01/44 752,885 1,672,799 Pool WA3208...................................................... 3.98% 04/01/34 1,970,458 1,748,102 Pool ZA4692...................................................... 3.50% 06/01/46 1,863,370 816,171 Pool ZM0063...................................................... 4.00% 08/01/45 883,761 805,412 Pool ZS8602...................................................... 3.00% 03/01/31 837,082 1,418,425 Pool ZS9844...................................................... 3.50% 07/01/46 1,511,957 4,287,766 Pool ZT0277...................................................... 3.50% 10/01/46 4,569,019 |
Page 12 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) PASS-THROUGH SECURITIES (CONTINUED) Federal Home Loan Mortgage Corporation (Continued) $ 1,607,495 Pool ZT0531...................................................... 3.50% 04/01/47 $ 1,733,585 1,815,816 Pool ZT0536...................................................... 3.50% 03/01/48 1,934,691 1,096,744 Pool ZT0542...................................................... 4.00% 07/01/48 1,194,993 367,323 Pool ZT1403...................................................... 3.50% 11/01/33 385,565 3,790,912 Pool ZT1703...................................................... 4.00% 01/01/49 4,096,549 Federal National Mortgage Association 6,464,453 Pool AL8825...................................................... 3.50% 06/01/46 6,904,913 872,912 Pool AM1619...................................................... 2.34% 12/01/22 897,653 113,700 Pool AM5673...................................................... 3.65% 04/01/23 121,027 1,600,000 Pool AM6501...................................................... 3.32% 08/01/26 1,767,048 116,091 Pool AM7122...................................................... 3.61% 11/01/34 134,213 91,576 Pool AM7817...................................................... 3.31% 01/01/27 100,861 42,019 Pool AN0550...................................................... 3.63% 02/01/31 48,832 119,216 Pool AN2786...................................................... 2.76% 09/01/36 130,453 200,191 Pool AN4665...................................................... 3.49% 02/01/32 232,117 4,500,000 Pool AN5942...................................................... 3.10% 07/01/32 5,108,109 700,000 Pool AN7274...................................................... 3.10% 11/01/29 780,854 1,665,000 Pool AN9186...................................................... 3.47% 04/01/27 1,840,295 1,960,002 Pool AN9454...................................................... 3.60% 04/01/27 2,183,098 3,524,000 Pool AN9924...................................................... 3.65% 07/01/30 4,097,177 3,831,509 Pool AS3134...................................................... 3.50% 08/01/44 4,088,100 938,789 Pool AS6620...................................................... 3.50% 02/01/46 1,000,688 301,876 Pool AS9334...................................................... 3.00% 03/01/32 313,934 382,956 Pool AS9749...................................................... 4.00% 06/01/47 407,786 320,544 Pool BD7081...................................................... 4.00% 03/01/47 342,438 3,347,665 Pool BJ2692...................................................... 3.50% 04/01/48 3,523,889 3,225,000 Pool BL0828...................................................... 4.02% 12/01/30 3,835,099 1,182,452 Pool BL3555...................................................... 2.99% 01/01/27 1,274,657 2,097,857 Pool BM1903...................................................... 3.50% 08/01/47 2,250,029 931,217 Pool BM2000...................................................... 3.50% 05/01/47 981,489 2,267,915 Pool BM3260...................................................... 3.50% 01/01/48 2,416,418 1,096,876 Pool BM4299...................................................... 3.00% 03/01/30 1,136,699 1,081,079 Pool BM4304...................................................... 3.00% 02/01/30 1,119,931 1,735,946 Pool BM4472...................................................... 3.50% 07/01/48 1,871,133 2,362,397 Pool CA0854...................................................... 3.50% 12/01/47 2,522,370 1,071,619 Pool CA0907...................................................... 3.50% 12/01/47 1,142,374 961,470 Pool CA0996...................................................... 3.50% 01/01/48 1,027,521 7,211,770 Pool CA1182...................................................... 3.50% 02/01/48 7,697,516 2,233,208 Pool CA1187...................................................... 3.50% 02/01/48 2,356,063 1,361,819 Pool CA1710...................................................... 4.50% 05/01/48 1,462,424 894,817 Pool CA1711...................................................... 4.50% 05/01/48 961,281 587,920 Pool CA2208...................................................... 4.50% 08/01/48 629,555 1,155,778 Pool CA2327...................................................... 4.00% 09/01/48 1,268,108 7,309,554 Pool CA3633...................................................... 3.50% 06/01/49 7,831,389 1,710,450 Pool FM1134...................................................... 3.00% 04/01/48 1,786,592 643,987 Pool MA1146...................................................... 4.00% 08/01/42 694,427 910,745 Pool MA1373...................................................... 3.50% 03/01/43 969,951 1,066,872 Pool MA2077...................................................... 3.50% 11/01/34 1,127,983 281,960 Pool MA2145...................................................... 4.00% 01/01/45 305,480 |
See Notes to Financial Statements Page 13
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) PASS-THROUGH SECURITIES (CONTINUED) Federal National Mortgage Association (Continued) $ 1,512,456 Pool MA2670...................................................... 3.00% 07/01/46 $ 1,584,052 1,336,721 Pool MA2806...................................................... 3.00% 11/01/46 1,398,862 43,751 Pool MA2896...................................................... 3.50% 02/01/47 46,118 1,973,500 Pool MA3057...................................................... 3.50% 07/01/47 2,077,643 831,462 Pool MA3088...................................................... 4.00% 08/01/47 886,274 625,071 Pool MA3147...................................................... 3.00% 10/01/47 648,865 1,822,723 Pool MA3210...................................................... 3.50% 12/01/47 1,920,356 230,031 Pool MA3238...................................................... 3.50% 01/01/48 242,731 1,646,228 Pool MA3239...................................................... 4.00% 01/01/48 1,754,187 893,321 Pool MA3276...................................................... 3.50% 02/01/48 940,854 614,454 Pool MA3336...................................................... 3.50% 04/01/38 646,478 466,549 Pool MA3410...................................................... 3.50% 07/01/33 489,600 847,998 Pool MA3537...................................................... 4.50% 12/01/48 905,322 10,243,038 Pool MA3834...................................................... 3.00% 11/01/49 10,560,687 4,896,487 Pool MA3846...................................................... 3.00% 11/01/49 5,010,818 11,310,634 Pool MA3864...................................................... 2.50% 12/01/34 11,622,405 19,353,288 Pool MA3896...................................................... 2.50% 01/01/35 19,886,765 25,728,111 Pool MA3905...................................................... 3.00% 01/01/50 26,541,368 17,707,887 Pool MA3930...................................................... 2.50% 02/01/35 18,196,014 9,571,426 Pool MA3937...................................................... 3.00% 02/01/50 9,875,690 7,930,000 Pool MA3960...................................................... 3.00% 03/01/50 8,184,626 67,175,000 Pool TBA (d)..................................................... 2.50% 03/15/35 68,996,073 4,275,000 Pool TBA (d)..................................................... 2.50% 03/15/50 4,362,256 25,950,000 Pool TBA (d)..................................................... 3.00% 03/15/50 26,732,555 41,700,000 Pool TBA (d)..................................................... 3.00% 04/15/50 42,903,558 1,075,000 Pool TBA (d)..................................................... 5.00% 04/15/50 1,163,111 Government National Mortgage Association 416,240 Pool MA1157...................................................... 3.50% 07/20/43 442,582 586,709 Pool MA3521...................................................... 3.50% 03/20/46 617,919 429,435 Pool MA4069...................................................... 3.50% 11/20/46 449,928 251,222 Pool MA4195...................................................... 3.00% 01/20/47 261,957 305,578 Pool MA4196...................................................... 3.50% 01/20/47 318,577 1,399,996 Pool MA4261...................................................... 3.00% 02/20/47 1,458,035 413,516 Pool MA4262...................................................... 3.50% 02/20/47 432,385 11,846,788 Pool MA4382...................................................... 3.50% 04/20/47 12,410,251 138,413 Pool MA4453...................................................... 4.50% 05/20/47 148,585 154,602 Pool MA4586...................................................... 3.50% 07/20/47 162,151 983,251 Pool MA4588...................................................... 4.50% 07/20/47 1,054,652 2,570,723 Pool MA4651...................................................... 3.00% 08/20/47 2,680,226 1,414,056 Pool MA4652...................................................... 3.50% 08/20/47 1,483,515 1,419,157 Pool MA4719...................................................... 3.50% 09/20/47 1,494,395 148,977 Pool MA4722...................................................... 5.00% 09/20/47 160,736 132,009 Pool MA4777...................................................... 3.00% 10/20/47 137,366 3,512,097 Pool MA4778...................................................... 3.50% 10/20/47 3,678,488 3,211,480 Pool MA4836...................................................... 3.00% 11/20/47 3,341,060 3,399,424 Pool MA4837...................................................... 3.50% 11/20/47 3,560,766 1,144,839 Pool MA4838...................................................... 4.00% 11/20/47 1,208,281 193,231 Pool MA4901...................................................... 4.00% 12/20/47 204,647 839,117 Pool MA4961...................................................... 3.00% 01/20/48 872,594 1,257,785 Pool MA4962...................................................... 3.50% 01/20/48 1,312,732 |
Page 14 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) PASS-THROUGH SECURITIES (CONTINUED) Government National Mortgage Association (Continued) $ 1,847,774 Pool MA4963...................................................... 4.00% 01/20/48 $ 1,956,299 1,046,880 Pool MA5078...................................................... 4.00% 03/20/48 1,106,112 2,449,174 Pool MA5136...................................................... 3.50% 04/20/48 2,574,146 2,280,585 Pool MA5399...................................................... 4.50% 08/20/48 2,419,685 858,106 Pool MA5466...................................................... 4.00% 09/20/48 905,006 248,643 Pool MA5467...................................................... 4.50% 09/20/48 263,411 746,670 Pool MA5597...................................................... 5.00% 11/20/48 802,617 4,211,518 Pool MA5976...................................................... 3.50% 06/20/49 4,310,575 770,797 Pool MA6030...................................................... 3.50% 07/20/49 788,502 2,911,347 Pool MA6080...................................................... 3.00% 08/20/49 2,986,545 13,850,000 Pool TBA (d)..................................................... 3.00% 04/15/50 14,298,942 -------------- 591,492,374 -------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES........................................ 649,027,092 (Cost $634,601,974) -------------- U.S. GOVERNMENT BONDS AND NOTES -- 27.6% 36,242,000 U.S. Treasury Bond.................................................. 2.38% 11/15/49 42,273,603 32,085,000 U.S. Treasury Bond.................................................. 2.00% 02/15/50 34,614,200 20,502,975 U.S. Treasury Inflation Indexed Bond (e)............................ 0.25% 02/15/50 21,522,008 1,515,192 U.S. Treasury Inflation Indexed Note (e)............................ 0.13% 07/15/24 1,555,022 13,702,298 U.S. Treasury Inflation Indexed Note (e)............................ 0.13% 10/15/24 14,080,818 17,878,751 U.S. Treasury Inflation Indexed Note (e)............................ 0.25% 07/15/29 18,881,756 74,345,000 U.S. Treasury Note.................................................. 1.63% 12/31/21 75,306,258 26,420,000 U.S. Treasury Note.................................................. 1.38% 01/31/22 26,662,528 46,630,000 U.S. Treasury Note.................................................. 1.13% 02/28/22 46,859,507 25,340,000 U.S. Treasury Note.................................................. 1.75% 12/31/24 26,335,288 50,800,000 U.S. Treasury Note.................................................. 1.38% 01/31/25 51,922,164 48,890,000 U.S. Treasury Note.................................................. 1.13% 02/28/25 49,399,908 28,023,000 U.S. Treasury Note.................................................. 1.75% 11/15/29 29,614,619 -------------- TOTAL U.S. GOVERNMENT BONDS AND NOTES.......................................................... 439,027,679 (Cost $422,951,917) -------------- CORPORATE BONDS AND NOTES -- 16.9% AEROSPACE/DEFENSE -- 0.0% 100,000 Northrop Grumman Corp............................................... 2.93% 01/15/25 106,050 -------------- AGRICULTURE -- 0.4% 280,000 BAT Capital Corp.................................................... 4.39% 08/15/37 297,012 545,000 BAT Capital Corp.................................................... 4.54% 08/15/47 568,276 1,010,000 Reynolds American, Inc.............................................. 5.70% 08/15/35 1,204,982 3,445,000 Reynolds American, Inc.............................................. 5.85% 08/15/45 4,124,269 -------------- 6,194,539 -------------- AIRLINES -- 0.2% 1,089,794 American Airlines Pass-Through Trust, Series 2014-1, Class A........ 3.70% 10/01/26 1,185,811 125,135 American Airlines Pass-Through Trust, Series 2015-2, Class AA....... 3.60% 09/22/27 136,666 970,814 Continental Airlines Pass-Through Trust, Series 2007-1, Class A..... 5.98% 04/19/22 1,026,060 123,284 Delta Air Lines Pass-Through Trust, Series 2002-1, Class G1......... 6.72% 01/02/23 131,806 514,819 US Airways Pass-Through Trust, Series 2012-1, Class A............... 5.90% 10/01/24 583,391 -------------- 3,063,734 -------------- |
See Notes to Financial Statements Page 15
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) AUTO MANUFACTURERS -- 2.1% $ 1,965,000 Daimler Finance North America LLC, 3 Mo. LIBOR + 0.90% (a) (f).................................................... 2.59% 02/15/22 $ 1,983,594 1,000,000 Ford Motor Credit Co. LLC........................................... 3.16% 08/04/20 1,003,772 885,000 Ford Motor Credit Co. LLC........................................... 2.34% 11/02/20 887,346 2,000,000 Ford Motor Credit Co. LLC........................................... 5.09% 01/07/21 2,052,176 4,190,000 Ford Motor Credit Co. LLC........................................... 3.20% 01/15/21 4,218,181 1,020,000 Ford Motor Credit Co. LLC........................................... 5.75% 02/01/21 1,049,671 3,135,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.81% (a).................. 2.71% 04/05/21 3,117,201 1,000,000 Ford Motor Credit Co. LLC........................................... 5.88% 08/02/21 1,044,903 285,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.88% (a).................. 2.73% 10/12/21 281,922 2,235,000 Ford Motor Credit Co. LLC........................................... 3.81% 10/12/21 2,281,178 2,916,000 Ford Motor Credit Co. LLC........................................... 5.60% 01/07/22 3,078,129 2,285,000 Ford Motor Credit Co. LLC........................................... 3.22% 01/09/22 2,295,068 390,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 1.27% (a).................. 3.23% 03/28/22 383,470 230,000 Ford Motor Credit Co. LLC........................................... 3.34% 03/28/22 232,423 150,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 1.08% (a).................. 2.84% 08/03/22 146,120 655,000 Ford Motor Credit Co. LLC........................................... 4.25% 09/20/22 674,571 1,822,000 General Motors Financial Co., Inc................................... 3.20% 07/06/21 1,843,985 1,465,000 General Motors Financial Co., Inc................................... 4.38% 09/25/21 1,514,921 2,140,000 General Motors Financial Co., Inc................................... 4.20% 11/06/21 2,213,821 760,000 General Motors Financial Co., Inc................................... 3.45% 04/10/22 779,551 2,095,000 General Motors Financial Co., Inc................................... 3.15% 06/30/22 2,144,683 -------------- 33,226,686 -------------- BANKS -- 1.9% 180,000 Bank of America Corp. (g)........................................... 3.00% 12/20/23 186,605 75,000 Bank of America Corp., Medium-Term Note (g)......................... 3.09% 10/01/25 78,840 6,910,000 Bank of America Corp., Medium-Term Note (g)......................... 2.02% 02/13/26 6,962,325 210,000 Bank of America Corp., Medium-Term Note (g)......................... 4.27% 07/23/29 241,766 300,000 Bank of New York Mellon (The) Corp., Medium-Term Note (g)........... 2.66% 05/16/23 307,252 1,000,000 Citigroup, Inc. (g)................................................. 3.14% 01/24/23 1,026,681 1,000,000 Goldman Sachs Group, (The), Inc. (g)................................ 2.88% 10/31/22 1,020,178 750,000 Goldman Sachs Group, (The), Inc. (g)................................ 2.91% 07/24/23 770,920 1,950,000 Goldman Sachs Group, (The), Inc. (g)................................ 3.27% 09/29/25 2,059,319 1,890,000 JPMorgan Chase & Co. (g)............................................ 4.02% 12/05/24 2,050,092 500,000 JPMorgan Chase & Co................................................. 3.90% 07/15/25 551,970 1,455,000 JPMorgan Chase & Co................................................. 3.20% 06/15/26 1,564,784 2,145,000 Morgan Stanley, Global Medium-Term Note, SOFR + 0.70% (a)........... 2.28% 01/20/23 2,153,419 425,000 Morgan Stanley, Global Medium-Term Note (g)......................... 4.43% 01/23/30 494,671 400,000 PNC Bank N.A........................................................ 3.80% 07/25/23 429,628 690,000 PNC Bank N.A., Bank Note............................................ 2.50% 01/22/21 695,384 1,480,000 Wells Fargo & Co.................................................... 3.07% 01/24/23 1,518,630 1,000,000 Wells Fargo & Co.................................................... 3.00% 04/22/26 1,060,527 250,000 Wells Fargo & Co.................................................... 3.00% 10/23/26 265,034 6,060,000 Wells Fargo & Co., Medium-Term Note (g)............................. 2.16% 02/11/26 6,142,313 350,000 Wells Fargo & Co., Medium-Term Note (g)............................. 3.58% 05/22/28 380,782 -------------- 29,961,120 -------------- BEVERAGES -- 0.1% 635,000 Anheuser-Busch InBev Worldwide, Inc................................. 4.75% 01/23/29 753,118 200,000 Anheuser-Busch InBev Worldwide, Inc................................. 4.44% 10/06/48 234,019 -------------- 987,137 -------------- |
Page 16 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) BIOTECHNOLOGY -- 0.1% $ 727,000 Amgen, Inc.......................................................... 4.40% 05/01/45 $ 843,396 175,000 Gilead Sciences, Inc................................................ 3.65% 03/01/26 192,597 -------------- 1,035,993 -------------- CHEMICALS -- 0.1% 1,744,000 International Flavors & Fragrances, Inc............................. 5.00% 09/26/48 2,055,389 -------------- COMPUTERS -- 0.1% 1,020,000 Dell International LLC / EMC Corp. (f).............................. 4.42% 06/15/21 1,051,118 -------------- DIVERSIFIED FINANCIAL SERVICES -- 0.3% 1,485,000 Air Lease Corp...................................................... 3.50% 01/15/22 1,527,370 1,890,000 Air Lease Corp...................................................... 3.25% 03/01/25 1,961,131 360,000 Air Lease Corp., Medium-Term Note................................... 2.30% 02/01/25 360,343 450,000 Raymond James Financial, Inc........................................ 4.95% 07/15/46 576,798 -------------- 4,425,642 -------------- ELECTRIC -- 0.8% 200,000 Ameren Illinois Co.................................................. 3.70% 12/01/47 237,223 750,000 Cleco Power LLC..................................................... 6.00% 12/01/40 1,003,135 500,000 Consolidated Edison Co. of New York, Inc............................ 4.50% 05/15/58 635,627 155,000 Duke Energy Carolinas LLC........................................... 3.70% 12/01/47 177,709 700,000 Duke Energy Progress LLC............................................ 3.25% 08/15/25 758,407 750,000 Duquesne Light Holdings, Inc. (f)................................... 6.40% 09/15/20 767,554 750,000 Entergy Texas, Inc.................................................. 3.45% 12/01/27 808,090 1,000,000 Evergy Metro, Inc................................................... 3.65% 08/15/25 1,101,487 1,250,000 Interstate Power & Light Co......................................... 3.25% 12/01/24 1,333,338 400,000 LG&E & KU Energy LLC................................................ 3.75% 11/15/20 403,872 830,000 Metropolitan Edison Co. (f)......................................... 4.00% 04/15/25 903,623 900,000 NextEra Energy Capital Holdings, Inc., 3 Mo. LIBOR + 0.55% (a)...... 2.16% 08/28/21 900,282 1,150,000 PNM Resources, Inc.................................................. 3.25% 03/09/21 1,166,323 825,000 Public Service Co. of New Mexico.................................... 3.85% 08/01/25 895,102 300,000 Southwestern Electric Power Co...................................... 3.55% 02/15/22 310,682 700,000 Trans-Allegheny Interstate Line Co. (f)............................. 3.85% 06/01/25 772,643 750,000 Tucson Electric Power Co............................................ 5.15% 11/15/21 788,233 355,000 Virginia Electric & Power Co........................................ 4.60% 12/01/48 466,387 -------------- 13,429,717 -------------- ENTERTAINMENT -- 0.0% 740,000 Churchill Downs, Inc. (f)........................................... 4.75% 01/15/28 741,369 -------------- ENVIRONMENTAL CONTROL -- 0.1% 260,000 Clean Harbors, Inc. (f)............................................. 5.13% 07/15/29 279,265 150,000 Republic Services, Inc.............................................. 2.90% 07/01/26 159,554 987,000 Waste Pro USA, Inc. (f)............................................. 5.50% 02/15/26 964,968 -------------- 1,403,787 -------------- FOOD -- 0.9% 1,000,000 Campbell Soup Co., 3 Mo. LIBOR + 0.63% (a).......................... 2.52% 03/15/21 1,001,091 1,500,000 Kraft Heinz Foods Co................................................ 5.00% 07/15/35 1,594,845 2,405,000 Kraft Heinz Foods Co................................................ 5.00% 06/04/42 2,400,299 2,635,000 Kraft Heinz Foods Co................................................ 5.20% 07/15/45 2,712,876 3,845,000 Kraft Heinz Foods Co................................................ 4.38% 06/01/46 3,584,434 2,755,000 Kraft Heinz Foods Co. (f)........................................... 4.88% 10/01/49 2,721,971 97,000 Kroger (The) Co..................................................... 5.40% 01/15/49 126,155 20,000 Lamb Weston Holdings, Inc. (f)...................................... 4.63% 11/01/24 20,842 -------------- 14,162,513 -------------- |
See Notes to Financial Statements Page 17
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) GAS -- 0.1% $ 500,000 Southern Co. Gas Capital Corp....................................... 2.45% 10/01/23 $ 514,349 400,000 Southern Co. Gas Capital Corp....................................... 5.88% 03/15/41 562,851 200,000 Spire, Inc.......................................................... 3.54% 02/27/24 208,083 -------------- 1,285,283 -------------- HEALTHCARE-PRODUCTS -- 0.1% 300,000 Boston Scientific Corp.............................................. 3.45% 03/01/24 319,903 180,000 Teleflex, Inc....................................................... 4.63% 11/15/27 189,225 525,000 Zimmer Biomet Holdings, Inc......................................... 2.70% 04/01/20 525,339 -------------- 1,034,467 -------------- HEALTHCARE-SERVICES -- 1.0% 150,000 Anthem, Inc......................................................... 3.30% 01/15/23 156,957 120,000 Anthem, Inc......................................................... 3.65% 12/01/27 131,384 2,300,000 Anthem, Inc......................................................... 2.88% 09/15/29 2,372,514 200,000 Centene Corp. (f)................................................... 5.38% 08/15/26 210,750 418,000 Encompass Health Corp............................................... 4.75% 02/01/30 432,275 1,428,000 HCA, Inc............................................................ 4.75% 05/01/23 1,546,388 2,315,000 HCA, Inc............................................................ 5.00% 03/15/24 2,575,007 400,000 HCA, Inc............................................................ 5.13% 06/15/39 465,890 1,540,000 HCA, Inc............................................................ 5.25% 06/15/49 1,798,059 500,000 Humana, Inc......................................................... 3.15% 12/01/22 519,626 360,000 Humana, Inc......................................................... 2.90% 12/15/22 371,790 475,000 Humana, Inc......................................................... 3.95% 08/15/49 516,481 200,000 New York and Presbyterian (The) Hospital............................ 3.56% 08/01/36 224,494 2,165,000 NYU Langone Hospitals, Series 2020.................................. 3.38% 07/01/55 2,326,623 650,000 Partners Healthcare System, Inc., Series 2020....................... 3.34% 07/01/60 721,530 101,000 Tenet Healthcare Corp............................................... 4.63% 07/15/24 101,213 1,440,000 UnitedHealth Group, Inc............................................. 3.75% 07/15/25 1,597,030 605,000 UnitedHealth Group, Inc............................................. 3.70% 08/15/49 675,902 -------------- 16,743,913 -------------- HOUSEHOLD PRODUCTS/WARES -- 0.0% 245,000 Spectrum Brands, Inc................................................ 5.75% 07/15/25 251,735 -------------- INSURANCE -- 0.4% 800,000 Berkshire Hathaway Finance Corp..................................... 4.20% 08/15/48 978,939 700,000 Farmers Exchange Capital III (f) (g)................................ 5.45% 10/15/54 846,955 600,000 Farmers Insurance Exchange (f)...................................... 8.63% 05/01/24 736,298 400,000 Nationwide Mutual Insurance Co., 3 Mo. LIBOR + 2.29% (a) (f)........ 4.18% 12/15/24 400,602 620,000 Pricoa Global Funding I (f)......................................... 3.45% 09/01/23 658,951 240,000 Teachers Insurance & Annuity Association of America (f) (g)......... 4.38% 09/15/54 259,371 2,055,000 Willis North America, Inc........................................... 2.95% 09/15/29 2,158,094 -------------- 6,039,210 -------------- MEDIA -- 0.4% 633,000 CCO Holdings LLC / CCO Holdings Capital Corp. (f)................... 5.38% 06/01/29 675,126 863,000 CCO Holdings LLC / CCO Holdings Capital Corp. (f)................... 4.50% 08/15/30 874,327 2,475,000 Charter Communications Operating LLC / Charter Communications Operating Capital................................................ 4.91% 07/23/25 2,786,956 100,000 Comcast Corp........................................................ 3.97% 11/01/47 117,831 850,000 CSC Holdings LLC (f)................................................ 6.63% 10/15/25 890,384 200,000 CSC Holdings LLC (f)................................................ 5.38% 02/01/28 208,530 34,000 CSC Holdings LLC (f)................................................ 6.50% 02/01/29 37,630 |
Page 18 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) MEDIA (CONTINUED) $ 150,000 Time Warner Cable LLC............................................... 5.88% 11/15/40 $ 179,524 700,000 Time Warner Cable LLC............................................... 5.50% 09/01/41 819,400 300,000 ViacomCBS, Inc...................................................... 2.50% 02/15/23 307,657 200,000 ViacomCBS, Inc...................................................... 3.70% 06/01/28 216,360 -------------- 7,113,725 -------------- MISCELLANEOUS MANUFACTURING -- 0.5% 460,000 General Electric Co., Global Medium-Term Note....................... 4.63% 01/07/21 471,096 1,000,000 General Electric Co., Global Medium-Term Note....................... 6.88% 01/10/39 1,394,932 470,000 General Electric Co., Medium-Term Note.............................. 4.65% 10/17/21 490,303 2,775,000 General Electric Co., Medium-Term Note.............................. 6.75% 03/15/32 3,778,585 1,395,000 General Electric Co., Medium-Term Note.............................. 5.88% 01/14/38 1,816,154 -------------- 7,951,070 -------------- OIL & GAS -- 0.1% 273,000 Antero Resources Corp............................................... 5.13% 12/01/22 169,746 665,000 Antero Resources Corp............................................... 5.00% 03/01/25 344,137 33,000 Endeavor Energy Resources L.P. / EER Finance, Inc. (f).............. 5.75% 01/30/28 32,309 1,770,000 EQT Corp............................................................ 3.90% 10/01/27 1,141,650 7,000 Gulfport Energy Corp................................................ 6.38% 05/15/25 2,243 400,000 Hess Corp........................................................... 5.60% 02/15/41 432,224 -------------- 2,122,309 -------------- OIL & GAS SERVICES -- 0.0% 125,000 USA Compression Partners L.P. / USA Compression Finance Corp............................................................. 6.88% 04/01/26 121,184 -------------- PACKAGING & CONTAINERS -- 0.1% 650,000 Amcor Finance USA, Inc. (f)......................................... 4.50% 05/15/28 754,318 76,000 Berry Global, Inc. (f).............................................. 4.88% 07/15/26 77,450 50,000 Graphic Packaging International LLC................................. 4.88% 11/15/22 52,266 240,000 Matthews International Corp. (f).................................... 5.25% 12/01/25 238,900 300,000 Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC / Reynolds Group Issuer Lu, 3 Mo. LIBOR + 3.50% (a) (f)............ 5.33% 07/15/21 299,700 355,000 WRKCo, Inc.......................................................... 4.90% 03/15/29 416,755 -------------- 1,839,389 -------------- PHARMACEUTICALS -- 2.4% 690,000 AbbVie, Inc. (f).................................................... 4.05% 11/21/39 765,641 400,000 AbbVie, Inc......................................................... 4.40% 11/06/42 461,988 1,870,000 AbbVie, Inc......................................................... 4.45% 05/14/46 2,160,884 450,000 AbbVie, Inc......................................................... 4.88% 11/14/48 554,511 3,325,000 AbbVie, Inc. (f).................................................... 4.25% 11/21/49 3,775,785 1,895,000 Bayer US Finance II LLC (f)......................................... 3.88% 12/15/23 2,040,034 1,045,000 Bayer US Finance II LLC (f)......................................... 3.38% 07/15/24 1,098,388 3,160,000 Bayer US Finance II LLC (f)......................................... 4.38% 12/15/28 3,601,002 815,000 Bayer US Finance II LLC (f)......................................... 4.63% 06/25/38 984,247 425,000 Bayer US Finance II LLC (f)......................................... 4.40% 07/15/44 472,629 2,190,000 Bayer US Finance II LLC (f)......................................... 4.88% 06/25/48 2,665,525 460,000 Bayer US Finance LLC (f)............................................ 3.38% 10/08/24 488,999 300,000 Becton Dickinson and Co............................................. 3.25% 11/12/20 303,329 1,000,000 Becton Dickinson and Co............................................. 2.89% 06/06/22 1,025,740 3,385,000 Becton Dickinson and Co............................................. 3.36% 06/06/24 3,590,999 1,000,000 Becton Dickinson and Co............................................. 6.70% 08/01/28 1,291,313 |
See Notes to Financial Statements Page 19
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) PHARMACEUTICALS (CONTINUED) $ 75,000 Cigna Corp. (f)..................................................... 3.05% 10/15/27 $ 78,665 1,030,000 Cigna Corp. (f)..................................................... 3.88% 10/15/47 1,092,460 2,129,000 Cigna Corp.......................................................... 4.90% 12/15/48 2,643,367 150,000 CVS Health Corp..................................................... 3.88% 07/20/25 164,000 400,000 CVS Health Corp..................................................... 4.30% 03/25/28 448,476 1,850,000 CVS Health Corp..................................................... 5.13% 07/20/45 2,264,808 4,375,000 CVS Health Corp..................................................... 5.05% 03/25/48 5,387,449 535,000 Elanco Animal Health, Inc........................................... 5.02% 08/28/23 573,405 75,000 Johnson & Johnson................................................... 3.63% 03/03/37 86,437 -------------- 38,020,081 -------------- PIPELINES -- 1.1% 145,000 Energy Transfer Operating L.P....................................... 5.20% 02/01/22 152,899 198,000 Energy Transfer Operating L.P....................................... 5.50% 06/01/27 224,636 260,000 Energy Transfer Operating L.P....................................... 5.15% 03/15/45 271,864 1,000,000 Energy Transfer Operating L.P....................................... 5.00% 05/15/50 1,013,729 405,000 EQM Midstream Partners L.P.......................................... 5.50% 07/15/28 339,694 650,000 Kinder Morgan, Inc.................................................. 5.30% 12/01/34 774,865 55,000 NGPL PipeCo LLC (f)................................................. 4.38% 08/15/22 57,511 276,390 Pipeline Funding Co. LLC (f)........................................ 7.50% 01/15/30 356,230 150,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 2.85% 01/31/23 152,424 200,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 3.85% 10/15/23 210,160 50,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 4.65% 10/15/25 54,480 650,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 4.50% 12/15/26 708,258 425,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 3.55% 12/15/29 418,680 244,000 Rockies Express Pipeline LLC (f).................................... 5.63% 04/15/20 244,756 1,500,000 Rockies Express Pipeline LLC (f).................................... 4.80% 05/15/30 1,458,152 1,360,000 Rockies Express Pipeline LLC (f).................................... 6.88% 04/15/40 1,396,675 421,068 Ruby Pipeline LLC (f)............................................... 6.50% 04/01/22 426,293 325,000 Sabine Pass Liquefaction LLC........................................ 5.63% 03/01/25 369,816 1,000,000 Sabine Pass Liquefaction LLC........................................ 5.00% 03/15/27 1,106,302 1,200,000 Spectra Energy Partners L.P......................................... 4.60% 06/15/21 1,235,382 400,000 Sunoco Logistics Partners Operations L.P............................ 3.90% 07/15/26 423,305 1,606,000 Sunoco Logistics Partners Operations L.P............................ 5.40% 10/01/47 1,699,837 145,000 TC PipeLines L.P.................................................... 4.65% 06/15/21 148,930 1,000,000 TC PipeLines L.P.................................................... 4.38% 03/13/25 1,079,962 1,250,000 TC PipeLines L.P.................................................... 3.90% 05/25/27 1,334,483 400,000 Williams Cos (The), Inc............................................. 4.50% 11/15/23 433,406 600,000 Williams Cos (The), Inc............................................. 4.55% 06/24/24 655,405 -------------- 16,748,134 -------------- REAL ESTATE INVESTMENT TRUSTS -- 1.7% 250,000 Alexandria Real Estate Equities, Inc................................ 4.30% 01/15/26 282,757 800,000 American Campus Communities Operating Partnership L.P............... 4.13% 07/01/24 877,092 250,000 American Campus Communities Operating Partnership L.P............... 3.63% 11/15/27 277,656 215,000 American Tower Corp................................................. 3.00% 06/15/23 224,000 785,000 Boston Properties L.P............................................... 3.20% 01/15/25 843,090 625,000 CC Holdings GS V LLC / Crown Castle GS III Corp..................... 3.85% 04/15/23 663,959 750,000 CubeSmart L.P....................................................... 4.38% 02/15/29 870,862 3,425,000 CyrusOne L.P. / CyrusOne Finance Corp............................... 2.90% 11/15/24 3,477,317 500,000 Digital Realty Trust L.P............................................ 3.63% 10/01/22 522,935 |
Page 20 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) REAL ESTATE INVESTMENT TRUSTS (CONTINUED) $ 2,210,000 GLP Capital L.P. / GLP Financing II, Inc............................ 3.35% 09/01/24 $ 2,296,488 1,000,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.25% 06/01/25 1,121,640 750,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.38% 04/15/26 847,973 1,210,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.30% 01/15/29 1,401,086 475,000 GLP Capital L.P. / GLP Financing II, Inc............................ 4.00% 01/15/30 505,786 1,175,000 Healthcare Realty Trust, Inc........................................ 3.75% 04/15/23 1,238,971 399,000 Healthpeak Properties, Inc.......................................... 4.25% 11/15/23 434,537 475,000 Healthpeak Properties, Inc.......................................... 3.88% 08/15/24 517,340 600,000 Healthpeak Properties, Inc.......................................... 3.25% 07/15/26 647,933 1,000,000 Hudson Pacific Properties L.P....................................... 4.65% 04/01/29 1,167,734 1,000,000 Kilroy Realty L.P................................................... 3.45% 12/15/24 1,073,008 1,300,000 Kimco Realty Corp................................................... 3.40% 11/01/22 1,360,649 200,000 Life Storage L.P.................................................... 3.88% 12/15/27 222,468 40,000 MGM Growth Properties Operating Partnership L.P. / MGP Finance Co.-Issuer, Inc.................................................. 5.63% 05/01/24 43,383 80,000 MGM Growth Properties Operating Partnership L.P. / MGP Finance Co.-Issuer, Inc.................................................. 4.50% 01/15/28 82,228 750,000 National Retail Properties, Inc..................................... 3.80% 10/15/22 795,043 176,000 National Retail Properties, Inc..................................... 3.30% 04/15/23 184,292 350,000 Piedmont Operating Partnership L.P.................................. 3.40% 06/01/23 365,493 750,000 Prologis L.P........................................................ 4.38% 02/01/29 888,582 22,000 SBA Communications Corp............................................. 4.88% 09/01/24 22,655 300,000 SL Green Operating Partnership L.P.................................. 3.25% 10/15/22 311,935 550,000 SL Green Realty Corp................................................ 4.50% 12/01/22 587,604 1,000,000 Ventas Realty L.P................................................... 2.65% 01/15/25 1,037,390 400,000 Ventas Realty L.P................................................... 3.85% 04/01/27 439,295 550,000 WEA Finance LLC (f)................................................. 3.15% 04/05/22 569,702 75,000 Welltower, Inc...................................................... 4.50% 01/15/24 82,387 1,125,000 Welltower, Inc...................................................... 4.00% 06/01/25 1,242,895 -------------- 27,528,165 -------------- RETAIL -- 0.1% 488,000 Rite Aid Corp. (f).................................................. 6.13% 04/01/23 448,350 500,000 Walgreens Boots Alliance, Inc....................................... 3.30% 11/18/21 513,159 150,000 Walgreens Boots Alliance, Inc....................................... 3.80% 11/18/24 160,169 -------------- 1,121,678 -------------- SEMICONDUCTORS -- 0.4% 2,530,000 Broadcom Corp. / Broadcom Cayman Finance Ltd........................ 3.00% 01/15/22 2,579,658 2,880,000 Broadcom Corp. / Broadcom Cayman Finance Ltd........................ 3.63% 01/15/24 3,024,887 935,000 Broadcom, Inc. (f).................................................. 3.63% 10/15/24 984,198 -------------- 6,588,743 -------------- SOFTWARE -- 0.1% 1,400,000 Fiserv, Inc......................................................... 3.20% 07/01/26 1,498,343 440,000 SS&C Technologies, Inc. (f)......................................... 5.50% 09/30/27 461,593 -------------- 1,959,936 -------------- TELECOMMUNICATIONS -- 1.3% 200,000 AT&T, Inc........................................................... 4.30% 02/15/30 229,108 1,000,000 AT&T, Inc........................................................... 5.25% 03/01/37 1,238,861 640,000 AT&T, Inc........................................................... 4.30% 12/15/42 719,246 322,000 AT&T, Inc........................................................... 4.80% 06/15/44 381,493 |
See Notes to Financial Statements Page 21
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) TELECOMMUNICATIONS (CONTINUED) $ 1,630,000 AT&T, Inc........................................................... 4.35% 06/15/45 $ 1,839,958 2,850,000 AT&T, Inc........................................................... 4.75% 05/15/46 3,347,985 500,000 AT&T, Inc........................................................... 5.15% 11/15/46 619,666 1,200,000 AT&T, Inc........................................................... 4.55% 03/09/49 1,392,223 215,000 Level 3 Financing, Inc.............................................. 5.38% 01/15/24 215,093 1,480,000 Level 3 Financing, Inc. (f)......................................... 3.40% 03/01/27 1,541,450 185,000 Qwest Corp.......................................................... 7.25% 09/15/25 216,594 1,000,000 SES GLOBAL Americas Holdings G.P. (f)............................... 5.30% 03/25/44 1,145,969 953,000 Sprint Communications, Inc. (f)..................................... 7.00% 03/01/20 953,000 128,000 Sprint Corp......................................................... 7.88% 09/15/23 146,507 1,419,688 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint Spectrum Co. III LLC (f)......................................... 3.36% 09/20/21 1,432,962 2,835,000 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint Spectrum Co. III LLC (f)......................................... 4.74% 03/20/25 3,041,572 1,335,000 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint Spectrum Co. III LLC (f)......................................... 5.15% 03/20/28 1,512,098 -------------- 19,973,785 -------------- TRANSPORTATION -- 0.0% 270,000 Union Pacific Corp.................................................. 3.95% 09/10/28 307,766 -------------- TOTAL CORPORATE BONDS AND NOTES................................................................ 268,595,367 (Cost $257,225,055) -------------- MORTGAGE-BACKED SECURITIES -- 7.7% COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.2% Alternative Loan Trust 1,052,908 Series 2005-56, Class 1A1, 1 Mo. LIBOR + 0.73% (a)............... 2.36% 11/25/35 1,088,095 3,647,885 Series 2007-13, Class A1......................................... 6.00% 06/25/47 3,102,736 American Home Mortgage Investment Trust 2,523,255 Series 2005-4, Class 1A1, 1 Mo. LIBOR + 0.58% (a)................ 2.21% 11/25/45 2,487,577 Banc of America Funding Trust 715,000 Series 2014-R6, Class 2A13 (b) (f)............................... 1.92% 07/26/36 703,066 BCAP LLC Trust 492,746 Series 2015-RR5, Class 1A3 (b) (f)............................... 6.05% 08/26/36 488,684 Bear Stearns ALT-A Trust 32,291 Series 2004-6, Class 1A, 1 Mo. LIBOR + 0.64% (a)................. 2.27% 07/25/34 32,411 Bear Stearns Mortgage Funding Trust 203,630 Series 2006-AR1, Class 1A1, 1 Mo. LIBOR + 0.21% (a).............. 1.84% 07/25/36 197,588 3,477,050 Series 2006-AR3, Class 1A1, 1 Mo. LIBOR + 0.18% (a).............. 1.81% 10/25/36 3,356,035 6,726,013 Series 2006-AR5, Class 2A1, 1 Mo. LIBOR + 0.19% (a).............. 1.82% 01/25/37 6,468,998 319,293 Series 2007-AR5, Class 1A1G, 1 Mo. LIBOR + 0.16% (a)............. 1.79% 06/25/47 305,558 CIM Trust 3,003,295 Series 2017-3, Class A1, 1 Mo. LIBOR + 2.00% (a) (f)............. 3.66% 01/25/57 3,074,539 2,748,142 Series 2017-6, Class A1 (a) (f).................................. 3.02% 06/25/57 2,809,730 4,789,853 Series 2019-R1, Class A (a) (f).................................. 3.25% 10/25/58 4,830,574 6,303,484 Series 2019-R4, Class A1 (a) (f)................................. 3.00% 10/25/59 6,344,402 Credit Suisse Mortgage Trust 425,649 Series 2010-7R, Class 1A12 (f)................................... 4.00% 01/26/37 433,015 491,230 Series 2010-8R, Class 4A5 (b) (f)................................ 3.85% 12/26/35 498,448 505,576 Series 2010-8R, Class 10A5 (b) (f)............................... 4.00% 04/26/47 506,788 |
Page 22 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Credit Suisse Mortgage Trust (Continued) $ 90,887 Series 2011-5R, Class 2A1 (b) (f)................................ 3.66% 08/27/46 $ 91,618 355,375 Series 2014-2R, Class 19A1 (b) (f)............................... 3.00% 05/27/36 353,829 104,333 Series 2015-8R, Class 3A1, 6 Mo. LIBOR + 1.50% (a) (f)........... 3.40% 11/25/37 104,256 3,867,536 Series 2019-RPL8, Class A1 (a) (f)............................... 3.32% 10/25/58 3,928,982 Deephaven Residential Mortgage Trust 175,856 Series 2017-1A, Class A1 (b) (f)................................. 2.73% 12/26/46 176,058 5,143,052 Series 2019-4A, Class A1 (a) (f)................................. 2.79% 10/25/59 5,187,247 GMACM Mortgage Loan Trust 2,098,747 Series 2006-AR1, Class 1A1 (b)................................... 3.82% 04/19/36 1,950,795 2,615,386 Series 2006-J1, Class A4......................................... 5.75% 04/25/36 2,664,371 GreenPoint Mortgage Funding Trust 184,668 Series 2006-AR1, Class A1A, 1 Mo. LIBOR + 0.58% (a).............. 2.21% 02/25/36 181,710 HarborView Mortgage Loan Trust 584,517 Series 2005-10, Class 2A1A, 1 Mo. LIBOR + 0.31% (a).............. 1.96% 11/19/35 564,421 1,749,557 Series 2007-7, Class 1A1, 1 Mo. LIBOR + 1.00% (a)................ 2.63% 10/25/37 1,686,230 HomeBanc Mortgage Trust 1,334,491 Series 2004-2, Class A1, 1 Mo. LIBOR + 0.74% (a)................. 2.37% 12/25/34 1,356,876 Impac CMB Trust 350,507 Series 2005-2, Class 1A1, 1 Mo. LIBOR + 0.52% (a)................ 2.15% 04/25/35 343,873 1,154,910 Series 2005-4, Class 1A1A, 1 Mo. LIBOR + 0.54% (a)............... 2.17% 05/25/35 1,158,203 IndyMac INDX Mortgage Loan Trust 2,090,468 Series 2005-AR14, Class 2A1A, 1 Mo. LIBOR + 0.30% (a)............ 1.93% 07/25/35 2,039,122 5,345,831 Series 2006-AR6, Class 2A1A, 1 Mo. LIBOR + 0.20% (a)............. 1.83% 06/25/46 4,819,906 6,395,932 Series 2007-FLX4, Class 2A2, 1 Mo. LIBOR + 0.25% (a)............. 1.88% 07/25/37 5,985,450 JP Morgan Mortgage Trust 2,808,934 Series 2006-A4, Class 1A1 (b).................................... 4.37% 06/25/36 2,534,710 Lehman XS Trust 360,297 Series 2006-16N, Class A4A, 1 Mo. LIBOR + 0.19% (a).............. 1.82% 11/25/46 346,091 4,167,072 Series 2007-16N, Class 2A1, 1 Mo. LIBOR + 0.40% (a).............. 2.03% 09/25/47 4,074,809 Merrill Lynch Alternative Note Asset Trust 5,609,169 Series 2007-OAR3, Class A1, 1 Mo. LIBOR + 0.19% (a).............. 1.85% 07/25/47 5,388,953 Morgan Stanley Mortgage Loan Trust 801,310 Series 2004-6AR, Class 1M1, 1 Mo. LIBOR + 0.98% (a).............. 2.60% 07/25/34 813,023 79,666 Series 2005-2AR, Class A, 1 Mo. LIBOR + 0.26% (a)................ 1.89% 04/25/35 79,602 Morgan Stanley Resecuritization Trust 148,173 Series 2015-R2, Class 1A1, 12 Mo. Treasury Average + 0.71% (a) (f)................................................. 2.86% 12/27/46 151,354 MortgageIT Trust 124,803 Series 2005-5, Class A1, 1 Mo. LIBOR + 0.52% (a)................. 2.15% 12/25/35 125,012 Opteum Mortgage Acceptance Corp. 1,631,746 Series 2005-5, Class 1A1D, 1 Mo. LIBOR + 0.38% (a)............... 2.01% 12/25/35 1,591,185 533,934 Series 2006-1, Class 1APT, 1 Mo. LIBOR + 0.21% (a)............... 1.84% 04/25/36 517,679 Stanwich Mortgage Loan Co. LLC 5,201,593 Series 2019-RPL1, Class A, steps up to 3.72% after Redemption Date (f) (h).................................................. 3.72% 03/15/49 5,274,040 Structured Adjustable Rate Mortgage Loan Trust 48,979 Series 2004-12, Class 3A1 (b).................................... 3.98% 09/25/34 50,032 |
See Notes to Financial Statements Page 23
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) Structured Asset Mortgage Investments II Trust $ 3,267,476 Series 2006-AR1, Class 3A1, 1 Mo. LIBOR + 0.23% (a).............. 1.86% 02/25/36 $ 3,065,370 3,435,170 Series 2007-AR6, Class A1, 12 Mo. Treasury Average + 1.50% (a)..................................................... 3.55% 08/25/47 3,393,248 WaMu Mortgage Pass-Through Certificates Trust 141,282 Series 2005-AR1, Class A2A1, 1 Mo. LIBOR + 0.68% (a)............. 2.31% 01/25/45 140,694 254,474 Series 2005-AR15, Class A1A1, 1 Mo. LIBOR + 0.26% (a)............ 1.89% 11/25/45 250,052 365,768 Series 2006-AR3, Class A1A, 12 Mo. Treasury Average + 1.00% (a)..................................................... 3.05% 02/25/46 375,644 524,274 Series 2006-AR4, Class 1A1A, 12 Mo. Treasury Average + 0.94% (a)..................................................... 3.09% 05/25/46 531,063 -------------- 98,023,752 -------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 1.5% Banc of America Merrill Lynch Large Loan Commercial Mortgage Securities Trust 285,000 Series 2015-200P, Class A (f).................................... 3.22% 04/14/33 306,736 1,275,000 Series 2016-ISQ, Class A (f)..................................... 2.85% 08/14/34 1,355,837 1,265,000 Series 2018-PARK, Class A (b) (f)................................ 4.09% 08/10/38 1,480,702 BX Trust 580,000 Series 2019-OC11, Class A (f).................................... 3.20% 12/09/41 637,835 CALI Mortgage Trust 1,125,000 Series 2019-101C, Class A (f).................................... 3.96% 03/10/39 1,309,043 Century Plaza Towers 840,000 Series 2019-CPT, Class A (f)..................................... 2.87% 11/13/39 908,237 COMM Mortgage Trust 225,000 Series 2012-CR5, Class A3........................................ 2.54% 12/10/45 230,811 315,000 Series 2012-CR5, Class A4........................................ 2.77% 12/10/45 325,625 3,000,000 Series 2015-3BP, Class A (f)..................................... 3.18% 02/10/35 3,231,906 DBJPM Mortgage Trust 2,050,000 Series 2016-SFC, Class A (f)..................................... 2.83% 08/10/36 2,159,446 DC Office Trust 900,000 Series 2019-MTC, Class A (f)..................................... 2.97% 09/15/45 976,375 Eleven Madison Mortgage Trust 305,000 Series 2015-11MD, Class A (b) (f)................................ 3.55% 09/10/35 335,114 Hudson Yards Mortgage Trust 1,190,000 Series 2019-30HY, Class A (f).................................... 3.23% 07/10/39 1,324,941 1,200,000 Series 2019-55HY, Class A (a) (f)................................ 2.94% 12/10/41 1,310,023 Irvine Core Office Trust 235,000 Series 2013-IRV, Class A2 (b) (f)................................ 3.17% 05/15/48 245,852 JPMorgan Chase Commercial Mortgage Securities Trust 1,110,000 Series 2019-OSB, Class A (f)..................................... 3.40% 06/05/39 1,243,402 MKT Mortgage Trust 1,730,000 Series 2020-525M, Class A (f).................................... 2.69% 02/12/40 1,846,141 Natixis Commercial Mortgage Securities Trust 1,300,000 Series 2020-2PAC, Class A (f).................................... 2.97% 12/15/38 1,370,942 One Bryant Park Trust 985,000 Series 2019-OBP, Class A (f)..................................... 2.52% 09/15/54 1,028,193 RBS Commercial Funding, Inc. Trust 50,000 Series 2013-GSP, Class A (b) (f)................................. 3.83% 01/15/32 53,788 |
Page 24 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- MORTGAGE-BACKED SECURITIES (CONTINUED) COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED) SFAVE Commercial Mortgage Securities Trust $ 150,000 Series 2015-5AVE, Class A1 (b) (f)............................... 3.87% 01/05/43 $ 165,848 125,000 Series 2015-5AVE, Class A2B (b) (f).............................. 4.14% 01/05/43 138,409 UBS-Barclays Commercial Mortgage Trust 249,678 Series 2013-C6, Class A3......................................... 2.97% 04/10/46 259,353 VNDO Mortgage Trust 250,000 Series 2012-6AVE, Class A (f).................................... 3.00% 11/15/30 259,389 Worldwide Plaza Trust 1,880,000 Series 2017-WWP, Class A (f)..................................... 3.53% 11/10/36 2,097,043 -------------- 24,600,991 -------------- TOTAL MORTGAGE-BACKED SECURITIES............................................................... 122,624,743 (Cost $120,594,737) -------------- ASSET-BACKED SECURITIES -- 6.7% Ajax Mortgage Loan Trust 5,579,816 Series 2019-F, Class A1, steps up to 3.86% after Redemption Date (f) (h).................................................. 2.86% 07/25/59 5,671,826 Ammc CLO 19 Ltd. 2,300,000 Series 2016-19A, Class AR, 3 Mo. LIBOR + 1.14% (a) (f)........... 2.97% 10/16/28 2,298,461 Argent Securities, Inc. 255,000 Series 2005-W2, Class M1, 1 Mo. LIBOR + 0.49% (a)................ 2.12% 10/25/35 254,075 Asset Backed Funding Certificates Trust 104,316 Series 2006-OPT1, Class A2, 1 Mo. LIBOR + 0.14% (a).............. 1.77% 09/25/36 103,104 Barings CLO Ltd. 400,000 Series 2013-IA, Class AR, 3 Mo. LIBOR + 0.80% (a) (f)............ 2.62% 01/20/28 399,560 767,000 Series 2016-2A, Class AR, 3 Mo. LIBOR + 1.08% (a) (f)............ 2.90% 07/20/28 767,546 BlueMountain CLO Ltd. 550,000 Series 2013-2A, Class A1R, 3 Mo. LIBOR + 1.18% (a) (f)........... 2.98% 10/22/30 549,780 Brazos Higher Education Authority, Inc. 270,000 Series 2011-1, Class A3, 3 Mo. LIBOR + 1.05% (a)................. 2.73% 11/25/33 271,286 300,000 Series 2011-2, Class A3, 3 Mo. LIBOR + 1.00% (a)................. 2.79% 10/27/36 301,876 Carrington Mortgage Loan Trust 1,470,000 Series 2006-OPT1, Class M1, 1 Mo. LIBOR + 0.35% (a).............. 1.98% 02/25/36 1,466,407 Citigroup Mortgage Loan Trust 1,600,000 Series 2006-HE2, Class M1, 1 Mo. LIBOR + 0.29% (a)............... 1.92% 08/25/36 1,585,042 Dryden Senior Loan Fund 900,000 Series 2013-26A, Class AR, 3 Mo. LIBOR + 0.90% (a) (f)........... 2.73% 04/15/29 895,050 572,000 Series 2013-28A, Class A1LR, 3 Mo. LIBOR + 1.20% (a) (f)......... 2.89% 08/15/30 572,057 ECMC Group Student Loan Trust 1,815,145 Series 2017-2A, Class A, 1 Mo. LIBOR + 1.05% (a) (f)............. 2.68% 05/25/67 1,831,551 EFS Volunteer No 3 LLC 165,490 Series 2012-1, Class A3, 1 Mo. LIBOR + 1.00% (a) (f)............. 2.63% 04/25/33 165,082 First Franklin Mortgage Loan Trust 277,048 Series 2006-FF13, Class A2C, 1 Mo. LIBOR + 0.16% (a)............. 1.79% 10/25/36 216,515 GE-WMC Mortgage Securities LLC 1,063,914 Series 2005-1, Class M1, 1 Mo. LIBOR + 0.66% (a)................. 2.29% 10/25/35 1,063,221 Goal Capital Funding Trust 5,100,000 Series 2007-1, Class A5, 3 Mo. LIBOR + 0.16% (a)................. 2.11% 03/25/42 4,426,842 GoldenTree Loan Management US CLO Ltd. 3,000,000 Series 2017-1A, Class AR, 3 Mo. LIBOR + 0.95% (a) (f)............ 2.60% 04/20/29 3,003,200 |
See Notes to Financial Statements Page 25
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- ASSET-BACKED SECURITIES (CONTINUED) GSAA Home Equity Trust $ 1,700,000 Series 2005-6, Class M1, 1 Mo. LIBOR + 0.43% (a)................. 2.06% 06/25/35 $ 1,711,543 JP Morgan Mortgage Acquisition Trust 205,674 Series 2006-ACC1, Class M1, 1 Mo. LIBOR + 0.27% (a).............. 1.90% 05/25/36 204,757 2,699,549 Series 2006-WF1, Class A6, steps up to 6.50% after Redemption Date (h)...................................................... 6.00% 07/25/36 1,325,201 405,000 Series 2007-CH2, Class MV1, 1 Mo. LIBOR + 0.28% (a).............. 1.91% 01/25/37 397,533 Legacy Mortgage Asset Trust 3,425,394 Series 2019-GS1, Class A1 (a) (f)................................ 4.00% 01/25/59 3,494,757 2,289,334 Series 2019-GS4, Class A1 (a) (f)................................ 3.44% 05/25/59 2,327,797 Long Beach Mortgage Loan Trust 917,813 Series 2006-1, Class 1A, 1 Mo. LIBOR + 0.22% (a)................. 1.85% 02/25/36 902,780 Magnetite CLO Ltd. 800,000 Series 2019-21A, Class A, 3 Mo. LIBOR + 1.28% (a) (f)............ 3.10% 04/20/30 801,440 Mastr Asset Backed Securities Trust 8,545,744 Series 2006-WMC3, Class A2, 1 Mo. LIBOR + 0.05% (a).............. 1.68% 08/25/36 4,060,559 Merrill Lynch First Franklin Mortgage Loan Trust 388,635 Series 2007-3, Class A2B, 1 Mo. LIBOR + 0.13% (a)................ 1.76% 06/25/37 315,679 Mid-State Trust 203,049 Series 2003-11, Class A1......................................... 4.86% 07/15/38 218,360 Morgan Stanley ABS Capital I, Inc. Trust 1,000,000 Series 2006-NC1, Class M1, 1 Mo. LIBOR + 0.38% (a)............... 2.01% 12/25/35 995,411 Navient Student Loan Trust 302,416 Series 2014-1, Class A3, 1 Mo. LIBOR + 0.51% (a)................. 2.14% 06/25/31 297,873 243,626 Series 2014-3, Class A, 1 Mo. LIBOR + 0.62% (a).................. 2.25% 03/25/83 238,581 77,380 Series 2014-5, Class A, 1 Mo. LIBOR + 0.62% (a).................. 2.25% 03/25/83 75,523 144,028 Series 2014-8, Class A3, 1 Mo. LIBOR + 0.60% (a)................. 2.23% 05/27/49 140,863 203,917 Series 2015-1, Class A2, 1 Mo. LIBOR + 0.60% (a)................. 2.23% 04/25/40 200,602 1,750,000 Series 2016-2A, Class A3, 1 Mo. LIBOR + 1.50% (a) (f)............ 3.13% 06/25/65 1,799,907 4,142,304 Series 2016-5A, Class A, 1 Mo. LIBOR + 1.25% (a) (f)............. 2.88% 06/25/65 4,176,809 300,000 Series 2017-3A, Class A3, 1 Mo. LIBOR + 1.05% (a) (f)............ 2.68% 07/26/66 300,422 3,774,675 Series 2017-5A, Class A, 1 Mo. LIBOR + 0.80% (a) (f)............. 2.43% 07/26/66 3,728,732 New Century Home Equity Loan Trust 2,600,000 Series 2005-4, Class M3, 1 Mo. LIBOR + 0.55% (a)................. 2.18% 09/25/35 2,588,479 Palmer Square Loan Funding Ltd. 238,367 Series 2019-1A, Class A1, 3 Mo. LIBOR + 1.05% (a) (f)............ 2.87% 04/20/27 238,391 2,093,513 Series 2019-4A, Class A1, 3 Mo. LIBOR + 0.90% (a) (f)............ 2.70% 10/24/27 2,092,884 Residential Asset Mortgage Products, Inc. 230,023 Series 2006-RZ1, Class M2, 1 Mo. LIBOR + 0.42% (a)............... 2.05% 03/25/36 230,790 2,000,000 Series 2006-RZ1, Class M3, 1 Mo. LIBOR + 0.45% (a)............... 2.08% 03/25/36 2,005,329 Residential Asset Securities Corp. 260,000 Series 2006-EMX3, Class A3, 1 Mo. LIBOR + 0.28% (a).............. 1.91% 04/25/36 254,942 1,445,000 Series 2006-KS3, Class M1, 1 Mo. LIBOR + 0.33% (a)............... 1.96% 04/25/36 1,432,018 31,120 Series 2006-KS4, Class A4, 1 Mo. LIBOR + 0.24% (a)............... 1.87% 06/25/36 31,190 Saxon Asset Securities Trust 761,476 Series 2007-2, Class A2C, 1 Mo. LIBOR + 0.24% (a)................ 1.87% 05/25/47 650,218 Securitized Asset-Backed Receivables LLC Trust 205,073 Series 2006-OP1, Class M2, 1 Mo. LIBOR + 0.39% (a)............... 2.02% 10/25/35 205,438 |
Page 26 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- ASSET-BACKED SECURITIES (CONTINUED) SLC Student Loan Trust $ 400,000 Series 2005-2, Class A4, 3 Mo. LIBOR + 0.16% (a)................. 2.05% 12/15/39 $ 382,253 5,054,000 Series 2006-1, Class A6, 3 Mo. LIBOR + 0.16% (a)................. 2.05% 03/15/55 4,747,614 130,000 Series 2006-2, Class A6, 3 Mo. LIBOR + 0.16% (a)................. 2.05% 09/15/39 123,634 2,129,228 Series 2008-1, Class A4A, 3 Mo. LIBOR + 1.60% (a)................ 3.49% 12/15/32 2,168,747 SLM Student Loan Trust 161,805 Series 2003-10A, Class A3, 3 Mo. LIBOR + 0.47% (a) (f)........... 2.36% 12/15/27 162,340 250,000 Series 2005-5, Class A5, 3 Mo. LIBOR + 0.75% (a)................. 2.54% 10/25/40 241,561 627,956 Series 2005-9, Class A7A, 3 Mo. LIBOR + 0.60% (a)................ 2.39% 01/25/41 616,285 213,207 Series 2006-2, Class A6, 3 Mo. LIBOR + 0.17% (a)................. 1.96% 01/25/41 205,055 600,000 Series 2006-8, Class A6, 3 Mo. LIBOR + 0.16% (a)................. 1.95% 01/25/41 567,606 72,179 Series 2007-6, Class A4, 3 Mo. LIBOR + 0.38% (a)................. 2.17% 10/25/24 72,234 80,000 Series 2007-7, Class B, 3 Mo. LIBOR + 0.75% (a).................. 2.54% 10/27/70 74,119 957,413 Series 2008-1, Class A4, 3 Mo. LIBOR + 0.65% (a)................. 2.44% 01/25/22 942,625 5,650,145 Series 2008-2, Class A3, 3 Mo. LIBOR + 0.75% (a)................. 2.54% 04/25/23 5,452,393 130,000 Series 2008-2, Class B, 3 Mo. LIBOR + 1.20% (a).................. 2.99% 01/25/83 119,577 700,000 Series 2008-3, Class B, 3 Mo. LIBOR + 1.20% (a).................. 2.99% 04/26/83 649,933 5,776,066 Series 2008-6, Class A4, 3 Mo. LIBOR + 1.10% (a)................. 2.89% 07/25/23 5,722,897 320,000 Series 2008-7, Class B, 3 Mo. LIBOR + 1.85% (a).................. 3.64% 07/26/83 314,550 2,843,486 Series 2008-8, Class A4, 3 Mo. LIBOR + 1.50% (a)................. 3.29% 04/25/23 2,860,647 345,000 Series 2011-1, Class A2, 1 Mo. LIBOR + 1.15% (a)................. 2.78% 10/25/34 347,842 4,150,000 Series 2011-2, Class A2, 1 Mo. LIBOR + 1.20% (a)................. 2.83% 10/25/34 4,207,322 797,535 Series 2012-2, Class A, 1 Mo. LIBOR + 0.70% (a).................. 2.33% 01/25/29 780,080 787,662 Series 2012-3, Class A, 1 Mo. LIBOR + 0.65% (a).................. 2.28% 12/27/38 784,199 299,183 Series 2012-6, Class A3, 1 Mo. LIBOR + 0.75% (a)................. 2.38% 05/26/26 297,424 4,215,323 Series 2012-7, Class A3, 1 Mo. LIBOR + 0.65% (a)................. 2.28% 05/26/26 4,075,929 555,000 Series 2012-7, Class B, 1 Mo. LIBOR + 1.80% (a).................. 3.43% 09/25/43 553,087 150,438 Series 2013-2, Class A, 1 Mo. LIBOR + 0.45% (a).................. 2.08% 06/25/43 148,669 Soundview Home Loan Trust 76,400 Series 2006-2, Class M1, 1 Mo. LIBOR + 0.33% (a)................. 1.96% 03/25/36 76,610 Structured Asset Investment Loan Trust 1,002,759 Series 2004-6, Class A3, 1 Mo. LIBOR + 0.80% (a)................. 2.43% 07/25/34 995,292 291,732 Series 2005-2, Class M2, 1 Mo. LIBOR + 0.74% (a)................. 2.36% 03/25/35 292,642 Structured Asset Securities Corp. Mortgage Loan Trust 1,350,000 Series 2005-NC2, Class M5, 1 Mo. LIBOR + 0.62% (a)............... 2.25% 05/25/35 1,349,239 TCI-Flatiron CLO Ltd. 700,000 Series 2016-1A, Class AR, 3 Mo. LIBOR + 1.22% (a) (f)............ 3.06% 07/17/28 700,140 Towd Point Mortgage Trust 582,833 Series 2015-2, Class 1A13 (a) (f)................................ 2.50% 11/25/60 585,894 Treman Park CLO Ltd. 850,000 Series 2015-1A, Class ARR, 3 Mo. LIBOR + 1.07% (a) (f)........... 2.89% 10/20/28 850,170 Voya CLO Ltd. 180,152 Series 2014-3A, Class A1R, 3 Mo. LIBOR + 0.72% (a) (f)........... 2.51% 07/25/26 180,008 Wachovia Student Loan Trust 1,104,072 Series 2006-1, Class A6, 3 Mo. LIBOR + 0.17% (a) (f)............. 1.96% 04/25/40 1,059,482 -------------- TOTAL ASSET-BACKED SECURITIES.................................................................. 105,995,388 (Cost $106,232,958) -------------- |
See Notes to Financial Statements Page 27
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL VALUE (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR) -------------- -------------------------------------------------------------------- ----------- ------------ -------------- FOREIGN CORPORATE BONDS AND NOTES -- 4.4% AIRLINES -- 0.0% 692,400 Air Canada Pass-Through Trust, Series 2017-1, Class AA (USD) (f)........................................................ 3.30% 01/15/30 $ 752,416 -------------- BANKS -- 0.8% 600,000 Banco Nacional de Comercio Exterior SNC (USD) (f) (g)............... 3.80% 08/11/26 607,715 400,000 Global Bank Corp. (USD) (g) (i)..................................... 5.25% 04/16/29 437,500 1,195,000 Lloyds Banking Group PLC (USD) (g).................................. 2.86% 03/17/23 1,218,372 3,125,000 Lloyds Banking Group PLC (USD) (g).................................. 2.91% 11/07/23 3,199,236 1,870,000 Lloyds Banking Group PLC (USD)...................................... 3.90% 03/12/24 2,011,116 1,800,000 Santander UK Group Holdings PLC (USD)............................... 2.88% 08/05/21 1,832,106 500,000 Santander UK Group Holdings PLC (USD) (g)........................... 3.37% 01/05/24 519,450 1,900,000 Santander UK Group Holdings PLC (USD) (g)........................... 4.80% 11/15/24 2,071,662 -------------- 11,897,157 -------------- BEVERAGES -- 0.1% 245,000 Bacardi Ltd. (USD) (f).............................................. 4.70% 05/15/28 280,778 385,000 Bacardi Ltd. (USD) (f).............................................. 5.30% 05/15/48 497,196 -------------- 777,974 -------------- COMMERCIAL SERVICES -- 0.4% 600,000 DP World Crescent Ltd. (USD) (f).................................... 4.85% 09/26/28 650,561 889,000 IHS Markit Ltd. (USD) (f)........................................... 5.00% 11/01/22 961,819 2,500,000 IHS Markit Ltd. (USD)............................................... 3.63% 05/01/24 2,653,579 795,000 IHS Markit Ltd. (USD) (f)........................................... 4.75% 02/15/25 883,380 135,000 IHS Markit Ltd. (USD) (f)........................................... 4.00% 03/01/26 147,413 250,000 IHS Markit Ltd. (USD)............................................... 4.75% 08/01/28 291,941 -------------- 5,588,693 -------------- DIVERSIFIED FINANCIAL SERVICES -- 1.1% 375,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust (USD)............................................................ 4.50% 05/15/21 387,473 800,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust (USD)............................................................ 5.00% 10/01/21 838,418 1,500,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust (USD)............................................................ 3.95% 02/01/22 1,554,959 1,000,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust (USD)............................................................ 4.13% 07/03/23 1,064,538 1,000,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust (USD)............................................................ 4.88% 01/16/24 1,089,425 3,380,000 Avolon Holdings Funding Ltd. (USD) (f).............................. 5.13% 10/01/23 3,625,657 135,000 Avolon Holdings Funding Ltd. (USD) (f).............................. 5.25% 05/15/24 147,274 885,000 Avolon Holdings Funding Ltd. (USD) (f).............................. 2.88% 02/15/25 885,489 840,000 Fondo Mivivienda S.A. (USD) (i)..................................... 3.50% 01/31/23 865,557 3,035,000 GE Capital International Funding Co. Unlimited Co. (USD)............ 2.34% 11/15/20 3,043,611 375,000 GE Capital International Funding Co. Unlimited Co. (USD)............ 4.42% 11/15/35 429,240 1,020,000 Park Aerospace Holdings Ltd. (USD) (f).............................. 5.25% 08/15/22 1,086,108 850,000 Park Aerospace Holdings Ltd. (USD) (f).............................. 4.50% 03/15/23 889,475 750,000 Park Aerospace Holdings Ltd. (USD) (f).............................. 5.50% 02/15/24 825,461 -------------- 16,732,685 -------------- |
Page 28 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL VALUE (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR) -------------- -------------------------------------------------------------------- ----------- ------------ -------------- FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) ELECTRIC -- 0.0% 400,000 Minejesa Capital B.V. (USD) (f)..................................... 5.63% 08/10/37 $ 449,374 250,000 Mong Duong Finance Holdings B.V. (USD) (i).......................... 5.13% 05/07/29 263,065 -------------- 712,439 -------------- ENVIRONMENTAL CONTROL -- 0.0% 745,000 GFL Environmental, Inc. (USD) (f)................................... 5.13% 12/15/26 772,938 -------------- HOUSEHOLD PRODUCTS/WARES -- 0.0% 200,000 Reckitt Benckiser Treasury Services PLC (USD) (f)................... 2.75% 06/26/24 209,777 -------------- MEDIA -- 0.0% 400,000 Virgin Media Secured Finance PLC (USD) (f).......................... 5.50% 08/15/26 412,556 200,000 Virgin Media Secured Finance PLC (USD) (f).......................... 5.50% 05/15/29 205,630 -------------- 618,186 -------------- MINING -- 0.2% 64,000 Corp. Nacional del Cobre de Chile (USD) (i)......................... 4.50% 09/16/25 71,408 900,000 Corp. Nacional del Cobre de Chile (USD) (i)......................... 3.63% 08/01/27 966,444 1,110,000 Indonesia Asahan Aluminium Persero PT (USD) (f)..................... 6.53% 11/15/28 1,372,817 -------------- 2,410,669 -------------- OIL & GAS -- 0.4% 20,000 Canadian Natural Resources Ltd. (USD)............................... 3.85% 06/01/27 21,268 200,000 Ecopetrol S.A. (USD)................................................ 5.88% 05/28/45 239,687 880,000 KazMunayGas National Co. JSC (USD) (i).............................. 5.38% 04/24/30 1,026,002 75,000 Petrobras Global Finance B.V. (USD) (f)............................. 5.09% 01/15/30 80,344 215,000 Petroleos Mexicanos (USD)........................................... 6.63% 06/15/35 215,846 2,430,000 Petroleos Mexicanos (USD)........................................... 6.75% 09/21/47 2,327,247 1,920,000 Petroleos Mexicanos (USD) (f)....................................... 7.69% 01/23/50 2,006,698 197,895 Transocean Pontus Ltd. (USD) (f).................................... 6.13% 08/01/25 200,367 517,000 Transocean Poseidon Ltd. (USD) (f).................................. 6.88% 02/01/27 526,059 -------------- 6,643,518 -------------- OIL & GAS SERVICES -- 0.0% 353,500 Transocean Phoenix 2 Ltd. (USD) (f)................................. 7.75% 10/15/24 364,252 17,500 Transocean Proteus Ltd. (USD) (f)................................... 6.25% 12/01/24 17,726 -------------- 381,978 -------------- PACKAGING & CONTAINERS -- 0.0% 400,000 Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc. (USD) (f)........................................................ 4.13% 08/15/26 399,250 51,000 OI European Group B.V. (USD) (f).................................... 4.00% 03/15/23 51,723 -------------- 450,973 -------------- PHARMACEUTICALS -- 0.2% 1,550,000 Allergan Funding SCS (USD).......................................... 3.80% 03/15/25 1,694,930 300,000 AstraZeneca PLC (USD)............................................... 3.50% 08/17/23 320,782 522,000 Bausch Health Cos., Inc. (USD) (f).................................. 6.50% 03/15/22 529,804 550,000 Bausch Health Cos., Inc. (USD) (f).................................. 7.00% 03/15/24 567,416 -------------- 3,112,932 -------------- PIPELINES -- 0.0% 600,000 Peru LNG SRL (USD) (i).............................................. 5.38% 03/22/30 511,709 -------------- |
See Notes to Financial Statements Page 29
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL VALUE (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR) -------------- -------------------------------------------------------------------- ----------- ------------ -------------- FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) RETAIL -- 0.1% 100,000 Alimentation Couche-Tard, Inc. (USD) (f)............................ 3.55% 07/26/27 $ 108,425 2,030,000 Alimentation Couche-Tard, Inc. (USD) (f)............................ 3.80% 01/25/50 2,019,554 -------------- 2,127,979 -------------- SAVINGS & LOANS -- 0.4% 4,895,000 Nationwide Building Society (USD) (f) (g)........................... 3.62% 04/26/23 5,090,468 360,000 Nationwide Building Society (USD) (f) (g)........................... 3.77% 03/08/24 377,121 300,000 Nationwide Building Society (USD) (f) (g)........................... 4.36% 08/01/24 322,353 -------------- 5,789,942 -------------- SEMICONDUCTORS -- 0.1% 1,205,000 NXP B.V. / NXP Funding LLC (USD) (f)................................ 4.13% 06/01/21 1,239,095 -------------- TELECOMMUNICATIONS -- 0.6% 200,000 C&W Senior Financing DAC (USD) (f).................................. 6.88% 09/15/27 211,464 1,970,000 Intelsat Jackson Holdings S.A. (USD) (f)............................ 8.50% 10/15/24 1,704,868 390,000 Intelsat Jackson Holdings S.A. (USD) (f)............................ 9.75% 07/15/25 344,744 725,000 Koninklijke KPN N.V. (USD).......................................... 8.38% 10/01/30 1,017,745 500,000 SES S.A. (USD) (f).................................................. 3.60% 04/04/23 521,364 330,000 Vodafone Group PLC (USD)............................................ 3.75% 01/16/24 355,027 2,777,000 Vodafone Group PLC (USD)............................................ 4.88% 06/19/49 3,344,274 1,375,000 Vodafone Group PLC (USD)............................................ 4.25% 09/17/50 1,519,971 -------------- 9,019,457 -------------- TOTAL FOREIGN CORPORATE BONDS AND NOTES........................................................ 69,750,517 (Cost $67,704,694) -------------- FOREIGN SOVEREIGN BONDS AND NOTES -- 0.8% BAHRAIN -- 0.0% 600,000 Bahrain Government International Bond (USD) (i)..................... 7.00% 10/12/28 695,736 -------------- BRAZIL -- 0.1% 1,100,000 Brazilian Government International Bond (USD)....................... 4.63% 01/13/28 1,210,561 -------------- COLOMBIA -- 0.0% 684,000 Colombia Government International Bond (USD)........................ 4.50% 01/28/26 758,539 -------------- DOMINICAN REPUBLIC -- 0.0% 700,000 Dominican Republic International Bond (USD) (i)..................... 6.00% 07/19/28 775,500 -------------- EGYPT -- 0.1% 800,000 Egypt Government International Bond (USD) (f)....................... 5.58% 02/21/23 829,934 -------------- MEXICO -- 0.1% 900,000 Mexico Government International Bond (USD).......................... 3.25% 04/16/30 925,875 -------------- OMAN -- 0.1% 840,000 Oman Government International Bond (USD) (f)........................ 5.63% 01/17/28 840,142 -------------- PARAGUAY -- 0.0% 600,000 Paraguay Government International Bond (USD) (i).................... 4.63% 01/25/23 637,005 -------------- QATAR -- 0.1% 1,140,000 Qatar Government International Bond (USD) (i)....................... 4.50% 04/23/28 1,322,400 -------------- RUSSIA -- 0.1% 800,000 Russian Foreign Bond - Eurobond (USD) (i)........................... 4.38% 03/21/29 890,210 -------------- SAUDI ARABIA -- 0.1% 1,100,000 Saudi Government International Bond (USD) (i)....................... 3.63% 03/04/28 1,181,542 -------------- |
Page 30 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL VALUE (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR) -------------- -------------------------------------------------------------------- ----------- ------------ -------------- FOREIGN SOVEREIGN BONDS AND NOTES (CONTINUED) SOUTH AFRICA -- 0.1% 1,200,000 Republic of South Africa Government International Bond (USD)........ 4.67% 01/17/24 $ 1,258,464 -------------- TURKEY -- 0.0% 400,000 Turkey Government International Bond (USD).......................... 3.25% 03/23/23 381,000 -------------- URUGUAY -- 0.0% 640,000 Uruguay Government International Bond (USD)......................... 4.38% 01/23/31 736,806 -------------- TOTAL FOREIGN SOVEREIGN BONDS AND NOTES........................................................ 12,443,714 (Cost $12,140,709) -------------- |
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- MUNICIPAL BONDS -- 0.6% CALIFORNIA -- 0.5% $ 300,000 CA St Build America Bonds........................................... 7.95% 03/01/36 301,536 2,585,000 Los Angeles CA Unified School District.............................. 5.75% 07/01/34 3,542,148 3,910,000 Regents of the University of CA Medical Center Pooled Revenue.......................................................... 3.26% 05/15/60 4,013,185 -------------- 7,856,869 -------------- NEW JERSEY -- 0.1% 500,000 New Jersey St Turnpike Authority Revenue............................ 3.73% 01/01/36 588,690 -------------- NEW YORK -- 0.0% 400,000 New York City NY Transitional Fin Auth Rev Qualified Sch Constr, Ser BD G-3....................................................... 5.27% 05/01/27 496,492 -------------- TOTAL MUNICIPAL BONDS.......................................................................... 8,942,051 (Cost $8,468,284) -------------- CAPITAL PREFERRED SECURITIES -- 0.0% ELECTRIC -- 0.0% 300,000 Alabama Power Capital Trust V, 3 Mo. LIBOR + 3.10% (a).............. 5.01% 10/01/42 300,147 -------------- TOTAL CAPITAL PREFERRED SECURITIES............................................................. 300,147 (Cost $290,250) -------------- U.S. TREASURY BILLS -- 2.8% 1,007,000 U.S. Treasury Bill (j).............................................. (k) 03/19/20 1,006,324 43,305,000 U.S. Treasury Bill.................................................. (k) 04/21/20 43,223,352 145,000 U.S. Treasury Bill.................................................. (k) 05/07/20 144,656 -------------- TOTAL U.S. TREASURY BILLS...................................................................... 44,374,332 (Cost $44,360,729) -------------- |
SHARES DESCRIPTION VALUE -------------- ----------------------------------------------------------------------------------------------- -------------- MONEY MARKET FUNDS -- 8.0% 127,216,564 JPMorgan 100% U.S. Treasury Securities Money Market - Fund Institutional Class - 1.41% (l)..... 127,216,564 (Cost $127,216,564) -------------- TOTAL INVESTMENTS -- 116.3%.................................................................... 1,848,297,594 (Cost $1,801,787,871) (m) NET OTHER ASSETS AND LIABILITIES -- (16.3)%.................................................... (259,384,038) -------------- NET ASSETS -- 100.0%........................................................................... $1,588,913,556 ============== |
See Notes to Financial Statements Page 31
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
FUTURES CONTRACTS AT FEBRUARY 29, 2020 (see Note 2C - Futures Contracts in the Notes to Financial Statements):
UNREALIZED APPRECIATION NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/ FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE ------------------------------ ------------ --------------- -------------- ------------- -------------- U.S. 2-Year Treasury Notes Long 165 Jun-2020 $ 36,024,141 $ 315,242 U.S. 5-Year Treasury Notes Long 1,169 Jun-2020 143,494,750 2,789,326 ------------- -------------- $ 179,518,891 $ 3,104,568 ============= ============== |
INTEREST RATE SWAP AGREEMENTS AT FEBRUARY 29, 2020 (see Note 2E - Swap
Agreements in the Notes to Financial Statements):
UNREALIZED APPRECIATION FLOATING EXPIRATION NOTIONAL FIXED (DEPRECIATION)/ COUNTERPARTY RATE DATE VALUE RATE VALUE ------------------------------ ----------------- --------------- -------------- ------------- -------------- Citibank, Global Markets, Inc. 3 month LIBOR(1) 1/21/2023 $ 105,720,000 1.580%(1) $ 1,550,254 Citibank, Global Markets, Inc. 3 month LIBOR(2) 1/21/2026 43,005,000 1.675%(2) (1,537,795) -------------- -------------- $ 148,725,000 $ 12,459 ============== ============== |
(1) The Fund pays the floating rate and receives the fixed rate. The floating rate is not effective until 1/21/2021 and no interest is being accrued until that date.
(2) The Fund pays the fixed rate and receives the floating rate. The floating rate is not effective until 1/21/2021 and no interest is being accrued until that date.
(b) Collateral Strip Rate security. Coupon is based on the weighted net interest rate of the investment's underlying collateral. The interest rate resets periodically.
(c) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At February 29, 2020, securities noted as such are valued at $2,114,700 or 0.1% of net assets.
(d) All or a portion of this security is part of a mortgage dollar roll agreement (see Note 2I - Mortgage Dollar Rolls in the Notes to Financial Statements).
(e) Security whose principal value is adjusted in accordance with changes to the country's Consumer Price Index. Interest is calculated on the basis of the current adjusted principal value.
(f) This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the "1933 Act"), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P., the Fund's Advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At February 29, 2020, securities noted as such amounted to $181,914,557 or 11.4% of net assets.
(g) Fixed-to-floating security. At a predetermined date, the fixed rate will change to a floating rate.
(h) Step-up security. A security where the coupon increases or steps up at a predetermined date.
(i) This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act.
(j) All or a portion of this security is segregated as collateral for open futures contracts.
(k) Zero coupon security.
(l) Rate shown reflects yield as of February 29, 2020.
Page 32 See Notes to Financial Statements
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
(m) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $53,929,303 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $4,302,553. The net unrealized appreciation was $49,626,750. The amounts presented are inclusive of derivative contracts.
LIBOR - London Interbank Offered Rate
SOFR - Secured Overnight Financing Rate
TBA - To-Be-Announced Security
Currency Abbreviations:
USD United States Dollar
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- U.S. Government Agency Mortgage-Backed Securities.................................... $ 649,027,092 $ -- $ 649,027,092 $ -- U.S. Government Bonds and Notes.................. 439,027,679 -- 439,027,679 -- Corporate Bonds and Notes*....................... 268,595,367 -- 268,595,367 -- Mortgage-Backed Securities....................... 122,624,743 -- 122,624,743 -- Asset-Backed Securities.......................... 105,995,388 -- 105,995,388 -- Foreign Corporate Bonds and Notes*............... 69,750,517 -- 69,750,517 -- Foreign Sovereign Bonds and Notes**.............. 12,443,714 -- 12,443,714 -- Municipal Bonds***............................... 8,942,051 -- 8,942,051 -- Capital Preferred Securities*.................... 300,147 -- 300,147 -- U.S. Treasury Bills.............................. 44,374,332 -- 44,374,332 -- Money Market Funds............................... 127,216,564 127,216,564 -- -- -------------- -------------- -------------- -------------- Total Investments................................ 1,848,297,594 127,216,564 1,721,081,030 -- Futures Contracts****............................ 3,104,568 3,104,568 -- -- Interest Rate Swap Agreements.................... 1,550,254 -- 1,550,254 -- -------------- -------------- -------------- -------------- Total............................................ $1,852,952,416 $ 130,321,132 $1,722,631,284 $ -- ============== ============== ============== ============== LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- Interest Rate Swap Agreements.................... $ (1,537,795) $ -- $ (1,537,795) $ -- ============== ============== ============== ============== |
* See Portfolio of Investments for industry breakout. ** See Portfolio of Investments for country breakout. *** See Portfolio of Investments for state breakout. **** Includes cumulative appreciation/depreciation on futures contracts as reported in the Futures Contracts table. Only the current day's variation margin is presented on the Statements of Assets and Liabilities.
See Notes to Financial Statements Page 33
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES -- 33.6% AEROSPACE/DEFENSE -- 0.3% $ 200,000 BAE Systems Holdings, Inc. (a)...................................... 2.85% 12/15/20 $ 201,337 510,000 Northrop Grumman Corp............................................... 2.93% 01/15/25 540,857 -------------- 742,194 -------------- AGRICULTURE -- 0.4% 250,000 BAT Capital Corp.................................................... 4.54% 08/15/47 260,677 645,000 Reynolds American, Inc.............................................. 5.85% 08/15/45 772,178 -------------- 1,032,855 -------------- AIRLINES -- 0.8% 363,265 American Airlines Pass-Through Trust, Series 2014-1, Class A........ 3.70% 10/01/26 395,270 323,605 Continental Airlines Pass-Through Trust, Series 2007-1, Class A..... 5.98% 04/19/22 342,020 318,073 Delta Air Lines Pass-Through Trust, Series 2002-1, Class G1......... 6.72% 01/02/23 340,059 545,795 United Airlines Pass-Through Trust, Series 2013-1, Class A.......... 4.30% 08/15/25 599,781 45,698 US Airways Pass-Through Trust, Series 2001-011G..................... 7.08% 03/20/21 47,466 146,255 US Airways Pass-Through Trust, Series 2012-1, Class A............... 5.90% 10/01/24 165,736 -------------- 1,890,332 -------------- AUTO MANUFACTURERS -- 2.1% 310,000 Daimler Finance North America LLC (a)............................... 2.20% 10/30/21 312,434 520,000 Daimler Finance North America LLC, 3 Mo. LIBOR + 0.90% (a) (b).................................................... 2.59% 02/15/22 524,921 350,000 Ford Motor Credit Co. LLC........................................... 3.20% 01/15/21 352,354 30,000 Ford Motor Credit Co. LLC........................................... 5.75% 02/01/21 30,873 125,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.81% (b).................. 2.71% 04/05/21 124,290 945,000 Ford Motor Credit Co. LLC........................................... 5.88% 08/02/21 987,433 300,000 Ford Motor Credit Co. LLC, 3 Mo. LIBOR + 0.88% (b).................. 2.73% 10/12/21 296,760 170,000 Ford Motor Credit Co. LLC........................................... 3.81% 10/12/21 173,512 600,000 Ford Motor Credit Co. LLC........................................... 3.22% 01/09/22 602,644 300,000 Ford Motor Credit Co. LLC........................................... 3.34% 03/28/22 303,161 250,000 General Motors Financial Co., Inc................................... 4.20% 03/01/21 253,843 475,000 General Motors Financial Co., Inc................................... 3.55% 04/09/21 482,774 405,000 General Motors Financial Co., Inc................................... 3.20% 07/06/21 409,887 65,000 General Motors Financial Co., Inc................................... 4.38% 09/25/21 67,215 80,000 General Motors Financial Co., Inc................................... 3.45% 04/10/22 82,058 -------------- 5,004,159 -------------- BANKS -- 5.7% 65,000 Bank of America Corp. (c)........................................... 3.00% 12/20/23 67,385 1,245,000 Bank of America Corp., Medium-Term Note (c)......................... 3.50% 05/17/22 1,273,562 200,000 Bank of America Corp., Medium-Term Note (c)......................... 3.97% 03/05/29 224,221 5,000 Bank of America Corp., Medium-Term Note (c)......................... 4.27% 07/23/29 5,756 465,000 Bank of America Corp., Medium-Term Note (c)......................... 3.97% 02/07/30 528,214 420,000 Bank of New York Mellon (The) Corp., Medium-Term Note (c)........... 2.66% 05/16/23 430,152 1,360,000 Citigroup, Inc...................................................... 2.90% 12/08/21 1,388,240 100,000 Citigroup, Inc. (c)................................................. 2.88% 07/24/23 102,831 500,000 Citigroup, Inc. (c)................................................. 3.35% 04/24/25 529,532 525,000 Citigroup, Inc. (c)................................................. 4.08% 04/23/29 597,417 300,000 Goldman Sachs Group, (The), Inc. (c)................................ 2.88% 10/31/22 306,054 640,000 Goldman Sachs Group, (The), Inc..................................... 2.60% 02/07/30 650,032 200,000 JPMorgan Chase & Co. (c)............................................ 4.01% 04/23/29 225,581 1,460,000 JPMorgan Chase & Co. (c)............................................ 4.20% 07/23/29 1,683,806 250,000 Morgan Stanley, 3 Mo. LIBOR + 0.93% (b)............................. 2.73% 07/22/22 251,755 |
Page 34 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) BANKS (CONTINUED) $ 1,710,000 Morgan Stanley, Global Medium-Term Note............................. 3.70% 10/23/24 $ 1,855,132 125,000 Wells Fargo & Co.................................................... 3.07% 01/24/23 128,263 500,000 Wells Fargo & Co., Global Medium-Term Note.......................... 2.60% 07/22/20 501,857 510,000 Wells Fargo & Co., Medium-Term Note (c)............................. 3.58% 05/22/28 554,853 250,000 Wells Fargo & Co., Medium-Term Note................................. 4.15% 01/24/29 288,473 1,345,000 Wells Fargo Bank N.A., Bank Note (c)................................ 2.08% 09/09/22 1,355,372 250,000 Wells Fargo Bank N.A., Bank Note, SOFR + 0.48% (b).................. 2.06% 03/25/20 250,040 475,000 Wells Fargo Bank N.A., Bank Note (c)................................ 3.33% 07/23/21 478,239 -------------- 13,676,767 -------------- BEVERAGES -- 0.4% 390,000 Constellation Brands, Inc........................................... 4.25% 05/01/23 421,579 420,000 Molson Coors Brewing Co............................................. 2.25% 03/15/20 420,023 -------------- 841,602 -------------- BIOTECHNOLOGY -- 0.1% 190,000 Amgen, Inc.......................................................... 4.40% 05/01/45 220,420 -------------- CHEMICALS -- 0.2% 400,000 International Flavors & Fragrances, Inc............................. 4.45% 09/26/28 459,248 -------------- COMMERCIAL SERVICES -- 0.5% 500,000 Global Payments, Inc................................................ 3.80% 04/01/21 511,310 600,000 RELX Capital, Inc................................................... 4.00% 03/18/29 687,200 61,000 Service Corp. International......................................... 4.63% 12/15/27 64,039 -------------- 1,262,549 -------------- COMPUTERS -- 0.1% 160,000 Dell International LLC / EMC Corp. (a).............................. 4.42% 06/15/21 164,881 -------------- DIVERSIFIED FINANCIAL SERVICES -- 0.6% 75,000 Air Lease Corp...................................................... 4.75% 03/01/20 75,000 570,000 Air Lease Corp...................................................... 3.88% 07/03/23 602,180 50,000 International Lease Finance Corp.................................... 4.63% 04/15/21 51,497 615,000 Raymond James Financial, Inc........................................ 3.63% 09/15/26 678,375 -------------- 1,407,052 -------------- ELECTRIC -- 1.5% 75,000 Alliant Energy Finance LLC (a)...................................... 3.75% 06/15/23 79,817 150,000 Duke Energy Progress LLC............................................ 3.70% 09/01/28 170,292 100,000 Duquesne Light Holdings, Inc. (a)................................... 6.40% 09/15/20 102,341 600,000 Duquesne Light Holdings, Inc. (a)................................... 5.90% 12/01/21 640,376 100,000 Evergy Metro, Inc................................................... 4.20% 06/15/47 126,561 75,000 Florida Power & Light Co............................................ 3.95% 03/01/48 92,844 100,000 Metropolitan Edison Co. (a)......................................... 3.50% 03/15/23 105,538 500,000 Pennsylvania Electric Co. (a)....................................... 4.15% 04/15/25 550,433 900,000 PNM Resources, Inc.................................................. 3.25% 03/09/21 912,775 100,000 Puget Sound Energy, Inc............................................. 4.22% 06/15/48 123,242 450,000 Southwestern Electric Power Co., Series M........................... 4.10% 09/15/28 515,949 75,000 Tucson Electric Power Co............................................ 5.15% 11/15/21 78,823 -------------- 3,498,991 -------------- ENTERTAINMENT -- 0.0% 95,000 Churchill Downs, Inc. (a)........................................... 4.75% 01/15/28 95,176 -------------- |
See Notes to Financial Statements Page 35
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) ENVIRONMENTAL CONTROL -- 0.3% $ 200,000 Clean Harbors, Inc. (a)............................................. 4.88% 07/15/27 $ 209,310 75,000 Republic Services, Inc.............................................. 3.95% 05/15/28 86,118 500,000 Waste Management, Inc............................................... 3.20% 06/15/26 542,715 -------------- 838,143 -------------- FOOD -- 1.8% 250,000 Campbell Soup Co., 3 Mo. LIBOR + 0.63% (b).......................... 2.52% 03/15/21 250,273 250,000 Conagra Brands, Inc., 3 Mo. LIBOR + 0.50% (b)....................... 2.38% 10/09/20 250,264 250,000 Conagra Brands, Inc................................................. 4.60% 11/01/25 280,394 650,000 General Mills, Inc.................................................. 4.00% 04/17/25 718,885 105,000 General Mills, Inc.................................................. 4.70% 04/17/48 131,428 70,000 Kraft Heinz Foods Co................................................ 5.00% 07/15/35 74,426 100,000 Kraft Heinz Foods Co. (a)........................................... 7.13% 08/01/39 122,361 55,000 Kraft Heinz Foods Co................................................ 5.00% 06/04/42 54,892 65,000 Kraft Heinz Foods Co................................................ 5.20% 07/15/45 66,921 765,000 Kraft Heinz Foods Co................................................ 4.38% 06/01/46 713,158 960,000 Kraft Heinz Foods Co. (a)........................................... 4.88% 10/01/49 948,491 249,000 Kroger (The) Co..................................................... 5.40% 01/15/49 323,842 387,000 Smithfield Foods, Inc. (a).......................................... 5.20% 04/01/29 442,192 -------------- 4,377,527 -------------- FOREST PRODUCTS & PAPER -- 0.2% 540,000 Georgia-Pacific LLC (a)............................................. 5.40% 11/01/20 552,756 -------------- GAS -- 0.3% 70,000 NiSource, Inc....................................................... 3.65% 06/15/23 73,992 500,000 Southern Co. Gas Capital Corp....................................... 5.88% 03/15/41 703,563 -------------- 777,555 -------------- HEALTHCARE-PRODUCTS -- 0.4% 500,000 Boston Scientific Corp.............................................. 3.45% 03/01/24 533,171 150,000 Fresenius US Finance II, Inc. (a)................................... 4.25% 02/01/21 153,450 208,000 Hologic, Inc. (a)................................................... 4.63% 02/01/28 217,432 -------------- 904,053 -------------- HEALTHCARE-SERVICES -- 1.8% 615,000 Anthem, Inc......................................................... 3.35% 12/01/24 655,277 635,000 Barnabas Health, Inc., Series 2012.................................. 4.00% 07/01/28 705,119 99,000 Centene Corp. (a)................................................... 5.25% 04/01/25 102,094 320,000 Encompass Health Corp............................................... 4.75% 02/01/30 330,928 525,000 Fresenius Medical Care US Finance II, Inc. (a)...................... 4.13% 10/15/20 529,620 260,000 HCA, Inc............................................................ 5.00% 03/15/24 289,202 90,000 HCA, Inc............................................................ 5.25% 04/15/25 102,346 535,000 HCA, Inc............................................................ 5.25% 06/15/49 624,650 100,000 Humana, Inc......................................................... 3.15% 12/01/22 103,925 105,000 Humana, Inc......................................................... 3.13% 08/15/29 110,985 90,000 Humana, Inc......................................................... 4.95% 10/01/44 111,030 340,000 Quest Diagnostics, Inc.............................................. 4.20% 06/30/29 390,848 150,000 Tenet Healthcare Corp............................................... 4.63% 07/15/24 150,316 150,000 UnitedHealth Group, Inc............................................. 3.70% 08/15/49 167,579 -------------- 4,373,919 -------------- HOUSEHOLD PRODUCTS/WARES -- 0.0% 60,000 Spectrum Brands, Inc................................................ 6.13% 12/15/24 61,775 -------------- |
Page 36 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) INSURANCE -- 0.8% $ 205,000 Berkshire Hathaway Finance Corp..................................... 4.20% 08/15/48 $ 250,853 140,000 Farmers Insurance Exchange (a) (c).................................. 4.75% 11/01/57 153,289 750,000 MassMutual Global Funding II (a).................................... 3.40% 03/08/26 824,621 150,000 Pricoa Global Funding I (a)......................................... 3.45% 09/01/23 159,424 175,000 Teachers Insurance & Annuity Association of America (a) (c)......... 4.38% 09/15/54 189,125 325,000 Willis North America, Inc........................................... 2.95% 09/15/29 341,304 -------------- 1,918,616 -------------- MEDIA -- 1.0% 589,000 CCO Holdings LLC / CCO Holdings Capital Corp. (a)................... 4.50% 08/15/30 596,731 600,000 Charter Communications Operating LLC / Charter Communications Operating Capital................................................ 5.75% 04/01/48 715,533 287,000 CSC Holdings LLC (a)................................................ 6.50% 02/01/29 317,644 100,000 NBCUniversal Media LLC.............................................. 2.88% 01/15/23 104,518 150,000 Sirius XM Radio, Inc. (a)........................................... 3.88% 08/01/22 150,019 390,000 Walt Disney (The) Co................................................ 4.00% 10/01/23 425,004 -------------- 2,309,449 -------------- MISCELLANEOUS MANUFACTURING -- 0.3% 100,000 General Electric Co., Global Medium-Term Note....................... 4.63% 01/07/21 102,412 205,000 General Electric Co., Medium-Term Note.............................. 5.88% 01/14/38 266,890 300,000 Ingersoll-Rand Co................................................... 9.00% 08/15/21 327,314 -------------- 696,616 -------------- OIL & GAS -- 0.2% 88,000 Antero Resources Corp............................................... 5.13% 12/01/22 54,717 100,000 Antero Resources Corp............................................... 5.63% 06/01/23 54,250 236,000 Antero Resources Corp............................................... 5.00% 03/01/25 122,130 435,000 EQT Corp............................................................ 3.90% 10/01/27 280,575 120,000 Range Resources Corp................................................ 4.88% 05/15/25 76,164 -------------- 587,836 -------------- OIL & GAS SERVICES -- 0.0% 70,000 USA Compression Partners L.P. / USA Compression Finance Corp............................................................. 6.88% 04/01/26 67,863 -------------- PACKAGING & CONTAINERS -- 0.6% 490,000 Amcor Finance USA, Inc. (a)......................................... 4.50% 05/15/28 568,640 58,000 Ball Corp........................................................... 4.00% 11/15/23 59,742 41,000 Berry Global, Inc. (a).............................................. 4.88% 07/15/26 41,782 58,000 Graphic Packaging International LLC................................. 4.88% 11/15/22 60,628 75,000 Matthews International Corp. (a).................................... 5.25% 12/01/25 74,656 60,000 Sealed Air Corp. (a)................................................ 5.50% 09/15/25 65,425 405,000 WRKCo, Inc.......................................................... 4.65% 03/15/26 466,738 -------------- 1,337,611 -------------- PHARMACEUTICALS -- 2.6% 85,000 AbbVie, Inc. (a).................................................... 3.20% 11/21/29 89,839 105,000 AbbVie, Inc. (a).................................................... 4.05% 11/21/39 116,511 200,000 AbbVie, Inc......................................................... 4.88% 11/14/48 246,449 610,000 AbbVie, Inc. (a).................................................... 4.25% 11/21/49 692,701 100,000 Bayer US Finance II LLC (a)......................................... 3.50% 06/25/21 102,275 1,055,000 Bayer US Finance II LLC (a)......................................... 4.38% 12/15/28 1,202,233 265,000 Bayer US Finance II LLC (a)......................................... 4.63% 06/25/38 320,031 100,000 Bayer US Finance II LLC (a)......................................... 4.40% 07/15/44 111,207 |
See Notes to Financial Statements Page 37
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) PHARMACEUTICALS (CONTINUED) $ 400,000 Becton Dickinson and Co............................................. 3.25% 11/12/20 $ 404,439 375,000 Becton Dickinson and Co., 3 Mo. LIBOR + 0.88% (b)................... 2.84% 12/29/20 375,239 75,000 Cigna Corp. (a)..................................................... 3.05% 10/15/27 78,665 795,000 Cigna Corp.......................................................... 4.38% 10/15/28 905,928 70,000 Cigna Corp.......................................................... 4.90% 12/15/48 86,912 970,000 CVS Health Corp..................................................... 5.05% 03/25/48 1,194,475 182,000 Elanco Animal Health, Inc........................................... 5.02% 08/28/23 195,065 -------------- 6,121,969 -------------- PIPELINES -- 1.7% 70,000 Cheniere Energy Partners L.P........................................ 5.25% 10/01/25 70,327 145,000 EQM Midstream Partners L.P.......................................... 5.50% 07/15/28 121,619 370,000 Kinder Morgan, Inc.................................................. 5.55% 06/01/45 440,372 92,130 Pipeline Funding Co. LLC (a)........................................ 7.50% 01/15/30 118,743 145,000 Plains All American Pipeline L.P. / PAA Finance Corp................ 4.65% 10/15/25 157,992 436,000 Rockies Express Pipeline LLC (a).................................... 5.63% 04/15/20 437,352 250,000 Rockies Express Pipeline LLC (a).................................... 4.95% 07/15/29 248,809 100,000 Rockies Express Pipeline LLC (a).................................... 6.88% 04/15/40 102,697 66,136 Ruby Pipeline LLC (a)............................................... 6.50% 04/01/22 66,957 100,000 Sabine Pass Liquefaction LLC........................................ 5.63% 03/01/25 113,790 400,000 Spectra Energy Partners L.P......................................... 4.60% 06/15/21 411,794 50,000 Sunoco Logistics Partners Operations L.P............................ 4.00% 10/01/27 52,408 930,000 Sunoco Logistics Partners Operations L.P............................ 5.40% 10/01/47 984,339 75,000 TC PipeLines L.P.................................................... 3.90% 05/25/27 80,069 54,000 TransMontaigne Partners L.P. / TLP Finance Corp..................... 6.13% 02/15/26 53,576 510,000 Williams Cos., (The), Inc........................................... 3.75% 06/15/27 535,623 -------------- 3,996,467 -------------- REAL ESTATE INVESTMENT TRUSTS -- 5.9% 450,000 Alexandria Real Estate Equities, Inc................................ 3.80% 04/15/26 498,818 75,000 Alexandria Real Estate Equities, Inc., Class E...................... 3.45% 04/30/25 81,253 75,000 American Campus Communities Operating Partnership L.P............... 3.75% 04/15/23 79,858 500,000 American Campus Communities Operating Partnership L.P............... 4.13% 07/01/24 548,183 300,000 Boston Properties L.P............................................... 4.13% 05/15/21 307,749 250,000 Boston Properties L.P............................................... 2.75% 10/01/26 264,779 200,000 Boston Properties L.P............................................... 3.40% 06/21/29 219,994 550,000 Camden Property Trust............................................... 2.95% 12/15/22 566,699 500,000 CubeSmart L.P....................................................... 4.38% 02/15/29 580,575 515,000 CyrusOne L.P. / CyrusOne Finance Corp............................... 2.90% 11/15/24 522,867 420,000 CyrusOne L.P. / CyrusOne Finance Corp............................... 3.45% 11/15/29 428,975 250,000 Digital Realty Trust L.P............................................ 3.95% 07/01/22 262,419 500,000 Digital Realty Trust L.P............................................ 3.63% 10/01/22 522,935 325,000 Essex Portfolio L.P................................................. 3.63% 08/15/22 340,048 285,000 GLP Capital L.P. / GLP Financing II, Inc............................ 4.88% 11/01/20 288,708 200,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.38% 11/01/23 218,688 250,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.38% 04/15/26 282,658 185,000 GLP Capital L.P. / GLP Financing II, Inc............................ 5.30% 01/15/29 214,216 115,000 GLP Capital L.P. / GLP Financing II, Inc............................ 4.00% 01/15/30 122,453 575,000 Healthcare Realty Trust, Inc........................................ 3.75% 04/15/23 606,305 575,000 Healthcare Trust of America Holdings L.P............................ 3.70% 04/15/23 606,085 47,000 Healthpeak Properties, Inc.......................................... 4.25% 11/15/23 51,186 75,000 Healthpeak Properties, Inc.......................................... 4.00% 06/01/25 83,311 |
Page 38 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) REAL ESTATE INVESTMENT TRUSTS (CONTINUED) $ 500,000 Hudson Pacific Properties L.P....................................... 3.95% 11/01/27 $ 554,136 175,000 Hudson Pacific Properties L.P....................................... 4.65% 04/01/29 204,353 400,000 Kilroy Realty L.P................................................... 3.45% 12/15/24 429,203 400,000 Kilroy Realty L.P................................................... 4.38% 10/01/25 449,950 500,000 Kimco Realty Corp................................................... 3.40% 11/01/22 523,327 325,000 Liberty Property L.P................................................ 4.13% 06/15/22 343,569 117,000 MGM Growth Properties Operating Partnership L.P. / MGP Finance Co.-Issuer, Inc.................................................. 5.63% 05/01/24 126,896 200,000 National Retail Properties, Inc..................................... 3.80% 10/15/22 212,011 250,000 National Retail Properties, Inc..................................... 3.90% 06/15/24 271,817 400,000 Reckson Operating Partnership L.P................................... 7.75% 03/15/20 400,803 40,000 SBA Communications Corp............................................. 4.88% 09/01/24 41,192 225,000 SL Green Operating Partnership L.P., 3 Mo. LIBOR + 0.98% (b)........ 2.67% 08/16/21 225,049 325,000 SL Green Operating Partnership L.P.................................. 3.25% 10/15/22 337,930 300,000 Ventas Realty L.P................................................... 3.75% 05/01/24 322,872 250,000 Ventas Realty L.P................................................... 2.65% 01/15/25 259,348 75,000 Ventas Realty L.P................................................... 4.00% 03/01/28 83,397 250,000 VEREIT Operating Partnership L.P.................................... 4.63% 11/01/25 280,812 1,000,000 WEA Finance LLC (a)................................................. 3.15% 04/05/22 1,035,821 250,000 Welltower, Inc...................................................... 3.75% 03/15/23 264,960 -------------- 14,066,208 -------------- RETAIL -- 0.5% 100,000 Family Dollar Stores, Inc........................................... 5.00% 02/01/21 102,677 75,000 Home Depot (The), Inc............................................... 3.90% 12/06/28 86,276 173,000 Rite Aid Corp. (a).................................................. 6.13% 04/01/23 158,944 75,000 Starbucks Corp...................................................... 3.80% 08/15/25 82,778 100,000 Walgreen Co......................................................... 3.10% 09/15/22 103,065 300,000 Walgreens Boots Alliance, Inc....................................... 3.30% 11/18/21 307,896 435,000 Walgreens Boots Alliance, Inc....................................... 4.80% 11/18/44 454,485 -------------- 1,296,121 -------------- SEMICONDUCTORS -- 0.4% 545,000 Broadcom Corp. / Broadcom Cayman Finance Ltd........................ 3.63% 01/15/24 572,418 205,000 Broadcom, Inc. (a).................................................. 3.13% 04/15/21 208,213 205,000 Broadcom, Inc. (a).................................................. 3.63% 10/15/24 215,787 -------------- 996,418 -------------- TELECOMMUNICATIONS -- 1.8% 594,000 AT&T, Inc........................................................... 4.85% 03/01/39 713,505 655,000 AT&T, Inc........................................................... 4.75% 05/15/46 769,449 289,000 Level 3 Financing, Inc.............................................. 5.38% 01/15/24 289,126 54,000 Qwest Corp.......................................................... 6.75% 12/01/21 57,122 125,000 Qwest Corp.......................................................... 7.25% 09/15/25 146,347 335,000 SES GLOBAL Americas Holdings G.P. (a)............................... 5.30% 03/25/44 383,900 311,000 Sprint Communications, Inc. (a)..................................... 7.00% 03/01/20 311,000 20,000 Sprint Corp......................................................... 7.88% 09/15/23 22,892 1,005,000 Sprint Spectrum Co. LLC / Sprint Spectrum Co. II LLC / Sprint Spectrum Co. III LLC (a)......................................... 4.74% 03/20/25 1,078,229 90,000 T-Mobile USA, Inc................................................... 6.00% 03/01/23 91,313 130,000 T-Mobile USA, Inc................................................... 6.50% 01/15/24 133,411 238,000 T-Mobile USA, Inc................................................... 6.00% 04/15/24 243,579 74,000 T-Mobile USA, Inc................................................... 4.75% 02/01/28 77,189 -------------- 4,317,062 -------------- |
See Notes to Financial Statements Page 39
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- CORPORATE BONDS AND NOTES (CONTINUED) TRUCKING & LEASING -- 0.2% $ 500,000 Aviation Capital Group LLC, 3 Mo. LIBOR + 0.95% (a) (b)............. 2.86% 06/01/21 $ 503,304 -------------- WATER -- 0.1% 250,000 American Water Capital Corp......................................... 3.45% 06/01/29 278,390 -------------- TOTAL CORPORATE BONDS AND NOTES................................................................ 80,675,884 (Cost $75,477,745) -------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES -- 23.3% COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.1% Federal Home Loan Mortgage Corporation 34,606 Series 2018-4824, Class ZC....................................... 4.00% 09/15/48 34,650 Federal National Mortgage Association 3,934,411 Series 2011-116, Class SA, IO, 1 Mo. LIBOR (x) -1 + 6.00% (d).... 4.37% 11/25/41 635,097 532,547 Series 2011-130, Class NW, 1 Mo. LIBOR + 1.20% (b)............... 2.86% 12/25/41 555,743 549,682 Series 2012-128, Class UA........................................ 2.50% 06/25/42 566,653 2,645,819 Series 2013-18, Class MI, IO..................................... 3.00% 02/25/33 187,299 Government National Mortgage Association 1,729,258 Series 2003-110, Class S, IO, 1 Mo. LIBOR (x) -1 + 6.60% (d)..... 4.95% 10/20/33 289,227 2,480,474 Series 2018-63, Class IO.......................................... 4.00% 09/20/47 369,859 -------------- 2,638,528 -------------- COMMERCIAL MORTGAGE-BACKED SECURITIES -- 12.0% Brean Murray Structured Product 650,000 Series BM-7289, Class A (h)...................................... 2.38% 03/25/30 663,000 Federal National Mortgage Association 20,749 Series 2010-M4, Class A3......................................... 3.82% 06/25/20 20,787 5,896,176 Series 2012-M4, Class X1, IO (e) (f)............................. 0.42% 04/25/22 52,100 2,519,341 Series 2014-M6, Class X2, IO (e) (g)............................. 0.26% 05/25/21 6,566 29,589,173 Series 2015-M4, Class X2, IO (e)................................. 0.39% 07/25/22 233,914 720,001 Series 2016-M2, Class AL......................................... 3.47% 04/25/36 822,468 300,611 Series 2016-M2, Class X3, IO (e)................................. 2.02% 04/25/36 7,787 3,120,187 Series 2016-M4, Class X2, IO (e)................................. 2.65% 01/25/39 237,894 492,126 Series 2016-M11, Class AL........................................ 2.94% 07/25/39 505,966 514,496 Series 2016-M11, Class X2, IO (e)................................ 2.73% 07/25/39 16,052 1,125,037 Series 2017-M5, Class A1......................................... 2.74% 04/25/29 1,197,416 1,202,669 Series 2017-M14, Class A1 (f).................................... 2.88% 11/25/27 1,270,606 1,323,775 Series 2017-M15, Class A1 (f).................................... 2.96% 09/25/27 1,410,095 6,100,000 Series 2019-M29, Class X4, IO (b)................................ 0.70% 03/25/29 328,189 3,900,000 Series 2019-M32, Class X2, IO (e)................................ 1.06% 10/25/29 331,804 Freddie Mac Multifamily PC REMIC Trust 4,095,000 Series 2019-P002, Class X, IO (e)................................ 1.14% 07/25/33 459,930 Freddie Mac Multifamily Structured Pass Through Certificates 156,158 Series 2010-K007, Class X1, IO (e)............................... 0.89% 04/25/20 9 2,000,000 Series 2011-K010, Class X3, IO (e)............................... 4.62% 11/25/44 36,696 3,000,000 Series 2011-K011, Class X3, IO (e)............................... 2.57% 12/25/43 40,132 5,413,749 Series 2011-K012, Class X3, IO (e)............................... 2.25% 01/25/41 72,023 550,000 Series 2011-KAIV, Class X2, IO (e)............................... 3.61% 06/25/41 19,800 8,139,000 Series 2012-K021, Class X3, IO (e)............................... 1.97% 07/25/40 326,878 2,500,000 Series 2012-K022, Class X3, IO (e)............................... 1.81% 08/25/40 98,691 11,075,000 Series 2013-K025, Class X3, IO (e)............................... 1.75% 11/25/40 478,532 77,598,532 Series 2013-K031, Class X1, IO (e)............................... 0.21% 04/25/23 484,285 18,041,802 Series 2013-K035, Class X1, IO (e)............................... 0.38% 08/25/23 210,081 |
Page 40 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED) Freddie Mac Multifamily Structured Pass Through Certificates (Continued) $ 4,000,000 Series 2013-K035, Class X3, IO (e)............................... 1.79% 12/25/41 $ 235,664 2,500,000 Series 2014-K037, Class X3, IO (e)............................... 2.21% 01/25/42 188,367 37,598,715 Series 2014-K714, Class X3, IO (e)............................... 1.82% 01/25/42 285,848 11,000,000 Series 2014-K715, Class X3, IO (e)............................... 2.01% 02/25/41 236,004 30,235,000 Series 2014-K716, Class X3, IO (e)............................... 1.80% 08/25/42 724,428 9,631,846 Series 2015-K042, Class X1, IO (e)............................... 1.05% 12/25/24 419,007 14,519,447 Series 2015-K044, Class X1, IO (e)............................... 0.74% 01/25/25 434,107 8,740,952 Series 2015-K045, Class X1, IO (e)............................... 0.45% 01/25/25 167,248 1,195,428 Series 2015-K719, Class X1, IO (e) (g)........................... 0.41% 06/25/22 1,474 1,402,173 Series 2015-K720, Class X1, IO (e)............................... 0.52% 08/25/22 13,353 3,527,726 Series 2016-K054, Class X1, IO (e)............................... 1.17% 01/25/26 214,979 3,894,820 Series 2016-K056, Class X1, IO (e)............................... 1.26% 05/25/26 261,835 11,351,383 Series 2016-K057, Class X1, IO (e)............................... 1.19% 07/25/26 738,850 1,900,000 Series 2016-K060, Class X3, IO (e)............................... 1.89% 12/25/44 215,593 5,145,622 Series 2016-KIR1, Class X, IO (e)................................ 1.07% 03/25/26 288,744 403,398 Series 2016-KJ03, Class A1....................................... 1.67% 01/25/21 403,936 10,076,029 Series 2016-KS05, Class X, IO (e)................................ 0.76% 01/25/23 154,380 3,783,094 Series 2016-KS06, Class X, IO (e)................................ 1.07% 08/25/26 197,272 5,000,000 Series 2016-KS07, Class X, IO (e)................................ 0.65% 09/25/25 167,531 6,949,962 Series 2016-KW01, Class X1, IO (e)............................... 0.97% 01/25/26 323,330 12,718,517 Series 2017-K726, Class X1, IO (e)............................... 0.88% 04/25/24 394,130 2,230,000 Series 2017-K728, Class X3, IO (e)............................... 1.95% 11/25/45 178,830 311,330 Series 2017-Q004, Class A2H (b).................................. 2.94% 01/25/46 313,804 694,464 Series 2017-Q006, Class APT1 (b)................................. 2.66% 07/25/26 722,728 118,233 Series 2018-K155, Class A1....................................... 3.75% 11/25/29 131,790 125,000 Series 2018-K155, Class A3....................................... 3.75% 04/25/33 149,742 1,097,801 Series 2018-KJ21, Class A1....................................... 3.11% 06/25/25 1,172,128 423,472 Series 2018-Q007, Class APT1 (f)................................. 2.98% 10/25/47 435,484 125,000 Series 2018-W5FX, Class AFX (e).................................. 3.34% 04/25/28 139,087 2,330,000 Series 2019-K093, Class XAM, IO (e).............................. 1.19% 05/25/29 235,470 1,365,000 Series 2019-KC04, Class X1, IO (e)............................... 1.25% 12/25/26 90,003 7,197,748 Series 2019-KC05, Class X1, IO (e)............................... 1.20% 06/25/27 481,616 15,500,000 Series 2019-KC07, Class X1, IO (e)............................... 0.85% 09/25/26 595,631 4,696,529 Series 2019-K734, Class X1, IO (e)............................... 0.65% 02/25/26 161,149 9,298,956 Series 2019-K736, Class X1, IO (e)............................... 1.31% 07/25/26 668,702 2,900,000 Series 2019-K736, Class XAM, IO (e).............................. 1.71% 07/25/26 286,477 1,121,346 Series 2019-KJ24, Class A1....................................... 2.28% 05/25/26 1,168,735 484,067 Series 2019-KJ25, Class A1....................................... 2.15% 11/25/24 500,228 1,253,841 Series 2019-KJ26, Class A1....................................... 2.14% 07/25/25 1,283,122 1,800,000 Series 2019-KS11, Class XFX, IO (e).............................. 1.60% 06/25/29 220,135 1,486,095 Series 2019-Q010, Class APT1 (e)................................. 2.88% 04/25/46 1,506,612 432,487 Series 2019-Q010, Class APT2 (e)................................. 2.99% 12/25/47 445,282 4,649,385 Series 2020-K737, Class X1, IO (f)............................... 0.64% 10/25/26 176,999 2,750,000 Series 2020-K737, Class XAM, IO (f).............................. 1.00% 10/25/26 175,486 1,960,000 Series 2020-KHG2, Class X, IO (e) (h)............................ 0.41% 02/25/30 52,651 1,500,000 Series 2020-KJ28, Class A1....................................... 1.77% 02/25/25 1,523,472 FRESB Mortgage Trust 57,718 Series 2016-SB24, Class A5H, 1 Mo. LIBOR (x) 0 + 2.00% (b)....... 2.00% 10/25/36 58,043 |
See Notes to Financial Statements Page 41
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED) COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED) Government National Mortgage Association $ 362,595 Series 2009-80, Class C (f)...................................... 5.04% 04/16/50 $ 375,992 768,506 Series 2013-125, Class IO, IO (f)................................ 0.67% 10/16/54 22,086 3,232,773 Series 2014-125, Class IO, IO (f)................................ 0.96% 11/16/54 187,088 -------------- 28,856,353 -------------- PASS-THROUGH SECURITIES -- 10.2% Federal Home Loan Mortgage Corporation 442,800 Pool WA3208...................................................... 3.98% 04/01/34 521,592 296,114 Pool WA3303...................................................... 3.83% 05/01/35 343,788 580,556 Pool WN0006...................................................... 3.42% 07/01/30 654,987 Federal National Mortgage Association 88,816 Pool 466551...................................................... 3.75% 07/01/21 90,785 125,000 Pool 466893...................................................... 4.05% 01/01/21 126,136 490,607 Pool AM2974...................................................... 4.10% 04/01/43 557,250 1,056,830 Pool AM4865...................................................... 4.24% 12/01/29 1,245,520 678,211 Pool AM8745...................................................... 2.81% 05/01/27 731,508 295,000 Pool AM9440...................................................... 3.05% 07/01/27 323,966 353,826 Pool AM9830...................................................... 3.19% 09/01/27 390,253 747,473 Pool AM9897...................................................... 3.50% 09/01/35 860,994 53,224 Pool AN0026...................................................... 3.48% 11/01/35 61,527 44,323 Pool AN0976...................................................... 3.26% 02/01/28 49,450 865,729 Pool AN5096...................................................... 3.32% 04/01/32 975,543 1,050,000 Pool AN5942...................................................... 3.10% 07/01/32 1,191,892 625,000 Pool AN9164...................................................... 3.55% 05/01/30 720,908 100,000 Pool AN9297...................................................... 3.69% 05/01/30 116,752 1,025,000 Pool AN9447...................................................... 3.78% 07/01/33 1,240,040 900,000 Pool AN9502...................................................... 3.96% 06/01/33 1,106,312 500,000 Pool AN9540...................................................... 3.75% 06/01/33 603,609 860,000 Pool AN9706...................................................... 3.76% 07/01/33 1,037,448 612,854 Pool AN9756...................................................... 3.94% 07/01/33 739,319 335,000 Pool BL0004...................................................... 3.50% 09/01/28 377,112 350,000 Pool BL0242...................................................... 3.82% 11/01/30 413,864 130,000 Pool BL0530...................................................... 4.03% 11/01/33 157,253 100,000 Pool BL0640...................................................... 4.10% 11/01/33 124,592 600,000 Pool BL0651...................................................... 3.95% 06/01/29 703,273 1,141,871 Pool BL0661...................................................... 3.99% 11/01/33 1,384,060 855,000 Pool BL0878...................................................... 3.94% 06/01/29 1,001,432 1,000,000 Pool BL0900...................................................... 4.08% 02/01/34 1,250,719 450,000 Pool BL1052...................................................... 3.95% 12/01/28 523,581 495,000 Pool BL1132...................................................... 3.73% 01/01/29 572,698 140,000 Pool BL1163...................................................... 4.17% 01/01/34 173,166 450,000 Pool BL1301...................................................... 3.69% 01/01/29 519,147 670,000 Pool BL1414...................................................... 3.96% 01/01/34 825,191 493,304 Pool BL1416...................................................... 3.86% 01/01/29 568,216 200,000 Pool BL1452...................................................... 3.90% 01/01/34 243,891 1,350,000 Pool BL1857...................................................... 3.53% 04/01/29 1,538,579 326,000 Pool BL1882...................................................... 3.60% 03/01/34 390,084 -------------- 24,456,437 -------------- TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES........................................ 55,951,318 (Cost $52,804,576) -------------- |
Page 42 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- MORTGAGE-BACKED SECURITIES -- 10.7% COLLATERALIZED MORTGAGE OBLIGATIONS -- 10.4% Adjustable Rate Mortgage Trust $ 142,672 Series 2005-8, Class 3A21 (e).................................... 4.14% 11/25/35 $ 130,292 Alternative Loan Trust 339,077 Series 2005-16, Class A3, 1 Mo. LIBOR + 0.50% (b)................ 2.13% 06/25/35 327,592 113,240 Series 2005-76, Class 1A1, 12 Mo. Treasury Average + 1.48% (b)..................................................... 3.53% 01/25/36 114,317 381,812 Series 2006-33CB, Class 2A1...................................... 6.00% 11/25/36 319,452 351,539 Series 2007-OA6, Class A1B, 1 Mo. LIBOR + 0.20% (b).............. 1.83% 06/25/37 338,181 American Home Mortgage Assets Trust 961,610 Series 2007-1, Class A1, 12 Mo. Treasury Average + 0.70% (b)..... 2.75% 02/25/47 579,837 American Home Mortgage Investment Trust 848,731 Series 2005-4, Class 1A1, 1 Mo. LIBOR + 0.58% (b)................ 2.21% 11/25/45 836,730 BCAP LLC Trust 429,207 Series 2007-AA3, Class 1A1A, 1 Mo. LIBOR + 0.21% (b)............. 1.84% 04/25/37 425,419 1,000,000 Series 2015-RR2, Class 25A3 (a) (e).............................. 2.48% 10/28/36 971,795 Bear Stearns ALT-A Trust 969,935 Series 2004-8, Class M1, 1 Mo. LIBOR + 0.92% (b)................. 2.54% 09/25/34 986,070 Bear Stearns Mortgage Funding Trust 1,125,325 Series 2006-AR1, Class 1A1, 1 Mo. LIBOR + 0.21% (b).............. 1.84% 07/25/36 1,091,933 617,489 Series 2006-AR3, Class 1A1, 1 Mo. LIBOR + 0.18% (b).............. 1.81% 10/25/36 595,998 363,034 Series 2007-AR1, Class 1A1, 1 Mo. LIBOR + 0.16% (b).............. 1.79% 01/25/37 343,457 292,839 Series 2007-AR3, Class 1A1, 1 Mo. LIBOR + 0.14% (b).............. 1.77% 03/25/37 279,634 CIM Trust 290,765 Series 2017-7, Class A (a)....................................... 3.00% 04/25/57 296,067 240,353 Series 2017-8, Class A1 (a)...................................... 3.00% 12/25/65 243,449 304,559 Series 2018-R6, Class A1, 1 Mo. LIBOR + 1.08% (a) (b)............ 2.73% 09/25/58 303,584 Credit Suisse Mortgage Trust 345,840 Series 2010-7R, Class 1A12 (a)................................... 4.00% 01/26/37 351,825 98,669 Series 2014-2R, Class 28A1 (a) (e)............................... 3.00% 06/27/37 100,010 DSLA Mortgage Loan Trust 89,372 Series 2004-AR4, Class 2A1A, 1 Mo. LIBOR + 0.36% (b)............. 2.01% 01/19/45 81,240 First Horizon Alternative Mortgage Securities Trust 66,999 Series 2004-AA4, Class A1 (e).................................... 3.91% 10/25/34 67,599 GreenPoint Mortgage Funding Trust 101,886 Series 2006-AR1, Class A1A, 1 Mo. LIBOR + 0.58% (b).............. 2.21% 02/25/36 100,253 585,023 Series 2007-AR1, Class 2A1A, 1 Mo. LIBOR + 0.20% (b)............. 1.83% 03/25/47 578,097 GreenPoint MTA Trust 576,167 Series 2005-AR3, Class 1A1, 1 Mo. LIBOR + 0.24% (b).............. 1.87% 08/25/45 563,848 HarborView Mortgage Loan Trust 245,186 Series 2005-9, Class 2A1A, 1 Mo. LIBOR + 0.34% (b)............... 1.99% 06/20/35 243,983 98,074 Series 2005-9, Class 2A1C, 1 Mo. LIBOR + 0.45% (b)............... 2.10% 06/20/35 98,160 777,581 Series 2007-7, Class 1A1, 1 Mo. LIBOR + 1.00% (b)................ 2.63% 10/25/37 749,436 HomeBanc Mortgage Trust 355,072 Series 2005-4, Class A1, 1 Mo. LIBOR + 0.27% (b)................. 1.90% 10/25/35 361,267 Impac CMB Trust 101,003 Series 2005-1, Class 1A1, 1 Mo. LIBOR + 0.52% (b)................ 2.15% 04/25/35 100,687 IndyMac INDX Mortgage Loan Trust 534,746 Series 2005-16IP, Class A1, 1 Mo. LIBOR + 0.64% (b).............. 2.27% 07/25/45 506,674 763,635 Series 2006-AR4, Class A1A, 1 Mo. LIBOR + 0.21% (b).............. 1.84% 05/25/46 756,122 318,505 Series 2006-AR21, Class A1, 1 Mo. LIBOR + 0.12% (b).............. 1.75% 08/25/36 293,740 |
See Notes to Financial Statements Page 43
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- MORTGAGE-BACKED SECURITIES (CONTINUED) COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED) IndyMac INDX Mortgage Loan Trust (Continued) $ 201,175 Series 2007-FLX2, Class A1C, 1 Mo. LIBOR + 0.19% (b)............. 1.82% 04/25/37 $ 192,269 JP Morgan Alternative Loan Trust 111,463 Series 2007-S1, Class A2, 1 Mo. LIBOR + 0.34% (b)................ 1.97% 04/25/47 107,171 Lehman XS Trust 430,146 Series 2005-5N, Class 3A1A, 1 Mo. LIBOR + 0.30% (b).............. 1.93% 11/25/35 425,133 MASTR Adjustable Rate Mortgages Trust 597,857 Series 2007-2, Class A1, 1 Mo. LIBOR + 0.15% (b)................. 1.78% 03/25/47 576,068 Merrill Lynch Mortgage Investors Trust 238,434 Series 2003-D, Class A, 1 Mo. LIBOR + 0.62% (b).................. 2.25% 08/25/28 238,359 403,984 Series 2004-E, Class A2B, 6 Mo. LIBOR + 0.72% (b)................ 2.78% 11/25/29 410,390 Morgan Stanley Resecuritization Trust 93,768 Series 2014-R8, Class 3B1, 12 Mo. Treasury Average + 0.75% (a) (b)................................................. 2.64% 06/26/47 93,716 Opteum Mortgage Acceptance Corp. Trust 752,553 Series 2006-1, Class 1AC1, 1 Mo. LIBOR + 0.30% (b)............... 1.93% 04/25/36 724,871 Structured Adjustable Rate Mortgage Loan Trust 63,868 Series 2005-12, Class 3A1 (e).................................... 4.02% 06/25/35 64,764 673,329 Series 2006-11, Class 1A1, 1 Mo. LIBOR + 0.16% (b)............... 1.79% 12/25/36 663,777 906,837 Series 2007-4, Class 1A2, 1 Mo. LIBOR + 0.22% (b)................ 1.85% 05/25/37 886,696 Structured Asset Mortgage Investments II Trust 446,614 Series 2005-AR2, Class 2A1, 1 Mo. LIBOR + 0.46% (b).............. 2.09% 05/25/45 448,514 616,738 Series 2006-AR1, Class 3A1, 1 Mo. LIBOR + 0.23% (b).............. 1.86% 02/25/36 578,590 587,831 Series 2006-AR3, Class 12A1, 1 Mo. LIBOR + 0.22% (b)............. 1.85% 05/25/36 579,330 652,947 Series 2006-AR4, Class 3A1, 1 Mo. LIBOR + 0.19% (b).............. 1.82% 06/25/36 641,631 78,922 Series 2006-AR5, Class 1A1, 1 Mo. LIBOR + 0.21% (b).............. 1.84% 05/25/36 72,950 1,101,828 Series 2006-AR8, Class A1A, 1 Mo. LIBOR + 0.20% (b).............. 1.83% 10/25/36 1,060,631 829,263 Series 2007-AR1, Class 1A1, 1 Mo. LIBOR + 0.16% (b).............. 1.79% 01/25/37 790,663 327,292 Series 2007-AR1, Class 2A1, 1 Mo. LIBOR + 0.18% (b).............. 1.81% 01/25/37 311,042 Structured Asset Mortgage Investments Trust 214,358 Series 2003-AR3, Class A1, 1 Mo. LIBOR + 0.68% (b)............... 2.33% 11/19/33 212,731 WaMu Mortgage Pass-Through Certificates Trust 207,170 Series 2004-AR12, Class A2A, 1 Mo. LIBOR + 0.78% (b)............. 2.41% 10/25/44 207,817 68,661 Series 2005-AR8, Class 2A1A, 1 Mo. LIBOR + 0.58% (b)............. 2.21% 07/25/45 68,310 81,329 Series 2005-AR11, Class A1A, 1 Mo. LIBOR + 0.32% (b)............. 1.95% 08/25/45 81,343 221,282 Series 2005-AR15, Class A1A1, 1 Mo. LIBOR + 0.26% (b)............ 1.89% 11/25/45 217,437 515,672 Series 2006-AR3, Class A1A, 12 Mo. Treasury Average + 1.00% (b)..................................................... 3.05% 02/25/46 529,597 75,992 Series 2006-AR11, Class 1A, 12 Mo. Treasury Average + 0.96% (b)..................................................... 3.01% 09/25/46 70,819 1,176,221 Series 2007-OA5, Class 1A, 12 Mo. Treasury Average + 0.75% (b)..................................................... 2.80% 06/25/47 1,134,985 Wells Fargo Mortgage Backed Securities Trust 449,463 Series 2007-AR5, Class A1 (e).................................... 4.56% 10/25/37 432,410 -------------- 24,958,762 -------------- COMMERCIAL MORTGAGE-BACKED OBLIGATIONS -- 0.3% BAMLL Commercial Mortgage Securities Trust 355,000 Series 2020-BOC, Class A (a)..................................... 2.63% 01/15/32 376,133 Benchmark Mortgage Trust 1,680,000 Series 2020-IG1, Class XA, IO (e)................................ 0.51% 03/15/53 74,381 |
Page 44 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- MORTGAGE-BACKED SECURITIES (CONTINUED) COMMERCIAL MORTGAGE-BACKED OBLIGATIONS (CONTINUED) COMM Mortgage Trust $ 1,559,660 Series 2012-CR4, Class XA, IO (e)................................ 1.70% 10/15/45 $ 53,500 5,600,000 Series 2020-CBM, Class XCP, IO (a) (e)........................... 0.49% 02/10/37 131,110 GS Mortgage Securities Corp Trust 2,600,000 Series 2020-UPTN, Class XA, IO (a) (e)........................... 0.35% 02/10/37 45,311 -------------- 680,435 -------------- TOTAL MORTGAGE-BACKED SECURITIES............................................................... 25,639,197 (Cost $25,183,736) -------------- ASSET-BACKED SECURITIES -- 8.8% 321 Henderson Receivables LLC 337,832 Series 2013-2A, Class A (a)...................................... 4.21% 03/15/62 382,813 ABFC Trust 109,505 Series 2007-NC1, Class A2, 1 Mo. LIBOR + 0.30% (a) (b)........... 1.93% 05/25/37 107,817 ACE Securities Corp. Home Equity Loan Trust 1,089,898 Series 2006-HE3, Class A2C, 1 Mo. LIBOR + 0.15% (b).............. 1.78% 06/25/36 888,368 Argent Securities, Inc. 160,000 Series 2005-W3, Class M1, 1 Mo. LIBOR + 0.44% (b)................ 2.07% 11/25/35 158,937 BCMSC Trust 2,369,065 Series 2000-A, Class A5.......................................... 8.32% 06/15/30 920,583 Carrington Mortgage Loan Trust 69,645 Series 2005-NC5, Class M1, 1 Mo. LIBOR + 0.48% (b)............... 2.11% 10/25/35 69,934 Citigroup Mortgage Loan Trust 1,274,469 Series 2006-HE3, Class A2B, 1 Mo. LIBOR + 0.10% (b).............. 1.76% 12/25/36 1,006,253 Citigroup Mortgage Loan Trust, Inc. 31,672 Series 2005-HE4, Class M1, 1 Mo. LIBOR + 0.41% (b)............... 2.04% 10/25/35 32,083 15,226 Series 2007-WFH2, Class A4, 1 Mo. LIBOR + 0.35% (b).............. 1.98% 03/25/37 15,262 425,000 Series 2007-WFH3, Class M1, 1 Mo. LIBOR + 0.26% (b).............. 1.89% 06/25/37 414,416 Conseco Finance Corp. 56,925 Series 1996-7, Class M1.......................................... 7.70% 09/15/26 59,897 1,638,494 Series 1999-3, Class A8.......................................... 7.06% 02/01/31 1,632,566 Countrywide Asset-Backed Certificates 226,971 Series 2006-6, Class 1A1, 1 Mo. LIBOR + 0.17% (b)................ 1.80% 09/25/36 224,871 Credit-Based Asset Servicing & Securitization LLC 957,000 Series 2006-MH1, Class B1 (a) (i)................................ 6.25% 10/25/36 1,014,238 EquiFirst Mortgage Loan Trust 130,300 Series 2005-1, Class M3, 1 Mo. LIBOR + 0.72% (b)................. 2.35% 04/25/35 130,580 First Franklin Mortgage Loan Trust 136,692 Series 2006-FF11, Class 2A3, 1 Mo. LIBOR + 0.15% (b)............. 1.78% 08/25/36 122,038 Fremont Home Loan Trust 23,461 Series 2005-A, Class M3, 1 Mo. LIBOR + 0.74% (b)................. 2.36% 01/25/35 23,451 86,067 Series 2005-D, Class 2A4, 1 Mo. LIBOR + 0.34% (b)................ 1.97% 11/25/35 86,418 GSAMP Trust 1,300,000 Series 2006-HE4, Class A2D, 1 Mo. LIBOR + 0.26% (b).............. 1.89% 06/25/36 1,267,930 JP Morgan Mortgage Acquisition Trust 727,374 Series 2006-WF1, Class A5, steps up to 6.91% after Redemption Date (j)...................................................... 6.41% 07/25/36 356,844 Mastr Asset Backed Securities Trust 156,541 Series 2006-HE5, Class A3, 1 Mo. LIBOR + 0.16% (b)............... 1.79% 11/25/36 114,942 |
See Notes to Financial Statements Page 45
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- ASSET-BACKED SECURITIES (CONTINUED) Mid-State Capital Trust $ 25,761 Series 2010-1, Class A (a)....................................... 3.50% 12/15/45 $ 26,536 Morgan Stanley ABS Capital I, Inc. Trust 2,313,313 Series 2006-HE8, Class A2B, 1 Mo. LIBOR + 0.10% (b).............. 1.73% 10/25/36 1,435,722 Navient Student Loan Trust 33,192 Series 2014-1, Class A3, 1 Mo. LIBOR + 0.51% (b)................. 2.14% 06/25/31 32,693 New Century Home Equity Loan Trust 700,000 Series 2005-3, Class M4, 1 Mo. LIBOR + 0.96% (b)................. 2.59% 07/25/35 701,036 NovaStar Mortgage Funding Trust 1,149,490 Series 2007-2, Class A1A, 1 Mo. LIBOR + 0.20% (b)................ 1.83% 09/25/37 1,125,261 Residential Asset Mortgage Product, Inc. 160,000 Series 2005-RZ3, Class M3, 1 Mo. LIBOR + 0.55% (b)............... 2.18% 09/25/35 160,452 900,000 Series 2006-RZ1, Class M3, 1 Mo. LIBOR + 0.45% (b)............... 2.08% 03/25/36 902,398 Residential Asset Securities Corp. 150,000 Series 2005-KS11, Class M2, 1 Mo. LIBOR + 0.42% (b).............. 2.05% 12/25/35 150,523 150,000 Series 2006-KS3, Class M1, 1 Mo. LIBOR + 0.33% (b)............... 1.96% 04/25/36 148,653 SLM Student Loan Trust 905,000 Series 2007-7, Class B, 3 Mo. LIBOR + 0.75% (b).................. 2.54% 10/27/70 838,470 300,000 Series 2008-2, Class B, 3 Mo. LIBOR + 1.20% (b).................. 2.99% 01/25/83 275,946 300,000 Series 2008-3, Class B, 3 Mo. LIBOR + 1.20% (b).................. 2.99% 04/26/83 278,543 650,000 Series 2008-5, Class B, 3 Mo. LIBOR + 1.85% (b).................. 3.64% 07/25/73 645,311 300,000 Series 2008-6, Class B, 3 Mo. LIBOR + 1.85% (b).................. 3.64% 07/26/83 293,635 220,000 Series 2008-8, Class B, 3 Mo. LIBOR + 2.25% (b).................. 4.04% 10/25/75 218,427 800,000 Series 2008-9, Class B, 3 Mo. LIBOR + 2.25% (b).................. 4.04% 10/25/83 802,994 100,000 Series 2012-7, Class B, 1 Mo. LIBOR + 1.80% (b).................. 3.43% 09/25/43 99,655 Soundview Home Loan Trust 680,000 Series 2005-OPT3, Class M1, 1 Mo. LIBOR + 0.47% (b).............. 2.10% 11/25/35 673,873 135,055 Series 2007-OPT2, Class 2A4, 1 Mo. LIBOR + 0.25% (b)............. 1.88% 07/25/37 123,456 Structured Receivables Finance LLC 152,433 Series 2010-B, Class A (a)....................................... 3.73% 08/15/36 156,191 United States Small Business Administration 737,575 Series 2007-20A, Class 1......................................... 5.32% 01/01/27 796,176 897,889 Series 2008-20F, Class 1......................................... 5.68% 06/01/28 994,565 1,058,297 Series 2008-20H, Class 1......................................... 6.02% 08/01/28 1,172,612 -------------- TOTAL ASSET-BACKED SECURITIES.................................................................. 21,083,369 (Cost $21,616,109) -------------- |
PRINCIPAL VALUE (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR) -------------- -------------------------------------------------------------------- ----------- ------------ -------------- FOREIGN CORPORATE BONDS AND NOTES -- 7.0% BANKS -- 0.9% 200,000 Global Bank Corp. (USD) (c) (k)..................................... 5.25% 04/16/29 218,750 125,000 Lloyds Bank PLC (USD)............................................... 3.30% 05/07/21 127,682 665,000 Lloyds Banking Group PLC (USD) (c).................................. 2.91% 11/07/23 680,798 200,000 Lloyds Banking Group PLC (USD)...................................... 3.90% 03/12/24 215,093 250,000 Santander UK Group Holdings PLC (USD) (c)........................... 4.80% 11/15/24 272,587 650,000 Santander UK PLC (USD).............................................. 3.40% 06/01/21 666,707 -------------- 2,181,617 -------------- |
Page 46 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL VALUE (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR) -------------- -------------------------------------------------------------------- ----------- ------------ -------------- FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) BEVERAGES -- 0.2% 170,000 Bacardi Ltd. (USD) (a).............................................. 4.70% 05/15/28 $ 194,825 15,000 Bacardi Ltd. (USD) (a).............................................. 5.30% 05/15/48 19,371 125,000 Pernod Ricard S.A. (USD) (a)........................................ 4.45% 01/15/22 131,711 -------------- 345,907 -------------- COMMERCIAL SERVICES -- 0.4% 200,000 DP World Crescent Ltd. (USD) (a).................................... 4.85% 09/26/28 216,854 250,000 IHS Markit Ltd. (USD) (a)........................................... 4.75% 02/15/25 277,792 465,000 IHS Markit Ltd. (USD)............................................... 4.75% 08/01/28 543,010 -------------- 1,037,656 -------------- DIVERSIFIED FINANCIAL SERVICES -- 1.6% 600,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust (USD)......................................................... 4.50% 05/15/21 619,957 20,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust (USD)......................................................... 3.95% 02/01/22 20,733 55,000 AerCap Ireland Capital DAC / AerCap Global Aviation Trust (USD)......................................................... 4.13% 07/03/23 58,550 74,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 5.13% 10/01/23 79,378 20,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 5.25% 05/15/24 21,818 100,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 3.95% 07/01/24 103,776 185,000 Avolon Holdings Funding Ltd. (USD) (a).............................. 2.88% 02/15/25 185,102 1,065,000 GE Capital International Funding Co. Unlimited Co. (USD)............ 2.34% 11/15/20 1,068,022 785,000 GE Capital International Funding Co. Unlimited Co. (USD)............ 4.42% 11/15/35 898,541 250,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 3.63% 03/15/21 252,340 135,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 5.25% 08/15/22 143,750 90,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 4.50% 03/15/23 94,180 255,000 Park Aerospace Holdings Ltd. (USD) (a).............................. 5.50% 02/15/24 280,657 -------------- 3,826,804 -------------- ELECTRIC -- 0.1% 250,000 Mong Duong Finance Holdings B.V. (USD) (k).......................... 5.13% 05/07/29 263,065 -------------- ENVIRONMENTAL CONTROL -- 0.1% 114,000 GFL Environmental, Inc. (USD) (a)................................... 5.13% 12/15/26 118,275 -------------- INTERNET -- 0.1% 300,000 Tencent Holdings Ltd. (USD) (a)..................................... 3.98% 04/11/29 340,853 -------------- MACHINERY-DIVERSIFIED -- 0.0% 110,000 Titan Acquisition Ltd. / Titan Co.-Borrower LLC (USD) (a)........... 7.75% 04/15/26 105,070 -------------- MEDIA -- 0.1% 200,000 Virgin Media Secured Finance PLC (USD) (a).......................... 5.50% 08/15/26 206,278 -------------- MINING -- 0.3% 250,000 Corp. Nacional del Cobre de Chile (USD) (k)......................... 3.63% 08/01/27 268,456 300,000 Indonesia Asahan Aluminium Persero PT (USD) (a)..................... 6.53% 11/15/28 371,032 -------------- 639,488 -------------- MISCELLANEOUS MANUFACTURING -- 0.0% 40,000 Ingersoll-Rand Luxembourg Finance S.A. (USD)........................ 3.55% 11/01/24 43,236 -------------- OIL & GAS -- 1.0% 440,000 KazMunayGas National Co. JSC (USD) (k).............................. 5.38% 04/24/30 513,001 75,000 Petrobras Global Finance B.V. (USD) (a)............................. 5.09% 01/15/30 80,344 |
See Notes to Financial Statements Page 47
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL VALUE (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR) -------------- -------------------------------------------------------------------- ----------- ------------ -------------- FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) OIL & GAS (CONTINUED) 200,000 Petroleos del Peru S.A. (USD) (k)................................... 4.75% 06/19/32 $ 224,430 370,000 Petroleos Mexicanos (USD)........................................... 6.63% 06/15/35 371,456 325,000 Petroleos Mexicanos (USD)........................................... 6.75% 09/21/47 311,257 419,000 Petroleos Mexicanos (USD) (a)....................................... 7.69% 01/23/50 437,920 111,890 Transocean Pontus Ltd. (USD) (a).................................... 6.13% 08/01/25 113,288 293,000 Transocean Poseidon Ltd. (USD) (a).................................. 6.88% 02/01/27 298,134 -------------- 2,349,830 -------------- PACKAGING & CONTAINERS -- 0.0% 18,000 OI European Group B.V. (USD) (a).................................... 4.00% 03/15/23 18,255 -------------- PHARMACEUTICALS -- 0.3% 390,000 Allergan Funding SCS (USD).......................................... 4.55% 03/15/35 467,091 6,000 Bausch Health Cos., Inc. (USD) (a).................................. 5.75% 08/15/27 6,393 225,000 Shire Acquisitions Investments Ireland DAC (USD).................... 2.40% 09/23/21 228,056 -------------- 701,540 -------------- PIPELINES -- 0.2% 200,000 Peru LNG SRL (USD) (k).............................................. 5.38% 03/22/30 170,570 200,000 Southern Gas Corridor CJSC (USD) (k)................................ 6.88% 03/24/26 239,202 -------------- 409,772 -------------- RETAIL -- 0.2% 510,000 Alimentation Couche-Tard, Inc. (USD) (a)............................ 3.55% 07/26/27 552,968 -------------- SAVINGS & LOANS -- 0.5% 630,000 Nationwide Building Society (USD) (a) (c)........................... 3.62% 04/26/23 655,157 135,000 Nationwide Building Society (USD) (a) (c)........................... 3.77% 03/08/24 141,420 325,000 Nationwide Building Society (USD) (a) (c)........................... 4.36% 08/01/24 349,216 -------------- 1,145,793 -------------- SEMICONDUCTORS -- 0.2% 500,000 NXP B.V. / NXP Funding LLC (USD) (a)................................ 4.13% 06/01/21 514,147 -------------- TELECOMMUNICATIONS -- 0.8% 200,000 C&W Senior Financing DAC (USD) (a).................................. 6.88% 09/15/27 211,465 625,000 Intelsat Jackson Holdings S.A. (USD) (a)............................ 8.50% 10/15/24 540,884 18,000 Intelsat Jackson Holdings S.A. (USD) (a)............................ 9.75% 07/15/25 15,911 125,000 Koninklijke KPN N.V. (USD).......................................... 8.38% 10/01/30 175,473 200,000 SES S.A. (USD) (a).................................................. 3.60% 04/04/23 208,546 100,000 Vodafone Group PLC (USD)............................................ 3.75% 01/16/24 107,584 250,000 Vodafone Group PLC (USD)............................................ 5.25% 05/30/48 315,626 228,000 Vodafone Group PLC (USD)............................................ 4.88% 06/19/49 274,575 80,000 Vodafone Group PLC (USD)............................................ 4.25% 09/17/50 88,435 -------------- 1,938,499 -------------- TOTAL FOREIGN CORPORATE BONDS AND NOTES........................................................ 16,739,053 (Cost $15,670,095) -------------- FOREIGN SOVEREIGN BONDS AND NOTES -- 1.5% BAHRAIN -- 0.1% 200,000 Bahrain Government International Bond (USD) (k)..................... 7.00% 10/12/28 231,912 -------------- BRAZIL -- 0.1% 250,000 Brazilian Government International Bond (USD)....................... 4.63% 01/13/28 275,128 -------------- |
Page 48 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL VALUE (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLAR) -------------- -------------------------------------------------------------------- ----------- ------------ -------------- FOREIGN SOVEREIGN BONDS AND NOTES (CONTINUED) COLOMBIA -- 0.2% 400,000 Colombia Government International Bond (USD)........................ 3.88% 04/25/27 $ 430,939 -------------- DOMINICAN REPUBLIC -- 0.1% 200,000 Dominican Republic International Bond (USD) (k)..................... 6.00% 07/19/28 221,571 -------------- EGYPT -- 0.1% 200,000 Egypt Government International Bond (USD) (a)....................... 5.58% 02/21/23 207,484 -------------- INDONESIA -- 0.1% 200,000 Perusahaan Penerbit SBSN Indonesia III (USD) (k).................... 4.15% 03/29/27 220,150 -------------- MEXICO -- 0.1% 200,000 Mexico Government International Bond (USD).......................... 3.25% 04/16/30 205,750 -------------- OMAN -- 0.1% 200,000 Oman Government International Bond (USD) (a)........................ 5.63% 01/17/28 200,034 -------------- QATAR -- 0.2% 400,000 Qatar Government International Bond (USD) (k)....................... 4.50% 04/23/28 464,000 -------------- RUSSIA -- 0.1% 200,000 Russian Foreign Bond - Eurobond (USD) (k)........................... 4.75% 05/27/26 225,261 -------------- SAUDI ARABIA -- 0.1% 400,000 Saudi Government International Bond (USD) (k)....................... 3.63% 03/04/28 429,652 -------------- SOUTH AFRICA -- 0.1% 250,000 Republic of South Africa Government International Bond (USD)........ 4.88% 04/14/26 261,700 -------------- URUGUAY -- 0.1% 200,000 Uruguay Government International Bond (USD)......................... 4.38% 01/23/31 230,252 -------------- TOTAL FOREIGN SOVEREIGN BONDS AND NOTES........................................................ 3,603,833 (Cost $3,357,408) -------------- |
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- MUNICIPAL BONDS -- 0.8% CALIFORNIA -- 0.8% $ 500,000 Los Angeles CA Unified School District.............................. 5.75% 07/01/34 685,135 500,000 Los Angeles Department of Water..................................... 6.01% 07/01/39 694,895 510,000 Regents of the University of California Medical Center Pooled Revenue.......................................................... 3.26% 05/15/60 523,459 75,000 Univ of CA Rev TXBL Gen Ref, Ser AJ................................. 4.60% 05/15/31 90,826 -------------- TOTAL MUNICIPAL BONDS.......................................................................... 1,994,315 (Cost $1,846,402) -------------- |
ANNUALIZED PRINCIPAL STATED YIELD ON DATE VALUE DESCRIPTION COUPON OF PURCHASE VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- COMMERCIAL PAPER -- 0.3% AUTO MANUFACTURERS -- 0.3% 310,000 Ford Motor Credit Co. LLC........................................... 3.25% 10/08/20 305,412 295,000 Ford Motor Credit Co. LLC........................................... 2.88% 01/08/21 288,348 -------------- TOTAL COMMERCIAL PAPER......................................................................... 593,760 (Cost $591,846) -------------- |
See Notes to Financial Statements Page 49
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE -------------- -------------------------------------------------------------------- ----------- ------------ -------------- U.S. GOVERNMENT BONDS AND NOTES -- 0.1% $ 275,000 Federal Home Loan Banks............................................. 4.05% 09/21/33 $ 278,770 -------------- TOTAL U.S. GOVERNMENT BONDS AND NOTES.......................................................... 278,770 (Cost $274,863) -------------- U.S. TREASURY BILLS -- 10.6% 1,750,000 U.S. Treasury Bill.................................................. (l) 03/17/20 1,748,932 768,000 U.S. Treasury Bill (m).............................................. (l) 03/19/20 767,485 1,935,000 U.S. Treasury Bill.................................................. (l) 04/09/20 1,932,160 6,310,000 U.S. Treasury Bill.................................................. (l) 04/14/20 6,299,616 5,475,000 U.S. Treasury Bill.................................................. (l) 04/21/20 5,464,677 4,445,000 U.S. Treasury Bill.................................................. (l) 05/14/20 4,433,416 4,800,000 U.S. Treasury Bill.................................................. (l) 07/16/20 4,778,988 -------------- TOTAL U.S. TREASURY BILLS...................................................................... 25,425,274 (Cost $25,412,571) -------------- |
SHARES DESCRIPTION VALUE -------------- ----------------------------------------------------------------------------------------------- -------------- MONEY MARKET FUNDS -- 3.0% 7,292,609 JPMorgan 100% U.S. Treasury Securities Money Market - Fund Institutional Class - 1.41% (n)..... 7,292,609 (Cost $7,292,609) -------------- TOTAL INVESTMENTS -- 99.7%..................................................................... 239,277,382 (Cost $229,527,960) (o) NET OTHER ASSETS AND LIABILITIES -- 0.3%....................................................... 668,721 -------------- NET ASSETS -- 100.0%........................................................................... $ 239,946,103 ============== |
FUTURES CONTRACTS AT FEBRUARY 29, 2020 (see Note 2C - Futures Contracts in the Notes to Financial Statements):
UNREALIZED APPRECIATION NUMBER OF EXPIRATION NOTIONAL (DEPRECIATION)/ FUTURES CONTRACTS POSITION CONTRACTS DATE VALUE VALUE ------------------------------ ------------ --------------- -------------- ------------- -------------- U.S. 5-Year Treasury Notes Long 140 Jun-2020 $ 17,185,000 $ 283,248 U.S. 10-Year Ultra Treasury Notes Short 238 Jun-2020 (35,752,063) (1,145,278) Ultra U.S. Treasury Bond Futures Short 64 Jun-2020 (13,280,000) (691,040) ------------- -------------- $ (31,847,063) $ (1,553,070) ============= ============== |
Page 50 See Notes to Financial Statements
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
INTEREST RATE SWAP AGREEMENTS AT FEBRUARY 29, 2020 (see Note 2E - Swap
Agreements in the Notes to Financial Statements):
UNREALIZED APPRECIATION FLOATING EXPIRATION NOTIONAL FIXED (DEPRECIATION)/ COUNTERPARTY RATE DATE VALUE RATE VALUE ------------------------------ ----------------- --------------- -------------- ------------- -------------- Citibank, Global Markets, Inc. 3 month LIBOR(1) 1/21/2023 $ 9,900,000 1.580%(1) $ 145,171 Citibank, Global Markets, Inc. 3 month LIBOR(2) 1/21/2026 4,030,000 1.675%(2) (144,107) Goldman Sachs and Co. 3 month LIBOR(1) 1/21/2023 7,405,000 1.573%(1) 106,158 Goldman Sachs and Co. 3 month LIBOR(2) 1/21/2026 3,010,000 1.667%(2) (105,479) -------------- -------------- $ 24,345,000 $ 1,743 ============== ============== |
(1) The Fund pays the floating rate and receives the fixed rate. The floating rate is not effective until 1/21/2021 and no interest is being accrued until that date.
(2) The Fund pays the fixed rate and receives the floating rate. The floating rate is not effective until 1/21/2021 and no interest is being accrued until that date.
(b) Floating or variable rate security.
(c) Fixed-to-floating security. At a predetermined date, the fixed rate will change to a floating rate.
(d) Inverse floating rate security.
(e) Collateral Strip Rate security. Coupon is based on the weighted net interest rate of the investment's underlying collateral. The interest rate resets periodically.
(f) Weighted Average Coupon security. Coupon is based on the blended interest rate of the underlying holdings, which may have different coupons. The coupon may change in any period.
(g) Pursuant to procedures adopted by the Trust's Board of Trustees, this security has been determined to be illiquid by the Advisor.
(h) This security is fair valued by the Advisor's Pricing Committee in accordance with procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the Investment Company Act of 1940, as amended. At February 29, 2020, securities noted as such are valued at $715,651 or 0.3% of net assets.
(i) Step security. The coupon rate is determined based on the underlying investments. The coupon rate resets periodically.
(j) Step-up security. A security where the coupon increases or steps up at a predetermined date.
(k) This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act.
(l) Zero coupon security.
(m) All or a portion of this security is segregated as collateral for open futures contracts.
(n) Rate shown reflects yield as of February 29, 2020.
(o) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $11,551,110 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $3,353,015. The net unrealized appreciation was $8,198,095. The amounts presented are inclusive of derivative contracts.
IO - Interest-Only Security - Principal amount shown represents par value on which interest payments are based.
LIBOR - London Interbank Offered Rates
SOFR - Secured Overnight Financing Rate
Currency Abbreviations:
USD United States Dollar
See Notes to Financial Statements Page 51
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- Corporate Bonds and Notes*....................... $ 80,675,884 $ -- $ 80,675,884 $ -- U.S. Government Agency Mortgage-Backed Securities.................................... 55,951,318 -- 55,951,318 -- Mortgage-Backed Securities....................... 25,639,197 -- 25,639,197 -- Asset-Backed Securities.......................... 21,083,369 -- 21,083,369 -- Foreign Corporate Bonds and Notes*............... 16,739,053 -- 16,739,053 -- Foreign Sovereign Bonds and Notes**.............. 3,603,833 -- 3,603,833 -- Municipal Bonds***............................... 1,994,315 -- 1,994,315 -- Commercial Paper*................................ 593,760 -- 593,760 -- U.S. Government Bonds and Notes.................. 278,770 -- 278,770 -- U.S. Treasury Bills.............................. 25,425,274 -- 25,425,274 -- Money Market Funds............................... 7,292,609 7,292,609 -- -- -------------- -------------- -------------- -------------- Total Investments................................ 239,277,382 7,292,609 231,984,773 -- Futures Contracts****............................ 283,248 283,248 -- -- Interest Rate Swap Agreements.................... 251,329 -- 251,329 -- -------------- -------------- -------------- -------------- Total............................................ $ 239,811,959 $ 7,575,857 $ 232,236,102 $ -- ============== ============== ============== ============== LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS -------------- -------------- -------------- -------------- Futures Contracts****............................ $ (1,836,318) $ (1,836,318) $ -- $ -- Interest Rate Swap Agreements.................... (249,586) -- (249,586) -- -------------- -------------- -------------- -------------- Total............................................ $ (2,085,904) $ (1,836,318) $ (249,586) $ -- ============== ============== ============== ============== |
* See Portfolio of Investments for industry breakout. ** See Portfolio of Investments for country breakout. *** See Portfolio of Investments for state breakout. **** Includes cumulative appreciation/depreciation on futures contracts as reported in the Futures Contracts table. Only the current day's variation margin is presented on the Statements of Assets and Liabilities.
Page 52 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST TCW FIRST TRUST TCW OPPORTUNISTIC FIXED UNCONSTRAINED INCOME ETF PLUS BOND ETF (FIXD) (UCON) ------------------- ------------------- ASSETS: Investments, at value.................................................. $ 1,848,297,594 $ 239,277,382 Swap contracts, at value............................................... 1,550,254 251,329 Cash................................................................... 130,627 -- Cash segregated as collateral for open swap contracts.................. 283,110 46,342 Receivables: Investment securities sold ......................................... 130,037,914 1,658,887 Capital shares sold ................................................ 18,695,104 1,299,127 Interest............................................................ 5,952,814 1,715,347 Variation margin.................................................... 1,243,109 133,437 Dividends........................................................... 47,129 6,255 --------------- --------------- Total Assets........................................................ 2,006,237,655 244,388,106 --------------- --------------- LIABILITIES: Swap contracts, at value............................................... 1,537,795 249,586 Due to custodian....................................................... -- 1,744 Due to custodian foreign currency...................................... -- 135 Payables: Investment securities purchased .................................... 415,131,647 3,309,586 Investment advisory fees............................................ 654,657 138,620 Variation margin.................................................... -- 742,332 --------------- --------------- Total Liabilities................................................... 417,324,099 4,442,003 --------------- --------------- NET ASSETS............................................................. $ 1,588,913,556 $ 239,946,103 =============== =============== NET ASSETS CONSIST OF: Paid-in capital........................................................ $ 1,531,737,294 $ 233,463,190 Par value.............................................................. 297,500 92,500 Accumulated distributable earnings (loss).............................. 56,878,762 6,390,413 --------------- --------------- NET ASSETS............................................................. $ 1,588,913,556 $ 239,946,103 =============== =============== NET ASSET VALUE, per share............................................. $ 53.41 $ 25.94 =============== =============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).......................................... 29,750,002 9,250,002 =============== =============== Investments, at cost................................................... $ 1,801,787,871 $ 229,527,960 =============== =============== Foreign currency, at cost (proceeds)................................... $ -- $ (130) =============== =============== |
See Notes to Financial Statements Page 53
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST TCW FIRST TRUST TCW OPPORTUNISTIC FIXED UNCONSTRAINED INCOME ETF PLUS BOND ETF (FIXD) (UCON) ------------------- ------------------- INVESTMENT INCOME: Interest............................................................... $ 15,645,124 $ 3,786,835 Dividends.............................................................. 228,498 54,392 --------------- --------------- Total investment income............................................. 15,873,622 3,841,227 --------------- --------------- EXPENSES: Investment advisory fees............................................... 3,832,317 908,544 --------------- --------------- Total expenses...................................................... 3,832,317 908,544 Less fees waived by the investment advisor............................. (589,587) (106,896) --------------- --------------- Net expenses........................................................... 3,242,730 801,648 --------------- --------------- NET INVESTMENT INCOME (LOSS)........................................... 12,630,892 3,039,579 --------------- --------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments......................................................... 12,128,189 2,446,827 Futures contracts................................................... 1,176,829 119,293 Forward foreign currency contracts.................................. -- 73,958 Foreign currency transactions....................................... -- (4,159) Swap contracts...................................................... (52,703) (15,364) --------------- --------------- Net realized gain (loss)............................................... 13,252,315 2,620,555 --------------- --------------- Net change in unrealized appreciation (depreciation) on: Investments......................................................... 20,315,003 227,534 Futures contracts................................................... 2,823,770 (1,398,827) Foreign currency transactions....................................... -- (5) Swap contracts...................................................... 97,748 33,546 --------------- --------------- Net change in unrealized appreciation (depreciation)................... 23,236,521 (1,137,752) --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 36,488,836 1,482,803 --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ 49,119,728 $ 4,522,382 =============== =============== |
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST TCW FIRST TRUST TCW OPPORTUNISTIC FIXED UNCONSTRAINED INCOME ETF PLUS BOND ETF (FIXD) (UCON) ------------------------------- ------------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED YEAR 2/29/2020 ENDED 2/29/2020 ENDED (UNAUDITED) 8/31/2019 (UNAUDITED) 8/31/2019 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss).............................. $ 12,630,892 $ 13,110,777 $ 3,039,579 $ 5,213,728 Net realized gain (loss).................................. 13,252,315 16,057,033 2,620,555 (3,737,035) Net change in unrealized appreciation (depreciation)...... 23,236,521 28,429,040 (1,137,752) 9,204,698 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations............................................. 49,119,728 57,596,850 4,522,382 10,681,391 -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................... (29,058,328) (14,132,128) (3,361,126) (5,539,586) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................. 676,265,554 545,941,078 50,511,188 191,160,543 Cost of shares redeemed................................... (7,872,419) (7,551,313) (19,332,144) (13,821,447) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................... 668,393,135 538,389,765 31,179,044 177,339,096 -------------- -------------- -------------- -------------- Total increase (decrease) in net assets................... 688,454,535 581,854,487 32,340,300 182,480,901 NET ASSETS: Beginning of period....................................... 900,459,021 318,604,534 207,605,803 25,124,902 -------------- -------------- -------------- -------------- End of period............................................. $1,588,913,556 $ 900,459,021 $ 239,946,103 $ 207,605,803 ============== ============== ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................... 17,000,002 6,450,002 8,050,002 1,000,002 Shares sold............................................... 12,900,000 10,700,000 1,950,000 7,600,000 Shares redeemed........................................... (150,000) (150,000) (750,000) (550,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period......................... 29,750,002 17,000,002 9,250,002 8,050,002 ============== ============== ============== ============== |
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF (FIXD)
SIX MONTHS ENDED YEAR ENDED AUGUST 31, PERIOD 2/29/2020 ----------------------------- ENDED (UNAUDITED) 2019 2018 8/31/2017 (a) ------------- ------------- ------------- ------------- Net asset value, beginning of period........................... $ 52.97 $ 49.40 $ 51.01 $ 50.00 ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... 0.59 1.39 1.15 0.49 Net realized and unrealized gain (loss)........................ 1.12 3.63 (1.46) 1.12 ----------- ----------- ----------- ----------- Total from investment operations............................... 1.71 5.02 (0.31) 1.61 ----------- ----------- ----------- ----------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................................... (0.67) (1.45) (1.30) (0.60) Net realized gain.............................................. (0.60) -- (0.00) (b) -- ----------- ----------- ----------- ----------- Total distributions............................................ (1.27) (1.45) (1.30) (0.60) ----------- ----------- ----------- ----------- Net asset value, end of period................................. $ 53.41 $ 52.97 $ 49.40 $ 51.01 =========== =========== =========== =========== TOTAL RETURN (c)............................................... 3.30% 10.33% (0.57)% 3.23% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 1,588,914 $ 900,459 $ 318,605 $ 51,011 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.65% (d) 0.65% 0.65% 0.65% (d) Ratio of net expenses to average net assets.................... 0.55% (d) 0.55% 0.55% 0.55% (d) Ratio of net investment income (loss) to average net assets.... 2.14% (d) 2.29% 2.29% 1.81% (d) Portfolio turnover rate (e).................................... 184% (f) 246% (f) 358% (f) 231% (f) |
FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF (UCON)
SIX MONTHS ENDED YEAR PERIOD 2/29/2020 ENDED ENDED (UNAUDITED) 8/31/2019 8/31/2018 (a) ------------- ------------- ------------- Net asset value, beginning of period........................... $ 25.79 $ 25.12 $ 25.00 ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... 0.36 0.77 0.17 Net realized and unrealized gain (loss)........................ 0.19 0.75 0.10 ----------- ----------- ----------- Total from investment operations............................... 0.55 1.52 0.27 ----------- ----------- ----------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................................... (0.40) (0.81) (0.15) Net realized gain.............................................. -- (0.04) -- ----------- ----------- ----------- Total distributions............................................ (0.40) (0.85) (0.15) ----------- ----------- ----------- Net asset value, end of period................................. $ 25.94 $ 25.79 $ 25.12 =========== =========== =========== TOTAL RETURN (c)............................................... 2.16% 6.15% 1.06% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 239,946 $ 207,606 $ 25,125 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.85% (d) 0.85% 0.85% (d) Ratio of net expenses to average net assets.................... 0.75% (d) 0.75% 0.75% (d) Ratio of net investment income (loss) to average net assets.... 2.84% (d) 3.16% 2.68% (d) Portfolio turnover rate (e).................................... 28% (g) 40% (g) 70% |
(a) Inception dates for FIXD and UCON are February 14, 2017 and June 4, 2018, respectively, which are consistent with the respective Fund's commencement of investment operations and are the dates the initial creation units were established.
(b) Amount is less than $0.01.
(c) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived by the investment advisor.
(d) Annualized.
(e) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.
(f) The portfolio turnover rate not including mortgage dollar rolls was 138%, 223%, 241% and 158% for the periods ending February 29, 2020, August 31, 2019, August 31, 2018 and August 31, 2017, respectively.
(g) The portfolio turnover rate not including mortgage dollar rolls was 27% and 39% for the periods ending February 29, 2020 and August 31, 2019.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on February 22, 2016, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of sixteen funds that are offering shares. This report covers the two funds listed below:
First Trust TCW Opportunistic Fixed Income ETF - (The Nasdaq Stock Market
LLC ("Nasdaq") ticker "FIXD")
First Trust TCW Unconstrained Plus Bond ETF - (NYSE Arca, Inc.
("NYSE Arca") ticker "UCON")
Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed for cash and, in certain circumstances, in-kind for securities in which a Fund invests, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund. Each Fund's investment objective is to seek to maximize long-term total return. Each Fund seeks to achieve its investment objective by investing, under normal market conditions, at least 80% of its net assets (including investment borrowings) in fixed income securities. Each Fund's investments principally include securities issued or guaranteed by the U.S. government or its agencies, instrumentalities or U.S. government-sponsored entities; Treasury Inflation Protected Securities; residential and commercial mortgage-backed securities; asset-backed securities; U.S. corporate bonds; fixed income securities issued by non-U.S. corporations and governments, including issuers with significant ties to emerging market countries; bank loans, including first lien senior secured floating rate bank loans ("Senior Loans")(1); municipal bonds; collateralized loan obligations (CLOs); Rule 144A securities, and other debt securities bearing fixed, floating or variable interest rates of any maturity. In addition, UCON may also invest in preferred stock and common stock. Each Fund may invest in to-be-announced transactions ("TBA Transactions"). FIXD may invest up to 20% of its assets invested in fixed income investments in non-agency, non-government sponsored entity securities and privately-issued mortgage-related and other asset-backed securities. FIXD may invest up to 35% of its net assets in corporate, non-U.S. and non-agency debt and other securities rated below investment grade by one or more nationally recognized statistical rating organization ("NRSRO"), or, if unrated, judged to be of comparable quality by TCW Investment Management Company LLC ("TCW" or the "Sub-Advisor") (commonly referred to as "high yield" or "junk" bonds). FIXD may also invest up to 20% of its net assets in securities denominated in non-U.S. currencies and securities of issuers with significant ties to emerging market countries, as determined by the Sub-Advisor. UCON may invest up to 50% of its assets invested in fixed income investments in non-agency, non-government sponsored entity securities and privately-issued mortgage-backed securities including residential mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities and CLOs. UCON may invest up to 70% of its net assets in securities rated below investment grade by one or more NRSRO, or, if unrated, judged to be of comparable quality by the Sub-Advisor (commonly referred to as "high yield" or "junk" bonds). UCON may also invest up to 60% of its net assets in securities issued by issuers with significant ties to emerging market countries, as determined by the Sub-Advisor, and up to 50% of its net assets in securities denominated in non-U.S. currencies.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. Each Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act.
Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows:
Corporate bonds, corporate notes, U.S. government securities, mortgage-backed securities, asset-backed securities, municipal securities, capital preferred securities, and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the Trust's Board of Trustees, which may use the following valuation inputs when available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.
Shares of open-end funds are valued at fair value which is based on NAV per share.
Senior Loans in which the Funds invest are not listed on any securities exchange or board of trade. Senior Loans are typically bought and sold by institutional investors in individually negotiated private transactions that function in many respects like an over-the-counter secondary market, although typically no formal market-makers exist. This market, while having grown substantially since its inception, generally has fewer trades and less liquidity than the secondary market for other types of securities. Some Senior Loans have few or no trades, or trade infrequently, and information regarding a specific Senior Loan may not be widely available or may be incomplete. Accordingly, determinations of the market value of Senior Loans may be based on infrequent and dated information. Because there is less reliable, objective data available, elements of judgment may play a greater role in valuation of Senior Loans than for other types of securities. Typically, Senior Loans are valued using information provided by a third-party pricing service. The third-party pricing service primarily uses over-the-counter pricing from dealer runs and broker quotes from indicative sheets to value the Senior Loans.
Forward foreign currency contracts are fair valued at the current day's interpolated foreign exchange rate, as calculated using the current day's spot rate, and the thirty, sixty, ninety, and one-hundred eighty day forward rates provided by a third-party pricing service.
Exchange-traded futures contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded futures contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.
Fixed income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor's Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes thereto;
2) the liquidity conditions in the relevant market and changes thereto;
3) the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates);
4) issuer-specific conditions (such as significant credit deterioration); and
5) any other market-based data the Advisor's Pricing Committee considers relevant. In this regard, the Advisor's Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost.
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Swaps are fair valued utilizing quotations provided by a third-party pricing service or, if the third-party pricing service does not provide a value, by quotes provided by the selling dealer or financial institution.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:
1) the fundamental business data relating to the issuer;
2) an evaluation of the forces which influence the market in which these securities are purchased and sold;
3) the type, size and cost of a security;
4) the financial statements of the issuer;
5) the credit quality and cash flow of the issuer, based on the Sub-Advisor's or external analysis;
6) the information as to any transactions in or offers for the security;
7) the price and extent of public trading in similar securities of the issuer, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing the security;
10) the business prospects of the issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer's management (for corporate debt only);
11) the economic, political and social prospects/developments of the country of issue and the assessment of the country's government leaders/officials (for sovereign debt only);
12) the prospects for the issuer's industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry (for corporate debt only); and
13) other relevant factors.
Because foreign markets may be open on different days than the days during which investors may transact in the shares of a Fund, the value of the Fund's securities may change on the days when investors are not able to transact in the shares of the Fund. The value of the securities denominated in foreign currencies is converted into U.S. dollars using exchange rates determined daily as of the close of regular trading on the NYSE.
The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly.
o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates).
o Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment.
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of February 29, 2020, is included with each Fund's Portfolio of Investments.
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FEBRUARY 29, 2020 (UNAUDITED)
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method.
On July 27, 2017, the Financial Conduct Authority ("FCA") announced that it will no longer persuade or compel banks to submit rates for the calculation of the London Interbank Offered Rates ("LIBOR") after 2021 (the "FCA Announcement"). Furthermore, in the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee of the Federal Reserve Board and the Federal Reserve Bank of New York. On August 24, 2017, the Federal Reserve Board requested public comment on a proposal by the Federal Reserve Bank of New York, in cooperation with the Office of Financial Research, to produce three new reference rates intended to serve as alternatives to LIBOR. These alternative rates are based on overnight repurchase agreement transactions secured by U.S. Treasury Securities. On December 12, 2017, following consideration of public comments, the Federal Reserve Board concluded that the public would benefit if the Federal Reserve Bank of New York published the three proposed reference rates as alternatives to LIBOR (the "Federal Reserve Board Notice").
At this time, it is not possible to predict the effect of the FCA Announcement, the Federal Reserve Board Notice, or other regulatory changes or announcements, any establishment of alternative reference rates or any other reforms to LIBOR that may be enacted in the United Kingdom, the United States or elsewhere. As such, the potential effect of any such event on each Fund cannot yet be determined.
Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates.
Securities purchased or sold on a when-issued, delayed-delivery or forward purchase commitment basis may have extended settlement periods. The value of the security so purchased is subject to market fluctuations during this period. Each Fund maintains liquid assets with a current value at least equal to the amount of its when-issued, delayed-delivery or forward purchase commitments until payment is made. At February 29, 2020, the Funds had no when-issued or delayed-delivery securities. At February 29, 2020, FIXD held $158,456,495 of forward purchase commitments.
C. FUTURES CONTRACTS
Each Fund may purchase or sell (i.e., is long or short) exchange-listed futures contracts to hedge against changes in interest rates (interest rate risk). Futures contracts are agreements between a Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Open futures contracts can also be closed out prior to settlement by entering into an offsetting transaction in a matching futures contract. If a Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain margin deposits on the futures contract. When the contract is closed or expires, a Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or expired. This gain or loss is included in "Net realized gain (loss) on futures contracts" on the Statements of Operations.
Upon entering into a futures contract, a Fund must deposit funds, called margin, with its custodian in the name of the clearing broker equal to a specified percentage of the current value of the contract. Open futures contacts are marked-to-market daily with the change in value recognized as a component of "Net change in unrealized appreciation (depreciation) on futures contracts" on the Statements of Operations. Pursuant to the contract, a Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin and are included in "Variation margin" receivable or payable on the Statements of Assets and Liabilities. If market conditions change unexpectedly, a Fund may not achieve the anticipated benefits of the futures contract and may realize a loss. The use of futures contracts involves the risk of imperfect correlation in movements in the price of the futures contracts, interest rates and the underlying instruments.
D. FORWARD FOREIGN CURRENCY CONTRACTS
Each Fund is subject to foreign currency risk in the normal course of pursuing its investment objective. Forward foreign currency contracts are agreements between two parties ("Counterparties") to exchange one currency for another at a future date and at a specified price. Each Fund uses forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's foreign currency exposure. These contracts are valued daily, and a Fund's net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in "Unrealized appreciation (depreciation) on forward foreign currency contracts" on the Statements of Assets and Liabilities. The change in unrealized appreciation/(depreciation) is included in "Net change in unrealized appreciation (depreciation) on forward foreign currency contracts" on the Statements of Operations. When the forward contract is closed, a Fund records a realized gain or loss equal to the difference between the proceeds from (or the cost of) the closing transaction and the Fund's basis in the contract. This realized gain or loss is included in "Net realized gain (loss) on forward
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foreign currency contracts" on the Statements of Operations. Risks arise from the possible inability of Counterparties to meet the terms of their contracts and from movement in currency and securities values and interest rates. Due to the risks, a Fund could incur losses in excess of the net unrealized value shown on the forward foreign currency contracts table in the Fund's Portfolio of Investments. In the event of default by the Counterparty, a Fund will provide notice to the Counterparty of the Fund's intent to convert the currency held by the Fund into the currency that the Counterparty agreed to exchange with the Fund. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, a Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances.
As of February 29, 2020, the Funds had no open forward foreign currency contracts.
E. SWAP AGREEMENTS
Each Fund may enter into swap agreements. A swap is a financial instrument that typically involves the exchange of cash flows between two parties on specified dates (settlement dates), where the cash flows are based on agreed upon prices, rates, etc. Payment received or made by the Fund for interest rate swaps, if any, are recorded on the Statements of Operations as "Net realized gain (loss) on swap contracts." When an interest rate swap is terminated, the Fund will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund's basis in the contract, if any. Generally, the basis of the contracts, if any, is the premium received or paid. Swap agreements are individually negotiated and involve the risk of the potential inability of the Counterparties to meet the terms of the agreement. In connection with these agreements, cash and securities may be identified as collateral in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default under the swap agreement or bankruptcy/insolvency of a party to the swap agreement. In the event of a default by a Counterparty, the Fund will seek withdrawal of the collateral and may incur certain costs exercising its rights with respect to the collateral. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances.
Swap agreements may increase or decrease the overall volatility of the investments of the Fund. The performance of swap agreements may be affected by changes in the specific interest rate, security, currency, or other factors that determine the amounts of payments due to and from the Fund. The Fund's maximum interest rate risk to meet its future payments under swap agreements outstanding at February 29, 2020, is equal to the total notional amount as shown on the Portfolio of Investments. The notional amount represents the U.S. dollar value of the contract as of the day of the opening transaction or contract reset. When the Fund enters into a swap agreement, any premium paid is included in "Swap contracts, at value" on the Statements of Assets and Liabilities.
Each Fund held interest rate swap agreements at February 29, 2020. An interest rate swap agreement involves the Fund's agreement to exchange a stream of interest payments for another party's stream of cash flows. Interest rate swaps do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss with respect to interest rate swaps is limited to the net amount of interest payments that the Fund is contractually obligated to make.
F. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES
Offsetting Assets and Liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset on the Statements of Assets and Liabilities, and disclose instruments and transactions subject to master netting or similar agreements. These disclosure requirements are intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on a fund's financial position. The transactions subject to offsetting disclosures are derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions.
For financial reporting purposes, the Funds do not offset financial assets and financial liabilities that are subject to master netting arrangements ("MNAs") or similar agreements on the Statements of Assets and Liabilities. MNAs provide the right, in the event of default (including bankruptcy and insolvency) for the non-defaulting Counterparty to liquidate the collateral and calculate the net exposure to the defaulting party or request additional collateral.
The Funds do not have the right to offset financial assets and financial liabilities related to futures contracts or swap contracts on the Statements of Assets and Liabilities.
G. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in "Net change in unrealized appreciation (depreciation) on foreign currency translation" on the Statements of Operations. Unrealized gains and losses on
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FEBRUARY 29, 2020 (UNAUDITED)
investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are shown in "Net change in unrealized appreciation (depreciation) on investments" on the Statements of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are included in "Net realized gain (loss) on foreign currency transactions" on the Statements of Operations. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase settlement date and subsequent sale trade date for fixed-income securities is included in "Net realized gain (loss) on investments" on the Statements of Operations.
H. INTEREST-ONLY SECURITIES
An interest-only security ("IO Security") is the interest-only portion of a mortgage-backed security that receives some or all of the interest portion of the underlying mortgage-backed security and little or no principal. A reference principal value called a notional value is used to calculate the amount of interest due to the IO Security. IO Securities are sold at a deep discount to their notional principal amount. Generally speaking, when interest rates are falling and prepayment rates are increasing, the value of an IO Security will fall. Conversely, when interest rates are rising and prepayment rates are decreasing, generally the value of an IO Security will rise. These securities, if any, are identified on each Fund's Portfolio of Investments.
I. MORTGAGE DOLLAR ROLLS
Each Fund may invest, without limitation, in mortgage dollar rolls. The Funds intend to enter into mortgage dollar rolls only with high quality securities dealers and banks, as determined by the Funds' Sub-Advisor. In a mortgage dollar roll, a Fund will sell (or buy) mortgage-backed securities for delivery on a specified date and simultaneously contract to repurchase (or sell) substantially similar (same type, coupon and maturity) securities on a future date. Mortgage dollar rolls are recorded as separate purchases and sales in a Fund.
J. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid monthly, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually.
Distributions in cash may be reinvested automatically in additional whole shares only if the broker through whom the shares were purchased makes such option available. Such shares will generally be reinvested by the broker based upon the market price of those shares and investors may be subject to customary brokerage commissions charged by the broker.
Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year ended August 31, 2019 was as follows:
Distributions Distributions Distributions paid from paid from paid from Ordinary Capital Return of Income Gains Capital ------------- ------------- ------------- First Trust TCW Opportunistic Fixed Income ETF $ 14,132,128 $ -- $ -- First Trust TCW Unconstrained Plus Bond ETF 5,422,118 117,468 -- |
As of August 31, 2019, the components of distributable earnings on a tax basis for each Fund were as follows:
Accumulated Net Undistributed Capital and Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) ------------- ------------- ------------- First Trust TCW Opportunistic Fixed Income ETF $ 10,189,503 $ 1,305,048 $ 25,322,811 First Trust TCW Unconstrained Plus Bond ETF 162,765 (4,167,198) 9,233,590 |
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FEBRUARY 29, 2020 (UNAUDITED)
K. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. For FIXD, the taxable years ending 2017, 2018, and 2019 remain open to federal and state audit. For UCON, the taxable years ending 2018 and 2019 remain open to federal and state audit. As of February 29, 2020, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions.
Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At August 31, 2019, the Funds had no capital loss carryforwards for federal income tax purposes.
During the taxable year ended August 31, 2019, the Funds utilized Post-enactment capital loss carryforwards in the following amounts:
Capital Loss Carryforward Utilized ------------------------------- First Trust TCW Opportunistic Fixed Income ETF $ 4,035,664 First Trust TCW Unconstrained Plus Bond ETF 57,275 |
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended August 31, 2019, the Funds listed below incurred and elected to defer net late year ordinary or capital losses as follows:
Qualified Late Year Losses --------------------------------- Ordinary Losses Capital Losses --------------------- --------------------- First Trust TCW Opportunistic Fixed Income ETF $ -- $ -- First Trust TCW Unconstrained Plus Bond ETF -- 4,167,198 |
L. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds.
TCW serves as the Funds' sub-advisor and manages each Fund's portfolio subject to First Trust's supervision. Pursuant to the Investment Management Agreement, between the Trust, on behalf of the Funds, and the Advisor, and the Investment Sub-Advisory Agreement among the Trust, on behalf of the Funds, the Advisor and TCW, First Trust will supervise TCW and its management of the investment of each Fund's assets and will pay TCW for its services as the Funds' sub-advisor. First Trust will also be responsible for each Fund's expenses, including the cost of transfer agency, sub-advisory, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. FIXD and UCON have each agreed to pay First Trust an annual unitary management fee equal to 0.65% and 0.85%, respectively, of its average daily net assets. Pursuant to a contractual agreement, First Trust has agreed to waive management fees of 0.10% of average daily net assets until December 31, 2020 for each Fund. The waiver agreement may be terminated by action of the Trust's Board of Trustees at any time upon 60 days' written notice by the Trust on behalf of each Fund or by the Funds' investment advisor only after December 31, 2020. During the six months ended February 29, 2020, the Advisor waived fees of $589,587 and $106,896 for FIXD and UCON, respectively.
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FEBRUARY 29, 2020 (UNAUDITED)
The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended February 29, 2020, the cost of purchases and proceeds from sales and paydowns of U.S. Government securities and non-U.S. Government securities for each Fund, excluding short-term investments, were as follows:
Purchases Sales ------------------ ------------------ FIRST TRUST TCW OPPORTUNISTIC FIXED INCOME ETF U.S. Government securities $2,725,300,521 $2,243,201,620 Non-U.S. Government securities 310,119,047 66,414,807 FIRST TRUST TCW UNCONSTRAINED PLUS BOND ETF U.S. Government securities 27,291,939 21,761,117 Non-U.S. Government securities 38,809,933 31,509,099 |
For the six months ended February 29, 2020, the Funds had no in-kind transactions.
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by each Fund at February 29, 2020, the primary underlying risk exposure and the location of these instruments as presented on the Statements of Assets and Liabilities.
ASSET DERIVATIVES LIABILITY DERIVATIVES --------------------------------------- --------------------------------------- DERIVATIVES STATEMENTS OF ASSETS AND STATEMENTS OF ASSETS AND INSTRUMENT RISK EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE ------------------ ------------------ -------------------------- ----------- -------------------------- ----------- FIXD Unrealized appreciation on Unrealized depreciation on Futures contracts Interest rate risk futures contracts* $ 3,104,568 futures contracts* $ -- Interest rate swap agreements Interest rate risk Swap contracts, at value 1,550,254 Swap contracts, at value 1,537,795 UCON Unrealized appreciation on Unrealized depreciation on Futures contracts Interest rate risk futures contracts* 283,248 futures contracts* 1,836,318 Interest rate swap agreements Interest rate risk Swap contracts, at value 251,329 Swap contracts, at value 249,586 |
* Includes cumulative appreciation/depreciation on futures contracts as reported in each Fund's Portfolio of Investments. Only the current day's variation margin is reported within the Statements of Assets and Liabilities.
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FEBRUARY 29, 2020 (UNAUDITED)
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended February 29, 2020, on each Fund's derivative instruments, as well as the primary underlying risk exposure associated with the instruments.
STATEMENTS OF OPERATIONS LOCATION FIXD UCON ---------------------------------------------------------------------------------------------- CURRENCY RISK EXPOSURE Net realized gain (loss) on forward foreign currency contracts $ -- $ 73,958 INTEREST RATE RISK EXPOSURE Net realized gain (loss) on futures contracts 1,176,829 119,293 Net realized gain (loss) on swap contracts (52,703) (15,364) Net change in unrealized appreciation (depreciation) on futures contracts 2,823,770 (1,398,827) Net change in unrealized appreciation (depreciation) on swap contracts 97,748 33,546 |
FIXD
During the six months ended February 29, 2020, there were no forward foreign
currency contracts opened or closed.
During the six months ended February 29, 2020, the notional value of futures contracts opened and closed were $421,836,937 and $346,747,761, respectively.
For the six months ended February 29, 2020, the average volume of interest rate swaps was $87,409,780.
UCON
During the six months ended February 29, 2020, the notional value of forward
foreign currency contracts opened and closed were $4,094,304 and $4,094,304,
respectively.
During the six months ended February 29, 2020, the notional value of futures contracts opened and closed were $43,938,261 and $51,065,259, respectively.
For the six months ended February 29, 2020, the average volume of interest rate swaps was $21,535,714.
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). In order to purchase Creation Units of each Fund, an Authorized Participant must deposit (i) a designated portfolio of securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. Each Fund's Creation Units are generally issued and redeemed for cash. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
7. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before December 31, 2020.
8. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there was the following subsequent event:
Beginning in December 2019, the outbreak of the respiratory disease designated as COVID-19 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short-term or may last for an extended period of time and, in either case, could result in a substantial economic downturn or recession. Management is continuing to monitor this event.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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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
EquityCompass Risk Manager ETF (ERM)
EquityCompass Tactical Risk Manager ETF (TERM)
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1 Fund Performance Overview EquityCompass Risk Manager ETF (ERM)...................................... 2 EquityCompass Tactical Risk Manager ETF (TERM)............................ 4 Notes to Fund Performance Overview........................................... 6 Portfolio Management......................................................... 7 Understanding Your Fund Expenses............................................. 8 Portfolio of Investments EquityCompass Risk Manager ETF (ERM)...................................... 9 EquityCompass Tactical Risk Manager ETF (TERM)............................ 12 Statements of Assets and Liabilities......................................... 15 Statements of Operations..................................................... 16 Statements of Changes in Net Assets.......................................... 17 Financial Highlights......................................................... 18 Notes to Financial Statements................................................ 19 Additional Information....................................................... 24 CAUTION REGARDING FORWARD-LOOKING STATEMENTS |
This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and/or EquityCompass Investment Management LLC (the "Sub-Advisor") and their representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund VIII (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its investment objectives. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in a Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance and investment approach.
The statistical information that follows may help you understand each Fund's performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the Advisor and/or Sub-Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information, and other Fund regulatory filings.
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the EquityCompass Risk Manager ETF ("ERM") and the EquityCompass Tactical Risk Manager ETF ("TERM" and together with ERM, the "Funds"), each a series of the First Trust Exchange-Traded Fund VIII, which contains detailed information about the Funds for the six months ended February 29, 2020.
To say that much has transpired over the past six months would be an understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China this past December, my message to investors would have sounded quite bullish, focusing on such accomplishments as the progress in the trade negotiations between the U.S. and China, where a "Phase One" deal was signed into law on January 15, 2020. The main takeaway from the deal is that China agreed to purchase an additional $200 billion of goods and services from the U.S. over the next several years in exchange for the U.S. cutting some of its tariffs on Chinese goods. The deal marked the first breakthrough since the Trump Administration launched its new tariff initiative in March 2018. On top of that news, the S&P 500(R) Index was setting new all-time highs all the way up through the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213 countries, areas or territories, had infected 1,991,562 people (confirmed cases) and was responsible for 130,885 confirmed deaths, according to the World Health Organization. These numbers are expected to trend higher in the days and weeks ahead. A growing number of U.S. state governors and foreign leaders have issued shelter in place orders to their citizens to help slow the spread of this new virus. The primary objective in doing so is to slow down the number of cases so that hospitals and health care workers are not overwhelmed by too many patients. The cost is high because it requires shutting down large chunks of the economy, which in turn negatively impacts the financial well-being of workers and companies. In the U.S., Congress passed a financial stimulus package valued at $2.0 trillion to help backstop workers and companies in the near-term. The faster we can end the shutdown, consistent with general health and welfare, the better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience a modest decline in real gross domestic product of 1.5% (annualized) in the first quarter of 2020, followed by a massive decline of 20% (annualized) in the second quarter. The good news is that he sees the economy growing at a 3.0% and 3.5% annual pace in the third and fourth quarters of 2020, respectively. In other words, we are expecting a healthy rebound in the second half of this year. As I noted earlier, the stock market was still at a record high in the third week of February. From February 19 through March 23, however, the S&P 500(R) Index posted a total return of -33.79%, putting it in bear market territory (price decline of 20% or more from the most recent peak). Sorry to say it, but the nearly 11-year bull market is no more. While we do not have a projection for where stocks will be at year-end, we do know this: excluding the current bear market, the S&P 500(R) Index has never failed to recoup all the losses sustained in any sell-off, pullback, correction or bear market. So, while I am understandably not bullish on the first half of 2020, I will be a bull once again after we put the worst of COVID-19 behind us. I continue to urge investors to stay the course. This too shall pass.
Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months.
Sincerely,
/s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. |
EQUITYCOMPASS RISK MANAGER ETF (ERM)
The EquityCompass Risk Manager ETF (the "Fund") seeks to provide long term capital appreciation with capital preservation as a secondary objective. Under normal market conditions, the Fund seeks to achieve its investment objectives by investing in equity securities of companies domiciled in the U.S. or listed on a U.S. exchange. During periods when the U.S. equity market is determined to be unfavorable by the Fund's Sub-Advisor, the Fund may invest all or a portion of its assets in cash, cash-equivalents, money market funds and/or short-term fixed income exchange-traded funds ("ETFs"), or the Fund may invest all or a portion of its assets in a single short-term fixed income ETF, the First Trust Enhanced Short Maturity ETF (FTSM). Certain of the ETFs in which the Fund invests may be advised by First Trust. The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the NYSE Arca, Inc., under the ticker symbol "ERM."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 6 Months Ended 1 Year Ended Inception (4/10/17) Inception (4/10/17) 2/29/20 2/29/20 to 2/29/20 to 2/29/20 FUND PERFORMANCE NAV -0.19% -2.03% 0.59% 1.71% Market Price 0.37% -1.53% 0.73% 2.12% INDEX PERFORMANCE S&P 500(R) Index 1.92% 8.19% 10.28% 32.69% Hedge Fund Research HFRI Equity Hedge Index(1) 1.68% 2.09% 3.66% 10.75% ------------------------------------------------------------------------------------------------------------------------------------ |
(1) Cumulative total return for the period April 30, 2017 through February 29, 2020. Performance data is not available for the entire period shown in the table for the index because performance data for the index is only available on a month-end basis. Performance data for the index may be updated on an ongoing basis and is subject to change.
(See Notes to Fund Performance Overview on page 6.)
---------------------------------------------------------- % OF TOTAL LONG-TERM SECTOR CLASSIFICATION INVESTMENTS ---------------------------------------------------------- Information Technology 20.34% Health Care 14.51 Financials 12.73 Consumer Discretionary 10.00 Industrials 9.75 Communication Services 8.98 Consumer Staples 8.23 Energy 4.50 Utilities 4.41 Real Estate 3.40 Materials 3.15 -------- Total 100.00% ======== ---------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ---------------------------------------------------------- L Brands, Inc. 0.90% NVIDIA Corp. 0.84 Albemarle Corp. 0.84 Netflix, Inc. 0.83 Gilead Sciences, Inc. 0.80 Biogen, Inc. 0.79 NextEra Energy, Inc. 0.78 Jack Henry & Associates, Inc. 0.78 DaVita, Inc. 0.78 Adobe, Inc. 0.77 -------- Total 8.11% ======== |
EQUITYCOMPASS RISK MANAGER ETF (ERM) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT APRIL 10, 2017 - FEBRUARY 29, 2020 EquityCompass S&P 500(R) Risk Manager ETF Index 4/10/17 $10,000 $10,000 8/31/17 10,244 10,571 2/28/18 11,107 11,716 8/31/18 11,804 12,649 2/28/19 10,382 12,264 8/31/19 10,190 13,019 2/29/19 10,171 13,269 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period April 11, 2017 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 4/11/17 - 8/31/17 89 0 0 0 9/1/17 - 8/31/18 225 0 0 0 9/1/18 - 8/31/19 146 4 0 0 9/1/19 - 2/29/20 105 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 4/11/17 - 8/31/17 11 0 0 0 9/1/17 - 8/31/18 27 0 0 0 9/1/18 - 8/31/19 98 2 0 0 9/1/19 - 2/29/20 18 0 0 1 |
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
The EquityCompass Tactical Risk Manager ETF (the "Fund") seeks to provide long term capital appreciation with capital preservation as a secondary objective. Under normal market conditions, the Fund seeks to achieve its investment objectives by investing in equity securities of companies domiciled in the U.S. or listed on a U.S. exchange. During periods when the U.S. equity market is determined to be unfavorable by the Fund's Sub-Advisor, the Fund may invest all or a portion of its assets in cash, cash equivalents, money market funds and/or short-term fixed income exchange-traded funds ("ETFs"), or the Fund may invest all or a portion of its assets in a single short-term fixed income ETF, the First Trust Enhanced Short Maturity ETF (FTSM). During such periods, the Fund may also invest a significant portion of its assets in securities designed to provide short exposure to broad U.S. market indices including by investing in inverse ETFs. Certain of the ETFs in which the Fund invests may be advised by First Trust. The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the NYSE Arca, Inc., under the ticker symbol "TERM."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 6 Months Ended 1 Year Ended Inception (4/10/17) Inception (4/10/17) 2/29/20 2/29/20 to 2/29/20 to 2/29/20 FUND PERFORMANCE NAV -0.24% -2.93% -4.20% -11.65% Market Price 0.18% -2.31% -4.10% -11.39% INDEX PERFORMANCE S&P 500(R) Index 1.92% 8.19% 10.28% 32.69% Hedge Fund Research HFRI Equity Hedge Index(1) 1.68% 2.09% 3.66% 10.75% ------------------------------------------------------------------------------------------------------------------------------------ |
(1) Cumulative total return for the period April 30, 2017 through February 29, 2020. Performance data is not available for the entire period shown in the table for the index because performance data for the index is only available on a month-end basis. Performance data for the index may be updated on an ongoing basis and is subject to change.
(See Notes to Fund Performance Overview on page 6.)
---------------------------------------------------------- % OF TOTAL LONG-TERM SECTOR CLASSIFICATION INVESTMENTS ---------------------------------------------------------- Information Technology 20.35% Health Care 14.51 Financials 12.72 Consumer Discretionary 9.99 Industrials 9.74 Communication Services 8.98 Consumer Staples 8.23 Energy 4.50 Utilities 4.41 Real Estate 3.41 Materials 3.16 -------- Total 100.00% ======== ---------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ---------------------------------------------------------- L Brands, Inc. 0.90% NVIDIA Corp. 0.84 Albemarle Corp. 0.84 Netflix, Inc. 0.83 Gilead Sciences, Inc. 0.81 Biogen, Inc. 0.79 NextEra Energy, Inc. 0.79 Adobe, Inc. 0.78 Jack Henry & Associates, Inc. 0.78 DaVita, Inc. 0.78 -------- Total 8.14% ======== |
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT APRIL 10, 2017 - FEBRUARY 29, 2020 EquityCompass Tactical S&P 500(R) Risk Manager ETF Index 4/10/17 $10,000 $10,000 8/31/17 10,244 10,571 2/28/18 11,107 11,716 8/31/18 11,805 12,649 2/28/19 9,102 12,264 8/31/19 8,856 13,019 2/29/20 8,835 13,269 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period April 11, 2017 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 4/11/17 - 8/31/17 83 0 0 0 9/1/17 - 8/31/18 229 0 0 0 9/1/18 - 8/31/19 116 3 0 0 9/1/19 - 2/29/20 16 1 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 4/11/17 - 8/31/17 17 0 0 0 9/1/17 - 8/31/18 23 0 0 0 9/1/18 - 8/31/19 129 2 0 0 9/1/19 - 2/29/20 107 0 0 0 |
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.
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
INVESTMENT ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment advisor to EquityCompass Risk Manager ETF ("ERM") and EquityCompass Tactical Risk Manager ETF ("TERM") (each a "Fund" and, collectively, the "Funds"). First Trust is responsible for the selection and ongoing monitoring of the securities in the Funds' portfolio and certain other services necessary for the management of the portfolios.
SUB-ADVISOR
EquityCompass Investment Management, LLC ("EquityCompass Investment Management" or the "Sub-Advisor") serves as the investment sub-advisor to the Funds.
PORTFOLIO MANAGEMENT
ADVISOR'S INVESTMENT COMMITTEE
The Advisor's Investment Committee (the "Investment Committee"), which manages the Funds' investments, consists of:
DANIEL J. LINDQUIST, MANAGING DIRECTOR OF FIRST TRUST
JON C. ERICKSON, SENIOR VICE PRESIDENT OF FIRST TRUST
DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND MANAGING DIRECTOR OF FIRST TRUST
ROGER F. TESTIN, SENIOR VICE PRESIDENT OF FIRST TRUST
TODD LARSON, CFA, VICE PRESIDENT OF FIRST TRUST
CHRIS A. PETERSON, CFA, SENIOR VICE PRESIDENT OF FIRST TRUST
JOHN GAMBLA, SENIOR PORTFOLIO MANAGER, ALTERNATIVES INVESTMENT TEAM OF FIRST TRUST
ROB A. GUTTSCHOW, CFA, SENIOR PORTFOLIO MANAGER, ALTERNATIVES INVESTMENT TEAM OF FIRST TRUST
SUB-ADVISOR PORTFOLIO MANAGERS
The Sub-Advisor portfolio managers, as set forth below, provide non-discretionary investment advice to the Investment Committee:
TIMOTHY M. MCCANN, SENIOR PORTFOLIO MANAGER, EQUITYCOMPASS INVESTMENT MANAGEMENT, LLC
BERNARD J. KAVANAGH, III, PORTFOLIO MANAGER, EQUITYCOMPASS INVESTMENT MANAGEMENT, LLC
The Investment Committee members are primarily and jointly responsible for the day-to-day management of the Funds, while the Sub-Advisor portfolio managers provide non-discretionary investment advice to the Investment Committee. Each portfolio manager has served as part of the portfolio management team of the Funds since inception.
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of EquityCompass Risk Manager ETF or EquityCompass Tactical Risk Manager ETF (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended February 29, 2020.
ACTUAL EXPENSES
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
----------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX MONTH SIX MONTH SEPTEMBER 1, 2019 FEBRUARY 29, 2020 PERIOD (a) PERIOD (a) (b) ----------------------------------------------------------------------------------------------------------------------- EQUITYCOMPASS RISK MANAGER ETF (ERM) Actual $1,000.00 $ 998.10 0.65% $3.23 Hypothetical (5% return before expenses) $1,000.00 $1,021.63 0.65% $3.27 EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM) Actual $1,000.00 $ 997.60 0.65% $3.23 Hypothetical (5% return before expenses) $1,000.00 $1,021.63 0.65% $3.27 |
(a) Annualized expense ratio and expenses paid during the six-month period do not include fees and expenses of any underlying funds in which each Fund may invest.
(b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (September 1, 2019 through February 29, 2020), multiplied by 182/366 (to reflect the six-month period).
EQUITYCOMPASS RISK MANAGER ETF (ERM)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS -- 99.4% AEROSPACE & DEFENSE -- 3.2% 365 Boeing (The) Co. $ 100,415 683 General Dynamics Corp. 109,068 297 Lockheed Martin Corp. 109,852 543 Raytheon Co. 102,388 806 United Technologies Corp. 105,256 ------------- 526,979 ------------- AIR FREIGHT & LOGISTICS -- 1.3% 798 FedEx Corp. 112,654 1,065 United Parcel Service, Inc., Class B 96,372 ------------- 209,026 ------------- AUTOMOBILES -- 1.8% 13,428 Ford Motor Co. 93,459 3,510 General Motors Co. 107,055 3,420 Harley-Davidson, Inc. 104,207 ------------- 304,721 ------------- BANKS -- 4.3% 3,555 Bank of America Corp. 101,317 1,560 Citigroup, Inc. 98,997 905 JPMorgan Chase & Co. 105,079 7,539 People's United Financial, Inc. 105,471 2,147 U.S. Bancorp 99,707 2,342 Wells Fargo & Co. 95,671 2,425 Zions Bancorp N.A. 96,879 ------------- 703,121 ------------- BEVERAGES -- 1.5% 2,267 Coca-Cola (The) Co. 121,262 914 PepsiCo, Inc. 120,675 ------------- 241,937 ------------- BIOTECHNOLOGY -- 2.9% 1,388 AbbVie, Inc. 118,965 516 Amgen, Inc. 103,061 422 Biogen, Inc. (a) 130,140 1,899 Gilead Sciences, Inc. 131,715 ------------- 483,881 ------------- CAPITAL MARKETS -- 3.2% 2,406 Bank of New York Mellon (The) Corp. 95,999 243 BlackRock, Inc. 112,511 521 Goldman Sachs Group (The), Inc. 104,601 6,937 Invesco Ltd. 99,893 2,417 Morgan Stanley 108,838 ------------- 521,842 ------------- CHEMICALS -- 2.5% 1,676 Albemarle Corp. 137,181 2,338 Dow, Inc. 94,478 2,011 DuPont de Nemours, Inc. 86,272 5,891 Mosaic (The) Co. 100,324 ------------- 418,255 ------------- SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 1.9% 2,610 Cisco Systems, Inc. $ 104,217 899 F5 Networks, Inc. (a) 107,835 5,094 Juniper Networks, Inc. 108,095 ------------- 320,147 ------------- CONSTRUCTION & ENGINEERING -- 0.7% 3,049 Quanta Services, Inc. 116,258 ------------- CONSUMER FINANCE -- 1.3% 993 American Express Co. 109,161 1,228 Capital One Financial Corp. 108,383 ------------- 217,544 ------------- CONTAINERS & PACKAGING -- 0.6% 3,258 Sealed Air Corp. 98,750 ------------- DIVERSIFIED FINANCIAL SERVICES -- 0.7% 544 Berkshire Hathaway, Inc., Class B (a) 112,249 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.1% 3,136 AT&T, Inc. 110,450 9,698 CenturyLink, Inc. 117,055 2,054 Verizon Communications, Inc. 111,245 ------------- 338,750 ------------- ELECTRIC UTILITIES -- 4.4% 1,368 Duke Energy Corp. 125,445 2,704 Exelon Corp. 116,569 508 NextEra Energy, Inc. 128,402 3,302 NRG Energy, Inc. 109,659 1,389 Pinnacle West Capital Corp. 124,302 1,963 Southern (The) Co. 118,487 ------------- 722,864 ------------- ELECTRICAL EQUIPMENT -- 0.6% 1,597 Emerson Electric Co. 102,384 ------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.9% 2,329 FLIR Systems, Inc. 98,913 855 IPG Photonics Corp. (a) 109,132 477 Zebra Technologies Corp., Class A (a) 100,633 ------------- 308,678 ------------- ENERGY EQUIPMENT & SERVICES -- 0.5% 3,079 Schlumberger Ltd. 83,410 ------------- ENTERTAINMENT -- 2.1% 1,723 Live Nation Entertainment, Inc. (a) 104,707 369 Netflix, Inc. (a) 136,172 840 Walt Disney (The) Co. 98,826 ------------- 339,705 ------------- |
See Notes to Financial Statements Page 9
EQUITYCOMPASS RISK MANAGER ETF (ERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) EQUITY REAL ESTATE INVESTMENT TRUSTS -- 3.4% 2,404 Apartment Investment & Management Co., Class A $ 115,007 3,984 Iron Mountain, Inc. 121,154 6,230 Kimco Realty Corp. 108,091 855 Simon Property Group, Inc. 105,233 1,375 SL Green Realty Corp. 107,855 ------------- 557,340 ------------- FOOD & STAPLES RETAILING -- 2.0% 424 Costco Wholesale Corp. 119,204 2,083 Walgreens Boots Alliance, Inc. 95,318 1,059 Walmart, Inc. 114,033 ------------- 328,555 ------------- FOOD PRODUCTS -- 1.3% 4,021 Kraft Heinz (The) Co. 99,600 2,291 Mondelez International, Inc., Class A 120,965 ------------- 220,565 ------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 2.6% 1,433 Abbott Laboratories 110,384 682 ABIOMED, Inc. (a) 102,477 787 Danaher Corp. 113,785 1,073 Medtronic PLC 108,019 ------------- 434,665 ------------- HEALTH CARE PROVIDERS & SERVICES -- 2.7% 1,675 CVS Health Corp. 99,126 1,639 DaVita, Inc. (a) 127,219 1,821 Henry Schein, Inc. (a) 110,972 425 UnitedHealth Group, Inc. 108,358 ------------- 445,675 ------------- HOTELS, RESTAURANTS & LEISURE -- 1.4% 610 McDonald's Corp. 118,444 1,406 Starbucks Corp. 110,272 ------------- 228,716 ------------- HOUSEHOLD PRODUCTS -- 1.4% 1,820 Colgate-Palmolive Co. 122,977 1,004 Procter & Gamble (The) Co. 113,683 ------------- 236,660 ------------- INDUSTRIAL CONGLOMERATES -- 2.0% 694 3M Co. 103,572 10,286 General Electric Co. 111,912 699 Honeywell International, Inc. 113,357 ------------- 328,841 ------------- INSURANCE -- 3.2% 1,096 Allstate (The) Corp. 115,354 2,417 American International Group, Inc. 101,901 929 Assurant, Inc. 112,028 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- INSURANCE (CONTINUED) 2,403 MetLife, Inc. $ 102,656 4,294 Unum Group 100,093 ------------- 532,032 ------------- INTERACTIVE MEDIA & SERVICES -- 1.4% 88 Alphabet, Inc., Class A (a) 117,854 575 Facebook, Inc., Class A (a) 110,670 ------------- 228,524 ------------- INTERNET & DIRECT MARKETING RETAIL -- 1.3% 64 Amazon.com, Inc. (a) 120,560 60 Booking Holdings, Inc. (a) 101,740 ------------- 222,300 ------------- IT SERVICES -- 8.8% 603 Accenture PLC, Class A 108,896 1,357 Akamai Technologies, Inc. (a) 117,394 1,122 Alliance Data Systems Corp. 96,357 984 Broadridge Financial Solutions, Inc. 102,690 3,435 DXC Technology Co. 82,818 780 Gartner, Inc. (a) 100,924 918 International Business Machines Corp. 119,478 839 Jack Henry & Associates, Inc. 127,310 1,224 Leidos Holdings, Inc. 125,643 407 Mastercard, Inc., Class A 118,132 1,118 PayPal Holdings, Inc. (a) 120,733 648 Visa, Inc., Class A 117,780 4,699 Western Union (The) Co. 105,211 ------------- 1,443,366 ------------- LIFE SCIENCES TOOLS & SERVICES -- 0.7% 375 Thermo Fisher Scientific, Inc. 109,050 ------------- MACHINERY -- 1.2% 842 Caterpillar, Inc. 104,610 2,475 Flowserve Corp. 99,470 ------------- 204,080 ------------- MEDIA -- 3.4% 247 Charter Communications, Inc., Class A (a) 121,813 2,740 Comcast Corp., Class A 110,778 3,448 DISH Network Corp., Class A (a) 115,577 5,367 Interpublic Group of Cos. (The), Inc. 114,639 8,468 News Corp., Class A 102,251 ------------- 565,058 ------------- MULTILINE RETAIL -- 1.2% 7,013 Macy's, Inc. 92,782 995 Target Corp. 102,485 ------------- 195,267 ------------- |
Page 10 See Notes to Financial Statements
EQUITYCOMPASS RISK MANAGER ETF (ERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) OIL, GAS & CONSUMABLE FUELS -- 4.0% 7,122 Cabot Oil & Gas Corp. $ 99,209 1,040 Chevron Corp. 97,074 2,257 Cimarex Energy Co. 74,594 1,867 ConocoPhillips 90,400 1,763 Exxon Mobil Corp. 90,689 5,817 Kinder Morgan, Inc. 111,512 2,760 Occidental Petroleum Corp. 90,362 ------------- 653,840 ------------- PERSONAL PRODUCTS -- 0.6% 11,374 Coty, Inc., Class A 104,982 ------------- PHARMACEUTICALS -- 5.5% 645 Allergan PLC 122,982 1,922 Bristol-Myers Squibb Co. 113,513 928 Eli Lilly & Co. 117,049 853 Johnson & Johnson 114,712 1,372 Merck & Co., Inc. 105,040 5,810 Mylan N.V. (a) 99,874 2,474 Perrigo Co., PLC 125,407 3,172 Pfizer, Inc. 106,008 ------------- 904,585 ------------- ROAD & RAIL -- 0.7% 691 Union Pacific Corp. 110,429 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.5% 2,085 Intel Corp. 115,759 512 NVIDIA Corp. 138,276 1,104 Qorvo, Inc. (a) 111,040 1,382 QUALCOMM, Inc. 108,211 947 Texas Instruments, Inc. 108,091 ------------- 581,377 ------------- SOFTWARE -- 2.2% 368 Adobe, Inc. (a) 127,004 777 Microsoft Corp. 125,882 2,266 Oracle Corp. 112,076 ------------- 364,962 ------------- SPECIALTY RETAIL -- 2.3% 567 Home Depot (The), Inc. 123,515 6,833 L Brands, Inc. 148,003 1,031 Lowe's Cos., Inc. 109,874 ------------- 381,392 ------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.9% 411 Apple, Inc. 112,351 1,987 NetApp, Inc. 92,833 3,412 Xerox Holdings Corp. 109,866 ------------- 315,050 ------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.9% 3,298 Capri Holdings Ltd. (a) 85,154 8,528 Hanesbrands, Inc. 112,911 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (CONTINUED) 1,208 NIKE, Inc., Class B $ 107,971 ------------- 306,036 ------------- TOBACCO -- 1.3% 2,478 Altria Group, Inc. 100,037 1,421 Philip Morris International, Inc. 116,337 ------------- 216,374 ------------- TOTAL COMMON STOCKS -- 99.4% 16,390,222 (Cost $17,467,161) ------------- MONEY MARKET FUNDS -- 0.4% 66,884 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.44% (b) 66,884 (Cost $66,884) ------------- TOTAL INVESTMENTS -- 99.8% 16,457,106 (Cost $17,534,045) (c) NET OTHER ASSETS AND LIABILITIES -- 0.2% 37,432 ------------- NET ASSETS -- 100.0% $ 16,494,538 ============= |
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $773,246 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $1,850,185. The net unrealized depreciation was $1,076,939.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ---------------------------------------- Common Stocks* $16,390,222 $ -- $ -- Money Market Funds 66,884 -- -- ---------------------------------------- Total Investments $16,457,106 $ -- $ -- ======================================== |
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 11
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS -- 99.4% AEROSPACE & DEFENSE -- 3.2% 545 Boeing (The) Co. $ 149,935 1,019 General Dynamics Corp. 162,724 443 Lockheed Martin Corp. 163,852 810 Raytheon Co. 152,734 1,203 United Technologies Corp. 157,100 ------------- 786,345 ------------- AIR FREIGHT & LOGISTICS -- 1.3% 1,190 FedEx Corp. 167,992 1,588 United Parcel Service, Inc., Class B 143,698 ------------- 311,690 ------------- AUTOMOBILES -- 1.8% 20,018 Ford Motor Co. 139,325 5,234 General Motors Co. 159,637 5,106 Harley-Davidson, Inc. 155,580 ------------- 454,542 ------------- BANKS -- 4.3% 5,301 Bank of America Corp. 151,079 2,328 Citigroup, Inc. 147,735 1,349 JPMorgan Chase & Co. 156,632 11,254 People's United Financial, Inc. 157,444 3,205 U.S. Bancorp 148,840 3,494 Wells Fargo & Co. 142,730 3,617 Zions Bancorp N.A. 144,499 ------------- 1,048,959 ------------- BEVERAGES -- 1.5% 3,384 Coca-Cola (The) Co. 181,010 1,366 PepsiCo, Inc. 180,353 ------------- 361,363 ------------- BIOTECHNOLOGY -- 2.9% 2,073 AbbVie, Inc. 177,677 770 Amgen, Inc. 153,792 630 Biogen, Inc. (a) 194,286 2,839 Gilead Sciences, Inc. 196,913 ------------- 722,668 ------------- CAPITAL MARKETS -- 3.2% 3,586 Bank of New York Mellon (The) Corp. 143,081 362 BlackRock, Inc. 167,610 776 Goldman Sachs Group (The), Inc. 155,798 10,336 Invesco Ltd. 148,838 3,602 Morgan Stanley 162,198 ------------- 777,525 ------------- CHEMICALS -- 2.5% 2,506 Albemarle Corp. 205,116 3,486 Dow, Inc. 140,869 2,998 DuPont de Nemours, Inc. 128,614 8,788 Mosaic (The) Co. 149,660 ------------- 624,259 ------------- SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 1.9% 3,893 Cisco Systems, Inc. $ 155,447 1,342 F5 Networks, Inc. (a) 160,973 7,595 Juniper Networks, Inc. 161,166 ------------- 477,586 ------------- CONSTRUCTION & ENGINEERING -- 0.7% 4,533 Quanta Services, Inc. 172,843 ------------- CONSUMER FINANCE -- 1.3% 1,481 American Express Co. 162,806 1,830 Capital One Financial Corp. 161,516 ------------- 324,322 ------------- CONTAINERS & PACKAGING -- 0.6% 4,858 Sealed Air Corp. 147,246 ------------- DIVERSIFIED FINANCIAL SERVICES -- 0.7% 812 Berkshire Hathaway, Inc., Class B (a) 167,548 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.1% 4,683 AT&T, Inc. 164,935 14,433 CenturyLink, Inc. 174,206 3,066 Verizon Communications, Inc. 166,055 ------------- 505,196 ------------- ELECTRIC UTILITIES -- 4.4% 2,041 Duke Energy Corp. 187,160 4,033 Exelon Corp. 173,863 760 NextEra Energy, Inc. 192,097 4,937 NRG Energy, Inc. 163,958 2,073 Pinnacle West Capital Corp. 185,513 2,928 Southern (The) Co. 176,734 ------------- 1,079,325 ------------- ELECTRICAL EQUIPMENT -- 0.6% 2,382 Emerson Electric Co. 152,710 ------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.9% 3,473 FLIR Systems, Inc. 147,498 1,275 IPG Photonics Corp. (a) 162,741 711 Zebra Technologies Corp., Class A (a) 150,000 ------------- 460,239 ------------- ENERGY EQUIPMENT & SERVICES -- 0.5% 4,588 Schlumberger Ltd. 124,289 ------------- ENTERTAINMENT -- 2.1% 2,570 Live Nation Entertainment, Inc. (a) 156,179 552 Netflix, Inc. (a) 203,704 1,255 Walt Disney (The) Co. 147,651 ------------- 507,534 ------------- |
Page 12 See Notes to Financial Statements
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) EQUITY REAL ESTATE INVESTMENT TRUSTS -- 3.4% 3,596 Apartment Investment & Management Co., Class A $ 172,033 5,951 Iron Mountain, Inc. 180,970 9,299 Kimco Realty Corp. 161,338 1,277 Simon Property Group, Inc. 157,173 2,053 SL Green Realty Corp. 161,037 ------------- 832,551 ------------- FOOD & STAPLES RETAILING -- 2.0% 632 Costco Wholesale Corp. 177,681 3,108 Walgreens Boots Alliance, Inc. 142,222 1,580 Walmart, Inc. 170,134 ------------- 490,037 ------------- FOOD PRODUCTS -- 1.3% 6,003 Kraft Heinz (The) Co. 148,694 3,417 Mondelez International, Inc., Class A 180,418 ------------- 329,112 ------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 2.6% 2,138 Abbott Laboratories 164,690 1,016 ABIOMED, Inc. (a) 152,664 1,175 Danaher Corp. 169,881 1,601 Medtronic PLC 161,173 ------------- 648,408 ------------- HEALTH CARE PROVIDERS & SERVICES -- 2.7% 2,500 CVS Health Corp. 147,950 2,445 DaVita, Inc. (a) 189,781 2,714 Henry Schein, Inc. (a) 165,391 634 UnitedHealth Group, Inc. 161,645 ------------- 664,767 ------------- HOTELS, RESTAURANTS & LEISURE -- 1.4% 910 McDonald's Corp. 176,695 2,099 Starbucks Corp. 164,624 ------------- 341,319 ------------- HOUSEHOLD PRODUCTS -- 1.4% 2,716 Colgate-Palmolive Co. 183,520 1,498 Procter & Gamble (The) Co. 169,619 ------------- 353,139 ------------- INDUSTRIAL CONGLOMERATES -- 2.0% 1,035 3M Co. 154,463 15,318 General Electric Co. 166,660 1,041 Honeywell International, Inc. 168,819 ------------- 489,942 ------------- INSURANCE -- 3.2% 1,634 Allstate (The) Corp. 171,978 3,598 American International Group, Inc. 151,692 1,384 Assurant, Inc. 166,897 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- INSURANCE (CONTINUED) 3,582 MetLife, Inc. $ 153,023 6,393 Unum Group 149,021 ------------- 792,611 ------------- INTERACTIVE MEDIA & SERVICES -- 1.4% 131 Alphabet, Inc., Class A (a) 175,442 859 Facebook, Inc., Class A (a) 165,332 ------------- 340,774 ------------- INTERNET & DIRECT MARKETING RETAIL -- 1.3% 96 Amazon.com, Inc. (a) 180,840 89 Booking Holdings, Inc. (a) 150,914 ------------- 331,754 ------------- IT SERVICES -- 8.8% 899 Accenture PLC, Class A 162,350 2,027 Akamai Technologies, Inc. (a) 175,356 1,674 Alliance Data Systems Corp. 143,763 1,471 Broadridge Financial Solutions, Inc. 153,514 5,124 DXC Technology Co. 123,540 1,164 Gartner, Inc. (a) 150,610 1,370 International Business Machines Corp. 178,306 1,252 Jack Henry & Associates, Inc. 189,978 1,827 Leidos Holdings, Inc. 187,542 608 Mastercard, Inc., Class A 176,472 1,670 PayPal Holdings, Inc. (a) 180,343 970 Visa, Inc., Class A 176,307 7,018 Western Union (The) Co. 157,133 ------------- 2,155,214 ------------- LIFE SCIENCES TOOLS & SERVICES -- 0.7% 560 Thermo Fisher Scientific, Inc. 162,848 ------------- MACHINERY -- 1.2% 1,256 Caterpillar, Inc. 156,045 3,689 Flowserve Corp. 148,261 ------------- 304,306 ------------- MEDIA -- 3.4% 367 Charter Communications, Inc., Class A (a) 180,993 4,091 Comcast Corp., Class A 165,399 5,143 DISH Network Corp., Class A (a) 172,393 8,004 Interpublic Group of Cos. (The), Inc. 170,966 12,640 News Corp., Class A 152,628 ------------- 842,379 ------------- MULTILINE RETAIL -- 1.2% 10,456 Macy's, Inc. 138,333 1,485 Target Corp. 152,955 ------------- 291,288 ------------- |
See Notes to Financial Statements Page 13
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) OIL, GAS & CONSUMABLE FUELS -- 4.0% 10,607 Cabot Oil & Gas Corp. $ 147,756 1,551 Chevron Corp. 144,770 3,369 Cimarex Energy Co. 111,345 2,784 ConocoPhillips 134,801 2,631 Exxon Mobil Corp. 135,339 8,680 Kinder Morgan, Inc. 166,396 4,109 Occidental Petroleum Corp. 134,529 ------------- 974,936 ------------- PERSONAL PRODUCTS -- 0.6% 16,943 Coty, Inc., Class A 156,384 ------------- PHARMACEUTICALS -- 5.5% 963 Allergan PLC 183,615 2,869 Bristol-Myers Squibb Co. 169,443 1,386 Eli Lilly & Co. 174,816 1,273 Johnson & Johnson 171,193 2,050 Merck & Co., Inc. 156,948 8,667 Mylan N.V. (a) 148,986 3,692 Perrigo Co., PLC 187,148 4,736 Pfizer, Inc. 158,277 ------------- 1,350,426 ------------- ROAD & RAIL -- 0.7% 1,030 Union Pacific Corp. 164,604 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.5% 3,112 Intel Corp. 172,778 765 NVIDIA Corp. 206,604 1,647 Qorvo, Inc. (a) 165,655 2,060 QUALCOMM, Inc. 161,298 1,413 Texas Instruments, Inc. 161,280 ------------- 867,615 ------------- SOFTWARE -- 2.2% 551 Adobe, Inc. (a) 190,161 1,161 Microsoft Corp. 188,094 3,386 Oracle Corp. 167,471 ------------- 545,726 ------------- SPECIALTY RETAIL -- 2.3% 845 Home Depot (The), Inc. 184,075 10,181 L Brands, Inc. 220,520 1,538 Lowe's Cos., Inc. 163,905 ------------- 568,500 ------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.9% 613 Apple, Inc. 167,570 2,964 NetApp, Inc. 138,478 5,093 Xerox Holdings Corp. 163,994 ------------- 470,042 ------------- SHARES DESCRIPTION VALUE --------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.9% 4,910 Capri Holdings Ltd. (a) $ 126,776 12,723 Hanesbrands, Inc. 168,453 1,803 NIKE, Inc., Class B 161,152 ------------- 456,381 ------------- TOBACCO -- 1.3% 3,697 Altria Group, Inc. 149,248 2,121 Philip Morris International, Inc. 173,646 ------------- 322,894 ------------- TOTAL COMMON STOCKS -- 99.4% 24,454,146 (Cost $26,142,521) ------------- MONEY MARKET FUNDS -- 0.4% 91,183 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.44% (b) 91,183 (Cost $91,183) ------------- TOTAL INVESTMENTS -- 99.8% 24,545,329 (Cost $26,233,704) (c) NET OTHER ASSETS AND LIABILITIES -- 0.2% 53,801 ------------- NET ASSETS -- 100.0% $ 24,599,130 ============= |
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $1,054,549 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $2,742,924. The net unrealized depreciation was $1,688,375.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ---------------------------------------- Common Stocks* $24,454,146 $ -- $ -- Money Market Funds 91,183 -- -- ---------------------------------------- Total Investments $24,545,329 $ -- $ -- ======================================== |
* See Portfolio of Investments for industry breakout.
Page 14 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
EQUITYCOMPASS EQUITYCOMPASS TACTICAL RISK MANAGER ETF RISK MANAGER ETF (ERM) (TERM) ---------------- ---------------- ASSETS: Investments, at value.................................................. $ 16,457,106 $ 24,545,329 Dividends receivable................................................... 47,330 68,037 ---------------- ---------------- Total Assets........................................................ 16,504,436 24,613,366 ---------------- ---------------- LIABILITIES: Investment advisory fees payable....................................... 9,898 14,236 ---------------- ---------------- Total Liabilities................................................... 9,898 14,236 ---------------- ---------------- NET ASSETS............................................................. $ 16,494,538 $ 24,599,130 ================ ================ NET ASSETS CONSIST OF: Paid-in capital........................................................ $ 20,887,152 $ 39,044,644 Par value.............................................................. 8,500 14,500 Accumulated distributable earnings (loss).............................. (4,401,114) (14,460,014) ---------------- ---------------- NET ASSETS............................................................. $ 16,494,538 $ 24,599,130 ================ ================ NET ASSET VALUE, per share............................................. $ 19.41 $ 16.96 ================ ================ Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).............................. 850,002 1,450,002 ================ ================ Investments, at cost................................................... $ 17,534,045 $ 26,233,704 ================ ================ |
See Notes to Financial Statements Page 15
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2020 (UNAUDITED)
EQUITYCOMPASS EQUITYCOMPASS TACTICAL RISK MANAGER ETF RISK MANAGER ETF (ERM) (TERM) ---------------- ---------------- INVESTMENT INCOME: Dividends.............................................................. $ 263,158 $ 387,282 ---------------- ---------------- Total investment income............................................. 263,158 387,282 ---------------- ---------------- EXPENSES: Investment advisory fees............................................... 65,103 95,539 ---------------- ---------------- Total expenses...................................................... 65,103 95,539 ---------------- ---------------- NET INVESTMENT INCOME (LOSS)........................................... 198,055 291,743 ---------------- ---------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments......................................................... 16,650 131,624 In-kind redemptions................................................. 442,657 468,282 ---------------- ---------------- Net realized gain (loss)............................................... 459,307 599,906 ---------------- ---------------- Net change in unrealized appreciation (depreciation) on: Investments......................................................... (330,407) (402,057) ---------------- ---------------- Net change in unrealized appreciation (depreciation)................... (330,407) (402,057) ---------------- ---------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 128,900 197,849 ---------------- ---------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ 326,955 $ 489,592 ================ ================ |
Page 16 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
EQUITYCOMPASS EQUITYCOMPASS RISK MANAGER ETF TACTICAL RISK MANAGER ETF (ERM) (TERM) -------------------------------- -------------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED YEAR 2/29/2020 ENDED 2/29/2020 ENDED (UNAUDITED) 8/31/2019 (UNAUDITED) 8/31/2019 --------------- --------------- --------------- --------------- OPERATIONS: Net investment income (loss).............................. $ 198,055 $ 511,567 $ 291,743 $ 784,765 Net realized gain (loss).................................. 459,307 (1,899,156) 599,906 (10,612,945) Net change in unrealized appreciation (depreciation)...... (330,407) (2,924,408) (402,057) (6,042,566) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations........................................ 326,955 (4,311,997) 489,592 (15,870,746) --------------- --------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations..................................... (255,300) (605,746) (374,021) (832,241) --------------- --------------- --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................. -- 9,146,356 -- 17,687,113 Cost of shares redeemed................................... (4,246,498) (11,547,316) (5,627,439) (32,708,789) --------------- --------------- --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions.......................... (4,246,498) (2,400,960) (5,627,439) (15,021,676) --------------- --------------- --------------- --------------- Total increase (decrease) in net assets................... (4,174,843) (7,318,703) (5,511,868) (31,724,663) NET ASSETS: Beginning of period....................................... 20,669,381 27,988,084 30,110,998 61,835,661 --------------- --------------- --------------- --------------- End of period............................................. $ 16,494,538 $ 20,669,381 $ 24,599,130 $ 30,110,998 =============== =============== =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................... 1,050,002 1,200,002 1,750,002 2,650,002 Shares sold............................................... -- 400,000 -- 850,000 Shares redeemed........................................... (200,000) (550,000) (300,000) (1,750,000) --------------- --------------- --------------- --------------- Shares outstanding, end of period......................... 850,002 1,050,002 1,450,002 1,750,002 =============== =============== =============== =============== |
See Notes to Financial Statements Page 17
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
EQUITYCOMPASS RISK MANAGER ETF (ERM)
SIX MONTHS ENDED YEAR ENDED AUGUST 31 PERIOD 2/29/2020 ----------------------------- ENDED (UNAUDITED) 2019 2018 8/31/2017 (a) ------------- ------------- ------------- ------------- Net asset value, beginning of period............................ $ 19.69 $ 23.32 $ 20.50 $ 20.05 ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss).................................... 0.22 0.39 0.30 0.10 Net realized and unrealized gain (loss)......................... (0.24) (3.56) 2.80 0.39 ----------- ----------- ----------- ----------- Total from investment operations................................ (0.02) (3.17) 3.10 0.49 ----------- ----------- ----------- ----------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income........................................... (0.26) (0.46) (0.28) (0.04) Net realized gain............................................... -- (0.00) (b) -- -- ----------- ----------- ----------- ----------- Total distributions............................................. (0.26) (0.46) (0.28) (0.04) ----------- ----------- ----------- ----------- Net asset value, end of period.................................. $ 19.41 $ 19.69 $ 23.32 $ 20.50 =========== =========== =========== =========== TOTAL RETURN (c)................................................ (0.19)% (13.68)% 15.23% 2.44% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)............................ $ 16,495 $ 20,669 $ 27,988 $ 10,250 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (d)............... 0.65% (e) 0.65% 0.65% 0.65% (e) Ratio of net expenses to average net assets (d)................. 0.65% (e) 0.59% 0.64% 0.65% (e) Ratio of net investment income (loss) to average net assets..... 1.98% (e) 1.89% 1.52% 1.81% (e) Portfolio turnover rate (f)..................................... 28% 207% 121% 8% |
EQUITYCOMPASS TACTICAL RISK MANAGER ETF (TERM)
SIX MONTHS ENDED YEAR ENDED AUGUST 31 PERIOD 2/29/2020 ----------------------------- ENDED (UNAUDITED) 2019 2018 8/31/2017 (a) ------------- ------------- ------------- ------------- Net asset value, beginning of period............................ $ 17.21 $ 23.33 $ 20.50 $ 20.05 ----------- ----------- ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss).................................... 0.19 0.34 0.29 0.09 Net realized and unrealized gain (loss)......................... (0.21) (6.13) 2.81 0.40 ----------- ----------- ----------- ----------- Total from investment operations................................ (0.02) (5.79) 3.10 0.49 ----------- ----------- ----------- ----------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income........................................... (0.23) (0.33) (0.27) (0.04) ----------- ----------- ----------- ----------- Net asset value, end of period.................................. $ 16.96 $ 17.21 $ 23.33 $ 20.50 =========== =========== =========== =========== TOTAL RETURN (c)................................................ (0.24)% (24.98)% 15.24% 2.44% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)............................ $ 24,599 $ 30,111 $ 61,836 $ 22,551 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (d)............... 0.65% (e) 0.65% 0.65% 0.65% (e) Ratio of net expenses to average net assets (d)................. 0.65% (e) 0.59% 0.64% 0.65% (e) Ratio of net investment income (loss) to average net assets..... 1.98% (e) 1.65% 1.52% 1.85% (e) Portfolio turnover rate (f)..................................... 28% 317% 120% 10% |
(a) Inception date is April 10, 2017, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b) Amount is less than $0.01.
(c) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived by the Advisor.
(d) The Fund indirectly bears its proportionate share of fees and expenses incurred by the underlying funds in which the Fund invests. This ratio does not include these indirect fees and expenses.
(e) Annualized.
(f) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.
Page 18 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on February 22, 2016, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of sixteen funds that are offering shares. This report covers the two funds listed below. The shares of each fund are listed and traded on the NYSE Arca, Inc. ("NYSE Arca").
EquityCompass Risk Manager ETF - (NYSE Arca ticker "ERM") EquityCompass Tactical Risk Manager ETF - (NYSE Arca ticker "TERM")
Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed in-kind for securities in which the Fund invests, and in certain circumstances, for cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund. ERM's and TERM's primary investment objective is to seek to provide long term capital appreciation with capital preservation as a secondary objective. Each Fund seeks to achieve its investment objectives by investing, under normal market conditions, in equity securities of companies domiciled in the U.S. or listed on a U.S. exchange. During periods when the U.S. equity market is determined to be unfavorable by the Fund's sub-advisor, EquityCompass Investment Management, LLC (the "Sub-Advisor"), each Fund may invest all or a portion of its assets in cash, cash equivalents, money market funds and/or short-term fixed income exchange-traded funds ("ETFs"), or each Fund may invest all or a portion of its assets in a single short-term fixed income ETF, the First Trust Enhanced Short Maturity ETF (FTSM). Certain of the ETFs in which each Fund invests may be advised by First Trust Advisors L.P. ("First Trust" or the "Advisor"). During an unfavorable market period, TERM may also invest in inverse ETFs which seek to provide investment results that match a negative return of the performance of an underlying index like the S&P 500(R).
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Each Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust, in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows:
Common stocks and other equity securities listed on any national or foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.
Shares of open-end funds are valued at fair value which is based on NAV per share.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect the value of the security.
The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly.
o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates).
o Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment.
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of February 29, 2020, is included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid quarterly by each Fund. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
The tax character of distributions paid by each Fund during the fiscal year ended August 31, 2019 was as follows:
Distributions Distributions Distributions paid from paid from paid from Ordinary Capital Return of Income Gains Capital ------------- ------------- ------------- EquityCompass Risk Manager ETF $ 599,411 $ 6,335 $ -- EquityCompass Tactical Risk Manager ETF 832,241 -- -- |
As of August 31, 2019, the components of distributable earnings on a tax basis for each Fund were as follows:
Accumulated Net Undistributed Capital and Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) ------------- ------------- ------------- EquityCompass Risk Manager ETF $ 106,391 $ (3,821,259) $ (757,901) EquityCompass Tactical Risk Manager ETF 152,805 (13,442,011) (1,286,379) |
D. INCOME TAXES
Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ending 2017, 2018 and 2019 remain open to federal and state audit. As of February 29, 2020, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions.
Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At August 31, 2019, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the table below, to the extent provided by regulations, to offset future capital gains. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to each applicable Fund's shareholders.
Non-Expiring Capital Loss Carryforwards ------------------------- EquityCompass Risk Manager ETF $ 3,821,259 EquityCompass Tactical Risk Manager ETF 13,442,011 |
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended August 31, 2019, the Funds had no net late year ordinary or capital losses.
E. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for supervising the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds.
The Funds and First Trust have retained the Sub-Advisor to provide recommendations to the Advisor regarding the selection and allocation of the securities in each Fund's investment portfolio. Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of each Fund's assets and is responsible for the expenses of each Fund including the cost of transfer agency, sub-advisory, custody, fund administration, legal, audit, other services and license fees, but excluding fee payments under the Investment Management Agreement, interest, taxes, pro rata share of fees and expenses attributable to investments in other investment companies ("acquired fund fees and expenses"), brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Funds have each agreed to pay First Trust an annual unitary management fee equal to 0.65% of its average daily net assets. In addition, each Fund incurs acquired fund fees and expenses. The total of unitary management fee and acquired fund fees and expenses represents each Fund's total annual operating expenses.
Pursuant to a contractual agreement between the Trust, on behalf of the Funds, and First Trust, the management fees paid to First Trust will be reduced by the proportional amount of the acquired fund fees and expenses of the shares of investment companies held by the Funds so that the Funds would not bear the indirect costs of holding them, provided that the investment companies are advised by First Trust. This contractual agreement shall continue until the earlier of (i) its termination at the direction of the Trust's Board of Trustees or (ii) the termination of the Funds' management agreement with First Trust. First Trust does not have the right to recover the waived fees on the shares of investment companies advised by First Trust.
The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended February 29, 2020, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows:
Purchases Sales ------------ ------------ EquityCompass Risk Manager ETF $ 5,463,802 $ 5,536,873 EquityCompass Tactical Risk Manager ETF 7,901,611 8,011,090 |
For the six months ended February 29, 2020, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
Purchases Sales ------------ ------------ EquityCompass Risk Manager ETF $ -- $ 4,221,613 EquityCompass Tactical Risk Manager ETF -- 5,591,252 |
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). In order to purchase Creation Units of each Fund, an Authorized Participant must deposit (i) a designated portfolio of securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before December 31, 2020.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there was the following subsequent event:
Beginning in December 2019, the outbreak of the respiratory disease designated as COVID-19 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short-term or may last for an extended period of time and, in either case, could result in a substantial economic downturn or recession. Management is continuing to monitor this event.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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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 Low Duration Strategic Focus ETF (LDSF)
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1 Fund Performance Overview.................................................... 2 Portfolio Management......................................................... 4 Understanding Your Fund Expenses............................................. 5 Portfolio of Investments..................................................... 6 Statement of Assets and Liabilities.......................................... 7 Statement of Operations...................................................... 8 Statements of Changes in Net Assets.......................................... 9 Financial Highlights......................................................... 10 Notes to Financial Statements................................................ 11 Additional Information....................................................... 16 CAUTION REGARDING FORWARD-LOOKING STATEMENTS |
This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the series of First Trust Exchange-Traded Fund VIII (the "Trust") described in this report (First Trust Low Duration Strategic Focus ETF; hereinafter referred to as the "Fund") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund's shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in the Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund's performance and investment approach.
The statistical information that follows may help you understand the Fund's performance compared to that of relevant market benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in the Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings.
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for the First Trust Low Duration Strategic Focus ETF (the "Fund"), which contains detailed information about the Fund for the six months ended February 29, 2020.
To say that much has transpired over the past six months would be an understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China this past December, my message to investors would have sounded quite bullish, focusing on such accomplishments as the progress in the trade negotiations between the U.S. and China, where a "Phase One" deal was signed into law on January 15, 2020. The main takeaway from the deal is that China agreed to purchase an additional $200 billion of goods and services from the U.S. over the next several years in exchange for the U.S. cutting some of its tariffs on Chinese goods. The deal marked the first breakthrough since the Trump Administration launched its new tariff initiative in March 2018. On top of that news, the S&P 500(R) Index was setting new all-time highs all the way up through the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213 countries, areas or territories, had infected 1,991,562 people (confirmed cases) and was responsible for 130,885 confirmed deaths, according to the World Health Organization. These numbers are expected to trend higher in the days and weeks ahead. A growing number of U.S. state governors and foreign leaders have issued shelter in place orders to their citizens to help slow the spread of this new virus. The primary objective in doing so is to slow down the number of cases so that hospitals and health care workers are not overwhelmed by too many patients. The cost is high because it requires shutting down large chunks of the economy, which in turn negatively impacts the financial well-being of workers and companies. In the U.S., Congress passed a financial stimulus package valued at $2.0 trillion to help backstop workers and companies in the near-term. The faster we can end the shutdown, consistent with general health and welfare, the better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience a modest decline in real gross domestic product of 1.5% (annualized) in the first quarter of 2020, followed by a massive decline of 20% (annualized) in the second quarter. The good news is that he sees the economy growing at a 3.0% and 3.5% annual pace in the third and fourth quarters of 2020, respectively. In other words, we are expecting a healthy rebound in the second half of this year. As I noted earlier, the stock market was still at a record high in the third week of February. From February 19 through March 23, however, the S&P 500(R) Index posted a total return of -33.79%, putting it in bear market territory (price decline of 20% or more from the most recent peak). Sorry to say it, but the nearly 11-year bull market is no more. While we do not have a projection for where stocks will be at year-end, we do know this: excluding the current bear market, the S&P 500(R) Index has never failed to recoup all the losses sustained in any sell-off, pullback, correction or bear market. So, while I am understandably not bullish on the first half of 2020, I will be a bull once again after we put the worst of COVID-19 behind us. I continue to urge investors to stay the course. This too shall pass.
Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund again in six months.
Sincerely,
/s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. |
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
The First Trust Low Duration Strategic Focus ETF (the "Fund") seeks to generate current income, with a secondary objective of preservation of capital. Under normal market conditions, the Fund seeks to achieve its investment objectives by investing at least 80% of its net assets (including investment borrowings) in a portfolio of U.S.-listed exchange-traded funds ("ETFs") that principally invest in income-generating securities that provide the Fund with an effective portfolio duration of three years or less. The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on The Nasdaq Stock Market LLC under the ticker symbol "LDSF."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS Inception Inception 6 Months Ended 1 Year Ended (1/3/19) (1/3/19) 2/29/20 2/29/20 to 2/29/20 to 2/29/20 FUND PERFORMANCE NAV 1.87% 4.29% 5.59% 6.48% Market Price 1.82% 4.19% 5.59% 6.48% INDEX PERFORMANCE Blended Benchmark(1) 2.13% 6.28% 6.79% 7.89% Bloomberg Barclays 1-5 Year Government/Credit Index 2.32% 6.36% 5.81% 6.75% ------------------------------------------------------------------------------------------------------------------------------------ |
Total returns for the period since inception are calculated from the inception date of the Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the period indicated. "Cumulative Total Returns" represent the total change in value of an investment over the period indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund are listed for trading as of the time that the Fund's NAV is calculated. Since shares of the Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively.
An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of the Fund will vary with changes in market conditions. Shares of the Fund may be worth more or less than their original cost when they are redeemed or sold in the market. The Fund's past performance is no guarantee of future performance.
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT JANUARY 3, 2019 - FEBRUARY 29, 2020 First Trust Bloomberg Barclays Low Duration Blended 1-5 Year Government/ Strategic Focus ETF Benchmark Credit Index 1/3/19 $10,000 $10,000 $10,000 2/28/19 10,210 10,151 10,037 8/31/19 10,452 10,564 10,433 2/29/20 10,648 10,789 10,675 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 4, 2019 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 1/4/19 - 8/31/19 155 0 0 0 9/1/19 - 2/29/20 116 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 1/4/19 - 8/31/19 11 0 0 0 9/1/19 - 2/29/20 8 0 0 0 |
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") serves as the investment advisor to the First Trust Low Duration Strategic Focus ETF (the "Fund"). First Trust is responsible for the ongoing monitoring of the Fund's investment portfolio, managing the Fund's business affairs and providing certain administration services necessary for the management of the Fund.
PORTFOLIO MANAGEMENT TEAM
DANIEL J. LINDQUIST, MANAGING DIRECTOR OF FIRST TRUST
DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND MANAGING DIRECTOR OF FIRST TRUST
CHRIS A. PETERSON, SENIOR VICE PRESIDENT OF FIRST TRUST
WILLIAM HOUSEY, SENIOR VICE PRESIDENT OF FIRST TRUST
STEVE COLLINS, VICE PRESIDENT OF FIRST TRUST
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of First Trust Low Duration Strategic Focus ETF (the "Fund"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended February 29, 2020.
ACTUAL EXPENSES
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
----------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH SEPTEMBER 1, 2019 FEBRUARY 29, 2020 PERIOD (a) PERIOD (a) (b) ----------------------------------------------------------------------------------------------------------------------- FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF) Actual $1,000.00 $1,018.70 0.20% $1.00 Hypothetical (5% return before expenses) $1,000.00 $1,023.87 0.20% $1.01 |
(a) Annualized expense ratio and expenses paid during the six-month period do not include fees and expenses of the underlying funds in which the Fund invests.
(b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (September 1, 2019 through February 29, 2020), multiplied by 182/366 (to reflect the six-month period).
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- EXCHANGE-TRADED FUNDS -- 99.9% CAPITAL MARKETS -- 99.9% 83,097 First Trust Emerging Markets Local Currency Bond ETF (a) $ 3,065,448 541,143 First Trust Enhanced Short Maturity ETF (a) 32,538,928 1,004,929 First Trust Low Duration Opportunities ETF (a) 52,668,329 407,577 First Trust Senior Loan Fund (a) 19,266,165 133,336 First Trust Tactical High Yield ETF (a) 6,384,128 313,942 First Trust TCW Opportunistic Fixed Income ETF (a) 16,792,757 ------------- TOTAL EXCHANGE-TRADED FUNDS -- 99.9% 130,715,755 (Cost $129,987,940) ------------- MONEY MARKET FUNDS -- 0.1% 91,745 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.44% (b) 91,745 (Cost $91,745) ------------- TOTAL INVESTMENTS -- 100.0% 130,807,500 (Cost $130,079,685) (c) NET OTHER ASSETS AND LIABILITIES -- 0.0% 32,279 ------------- NET ASSETS -- 100.0% $ 130,839,779 ============= |
(a) Investment in an affiliated fund.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $1,030,210 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $302,395. The net unrealized appreciation was $727,815.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS ------------------------------------------ Exchange-Traded Funds* $130,715,755 $ -- $ -- Money Market Funds 91,745 -- -- ------------------------------------------ Total Investments $130,807,500 $ -- $ -- ========================================== |
* See Portfolio of Investments for industry breakout.
Page 6 See Notes to Financial Statements
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
ASSETS: Investments, at value - Affiliated..................................... $ 130,715,755 Investments, at value - Unaffiliated................................... 91,745 ---------------- Total investments, at value............................................ 130,807,500 Receivables: Capital shares sold................................................. 2,057,324 Dividends........................................................... 50,453 ---------------- Total Assets........................................................ 132,915,277 ---------------- LIABILITIES: Payables: Investment securities purchased..................................... 2,056,127 Investment advisory fees............................................ 19,371 ---------------- Total Liabilities................................................... 2,075,498 ---------------- NET ASSETS............................................................. $ 130,839,779 ================ NET ASSETS CONSIST OF: Paid-in capital........................................................ $ 130,055,784 Par value.............................................................. 63,500 Accumulated distributable earnings (loss).............................. 720,495 ---------------- NET ASSETS............................................................. $ 130,839,779 ================ NET ASSET VALUE, per share............................................. $ 20.60 ================ Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).............................. 6,350,002 ================ Investments, at cost - Affiliated...................................... $ 129,987,940 ================ Investments, at cost - Unaffiliated.................................... $ 91,745 ================ Total investments, at cost............................................. $ 130,079,685 ================ |
See Notes to Financial Statements Page 7
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2020 (UNAUDITED)
INVESTMENT INCOME: Dividends - Affiliated................................................. $ 1,171,254 Dividends - Unaffiliated............................................... 54,145 ---------------- Total investment income............................................. 1,225,399 ---------------- EXPENSES: Investment advisory fees............................................... 85,566 ---------------- Total expenses...................................................... 85,566 ---------------- NET INVESTMENT INCOME (LOSS)........................................... 1,139,833 ---------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investment - Affiliated............................................. (22,789) Investments - Unaffiliated.......................................... 2,528 In-kind redemptions - Affiliated.................................... 15,864 In-kind redemptions - Unaffiliated.................................. 18,134 Distribution of capital gains from investment companies............. 111,416 ---------------- Net realized gain (loss)............................................... 125,153 ---------------- Net change in unrealized appreciation (depreciation) on: Investment - Affiliated............................................. 518,892 Investments - Unaffiliated.......................................... (38,246) ---------------- Net change in unrealized appreciation (depreciation)................... 480,646 ---------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................ 605,799 ---------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................................... $ 1,745,632 ================ |
Page 8 See Notes to Financial Statements
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED PERIOD 2/29/2020 ENDED (UNAUDITED) 8/31/2019 (a) ---------------- ---------------- OPERATIONS: Net investment income (loss)......................................................... $ 1,139,833 $ 425,301 Net realized gain (loss)............................................................. 125,153 (21,140) Net change in unrealized appreciation (depreciation)................................. 480,646 247,169 ---------------- ---------------- Net increase (decrease) in net assets resulting from operations...................... 1,745,632 651,330 ---------------- ---------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations................................................................ (1,231,606) (432,051) ---------------- ---------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold............................................................ 88,302,392 51,029,601 Cost of shares redeemed.............................................................. (8,204,404) (1,021,115) ---------------- ---------------- Net increase (decrease) in net assets resulting from shareholder transactions........ 80,097,988 50,008,486 ---------------- ---------------- Total increase (decrease) in net assets.............................................. 80,612,014 50,227,765 NET ASSETS: Beginning of period.................................................................. 50,227,765 -- ---------------- ---------------- End of period........................................................................ $ 130,839,779 $ 50,227,765 ================ ================ CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period.............................................. 2,450,002 -- Shares sold.......................................................................... 4,300,000 2,500,002 Shares redeemed...................................................................... (400,000) (50,000) ---------------- ---------------- Shares outstanding, end of period.................................................... 6,350,002 2,450,002 ================ ================ |
(a) Inception date is January 3, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
See Notes to Financial Statements Page 9
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
SIX MONTHS ENDED PERIOD 2/29/2020 ENDED (UNAUDITED) 8/31/2019 (a) --------------- --------------- Net asset value, beginning of period........................... $ 20.50 $ 20.03 ----------- ----------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... 0.27 0.43 Net realized and unrealized gain (loss)........................ 0.11 0.47 ----------- ----------- Total from investment operations............................... 0.38 0.90 ----------- ----------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................................... (0.28) (0.43) ----------- ----------- Net asset value, end of period................................. $ 20.60 $ 20.50 =========== =========== TOTAL RETURN (b)............................................... 1.87% 4.52% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 130,840 $ 50,228 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets (c).............. 0.20% (d) 0.20% (d) Ratio of net investment income (loss) to average net assets ... 2.66% (d) 3.16% (d) Portfolio turnover rate (e).................................... 8% 14% |
(a) Inception date is January 3, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(c) The Fund indirectly bears its proportionate share of fees and expenses incurred by the underlying funds in which the Fund invests. This ratio does not include these indirect fees and expenses.
(d) Annualized.
(e) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.
Page 10 See Notes to Financial Statements
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on February 22, 2016, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of sixteen funds that are offering shares. This report covers the First Trust Low Duration Strategic Focus ETF (the "Fund"), which trades under the ticker "LDSF" on The Nasdaq Stock Market LLC ("Nasdaq"). Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are generally issued and redeemed in-kind for securities in which the Fund invests and, in certain circumstances, for cash and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, the Fund's shares are not redeemable securities.
The Fund is an actively managed exchange-traded fund. The Fund's primary investment objective is to generate current income. The Fund's secondary investment objective is the preservation of capital. The Fund seeks to achieve its investment objectives by investing, under normal market conditions, at least 80% of its net assets (including investment borrowings) in a portfolio of U.S.-listed exchange-traded funds ("ETFs") that principally invest in income-generating securities that provide the Fund with an effective portfolio duration of three years or less. A significant portion of the ETFs in which the Fund invests may be advised by First Trust. The Fund may invest in ETFs that invest principally in corporate bonds, floating rate loans and fixed-to-floating rate loans, senior loans, mortgage-backed securities, hybrid income securities (including convertible, contingent convertible and preferred securities), government debt and other fixed income securities. The securities to which the Fund may have exposure may be issued by both U.S. and non-U.S. issuers, including both corporate and governmental issuers located in countries considered to be emerging markets. The Fund may also invest up to 40% of its net assets in ETFs that have exposure to U.S. corporate high yield securities (also known as "junk bonds") and senior loans. The Fund may invest up to 20% of its net assets in bonds issued by non-U.S. government and corporate issuers, including up to 10% of its net assets in ETFs holding debt of issuers located in countries considered to be emerging markets. The Fund may also invest up to 10% of its net assets in ETFs holding preferred securities and up to 10% of its net assets in ETFs holding convertible securities.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. The Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Advisor's Pricing Committee in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. All securities and other assets of the Fund initially expressed in foreign currencies will be converted to U.S. dollars using exchange rates in effect at the time of valuation. The Fund's investments are valued as follows:
Common stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV per share.
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect the value of the security.
The Fund is subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly.
o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates).
o Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment.
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund's investments as of February 29, 2020, is included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date.
C. AFFILIATED TRANSACTIONS
The Fund invests in securities of affiliated funds. The Fund's investment performance and risks are directly related to the investment performance and risks of the affiliated funds. Dividend income, realized gains and losses, and change in appreciation (depreciation) from affiliated funds are presented on the Statement of Operations.
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
Amounts related to these investments at February 29, 2020 and for the fiscal period then ended are as follows:
CHANGE IN UNREALIZED REALIZED SHARES AT VALUE AT APPRECIATION GAIN VALUE AT DIVIDEND SECURITY NAME 2/29/2020 8/31/2019 PURCHASES SALES (DEPRECIATION) (LOSS) 2/29/2020 INCOME ---------------------------------------------------------------------------------------------------------------------------------- First Trust Emerging Markets Local Currency Bond ETF 83,097 $ 1,215,799 $ 2,237,229 $ (281,608) $ (109,111) $ 3,139 $ 3,065,448 $ 60,037 First Trust Enhanced Short Maturity ETF 541,143 11,259,941 21,267,246 -- 11,741 -- 32,538,928 222,096 First Trust Low Duration Opportunities ETF 1,004,929 20,129,332 35,298,966 (3,198,803) 448,830 (9,996) 52,668,329 415,670 First Trust Senior Loan Fund 407,577 7,477,145 13,260,449 (1,383,435) (81,982) (6,012) 19,266,165 248,969 First Trust Tactical High Yield ETF 133,336 2,502,346 4,418,692 (477,401) (65,453) 5,944 6,384,128 107,507 First Trust TCW Opportunistic Fixed Income ETF 313,942 2,562,596 13,915,294 -- 314,867 -- 16,792,757 116,975 ---------------------------------------------------------------------------------------------- $ 45,147,159 $ 90,397,876 $ (5,341,247) $ 518,892 $ (6,925) $130,715,755 $ 1,171,254 ============================================================================================== |
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly by the Fund, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on significantly modified portfolio securities held by the Fund and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
The tax character of distributions paid during the fiscal period ended August 31, 2019 was as follows:
Distributions paid from: Ordinary income................................. $ 432,051 Capital gains................................... -- Return of capital............................... -- |
As of August 31, 2019, the components of distributable earnings on a tax basis for the Fund were as follows:
Undistributed ordinary income................... $ -- Accumulated capital and other gain (loss)....... (11,785) Net unrealized appreciation (depreciation)...... 218,254 |
E. INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of the Fund's taxable income exceeds the distributions from such taxable income for the calendar year.
The Fund is subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. The taxable year ending 2019 remains open to federal and state audit. As of February 29, 2020, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund's financial statements for uncertain tax positions.
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
The Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At August 31, 2019, the Fund had non-expiring capital loss carryforwards available for federal income tax purposes of $11,785. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to the Fund's shareholders.
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal period ended August 31, 2019, the Fund had no net late year ordinary or capital losses.
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio, managing the Fund's business affairs and providing certain administrative services necessary for the management of the Fund.
Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of the Fund's assets and is responsible for the expenses of the Fund including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees (if any), but excluding fee payments under the Investment Management Agreement, interest, taxes, pro rata share of fees and expenses attributable to investments in other investment companies ("acquired fund fees and expenses"), brokerage commissions and other expenses connected with the execution of portfolio transactions, expenses associated with short sale transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, which are paid by the Fund. The Fund has agreed to pay First Trust an annual unitary management fee equal to 0.20% of its average daily net assets. In addition, the Fund incurs acquired fund fees and expenses. The total of the unitary management fee and acquired fund fees and expenses represents the Fund's total annual operating expenses.
The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of the Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for the Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen will rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended February 29, 2020, the cost of purchases and proceeds from sales of investments, excluding short-term investments and in-kind transactions, were $6,749,868 and $6,758,917, respectively.
For the six months ended February 29, 2020, the cost of in-kind purchases and proceeds from in-kind sales were $88,226,372 and $8,196,627, respectively.
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). In order to purchase Creation Units of the Fund, an Authorized Participant must deposit (i) a designated portfolio of equity securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee is based on the composition of the securities included in the Fund's portfolio and the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When the Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in the Fund's portfolio and the countries in which the transactions are settled. The Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, the Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before December 31, 2020.
7. INDEMNIFICATION
The Trust, on behalf of the Fund, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there was the following subsequent event:
Beginning in December 2019, the outbreak of the respiratory disease designated as COVID-19 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short term or may last for an extended period of time and, in either case, could result in a substantial economic downturn or recession. Management is continuing to monitor this event.
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. The Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
ETF Risk. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
Fixed Income Securities Risk. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.
FIRST TRUST LOW DURATION STRATEGIC FOCUS ETF (LDSF)
FEBRUARY 29, 2020 (UNAUDITED)
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
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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
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)
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1 Fund Performance Overview FT Cboe Vest U.S. Equity Buffer ETF - August (FAUG)....................... 2 FT Cboe Vest U.S. Equity Deep Buffer ETF - August (DAUG).................. 4 FT Cboe Vest U.S. Equity Buffer ETF - November (FNOV)..................... 6 FT Cboe Vest U.S. Equity Deep Buffer ETF - November (DNOV)................ 8 FT Cboe Vest U.S. Equity Buffer ETF - February (FFEB)..................... 10 FT Cboe Vest U.S. Equity Deep Buffer ETF - February (DFEB)................ 12 Notes to Fund Performance Overview........................................... 14 Portfolio Management......................................................... 15 Understanding Your Fund Expenses............................................. 16 Portfolio of Investments FT Cboe Vest U.S. Equity Buffer ETF - August (FAUG)....................... 18 FT Cboe Vest U.S. Equity Deep Buffer ETF - August (DAUG).................. 20 FT Cboe Vest U.S. Equity Buffer ETF - November (FNOV)..................... 22 FT Cboe Vest U.S. Equity Deep Buffer ETF - November (DNOV)................ 24 FT Cboe Vest U.S. Equity Buffer ETF - February (FFEB)..................... 26 FT Cboe Vest U.S. Equity Deep Buffer ETF - February (DFEB)................ 28 Statements of Assets and Liabilities......................................... 30 Statements of Operations..................................................... 32 Statements of Changes in Net Assets.......................................... 34 Financial Highlights......................................................... 36 Notes to Financial Statements................................................ 39 Additional Information....................................................... 46 CAUTION REGARDING FORWARD-LOOKING STATEMENTS |
This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and/or Cboe Vest Financial LLC ("Cboe Vest" or the "Sub-Advisor") and their respective representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund VIII (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in a Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance and investment approach.
The statistical information that follows may help you understand each Fund's performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the Advisor and/or Sub-Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in the prospectus, statement of additional information, and other Fund regulatory filings.
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for certain series of the First Trust Exchange-Traded Fund VIII (the "Funds"), which contains detailed information about the Funds for the period ended February 29, 2020.
To say that much has transpired over the past six months would be an understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China this past December, my message to investors would have sounded quite bullish, focusing on such accomplishments as the progress in the trade negotiations between the U.S. and China, where a "Phase One" deal was signed into law on January 15, 2020. The main takeaway from the deal is that China agreed to purchase an additional $200 billion of goods and services from the U.S. over the next several years in exchange for the U.S. cutting some of its tariffs on Chinese goods. The deal marked the first breakthrough since the Trump Administration launched its new tariff initiative in March 2018. On top of that news, the S&P 500(R) Index was setting new all-time highs all the way up through the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213 countries, areas or territories, had infected 1,991,562 people (confirmed cases) and was responsible for 130,885 confirmed deaths, according to the World Health Organization. These numbers are expected to trend higher in the days and weeks ahead. A growing number of U.S. state governors and foreign leaders have issued shelter in place orders to their citizens to help slow the spread of this new virus. The primary objective in doing so is to slow down the number of cases so that hospitals and health care workers are not overwhelmed by too many patients. The cost is high because it requires shutting down large chunks of the economy, which in turn negatively impacts the financial well-being of workers and companies. In the U.S., Congress passed a financial stimulus package valued at $2.0 trillion to help backstop workers and companies in the near-term. The faster we can end the shutdown, consistent with general health and welfare, the better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience a modest decline in real gross domestic product of 1.5% (annualized) in the first quarter of 2020, followed by a massive decline of 20% (annualized) in the second quarter. The good news is that he sees the economy growing at a 3.0% and 3.5% annual pace in the third and fourth quarters of 2020, respectively. In other words, we are expecting a healthy rebound in the second half of this year. As I noted earlier, the stock market was still at a record high in the third week of February. From February 19 through March 23, however, the S&P 500(R) Index posted a total return of -33.79%, putting it in bear market territory (price decline of 20% or more from the most recent peak). Sorry to say it, but the nearly 11-year bull market is no more. While we do not have a projection for where stocks will be at year-end, we do know this: excluding the current bear market, the S&P 500(R) Index has never failed to recoup all the losses sustained in any sell-off, pullback, correction or bear market. So, while I am understandably not bullish on the first half of 2020, I will be a bull once again after we put the worst of COVID-19 behind us. I continue to urge investors to stay the course. This too shall pass.
Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months.
Sincerely,
/s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. |
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
The FT Cboe Vest U.S. Equity Buffer ETF - August (the "Fund") seeks to provide investors with returns (before fees, expenses and taxes) that match the price return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a predetermined upside cap of 8.60% (before fees, expenses and taxes) and 7.93% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against the first 10% (before fees, expenses and taxes) of Underlying ETF losses, over the period from November 7, 2019 to August 21, 2020 (the "Outcome Period"). Under normal market conditions, the Fund will invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX Options") that reference the performance of the Underlying ETF. The Fund will not terminate at the end of the Outcome Period; instead, a subsequent Outcome Period will begin. At the start of each new Outcome Period, the Fund resets by investing in a new set of FLEX Options that will provide a new cap for the new Outcome Period. This means that the cap will change for each Outcome Period based upon prevailing market conditions at the beginning of each Outcome Period. An investor that purchases Fund shares other than on the first day of an Outcome Period and/or sells Fund shares prior to the end of an Outcome Period may experience results that are very different from the target outcomes sought by the Fund for that Outcome Period. The Fund is classified as non-diversified under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol "FAUG."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (11/6/19) to 2/29/20 FUND PERFORMANCE NAV -2.36% Market Price -2.43% INDEX PERFORMANCE S&P 500(R) Index -3.98% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 14.)
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT NOVEMBER 6, 2019 - FEBRUARY 29, 2020 FT Cboe Vest U.S. Equity S&P 500(R) Buffer ETF - August Index 11/6/19 $10,000 $10,000 2/29/20 9,764 9,602 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period November 7, 2019 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 11/7/19 - 2/29/20 14 1 1 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 11/7/19 - 2/29/20 61 0 0 0 |
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
The FT Cboe Vest U.S. Equity Deep Buffer ETF - August (the "Fund") seeks to provide investors with returns (before fees, expenses and taxes) that match the price return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a predetermined upside cap of 6.58% (before fees, expenses and taxes) and 5.91% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against Underlying ETF losses between -5% and -30% (before fees, expenses and taxes), over the period from November 7, 2019 to August 21, 2020 (the "Outcome Period"). Under normal market conditions, the Fund will invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX Options") that reference the performance of the Underlying ETF. The Fund will not terminate at the end of the Outcome Period; instead, a subsequent Outcome Period will begin. At the start of each new Outcome Period, the Fund resets by investing in a new set of FLEX Options that will provide a new cap for the new Outcome Period. This means that the cap will change for each Outcome Period based upon prevailing market conditions at the beginning of each Outcome Period. An investor that purchases Fund shares other than on the first day of an Outcome Period and/or sells Fund shares prior to the end of an Outcome Period may experience results that are very different from the target outcomes sought by the Fund for that Outcome Period. The Fund is classified as non-diversified under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol "DAUG."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (11/6/19) to 2/29/20 FUND PERFORMANCE NAV -1.96% Market Price -1.16% INDEX PERFORMANCE S&P 500(R) Index -3.98% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 14.)
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT NOVEMBER 6, 2019 - FEBRUARY 29, 2020 FT Cboe Vest U.S. Equity S&P 500(R) Deep Buffer ETF - August Index 11/6/19 $10,000 $10,000 2/29/20 9,804 9,602 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period November 7, 2019 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 11/7/19 - 2/29/20 21 1 1 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 11/7/19 - 2/29/20 54 0 0 0 |
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
The FT Cboe Vest U.S. Equity Buffer ETF - November (the "Fund") seeks to provide investors with returns (before fees, expenses and taxes) that match the price return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a predetermined upside cap of 12.36% (before fees, expenses and taxes) and 11.50% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against the first 10% (before fees, expenses and taxes) of Underlying ETF losses, over the period from November 18, 2019 to November 20, 2020 (the "Outcome Period"). Under normal market conditions, the Fund will invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX Options") that reference the performance of the Underlying ETF. The Fund will not terminate at the end of the Outcome Period; instead, a subsequent Outcome Period will begin. At the start of each new Outcome Period, the Fund resets by investing in a new set of FLEX Options that will provide a new cap for the new Outcome Period. This means that the cap will change for each Outcome Period based upon prevailing market conditions at the beginning of each Outcome Period. An investor that purchases Fund shares other than on the first day of an Outcome Period and/or sells Fund shares prior to the end of an Outcome Period may experience results that are very different from the target outcomes sought by the Fund for that Outcome Period. The Fund is classified as non-diversified under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol "FNOV."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (11/15/19) to 2/29/20 FUND PERFORMANCE NAV -2.95% Market Price -3.24% INDEX PERFORMANCE S&P 500(R) Index -5.33% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 14.)
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT NOVEMBER 15, 2019 - FEBRUARY 29, 2020 FT Cboe Vest U.S. Equity S&P 500(R) Buffer ETF - November Index 11/15/19 $10,000 $10,000 2/29/20 9,705 9,467 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period November 18, 2019 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 11/18/19 - 2/29/20 41 1 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 11/18/19 - 2/29/20 28 0 0 0 |
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
The FT Cboe Vest U.S. Equity Deep Buffer ETF - November (the "Fund") seeks to provide investors with returns (before fees, expenses and taxes) that match the price return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a predetermined upside cap of 8.12% (before fees, expenses and taxes) and 7.26% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against Underlying ETF losses between -5% and -30% (before fees, expenses and taxes), over the period from November 18, 2019 to November 20, 2020 (the "Outcome Period"). Under normal market conditions, the Fund will invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX Options") that reference the performance of the Underlying ETF. The Fund will not terminate at the end of the Outcome Period; instead, a subsequent Outcome Period will begin. At the start of each new Outcome Period, the Fund resets by investing in a new set of FLEX Options that will provide a new cap for the new Outcome Period. This means that the cap will change for each Outcome Period based upon prevailing market conditions at the beginning of each Outcome Period. An investor that purchases Fund shares other than on the first day of an Outcome Period and/or sells Fund shares prior to the end of an Outcome Period may experience results that are very different from the target outcomes sought by the Fund for that Outcome Period. The Fund is classified as non-diversified under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol "DNOV."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (11/15/19) to 2/29/20 FUND PERFORMANCE NAV -2.95% Market Price -1.73% INDEX PERFORMANCE S&P 500(R) Index -5.33% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 14.)
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT NOVEMBER 15, 2019 - FEBRUARY 29, 2020 FT Cboe Vest U.S. Equity S&P 500(R) Deep Buffer ETF - November Index 11/15/19 $10,000 $10,000 2/29/20 9,705 9,467 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period November 18, 2019 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 11/18/19 - 2/29/20 12 0 1 1 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 11/18/19 - 2/29/20 56 0 0 0 |
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
The FT Cboe Vest U.S. Equity Buffer ETF - February (the "Fund") seeks to provide investors with returns (before fees, expenses and taxes) that match the price return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a predetermined upside cap of 10.75% (before fees, expenses and taxes) and 9.90% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against the first 10% (before fees, expenses and taxes) of Underlying ETF losses, over the period from February 24, 2020 to February 19, 2021 (the "Outcome Period"). Under normal market conditions, the Fund will invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX Options") that reference the performance of the Underlying ETF. The Fund will not terminate at the end of the Outcome Period; instead, a subsequent Outcome Period will begin. At the start of each new Outcome Period, the Fund resets by investing in a new set of FLEX Options that will provide a new cap for the new Outcome Period. This means that the cap will change for each Outcome Period based upon prevailing market conditions at the beginning of each Outcome Period. An investor that purchases Fund shares other than on the first day of an Outcome Period and/or sells Fund shares prior to the end of an Outcome Period may experience results that are very different from the target outcomes sought by the Fund for that Outcome Period. The Fund is classified as non-diversified under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol "FFEB."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (2/21/20) to 2/29/20 FUND PERFORMANCE NAV -7.86% Market Price -7.82% INDEX PERFORMANCE S&P 500(R) Index -11.49% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 14.)
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT FEBRUARY 21, 2020 - FEBRUARY 29, 2020 FT Cboe Vest U.S. Equity S&P 500(R) Buffer ETF - February Index 2/21/20 $10,000 $10,000 2/29/20 9,214 8,851 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period February 24, 2020 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 2/24/20 - 2/29/20 5 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 2/24/20 - 2/29/20 0 0 0 0 |
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
The FT Cboe Vest U.S. Equity Deep Buffer ETF - February (the "Fund") seeks to provide investors with returns (before fees, expenses and taxes) that match the price return of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a predetermined upside cap of 7.50% (before fees, expenses and taxes) and 6.65% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against Underlying ETF losses between -5% and -30% (before fees, expenses and taxes), over the period from February 24, 2020 to February 19, 2021 (the "Outcome Period"). Under normal market conditions, the Fund will invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX Options") that reference the performance of the Underlying ETF. The Fund will not terminate at the end of the Outcome Period; instead, a subsequent Outcome Period will begin. At the start of each new Outcome Period, the Fund resets by investing in a new set of FLEX Options that will provide a new cap for the new Outcome Period. This means that the cap will change for each Outcome Period based upon prevailing market conditions at the beginning of each Outcome Period. An investor that purchases Fund shares other than on the first day of an Outcome Period and/or sells Fund shares prior to the end of an Outcome Period may experience results that are very different from the target outcomes sought by the Fund for that Outcome Period. The Fund is classified as non-diversified under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the Cboe BZX Exchange, Inc., under the ticker symbol "DFEB."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (2/21/20) to 2/29/20 FUND PERFORMANCE NAV -5.38% Market Price -4.69% INDEX PERFORMANCE S&P 500(R) Index -11.49% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 14.)
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT FEBRUARY 21, 2020 - FEBRUARY 29, 2020 FT Cboe Vest U.S. Equity S&P 500(R) Deep Buffer ETF - February Index 2/21/20 $10,000 $10,000 2/29/20 9,462 8,851 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period February 24, 2020 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 2/24/20 - 2/29/20 4 1 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 2/24/20 - 2/29/20 0 0 0 0 |
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.
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment advisor to FT Cboe Vest U.S. Equity Buffer ETF - August ("FAUG"), FT Cboe Vest U.S. Equity Deep Buffer ETF - August ("DAUG"), FT Cboe Vest U.S. Equity Buffer ETF - November ("FNOV"), FT Cboe Vest U.S. Equity Deep Buffer ETF - November ("DNOV"), FT Cboe Vest U.S. Equity Buffer ETF - February ("FFEB"), FT Cboe Vest U.S. Equity Deep Buffer ETF - February ("DFEB"), (each a "Fund" and, collectively, the "Funds"). First Trust is responsible for the ongoing monitoring of each Fund's investment portfolio, managing each Fund's business affairs and providing certain administrative services necessary for the management of each Fund.
SUB-ADVISOR
Cboe VestSM Financial LLC ("Cboe Vest" or the "Sub-Advisor") serves as the investment sub-advisor to the Funds. In this capacity, Cboe Vest is responsible for the selection and ongoing monitoring of the securities in each Fund's investment portfolio. Cboe Vest, with principal offices at 1765 Greensboro Station Pl., 9th Floor, McLean, Virginia 22102, was founded in 2012. Cboe Vest had approximately $646 million under management or committed to management as of February 29, 2020.
PORTFOLIO MANAGEMENT TEAM
KARAN SOOD, MANAGING DIRECTOR OF CBOE VEST
HOWARD RUBIN, MANAGING DIRECTOR OF CBOE VEST
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of FT Cboe Vest U.S. Equity Buffer ETF - August, FT Cboe Vest U.S. Equity Deep Buffer ETF - August, FT Cboe Vest U.S. Equity Buffer ETF - November, FT Cboe Vest U.S. Equity Deep Buffer ETF - November, FT Cboe Vest U.S. Equity Buffer ETF - February or FT Cboe Vest U.S. Equity Deep Buffer ETF - February (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the period (or since inception) and held through the six-month (or shorter) period ended February 29, 2020.
ACTUAL EXPENSES
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
-------------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSES PAID EXPENSE RATIO DURING THE PERIOD BEGINNING ENDING BASED ON THE NOVEMBER 6, 2019 (a) ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO NOVEMBER 6, 2019 (a) FEBRUARY 29, 2020 IN THE PERIOD FEBRUARY 29, 2020 (b) -------------------------------------------------------------------------------------------------------------------------------- FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG) Actual $1,000.00 $ 976.40 0.85% $2.66 Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27 FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG) Actual $1,000.00 $ 980.40 0.85% $2.67 Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27 |
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSES PAID EXPENSE RATIO DURING THE PERIOD BEGINNING ENDING BASED ON THE NOVEMBER 15, 2019 (a) ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO NOVEMBER 15, 2019 (a) FEBRUARY 29, 2020 IN THE PERIOD FEBRUARY 29, 2020 (c) -------------------------------------------------------------------------------------------------------------------------------- FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV) Actual $1,000.00 $ 970.50 0.85% $2.45 Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27 FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV) Actual $1,000.00 $ 970.50 0.85% $2.45 Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27 |
-------------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSES PAID EXPENSE RATIO DURING THE PERIOD BEGINNING ENDING BASED ON THE FEBRUARY 21, 2020 (a) ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO FEBRUARY 21, 2020 (a) FEBRUARY 29, 2020 IN THE PERIOD FEBRUARY 29, 2020 (d) -------------------------------------------------------------------------------------------------------------------------------- FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB) Actual $1,000.00 $ 921.40 0.85% $0.20 Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27 FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB) Actual $1,000.00 $ 946.20 0.85% $0.20 Hypothetical (5% return before expenses) $1,000.00 $1,020.64 0.85% $4.27 |
(a) Inception date.
(b) Actual expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (November 6, 2019 through February 29, 2020), multiplied by 116/366. Hypothetical expenses are assumed for the most recent six-month period.
(c) Actual expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (November 15, 2019 through February 29, 2020), multiplied by 107/366. Hypothetical expenses are assumed for the most recent six-month period.
(d) Actual expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (February 21, 2020 through February 29, 2020), multiplied by 9/366. Hypothetical expenses are assumed for the most recent six-month period.
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- PURCHASED OPTIONS -- 104.4% CALL OPTIONS PURCHASED -- 96.8% 147 SPDR(R) S&P 500(R) ETF Trust (a)....................... $ 4,355,022 $ 3.07 08/21/20 $ 4,265,940 (Cost $4,432,492) ------------- PUT OPTIONS PURCHASED -- 7.6% 147 SPDR(R) S&P 500(R) ETF Trust........................... 4,355,022 307.10 08/21/20 336,290 (Cost $186,447) ------------- TOTAL PURCHASED OPTIONS.......................................................................... 4,602,230 (Cost $4,618,939) ------------- |
SHARES DESCRIPTION VALUE -------------- ------------------------------------------------------------------------------------------------- ------------- MONEY MARKET FUNDS -- 1.0% 43,749 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (b)........................ 43,749 (Cost $43,749) ------------- TOTAL INVESTMENTS -- 105.4%...................................................................... 4,645,979 (Cost $4,662,688) (c) ------------- |
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- WRITTEN OPTIONS -- (5.3%) CALL OPTIONS WRITTEN -- (1.3%) (147) SPDR(R) S&P 500(R) ETF Trust (a)....................... $ (4,355,022) $ 333.51 08/21/20 (58,553) (Premiums received $110,197) ------------- PUT OPTIONS WRITTEN -- (4.0%) (147) SPDR(R) S&P 500(R) ETF Trust........................... (4,355,022) 276.39 08/21/20 (174,984) (Premiums received $126,465) ------------- TOTAL WRITTEN OPTIONS............................................................................ (233,537) (Premiums received $236,662) ------------- NET OTHER ASSETS AND LIABILITIES -- (0.1)%....................................................... (3,124) ------------- NET ASSETS -- 100.0%............................................................................. $ 4,409,318 ============= |
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $201,487 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $215,071. The net unrealized depreciation was $13,584. The amounts presented are inclusive of derivative contracts.
Page 18 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Purchased........................... $ 4,265,940 $ -- $ 4,265,940 $ -- Put Options Purchased............................ 336,290 -- 336,290 -- Money Market Funds............................... 43,749 43,749 -- -- ------------- ------------- ------------- ------------- Total Investments................................ $ 4,645,979 $ 43,749 $ 4,602,230 $ -- ============= ============= ============= ============= LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Written............................. $ (58,553) $ -- $ (58,553) $ -- Put Options Written.............................. (174,984) -- (174,984) -- ------------- ------------- ------------- ------------- Total............................................ $ (233,537) $ -- $ (233,537) $ -- ============= ============= ============= ============= |
See Notes to Financial Statements Page 19
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- PURCHASED OPTIONS -- 101.8% CALL OPTIONS PURCHASED -- 96.4% 49 SPDR(R) S&P 500(R) ETF Trust (a)....................... $ 1,451,674 $ 3.08 08/21/20 $ 1,421,931 (Cost $1,469,919) ------------- PUT OPTIONS PURCHASED -- 5.4% 49 SPDR(R) S&P 500(R) ETF Trust........................... 1,451,674 291.75 08/21/20 80,149 (Cost $59,209) ------------- TOTAL PURCHASED OPTIONS.......................................................................... 1,502,080 (Cost $1,529,128) ------------- |
SHARES DESCRIPTION VALUE -------------- ------------------------------------------------------------------------------------------------- ------------- MONEY MARKET FUNDS -- 1.0% 14,538 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (b)........................ 14,538 (Cost $14,538) ------------- TOTAL INVESTMENTS -- 102.8%....................................................................... 1,516,618 (Cost $1,543,666) (c) ------------- |
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- WRITTEN OPTIONS -- (2.7%) CALL OPTIONS WRITTEN -- (1.9%) (49) SPDR(R) S&P 500(R) ETF Trust (a)....................... $ (1,451,674) $ 327.30 08/21/20 (28,030) (Premiums received $32,274) ------------- PUT OPTIONS WRITTEN -- (0.8%) (49) SPDR(R) S&P 500(R) ETF Trust........................... (1,451,674) 214.97 08/21/20 (11,179) (Premiums received $8,068) ------------- TOTAL WRITTEN OPTIONS............................................................................ (39,209) (Premiums received $40,342) ------------- NET OTHER ASSETS AND LIABILITIES -- (0.1)%....................................................... (1,883) ------------- NET ASSETS -- 100.0%............................................................................. $ 1,475,526 ============= |
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $25,184 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $51,099. The net unrealized depreciation was $25,915. The amounts presented are inclusive of derivative contracts.
Page 20 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Purchased........................... $ 1,421,931 $ -- $ 1,421,931 $ -- Put Options Purchased............................ 80,149 -- 80,149 -- Money Market Funds............................... 14,538 14,538 -- -- ------------- ------------- ------------- ------------- Total Investments................................ $ 1,516,618 $ 14,538 $ 1,502,080 $ -- ============= ============= ============= ============= LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Written............................. $ (28,030) $ -- $ (28,030) $ -- Put Options Written.............................. (11,179) -- (11,179) -- ------------- ------------- ------------- ------------- Total............................................ $ (39,209) $ -- $ (39,209) $ -- ============= ============= ============= ============= |
See Notes to Financial Statements Page 21
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- PURCHASED OPTIONS -- 105.3% CALL OPTIONS PURCHASED -- 95.3% 1,764 SPDR(R) S&P 500(R) ETF Trust........................... $ 52,260,264 $ 3.12 11/20/20 $ 50,900,220 (Cost $53,663,275) ------------- PUT OPTIONS PURCHASED -- 10.0% 1,764 SPDR(R) S&P 500(R) ETF Trust........................... 52,260,264 311.79 11/20/20 5,314,932 (Cost $3,590,273) ------------- TOTAL PURCHASED OPTIONS.......................................................................... 56,215,152 (Cost $57,253,548) ------------- |
SHARES DESCRIPTION VALUE -------------- ------------------------------------------------------------------------------------------------- ------------- MONEY MARKET FUNDS -- 0.9% 501,233 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (a)........................ 501,233 (Cost $501,233) ------------- TOTAL INVESTMENTS -- 106.2%...................................................................... 56,716,385 (Cost $57,754,781) (b) ------------- |
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- WRITTEN OPTIONS -- (6.2%) CALL OPTIONS WRITTEN -- (0.5%) (1,764) SPDR(R) S&P 500(R) ETF Trust........................... $ (52,260,264) $ 350.33 11/20/20 (292,824) (Premiums received $663,109) ------------- PUT OPTIONS WRITTEN -- (5.7%) (1,764) SPDR(R) S&P 500(R) ETF Trust........................... (52,260,264) 280.61 11/20/20 (3,049,956) (Premiums received $1,951,585) ------------- TOTAL WRITTEN OPTIONS............................................................................ (3,342,780) (Premiums received $2,614,694) ------------- NET OTHER ASSETS AND LIABILITIES -- 0.0%......................................................... 19,023 ------------- NET ASSETS -- 100.0%............................................................................. $ 53,392,628 ============= |
(b) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $2,094,944 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $3,861,426. The net unrealized depreciation was $1,766,482. The amounts presented are inclusive of derivative contracts.
Page 22 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Purchased........................... $ 50,900,220 $ -- $ 50,900,220 $ -- Put Options Purchased............................ 5,314,932 -- 5,314,932 -- Money Market Funds............................... 501,233 501,233 -- -- ------------- ------------- ------------- ------------- Total Investments................................ $ 56,716,385 $ 501,233 $ 56,215,152 $ -- ============= ============= ============= ============= LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Written............................. $ (292,824) $ -- $ (292,824) $ -- Put Options Written.............................. (3,049,956) -- (3,049,956) -- ------------- ------------- ------------- ------------- Total............................................ $ (3,342,780) $ -- $ (3,342,780) $ -- ============= ============= ============= ============= |
See Notes to Financial Statements Page 23
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- PURCHASED OPTIONS -- 102.1% CALL OPTIONS PURCHASED -- 95.4% 441 SPDR(R) S&P 500(R) ETF Trust (a)....................... $ 13,065,066 $ 3.13 11/20/20 $ 12,726,819 (Cost $13,607,745) ------------- PUT OPTIONS PURCHASED -- 6.7% 441 SPDR(R) S&P 500(R) ETF Trust........................... 13,065,066 296.20 11/20/20 896,849 (Cost $569,287) ------------- TOTAL PURCHASED OPTIONS.......................................................................... 13,623,668 (Cost $14,177,032) ------------- |
SHARES DESCRIPTION VALUE -------------- ------------------------------------------------------------------------------------------------- ------------- MONEY MARKET FUNDS -- 1.0% 127,395 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (b)........................ 127,395 (Cost $127,395) ------------- TOTAL INVESTMENTS -- 103.1%...................................................................... 13,751,063 (Cost $14,304,427) (c) ------------- |
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- WRITTEN OPTIONS -- (3.0%) CALL OPTIONS WRITTEN -- (1.8%) (441) SPDR(R) S&P 500(R) ETF Trust (a)....................... $ (13,065,066) $ 337.11 11/20/20 (234,953) (Premiums received $392,820) ------------- PUT OPTIONS WRITTEN -- (1.2%) (441) SPDR(R) S&P 500(R) ETF Trust........................... (13,065,066) 218.25 11/20/20 (161,703) (Premiums received $86,723) ------------- TOTAL WRITTEN OPTIONS............................................................................ (396,656) (Premiums received $479,543) ------------- NET OTHER ASSETS AND LIABILITIES -- (0.1)%....................................................... (9,325) ------------- NET ASSETS -- 100.0%............................................................................. $ 13,345,082 ============= |
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $485,429 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $955,906. The net unrealized depreciation was $470,477. The amounts presented are inclusive of derivative contracts.
Page 24 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Purchased........................... $ 12,726,819 $ -- $ 12,726,819 $ -- Put Options Purchased............................ 896,849 -- 896,849 -- Money Market Funds............................... 127,395 127,395 -- -- ------------- ------------- ------------- ------------- Total Investments................................ $ 13,751,063 $ 127,395 $ 13,623,668 $ -- ============= ============= ============= ============= LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Written............................. $ (234,953) $ -- $ (234,953) $ -- Put Options Written.............................. (161,703) -- (161,703) -- ------------- ------------- ------------- ------------- Total............................................ $ (396,656) $ -- $ (396,656) $ -- ============= ============= ============= ============= |
See Notes to Financial Statements Page 25
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- PURCHASED OPTIONS -- 108.0% CALL OPTIONS PURCHASED -- 93.2% 2,944 SPDR(R) S&P 500(R) ETF Trust........................... $ 87,218,944 $ 3.33 02/19/21 $ 84,327,936 (Cost $88,620,656) ------------- PUT OPTIONS PURCHASED -- 14.8% 2,944 SPDR(R) S&P 500(R) ETF Trust........................... 87,218,944 333.48 02/19/21 13,353,984 (Cost $10,044,008) ------------- TOTAL PURCHASED OPTIONS.......................................................................... 97,681,920 (Cost $98,664,664) ------------- |
SHARES DESCRIPTION VALUE -------------- ------------------------------------------------------------------------------------------------- ------------- MONEY MARKET FUNDS -- 1.0% 921,922 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (a)........................ 921,922 (Cost $921,922) ------------- TOTAL INVESTMENTS -- 109.0%...................................................................... 98,603,842 (Cost $99,586,586) (b) ------------- |
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- WRITTEN OPTIONS -- (9.2%) CALL OPTIONS WRITTEN -- (0.3%) (2,944) SPDR(R) S&P 500(R) ETF Trust........................... $ (87,218,944) $ 369.33 02/19/21 (294,400) (Premiums received $391,635) ------------- PUT OPTIONS WRITTEN -- (8.9%) (2,944) SPDR(R) S&P 500(R) ETF Trust........................... (87,218,944) 300.13 02/19/21 (8,057,728) (Premiums received $5,810,689) ------------- TOTAL WRITTEN OPTIONS............................................................................ (8,352,128) (Premiums received $6,202,324) ------------- NET OTHER ASSETS AND LIABILITIES -- 0.2%......................................................... 203,631 ------------- NET ASSETS -- 100.0%............................................................................. $ 90,455,345 ============= |
(b) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $3,407,211 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $6,539,759. The net unrealized depreciation was $3,132,548. The amounts presented are inclusive of derivative contracts.
Page 26 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Purchased........................... $ 84,327,936 $ -- $ 84,327,936 $ -- Put Options Purchased............................ 13,353,984 -- 13,353,984 -- Money Market Funds............................... 921,922 921,922 -- -- ------------- ------------- ------------- ------------- Total Investments................................ $ 98,603,842 $ 921,922 $ 97,681,920 $ -- ============= ============= ============= ============= LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Written............................. $ (294,400) $ -- $ (294,400) $ -- Put Options Written.............................. (8,057,728) -- (8,057,728) -- ------------- ------------- ------------- ------------- Total............................................ $ (8,352,128) $ -- $ (8,352,128) $ -- ============= ============= ============= ============= |
See Notes to Financial Statements Page 27
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- PURCHASED OPTIONS -- 102.0% CALL OPTIONS PURCHASED -- 90.8% 3,910 SPDR(R) S&P 500(R) ETF Trust........................... $ 115,837,660 $ 3.32 02/19/21 $ 112,001,950 (Cost $116,071,048) ------------- PUT OPTIONS PURCHASED -- 11.2% 3,910 SPDR(R) S&P 500(R) ETF Trust........................... 115,837,660 316.81 02/19/21 13,747,560 (Cost $11,233,966) ------------- TOTAL PURCHASED OPTIONS.......................................................................... 125,749,510 (Cost $127,305,014) ------------- |
SHARES DESCRIPTION VALUE -------------- ------------------------------------------------------------------------------------------------- ------------- MONEY MARKET FUNDS -- 0.7% 914,641 Dreyfus Government Cash Management Fund, Institutional Shares - 1.50% (a)........................ 914,641 (Cost $914,641) ------------- TOTAL INVESTMENTS -- 102.7%...................................................................... 126,664,151 (Cost $128,219,655) (b) ------------- |
NUMBER OF NOTIONAL EXERCISE EXPIRATION CONTRACTS DESCRIPTION AMOUNT PRICE DATE VALUE -------------- ------------------------------------------------------- ------------- ----------- ------------ ------------- WRITTEN OPTIONS -- (3.1%) CALL OPTIONS WRITTEN -- (0.6%) (3,910) SPDR(R) S&P 500(R) ETF Trust........................... $(115,837,660) $ 358.49 02/19/21 (688,160) (Premiums received $990,466) ------------- PUT OPTIONS WRITTEN -- (2.5%) (3,910) SPDR(R) S&P 500(R) ETF Trust........................... (115,837,660) 233.44 02/19/21 (3,151,460) (Premiums received $2,319,147) ------------- TOTAL WRITTEN OPTIONS............................................................................ (3,839,620) (Premiums received $3,309,613) ------------- NET OTHER ASSETS AND LIABILITIES -- 0.4%......................................................... 540,326 ------------- NET ASSETS -- 100.0%............................................................................. $ 123,364,857 ============= |
(b) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $2,815,900 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $4,901,411. The net unrealized depreciation was $2,085,511. The amounts presented are inclusive of derivative contracts.
Page 28 See Notes to Financial Statements
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Purchased........................... $ 112,001,950 $ -- $ 112,001,950 $ -- Put Options Purchased............................ 13,747,560 -- 13,747,560 -- Money Market Funds............................... 914,641 914,641 -- -- ------------- ------------- ------------- ------------- Total Investments................................ $ 126,664,151 $ 914,641 $ 125,749,510 $ -- ============= ============= ============= ============= LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 2/29/2020 PRICES INPUTS INPUTS ------------- ------------- ------------- ------------- Call Options Written............................. $ (688,160) $ -- $ (688,160) $ -- Put Options Written.............................. (3,151,460) -- (3,151,460) -- ------------- ------------- ------------- ------------- Total............................................ $ (3,839,620) $ -- $ (3,839,620) $ -- ============= ============= ============= ============= |
See Notes to Financial Statements Page 29
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
FT CBOE VEST FT CBOE VEST U.S. EQUITY U.S. EQUITY BUFFER ETF - DEEP BUFFER ETF - AUGUST AUGUST (FAUG) (DAUG) ------------------- ------------------- ASSETS: Investments, at value..................................................... $ 43,749 $ 14,538 Options contracts purchased, at value..................................... 4,602,230 1,502,080 Receivables: Investment securities sold............................................. -- -- Dividends.............................................................. 248 93 Capital shares sold.................................................... -- -- --------------- --------------- Total Assets........................................................... 4,646,227 1,516,711 --------------- --------------- LIABILITIES: Options contracts written, at value....................................... 233,537 39,209 Payables: Investment securities purchased........................................ -- -- Investment advisory fees............................................... 3,372 1,976 --------------- --------------- Total Liabilities...................................................... 236,909 41,185 --------------- --------------- NET ASSETS................................................................ $ 4,409,318 $ 1,475,526 =============== =============== NET ASSETS CONSIST OF: Paid-in capital........................................................... $ 4,456,103 $ 1,494,339 Par value................................................................. 1,500 500 Accumulated distributable earnings (loss)................................. (48,285) (19,313) --------------- --------------- NET ASSETS................................................................ $ 4,409,318 $ 1,475,526 =============== =============== NET ASSET VALUE, per share................................................ $ 29.40 $ 29.51 =============== =============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)................................. 150,002 50,002 =============== =============== Investments, at cost...................................................... $ 43,749 $ 14,538 =============== =============== Premiums paid on options contracts purchased.............................. $ 4,618,939 $ 1,529,128 =============== =============== Premiums received on options contracts written............................ $ 236,662 $ 40,342 =============== =============== |
Page 30 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF - NOVEMBER NOVEMBER FEBRUARY FEBRUARY (FNOV) (DNOV) (FFEB) (DFEB) ------------------- ------------------- ------------------- ------------------- $ 501,233 $ 127,395 $ 921,922 $ 914,641 56,215,152 13,623,668 97,681,920 125,749,510 278,017 -- 1,563,954 1,440,096 429 153 112 107 4,450,377 -- 16,964,158 46,453,338 --------------- --------------- --------------- --------------- 61,445,208 13,751,216 117,132,066 174,557,692 --------------- --------------- --------------- --------------- 3,342,780 396,656 8,352,128 3,839,620 4,685,138 -- 18,317,396 47,346,368 24,662 9,478 7,197 6,847 --------------- --------------- --------------- --------------- 8,052,580 406,134 26,676,721 51,192,835 --------------- --------------- --------------- --------------- $ 53,392,628 $ 13,345,082 $ 90,455,345 $ 123,364,857 =============== =============== =============== =============== $ 55,198,995 $ 13,836,305 $ 93,562,983 $ 125,414,609 18,000 4,500 32,000 42,500 (1,824,367) (495,723) (3,139,638) (2,092,252) --------------- --------------- --------------- --------------- $ 53,392,628 $ 13,345,082 $ 90,455,345 $ 123,364,857 =============== =============== =============== =============== $ 29.66 $ 29.66 $ 28.27 $ 29.03 =============== =============== =============== =============== 1,800,002 450,002 3,200,002 4,250,002 =============== =============== =============== =============== $ 501,233 $ 127,395 $ 921,922 $ 914,641 =============== =============== =============== =============== $ 57,253,548 $ 14,177,032 $ 98,664,664 $ 127,305,014 =============== =============== =============== =============== $ 2,614,694 $ 479,543 $ 6,202,324 $ 3,309,613 =============== =============== =============== =============== |
See Notes to Financial Statements Page 31
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED FEBRUARY 29, 2020 (UNAUDITED)
FT CBOE VEST FT CBOE VEST U.S. EQUITY U.S. EQUITY BUFFER ETF - DEEP BUFFER ETF - AUGUST AUGUST (FAUG) (a) (DAUG) (a) ------------------- ------------------- INVESTMENT INCOME: Dividends................................................................. $ 548 $ 206 --------------- --------------- Total investment income................................................ 548 206 --------------- --------------- EXPENSES: Investment advisory fees.................................................. 15,681 8,085 --------------- --------------- Total expenses......................................................... 15,681 8,085 --------------- --------------- NET INVESTMENT INCOME (LOSS).............................................. (15,133) (7,879) --------------- --------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Purchased options contracts............................................ 27,726 19,302 Written options contracts.............................................. (47,294) (4,821) --------------- --------------- Net realized gain (loss).................................................. (19,568) 14,481 --------------- --------------- Net change in unrealized appreciation (depreciation) on: Purchased options contracts............................................ (16,709) (27,048) Written options contracts.............................................. 3,125 1,133 --------------- --------------- Net change in unrealized appreciation (depreciation)...................... (13,584) (25,915) --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)................................... (33,152) (11,434) --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................................ $ (48,285) $ (19,313) =============== =============== |
(a) Inception date is November 6, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b) Inception date is November 15, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(c) Inception date is February 21, 2020, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
Page 32 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF - NOVEMBER NOVEMBER FEBRUARY FEBRUARY (FNOV) (b) (DNOV) (b) (FFEB) (c) (DFEB) (c) ------------------- ------------------- ------------------- ------------------- $ 1,083 $ 444 $ 112 $ 107 --------------- --------------- --------------- --------------- 1,083 444 112 107 --------------- --------------- --------------- --------------- 58,968 25,690 7,202 6,848 --------------- --------------- --------------- --------------- 58,968 25,690 7,202 6,848 --------------- --------------- --------------- --------------- (57,885) (25,246) (7,090) (6,741) --------------- --------------- --------------- --------------- -- -- -- -- -- -- -- -- --------------- --------------- --------------- --------------- -- -- -- -- --------------- --------------- --------------- --------------- (1,038,396) (553,364) (982,744) (1,555,504) (728,086) 82,887 (2,149,804) (530,007) --------------- --------------- --------------- --------------- (1,766,482) (470,477) (3,132,548) (2,085,511) --------------- --------------- --------------- --------------- (1,766,482) (470,477) (3,132,548) (2,085,511) --------------- --------------- --------------- --------------- $ (1,824,367) $ (495,723) $ (3,139,638) $ (2,092,252) =============== =============== =============== =============== |
See Notes to Financial Statements Page 33
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
FT CBOE VEST FT CBOE VEST U.S. EQUITY U.S. EQUITY BUFFER ETF - DEEP BUFFER ETF - AUGUST AUGUST (FAUG) (DAUG) ------------------- ------------------- PERIOD ENDED PERIOD ENDED 2/29/20 2/29/20 (UNAUDITED) (a) (UNAUDITED) (a) ------------------- ------------------- OPERATIONS: Net investment income (loss).............................................. $ (15,133) $ (7,879) Net realized gain (loss).................................................. (19,568) 14,481 Net change in unrealized appreciation (depreciation)...................... (13,584) (25,915) --------------- --------------- Net increase (decrease) in net assets resulting from operations........... (48,285) (19,313) --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................................. 9,115,590 3,011,135 Cost of shares redeemed................................................... (4,657,987) (1,516,296) --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions........................................................... 4,457,603 1,494,839 --------------- --------------- Total increase (decrease) in net assets................................... 4,409,318 1,475,526 NET ASSETS: Beginning of period....................................................... -- -- --------------- --------------- End of period............................................................. $ 4,409,318 $ 1,475,526 =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period................................... -- -- Shares sold............................................................... 300,002 100,002 Shares redeemed........................................................... (150,000) (50,000) --------------- --------------- Shares outstanding, end of period......................................... 150,002 50,002 =============== =============== |
(a) Inception date is November 6, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b) Inception date is November 15, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(c) Inception date is February 21, 2020, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
Page 34 See Notes to Financial Statements
FT CBOE VEST FT CBOE VEST FT CBOE VEST FT CBOE VEST U.S. EQUITY U.S. EQUITY U.S. EQUITY U.S. EQUITY BUFFER ETF - DEEP BUFFER ETF - BUFFER ETF - DEEP BUFFER ETF - NOVEMBER NOVEMBER FEBRUARY FEBRUARY (FNOV) (DNOV) (FFEB) (DFEB) ------------------- ------------------- ------------------- ------------------- PERIOD ENDED PERIOD ENDED PERIOD ENDED PERIOD ENDED 2/29/20 2/29/20 2/29/20 2/29/20 (UNAUDITED) (b) (UNAUDITED) (b) (UNAUDITED) (c) (UNAUDITED) (c) ------------------- ------------------- ------------------- ------------------- $ (57,885) $ (25,246) $ (7,090) $ (6,741) -- -- -- -- (1,766,482) (470,477) (3,132,548) (2,085,511) --------------- --------------- --------------- --------------- (1,824,367) (495,723) (3,139,638) (2,092,252) --------------- --------------- --------------- --------------- 55,216,995 13,840,805 93,594,983 125,457,109 -- -- -- -- --------------- --------------- --------------- --------------- 55,216,995 13,840,805 93,594,983 125,457,109 --------------- --------------- --------------- --------------- 53,392,628 13,345,082 90,455,345 123,364,857 -- -- -- -- --------------- --------------- --------------- --------------- $ 53,392,628 $ 13,345,082 $ 90,455,345 $ 123,364,857 =============== =============== =============== =============== -- -- -- -- 1,800,002 450,002 3,200,002 4,250,002 -- -- -- -- --------------- --------------- --------------- --------------- 1,800,002 450,002 3,200,002 4,250,002 =============== =============== =============== =============== |
See Notes to Financial Statements Page 35
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FT CBOE VEST U.S. EQUITY BUFFER ETF - AUGUST (FAUG)
PERIOD ENDED 2/29/2020 (a) (UNAUDITED) --------------- Net asset value, beginning of period........................... $ 30.10 --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... (0.10) Net realized and unrealized gain (loss)........................ (0.60) --------- Total from investment operations............................... (0.70) --------- Net asset value, end of period................................. $ 29.40 ========= TOTAL RETURN (b)............................................... (2.36)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 4,409 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.85% (c) Ratio of net investment income (loss) to average net assets.... (0.82)% (c) Portfolio turnover rate (d).................................... 0% |
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - AUGUST (DAUG)
PERIOD ENDED 2/29/2020 (a) (UNAUDITED) --------------- Net asset value, beginning of period........................... $ 30.10 --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... (0.16) Net realized and unrealized gain (loss)........................ (0.43) --------- Total from investment operations............................... (0.59) --------- Net asset value, end of period................................. $ 29.51 ========= TOTAL RETURN (b)............................................... (1.96)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 1,476 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.85% (c) Ratio of net investment income (loss) to average net assets.... (0.83)% (c) Portfolio turnover rate (d).................................... 0% |
(a) Inception date is November 6, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The return presented does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(c) Annualized.
(d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions, derivatives and in-kind transactions.
Page 36 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FT CBOE VEST U.S. EQUITY BUFFER ETF - NOVEMBER (FNOV)
PERIOD ENDED 2/29/2020 (a) (UNAUDITED) --------------- Net asset value, beginning of period........................... $ 30.56 --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... (0.03) Net realized and unrealized gain (loss)........................ (0.87) --------- Total from investment operations............................... (0.90) --------- Net asset value, end of period................................. $ 29.66 ========= TOTAL RETURN (b)............................................... (2.95)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 53,393 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.85% (c) Ratio of net investment income (loss) to average net assets.... (0.83)% (c) Portfolio turnover rate (d).................................... 0% |
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - NOVEMBER (DNOV)
PERIOD ENDED 2/29/2020 (a) (UNAUDITED) --------------- Net asset value, beginning of period........................... $ 30.55 --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... (0.06) Net realized and unrealized gain (loss)........................ (0.83) --------- Total from investment operations............................... (0.89) --------- Net asset value, end of period................................. $ 29.66 ========= TOTAL RETURN (b)............................................... (2.95)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 13,345 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.85% (c) Ratio of net investment income (loss) to average net assets.... (0.84)% (c) Portfolio turnover rate (d).................................... 0% |
(a) Inception date is November 15, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The return presented does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(c) Annualized.
(d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions, derivatives and in-kind transactions.
See Notes to Financial Statements Page 37
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FT CBOE VEST U.S. EQUITY BUFFER ETF - FEBRUARY (FFEB)
PERIOD ENDED 2/29/2020 (a) (UNAUDITED) --------------- Net asset value, beginning of period........................... $ 30.68 --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... (0.00) (b) Net realized and unrealized gain (loss)........................ (2.41) --------- Total from investment operations............................... (2.41) --------- Net asset value, end of period................................. $ 28.27 ========= TOTAL RETURN (c)............................................... (7.86)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 90,455 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.85% (d) Ratio of net investment income (loss) to average net assets.... (0.84)% (d) Portfolio turnover rate (e).................................... 0% |
FT CBOE VEST U.S. EQUITY DEEP BUFFER ETF - FEBRUARY (DFEB)
PERIOD ENDED 2/29/2020 (a) (UNAUDITED) --------------- Net asset value, beginning of period........................... $ 30.68 --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... (0.00) (b) Net realized and unrealized gain (loss)........................ (1.65) --------- Total from investment operations............................... (1.65) --------- Net asset value, end of period................................. $ 29.03 ========= TOTAL RETURN (c)............................................... (5.38)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 123,365 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.85% (d) Ratio of net investment income (loss) to average net assets.... (0.84)% (d) Portfolio turnover rate (e).................................... 0% |
(a) Inception date is February 21, 2020, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b) Amount represents less than $0.01 per share.
(c) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The return presented does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(d) Annualized.
(e) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions, derivatives and in-kind transactions.
Page 38 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on February 22, 2016, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of sixteen funds that are offering shares. This report covers the six funds listed below. The shares of each fund are listed and traded on the Cboe BZX Exchange, Inc. ("Cboe BZX").
FT Cboe Vest U.S. Equity Buffer ETF - August - (Cboe BZX ticker "FAUG")(1)
FT Cboe Vest U.S. Equity Deep Buffer ETF - August - (Cboe BZX ticker
"DAUG")(1)
FT Cboe Vest U.S. Equity Buffer ETF - November - (Cboe BZX ticker "FNOV")(2)
FT Cboe Vest U.S. Equity Deep Buffer ETF - November - (Cboe BZX ticker
"DNOV")(2)
FT Cboe Vest U.S. Equity Buffer ETF - February - (Cboe BZX ticker "FFEB")(3)
FT Cboe Vest U.S. Equity Deep Buffer ETF - February - (Cboe BZX ticker
"DFEB")(3)
(1) Commenced investment operations on November 6, 2019.
(2) Commenced investment operations on November 15, 2019.
(3) Commenced investment operations on February 21, 2020.
Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Each Fund's Creation Units are generally issued, in-kind for securities in which a Fund invests, and, in certain circumstances, for cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund.
The investment objective of FAUG is to seek to provide investors with returns (before fees, expenses and taxes) that match those of the SPDR(R) S&P 500(R) ETF Trust (the "Underlying ETF"), up to a predetermined upside cap of 8.60% (before fees, expenses and taxes) and 7.93% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee ), while providing a buffer against the first 10% (before fees, expenses and taxes) of Underlying ETF losses, over the period from November 7, 2019 to August 21, 2020.
The investment objective of DAUG is to seek to provide investors with returns (before fees, expenses and taxes) that match those of the Underlying ETF, up to a predetermined upside cap of 6.58% (before fees, expenses and taxes) and 5.91% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against Underlying ETF losses between -5% and -30% (before fees, expenses and taxes) over the period from November 7, 2019 to August 21, 2020.
The investment objective of FNOV is to seek to provide investors with returns (before fees, expenses and taxes) that match those of the Underlying ETF, up to a predetermined upside cap of 12.36% (before fees, expenses and taxes) and 11.50% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against the first 10% (before fees, expenses and taxes) of Underlying ETF losses, over the period from November 18, 2019 to November 20, 2020.
The investment objective of DNOV is to seek to provide investors with returns (before fees, expenses and taxes) that match those of the Underlying ETF, up to a predetermined upside cap of 8.12% (before fees, expenses and taxes) and 7.26% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against Underlying ETF losses between -5% and -30% (before fees, expenses and taxes) over the period from November 18, 2019 to November 20, 2020.
The investment objective of FFEB is to seek to provide investors with returns (before fees, expenses and taxes) that match the price return of the Underlying ETF, up to a predetermined upside cap of 10.75% (before fees, expenses and taxes) and 9.90% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against the first 10% (before fees, expenses and taxes) of Underlying ETF losses, over the period from February 24, 2020 to February 19, 2021.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The investment objective of DFEB is to seek to provide investors with returns (before fees, expenses and taxes) that match the price return of the Underlying ETF, up to a predetermined upside cap of 7.50% (before fees, expenses and taxes) and 6.65% (after fees and expenses, excluding brokerage commissions, trading fees, taxes and extraordinary expenses not included in the Fund's management fee), while providing a buffer against Underlying ETF losses between -5% and -30% (before fees, expenses and taxes) over the period from February 24, 2020 to February 19, 2021.
Under normal market conditions, each Fund will invest substantially all of its assets in FLexible EXchange(R) Options ("FLEX Options") that reference the performance of the Underlying ETF.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Each Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows:
Exchange-traded options contracts (other than FLEX Option contracts) are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded options contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Over-the-counter options contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. FLEX Options are normally valued using a model-based price provided by a third-party pricing vendor. On days when a trade in a FLEX Option occurs, the trade price will be used to value such FLEX Options in lieu of the model price.
Shares of open-end funds are valued at fair value which is based on NAV per share.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect the value of the security.
The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly.
o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates).
o Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment.
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of February 29, 2020, is included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date.
C. FLEX OPTIONS
FLEX Options are customized equity or index option contracts that trade on an exchange, but provide investors with the ability to customize key contract terms like exercise prices, styles and expiration dates. FLEX Options are guaranteed for settlement by the Options Clearing Corporation.
Each Fund will purchase and sell call and put FLEX Options based on the performance of the Underlying ETF. The FLEX Options that each Fund will hold that reference the Underlying ETF will give each Fund the right to receive or deliver shares of the Underlying ETF on the option expiration date at a strike price, depending on whether the option is a put or call option and whether each Fund purchases or sells the option. The FLEX Options held by each Fund are European style options, which are exercisable at the strike price only on the FLEX Option expiration date.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid annually, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually.
Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
E. INCOME TAXES
Each Fund intends to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. As of February 29, 2020, management has evaluated the application of these standards to the Funds and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions.
Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership.
Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes.
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds.
Cboe Vest Financial LLC ("Cboe Vest"), an affiliate of First Trust, serves as the Funds' sub-advisor and manages each Fund's portfolio subject to First Trust's supervision. Pursuant to the Investment Management Agreement, between the Trust, on behalf of the Funds, and the Advisor, and the Investment Sub-Advisory Agreement among the Trust, on behalf of the Funds, the Advisor and Cboe Vest, First Trust will supervise Cboe Vest and its management of the investment of each Fund's assets and will pay Cboe Vest for its services as the Funds' sub-advisor. First Trust will also be responsible for each Fund's expenses, including the cost of transfer agency, sub-advisory, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a 12b-1 plan, if any, and extraordinary expenses. Each Fund has agreed to pay First Trust an annual unitary management fee equal to 0.85% of its average daily net assets.
The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the period ended February 29, 2020, the Funds had no purchases or sales of investments, excluding short-term investments, derivatives, and in-kind transactions.
For the period ended February 29, 2020, the Funds had no in-kind purchases or sales.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by each Fund at February 29, 2020, the primary underlying risk exposure and the location of these instruments as presented on the Statements of Assets and Liabilities.
ASSET DERIVATIVES LIABILITY DERIVATIVES ---------------------------------------- ---------------------------------------- DERIVATIVES STATEMENTS OF ASSETS AND STATEMENTS OF ASSETS AND INSTRUMENT RISK EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE ----------- -------------- ------------------------ ------------- ------------------------ ------------- FAUG Options contracts Options contracts Options Equity Risk purchased, at value $ 4,602,230 written, at value $ 233,537 DAUG Options contracts Options contracts Options Equity Risk purchased, at value 1,502,080 written, at value 39,209 FNOV Options contracts Options contracts Options Equity Risk purchased, at value 56,215,152 written, at value 3,342,780 DNOV Options contracts Options contracts Options Equity Risk purchased, at value 13,623,668 written, at value 396,656 FFEB Options contracts Options contracts Options Equity Risk purchased, at value 97,681,920 written, at value 8,352,128 DFEB Options contracts Options contracts Options Equity Risk purchased, at value 125,749,510 written, at value 3,839,620 |
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the period ended February 29, 2020, on each Fund's derivative instruments, as well as the primary underlying risk exposure associated with the instruments.
EQUITY RISK -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS LOCATION FAUG DAUG FNOV DNOV FFEB DFEB ------------------------------------- -------------------------------------------------------------------------------- Net realized gain (loss) on: Purchased options contracts $ 27,726 $ 19,302 $ -- $ -- $ -- $ -- Written options contracts (47,294) (4,821) -- -- -- -- Net change in unrealized appreciation (depreciation) on: Purchased options contracts (16,709) (27,048) (1,038,396) (553,364) (982,744) (1,555,504) Written options contracts 3,125 1,133 (728,086) 82,887 (2,149,804) (530,007) |
The funds do not have the right to offset financial assets and financial liabilities related to options contracts on the Statements of Assets and Liabilities.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The following table presents the premiums for purchased options contracts opened, premiums for purchased options contracts closed, exercised and expired, premiums for written options contracts opened and premiums for written options contracts closed, exercised and expired, for the period ended February 29, 2020, on each Fund's options contracts.
PREMIUMS FOR PREMIUMS FOR PREMIUMS FOR PURCHASED WRITTEN OPTIONS PURCHASED OPTIONS CONTRACTS PREMIUMS FOR CONTRACTS CLOSED, OPTIONS CONTRACTS CLOSED, EXERCISED WRITTEN OPTIONS EXERCISED AND OPENED AND EXPIRED CONTRACTS OPENED EXPIRED ---------------------------------------------------------------------------- FAUG $ 9,412,955 $ 4,794,016 $ 399,972 $ 163,310 DAUG 3,058,255 1,529,127 80,683 40,341 FNOV 57,253,548 -- 2,614,694 -- DNOV 14,177,032 -- 479,543 -- FFEB 98,664,664 -- 6,202,324 -- DFEB 127,305,014 -- 3,309,613 -- |
6. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant'). In order to purchase Creation Units of each Fund, an Authorized Participant must deposit (i) a designated portfolio of securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities.
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request.
7. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before November 1, 2021 for FAUG, DAUG, FNOV and DNOV and February 1, 2022 for FFEB and DFEB.
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8. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
9. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there was the following subsequent event:
Beginning in December 2019, the outbreak of the respiratory disease designated as COVID-19 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short term or may last for an extended period of time and, in either case, could result in a substantial economic downturn or recession. Management is continuing to monitor this event.
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PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
BUFFERED LOSS RISK. There can be no guarantee that the Fund will be successful in its strategy to buffer against Underlying ETF losses if the Underlying ETF decreases over the Target Outcome Period by 10% or less. A shareholder may lose their entire investment. The Fund's strategy seeks to deliver returns that match the Underlying ETF (up to the cap), while limiting downside losses, if shares are bought on the day on which the Fund enters into the FLEX Options and held until those FLEX Options expire at the end of each Target Outcome Period. In the event an investor purchases shares after the date on which the FLEX Options were entered into or sells shares prior to the expiration of the FLEX Options, the buffer that the Fund seeks to provide may not be available.
CAPPED UPSIDE RISK. The Fund's strategy seeks to provide returns that match those of the Underlying ETF for Fund shares purchased on the first day of a Target Outcome Period and held for the entire Target Outcome Period, subject to a pre-determined upside cap. If an investor does not hold its Funds hares for an entire Target Outcome Period, the returns realized by that investor may not match those the Fund seeks to achieve. If the Underlying ETF experiences gains during a Target Outcome Period, the Fund will not participate in those gains beyond the cap. In the event an investor purchases Fund shares after the first day of a Target Outcome Period and the Fund has risen in value to a level near to the cap, there may be little or no ability for that investor to experience an investment gain on their Fund shares.
CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.
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DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
FLEX OPTIONS CORRELATION RISK. The FLEX Options held by the Fund will be exercisable at the strike price only on their expiration date. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options prior to the expiration date may vary because of related factors other than the value of the Underlying ETF. Factors that may influence the value of the FLEX Options, other than changes in the value of the Underlying ETF, may include interest rate changes, changing supply and demand, decreased liquidity of the FLEX Options and changing volatility levels of the Underlying ETF.
FLEX OPTIONS LIQUIDITY RISK. The FLEX Options are listed on an exchange; however, no one can guarantee that a liquid secondary trading market will exist for the FLEX Options. In the event that trading in the FLEX Options is limited or absent, the value of the Fund's FLEX Options may decrease. In a less liquid market for the FLEX Options, liquidating the FLEX Options may require the payment of a premium (for written FLEX Options) or acceptance of a discounted price (for purchased FLEX Options) and may take longer to complete. A less liquid trading market may adversely impact the value of the FLEX Options and Fund shares and result in the Fund being unable to achieve its investment objective. The trading in FLEX Options may be less deep and liquid than the market for certain other securities. FLEX Options may be less liquid than certain non-customized options. In a less liquid market for the FLEX Options, the liquidation of a large number of options may more significantly impact the price. A less liquid trading market may adversely impact the value of the FLEX Options and the value of your investment.
FLEX OPTIONS RISK. The OCC may be unable or unwilling to perform its obligations under the FLEX Options contracts. Additionally, FLEX Options may be less liquid than other exchange-traded options. The value of the FLEX Options prior to their expiration date may vary because of factors other than fluctuations in the value of the Underlying ETF, such as an increase in interest rates, a change in the actual and perceived volatility of the stock market and the Underlying ETF and the remaining time to expiration. Additionally, the value of the FLEX Options does not increase or decrease at the same rate as the Underlying ETF or its underlying securities. FLEX Option prices may be highly volatile and may fluctuate substantially during a short period of time. Trading FLEX Options involves risks different from, or possibly greater than, the risks associated with investing directly in securities.
FLEX OPTIONS VALUATION RISK. The FLEX Options held by the Fund will be exercisable at the strike price only on their expiration date. Prior to the expiration date, the value of the FLEX Options will be determined based upon market quotations or using other recognized pricing methods. The value of the FLEX Options prior to the expiration date may vary because of related factors
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other than the value of the Underlying ETF. During periods of reduced market liquidity or in the absence of readily available market quotations for the holdings of the Fund, the ability of the Fund to value the FLEX Options becomes more difficult and the judgment of the Fund's investment adviser (employing the fair value procedures adopted by the Board of Trustees of the Trust) may play a greater role in the valuation of the Fund's holdings due to reduced availability of reliable objective pricing data.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
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SPECIAL TAX RISK. The Fund intends to qualify as a "regulated Investment company" ("RIC"), however, the federal income tax treatment of certain aspects of the proposed operations of the Fund are not entirely clear. This includes the tax aspects of the Fund's options strategy, its hedging strategy, the possible application of the "straddle" rules, and various loss limitation provisions of the Internal Revenue Code of 1986, as amended. If, in any year, the Fund fails to qualify as a regulated investment company under the applicable tax laws, the Fund would be taxed as an ordinary corporation. Certain options on an ETF may not qualify as "Section 1256 contracts" under Section 1256 of the Code, and disposition of such options will likely result in short-term or long-term capital gains or losses depending on the holding period.
The Fund intends to treat any income it may derive from the FLEX Options as "qualifying income" under the provisions of the Code applicable to RICs. In addition, based upon language in the legislative history, the Fund intends to treat the issuer of the FLEX Options as the referenced asset, which, assuming the referenced asset qualifies as a RIC, would allow the Fund to qualify for special rules in the RIC diversification requirements. If the income is not qualifying income or the issuer of the FLEX Options is not appropriately the referenced asset, the Fund could lose its own status as a RIC.
In the event that a shareholder purchases shares of the Fund shortly before a distribution by the Fund, the entire distribution may be taxable to the shareholder even though a portion of the distribution effectively represents a return of the purchase price.
TARGET OUTCOME PERIOD RISK. The Fund's investment strategy is designed to deliver returns that match the Underlying ETF if Fund shares are bought on the day on which the Fund enters into the FLEX Options (i.e., the first day of a Target Outcome Period) and held until those FLEX Options expire at the end of the Target Outcome Period. In the event an investor purchases Fund shares after the first day of a Target Outcome Period or sells shares prior to the expiration of the Target Outcome Period, the value of that investor's investment in Fund shares may not be buffered against a decline in the value of the Underlying ETF and may not participate in a gain in the value of the Underlying ETF up to the cap for the investor's investment period.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENT
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT AND INVESTMENT SUB-ADVISORY AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"), including the Independent Trustees, unanimously approved the Investment Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P. (the "Advisor") and the Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement" and together with the Advisory Agreement, the "Agreements") among the Trust, the Advisor and Cboe Vest Financial LLC (the "Sub-Advisor") on behalf of the following four series of the Trust (each a "Fund" and collectively, the "Funds"):
FT Cboe Vest U.S. Equity Buffer ETF - August (FAUG) FT Cboe Vest U.S. Equity Deep Buffer ETF - August (DAUG) FT Cboe Vest U.S. Equity Buffer ETF - November (FNOV) FT Cboe Vest U.S. Equity Deep Buffer ETF - November (DNOV)
The Board approved the Agreements for each Fund for an initial two-year term at a meeting held on October 30, 2019. The Board determined for each Fund that the Agreements are in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment.
To reach this determination for each Fund, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. To assist the Board in its evaluation of the Agreements for each Fund, the Independent Trustees received a separate report from each of the Advisor and the Sub-Advisor in advance of the Board meeting responding to requests for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services to be provided by the Advisor and the Sub-Advisor to each Fund (including the relevant personnel responsible for these services and their experience); the proposed unitary fee rate payable by each Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the proposed sub-advisory fee rate as compared to fees charged to other clients of the Sub-Advisor; the estimated expense ratio of each Fund as compared to expense ratios of the funds in the
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Fund's Expense Group and Expense Universe; the nature of expenses to be incurred in providing services to each Fund and the potential for economies of scale, if any; financial data on the Advisor and the Sub-Advisor; any fall-out benefits to the Advisor and its affiliates, First Trust Portfolios L.P. ("FTP") and First Trust Capital Partners, LLC ("FTCP"), and the Sub-Advisor; and information on the Advisor's and the Sub-Advisor's compliance programs. The Independent Trustees and their counsel also met separately to discuss the information provided by the Advisor and the Sub-Advisor. The Board applied its business judgment to determine whether the arrangements between the Trust and the Advisor and among the Trust, the Advisor and the Sub-Advisor are reasonable business arrangements from each Fund's perspective.
In evaluating whether to approve the Agreements for each Fund, the Board considered the nature, extent and quality of the services to be provided by the Advisor and the Sub-Advisor under the Agreements. With respect to the Advisory Agreement, the Board considered that the Advisor will be responsible for the overall management and administration of each Fund and reviewed all of the services to be provided by the Advisor to the Funds, including the oversight of the Sub-Advisor, as well as the background and experience of the persons responsible for such services. The Board considered that each Fund will be an actively-managed ETF and will employ an advisor/sub-advisor management structure and considered that the Advisor manages other ETFs with a similar structure in the First Trust Fund Complex. The Board noted that the Advisor will oversee the Sub-Advisor's day-to-day management of the Fund's investments, including portfolio risk monitoring and performance review. In reviewing the services to be provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's, the Sub-Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's compliance with its investment objective, policies and restrictions. The Board noted that employees of the Advisor provide management services to other ETFs and to other funds in the First Trust Fund Complex with diligence and care. With respect to the Sub-Advisory Agreement, the Board reviewed the materials provided by the Sub-Advisor and noted the background and experience of the Sub-Advisor's portfolio management team and the Sub-Advisor's investment style. At the meeting, the Trustees received a presentation from representatives of the Sub-Advisor, and were able to ask questions about the Sub-Advisor and the proposed options-based and target outcome investment strategies for the Funds. Because the Funds had yet to commence investment operations, the Board could not consider the historical investment performance of the Funds. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services to be provided to each Fund by the Advisor and the Sub-Advisor under the Agreements are expected to be satisfactory.
The Board considered the proposed unitary fee rate payable by each Fund under the Advisory Agreement for the services to be provided. The Board noted that, under the unitary fee arrangement, each Fund would pay the Advisor a unitary fee equal to an annual rate of 0.85% of its average daily net assets. The Board considered that, from the unitary fee for each Fund, the Advisor would pay the Sub-Advisor a sub-advisory fee equal to 50% of the Fund's unitary fee remaining after the Fund's expenses are paid. The Board noted that the Advisor would be responsible for each Fund's expenses, including the cost of sub-advisory, transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Advisory Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Board received and reviewed information showing the advisory or unitary fee rates and expense ratios of the peer funds in the Expense Groups, as well as advisory and unitary fee rates charged by the Advisor and the Sub-Advisor to other fund (including ETF) and non-fund clients, as applicable. Because each Fund will pay a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee for each Fund was above the median total (net) expense ratio of the peer funds in its Expense Group. With respect to the Expense Groups, the Board discussed with representatives of the Advisor how the Expense Groups were assembled and how each Fund compared and differed from the peer funds. The Board took this information into account in considering the peer data. With respect to fees charged to other clients, the Board considered differences between each Fund and other clients that limited their comparability, noting the Advisor's statement that the Funds are unique within the First Trust Fund Complex, but are most similar to two other ETFs in the First Trust Fund Complex utilizing options-based strategies, each of which also pays a unitary fee equal to an annual rate of 0.85% of its average daily net assets. The Board also considered the Advisor's statement that it provides advisory services to two Canadian ETFs with investment objectives and policies similar to those of the Funds, each of which also pays a unitary fee equal to an annual rate of 0.85% of its average daily net assets and is sub-advised by the Sub-Advisor. In light of the information considered and the nature, extent and quality of the services expected to be provided to each Fund under the Agreements, the Board determined that, for each Fund, the proposed unitary fee, including the sub-advisory fee to be paid by the Advisor to the Sub-Advisor from the unitary fee, was fair and reasonable.
The Board noted that the proposed unitary fee for each Fund was not structured to pass on to shareholders the benefits of any economies of scale as the Fund's assets grow. The Board noted that any reduction in fixed costs associated with the management of the Funds would benefit the Advisor and the Sub-Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Funds. The Board noted that the Advisor has continued to hire personnel and build infrastructure, including technology, to improve the services to the funds in the First Trust Fund Complex. The Board took into consideration the types of costs to be borne by the Advisor in connection with its services to be performed for each Fund under the Advisory Agreement and noted that the Advisor was unable to estimate the profitability of the Advisory Agreement for each Fund to the Advisor at this time. The Board also considered the Sub-Advisor's estimate of the asset level for each Fund at which the Sub-Advisor expects the Sub-Advisory Agreement for the Fund to be profitable to the Sub-Advisor and that the Sub-Advisor would be paid by the Advisor from each Fund's unitary fee. The Board
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
noted its understanding that the sub-advisory fee rate for each Fund was negotiated at arm's length between the Advisor and the Sub-Advisor. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Funds. The Board noted that FTCP has a controlling ownership interest in the Sub-Advisor's parent company and considered potential fall-out benefits to the Advisor from such ownership interest. The Board also considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Funds, may have had no dealings with the Advisor or FTP. The Board also considered the potential fall-out benefits to the Sub-Advisor from FTCP's controlling ownership interest in the Sub-Advisor's parent company. The Board noted the Sub-Advisor's statements that it does not foresee any fall-out benefits from its relationship with the Funds and that, as a policy, it does not enter into soft-dollar arrangements for the procurement of research services in connection with client securities transactions. The Board concluded that the character and amount of potential fall-out benefits to the Advisor and the Sub-Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements are fair and reasonable and that the approval of the Agreements is in the best interests of each Fund. No single factor was determinative in the Board's analysis.
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT AND INVESTMENT SUB-ADVISORY AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"), including the Independent Trustees, unanimously approved the Investment Management Agreement (the "Advisory Agreement") with First Trust Advisors L.P. (the "Advisor") and the Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement" and together with the Advisory Agreement, the "Agreements") among the Trust, the Advisor and Cboe Vest Financial LLC (the "Sub-Advisor") on behalf of the following two series of the Trust (each a "Fund" and collectively, the "Funds"):
FT Cboe Vest U.S. Equity Buffer ETF - February (FFEB) FT Cboe Vest U.S. Equity Deep Buffer ETF - February (DFEB)
The Board approved the Agreements for each Fund for an initial two-year term at a meeting held on December 8-9, 2019. The Board determined for each Fund that the Agreements are in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment.
To reach this determination for each Fund, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. To assist the Board in its evaluation of the Agreements for each Fund, the Independent Trustees received a separate report from each of the Advisor and the Sub-Advisor in advance of the Board meeting responding to requests for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services to be provided by the Advisor and the Sub-Advisor to each Fund (including the relevant personnel responsible for these services and their experience); the proposed unitary fee rate payable by each Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the proposed sub-advisory fee rate as compared to fees charged to other clients of the Sub-Advisor; the estimated expense ratio of each Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; the nature of expenses to be incurred in providing services to each Fund and the potential for economies of scale, if any; financial data on the Advisor and the Sub-Advisor; any fall-out benefits to the Advisor and its affiliates, First Trust Portfolios L.P. ("FTP") and First Trust Capital Partners, LLC ("FTCP"), and the Sub-Advisor; and information on the Advisor's and the Sub-Advisor's compliance programs. The Independent Trustees and their counsel also met separately to discuss the information provided by the Advisor and the Sub-Advisor. The Board applied its business judgment to determine whether the arrangements between the Trust and the Advisor and among the Trust, the Advisor and the Sub-Advisor are reasonable business arrangements from each Fund's perspective.
In evaluating whether to approve the Agreements for each Fund, the Board considered the nature, extent and quality of the services to be provided by the Advisor and the Sub-Advisor under the Agreements. With respect to the Advisory Agreement, the Board considered that the Advisor will be responsible for the overall management and administration of each Fund and reviewed all of the services to be provided by the Advisor to the Funds, including the oversight of the Sub-Advisor, as well as the background and experience of the persons responsible for such services. The Board considered that each Fund will be an actively-managed ETF and will employ an advisor/sub-advisor management structure and considered that the Advisor manages other ETFs with a similar structure in the First Trust Fund Complex. The Board noted that the Advisor will oversee the Sub-Advisor's day-to-day management of the Fund's investments, including portfolio risk monitoring and performance review. In reviewing the services to be provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Advisor's, the Sub-Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's compliance with its investment objective, policies and restrictions. The Board noted that employees of the Advisor provide management services to other ETFs and to other funds in the First Trust Fund Complex with diligence and care. With respect to the Sub-Advisory Agreement, the Board reviewed the materials provided by the Sub-Advisor and noted the background and experience of the Sub-Advisor's portfolio management team and the Sub-Advisor's investment style, as well as the Board's prior meeting with representatives of the Sub-Advisor in October 2019. Because the Funds had yet to commence investment operations, the Board could not consider the historical investment performance of the Funds. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services to be provided to each Fund by the Advisor and the Sub-Advisor under the Agreements are expected to be satisfactory.
The Board considered the proposed unitary fee rate payable by each Fund under the Advisory Agreement for the services to be provided. The Board noted that, under the unitary fee arrangement, each Fund would pay the Advisor a unitary fee equal to an annual rate of 0.85% of its average daily net assets. The Board considered that, from the unitary fee for each Fund, the Advisor would pay the Sub-Advisor a sub-advisory fee equal to 50% of the Fund's unitary fee remaining after the Fund's expenses are paid. The Board noted that the Advisor would be responsible for each Fund's expenses, including the cost of sub-advisory, transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Advisory Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Board received and reviewed information showing the advisory or unitary fee rates and expense ratios of the peer funds in the Expense Groups, as well as advisory and unitary fee rates charged by the Advisor and the Sub-Advisor to other fund (including ETF) and non-fund clients, as applicable. Because each Fund will pay a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee for each Fund was above the median total (net) expense ratio of the peer funds in its Expense Group. With respect to the Expense Groups, the Board discussed with representatives of the Advisor how the Expense Groups were assembled and how each Fund compared and differed from the peer funds. The Board took this information into account in considering the peer data. With respect to fees charged to other clients, the Board considered that the Funds are part of the FT Cboe Vest U.S. Equity Target Outcome ETF product line in the First Trust Fund Complex and noted that the first set of four ETFs in the product line, identical to the Funds except with respect to the target outcome periods, was launched in November 2019, each of which also pays a unitary fee equal to an annual rate of 0.85% of its average daily net assets and is sub-advised by the Sub-Advisor. In light of the information considered and the nature, extent and quality of the services expected to be provided to each Fund under the Agreements, the Board determined that, for each Fund, the proposed unitary fee, including the sub-advisory fee to be paid by the Advisor to the Sub-Advisor from the unitary fee, was fair and reasonable.
The Board noted that the proposed unitary fee for each Fund was not structured to pass on to shareholders the benefits of any economies of scale as the Fund's assets grow. The Board noted that any reduction in fixed costs associated with the management of the Funds would benefit the Advisor and the Sub-Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Funds. The Board noted that the Advisor has continued to hire personnel and build infrastructure, including technology, to improve the services to the funds in the First Trust Fund Complex. The Board took into consideration the types of costs to be borne by the Advisor in connection with its services to be performed for each Fund under the Advisory Agreement. The Board considered the Advisor's estimate of the asset level for each Fund at which the Advisor expects the Advisory Agreement for the Fund to be profitable to the Advisor and the Advisor's estimate of the profitability of the Advisory Agreement for each Fund if its assets reach $100 million. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor's estimated profitability level for each Fund was not unreasonable. The Board reviewed financial information provided by the Sub-Advisor, but did not review any potential profitability of the Sub-Advisory Agreement for each Fund to the Sub-Advisor. The Board considered that the Sub-Advisor would be paid by the Advisor from each Fund's unitary fee and its understanding that the sub-advisory fee rate for each Fund was the product of an arm's length negotiation. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Funds. The Board noted that FTCP has a controlling ownership interest in the Sub-Advisor's parent company and considered potential fall-out benefits to the Advisor from such ownership interest. The Board also considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Funds, may have had no dealings with the Advisor or FTP. The Board also considered the potential fall-out benefits to the Sub-Advisor from FTCP's controlling ownership interest in the Sub-Advisor's parent company. The Board noted the Sub-Advisor's statements that it does not foresee any fall-out benefits from its relationship with the Funds and that, as a policy, it does not enter into soft-dollar arrangements for the procurement of research services in connection with client securities transactions. The Board concluded that the character and amount of potential fall-out benefits to the Advisor and the Sub-Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements are fair and reasonable and that the approval of the Agreements is in the best interests of each Fund. No single factor was determinative in the Board's analysis.
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 Active Factor Large Cap ETF (AFLG)
First Trust Active Factor Mid Cap ETF (AFMC)
First Trust Active Factor Small Cap ETF (AFSM)
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020
Shareholder Letter........................................................... 1 Fund Performance Overview First Trust Active Factor Large Cap ETF (AFLG)............................ 2 First Trust Active Factor Mid Cap ETF (AFMC).............................. 4 First Trust Active Factor Small Cap ETF (AFSM)............................ 6 Notes to Fund Performance Overview........................................... 8 Portfolio Management......................................................... 9 Understanding Your Fund Expenses............................................. 10 Portfolio of Investments First Trust Active Factor Large Cap ETF (AFLG)............................ 11 First Trust Active Factor Mid Cap ETF (AFMC).............................. 15 First Trust Active Factor Small Cap ETF (AFSM)............................ 20 Statements of Assets and Liabilities......................................... 25 Statements of Operations..................................................... 26 Statements of Changes in Net Assets.......................................... 27 Financial Highlights......................................................... 28 Notes to Financial Statements................................................ 30 Additional Information....................................................... 35 CAUTION REGARDING FORWARD-LOOKING STATEMENTS |
This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund VIII (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in a Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance and investment approach.
The statistical information that follows may help you understand each Fund's performance compared to that of a relevant market benchmark.
It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information, and other Fund regulatory filings.
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 29, 2020
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for certain series of the First Trust Exchange-Traded Fund VIII (the "Funds"), which contains detailed information about the Funds since their inception on December 3, 2019, to February 29, 2020.
To say that much has transpired over the past six months would be an understatement. Prior to the onset of the coronavirus (COVID-19) in Wuhan, China this past December, my message to investors would have sounded quite bullish, focusing on such accomplishments as the progress in the trade negotiations between the U.S. and China, where a "Phase One" deal was signed into law on January 15, 2020. The main takeaway from the deal is that China agreed to purchase an additional $200 billion of goods and services from the U.S. over the next several years in exchange for the U.S. cutting some of its tariffs on Chinese goods. The deal marked the first breakthrough since the Trump Administration launched its new tariff initiative in March 2018. On top of that news, the S&P 500(R) Index was setting new all-time highs all the way up through the close of trading on February 19, 2020, the day it peaked.
Unfortunately, the good news has been overshadowed by the escalation and spread of the COVID-19 pandemic. As of April 16, 2020, this disease had spread to 213 countries, areas or territories, had infected 1,991,562 people (confirmed cases) and was responsible for 130,885 confirmed deaths, according to the World Health Organization. These numbers are expected to trend higher in the days and weeks ahead. A growing number of U.S. state governors and foreign leaders have issued shelter in place orders to their citizens to help slow the spread of this new virus. The primary objective in doing so is to slow down the number of cases so that hospitals and health care workers are not overwhelmed by too many patients. The cost is high because it requires shutting down large chunks of the economy, which in turn negatively impacts the financial well-being of workers and companies. In the U.S., Congress passed a financial stimulus package valued at $2.0 trillion to help backstop workers and companies in the near-term. The faster we can end the shutdown, consistent with general health and welfare, the better, according to Brian Wesbury, Chief Economist at First Trust Advisors L.P.
Here is what we think we know. Brian Wesbury believes the U.S. could experience a modest decline in real gross domestic product of 1.5% (annualized) in the first quarter of 2020, followed by a massive decline of 20% (annualized) in the second quarter. The good news is that he sees the economy growing at a 3.0% and 3.5% annual pace in the third and fourth quarters of 2020, respectively. In other words, we are expecting a healthy rebound in the second half of this year. As I noted earlier, the stock market was still at a record high in the third week of February. From February 19 through March 23, however, the S&P 500(R) Index posted a total return of -33.79%, putting it in bear market territory (price decline of 20% or more from the most recent peak). Sorry to say it, but the nearly 11-year bull market is no more. While we do not have a projection for where stocks will be at year-end, we do know this: excluding the current bear market, the S&P 500(R) Index has never failed to recoup all the losses sustained in any sell-off, pullback, correction or bear market. So, while I am understandably not bullish on the first half of 2020, I will be a bull once again after we put the worst of COVID-19 behind us. I continue to urge investors to stay the course. This too shall pass.
Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months.
Sincerely,
/s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. |
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
The First Trust Active Factor Large Cap ETF (the "Fund") seeks to provide capital appreciation. Under normal market conditions, the Fund will invest at least 80% of its net assets (including investment borrowings) in U.S.-listed equity securities issued by large capitalization companies. The Fund defines large capitalization companies as those that, at the time of investment, have a minimum market capitalization equal to or greater than the minimum market capitalization of a widely recognized index of large capitalization companies based upon the composition of the index at the time of investment. The Fund is actively managed primarily relying on a multi-factor quantitative methodology with active risk management to construct a portfolio of securities exhibiting exposures to one or more investing factors. The multi-factor quantitative methodology currently used by the Fund may take into account the following factors: (i) value; (ii) momentum; (iii) quality; and (iv) low volatility. The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the NYSE Arca, Inc., under the ticker symbol "AFLG."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (12/3/19) to 2/29/20 FUND PERFORMANCE NAV -6.56% Market Price -6.51% INDEX PERFORMANCE S&P 500(R) Index -4.05% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 8.)
---------------------------------------------------------- % OF TOTAL LONG-TERM SECTOR CLASSIFICATION INVESTMENTS ---------------------------------------------------------- Information Technology 23.27% Health Care 14.47 Financials 13.43 Industrials 8.81 Consumer Discretionary 8.72 Communication Services 7.63 Consumer Staples 6.18 Real Estate 5.79 Utilities 4.60 Materials 4.05 Energy 3.05 -------- Total 100.00% ======== ---------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ---------------------------------------------------------- Apple, Inc. 5.37% Microsoft Corp. 2.95 AT&T, Inc. 1.82 Bristol-Myers Squibb Co. 1.65 Johnson & Johnson 1.60 PulteGroup, Inc. 1.12 Merck & Co., Inc. 1.10 JPMorgan Chase & Co. 1.03 Intel Corp. 1.02 Alphabet, Inc., Class A 1.02 -------- Total 18.68% ======== |
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 3, 2019 - FEBRUARY 29, 2020 First Trust Active Factor S&P 500(R) Large Cap ETF Index 12/3/19 $10,000 $10,000 2/29/20 9,344 9,595 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period December 4, 2019 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 12/4/19 - 2/29/20 59 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 12/4/19 - 2/29/20 0 0 0 0 |
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
The First Trust Active Factor Mid Cap ETF (the "Fund") seeks to provide capital
appreciation. Under normal market conditions, the Fund will invest at least 80%
of its net assets (including investment borrowings) in U.S.-listed equity
securities issued by mid capitalization companies. The Fund defines mid
capitalization companies as those that, at the time of investment, have a market
capitalization between the minimum and maximum market capitalization of a widely
recognized index of mid capitalization companies based upon the composition of
the index at the time of investment. The Fund is actively managed primarily
relying on a multi-factor quantitative methodology with active risk management
to construct a portfolio of securities exhibiting exposures to one or more
investing factors. The multi-factor quantitative methodology currently used by
the Fund may take into account the following factors: (i) value; (ii) momentum;
(iii) quality; and (iv) low volatility. The Fund is classified as
"non-diversified" under the Investment Company Act of 1940, as amended. The
shares of the Fund are listed and traded on the NYSE Arca, Inc., under the
ticker symbol "AFMC."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (12/3/19) to 2/29/20 FUND PERFORMANCE NAV -8.74% Market Price -8.69% INDEX PERFORMANCE S&P MidCap 400 Index -8.19% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 8.)
---------------------------------------------------------- % OF TOTAL LONG-TERM SECTOR CLASSIFICATION INVESTMENTS ---------------------------------------------------------- Information Technology 16.77% Industrials 15.26 Financials 15.22 Health Care 13.18 Consumer Discretionary 13.13 Real Estate 9.84 Materials 5.52 Utilities 4.94 Communication Services 2.78 Consumer Staples 1.93 Energy 1.43 -------- Total 100.00% ======== ---------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ---------------------------------------------------------- Reliance Steel & Aluminum Co. 1.38% Hawaiian Electric Industries, Inc. 1.34 SYNNEX Corp. 1.19 CACI International, Inc., Class A 1.11 DaVita, Inc. 1.10 Portland General Electric Co. 1.06 Bio-Rad Laboratories, Inc., Class A 1.03 NorthWestern Corp. 1.01 Jabil, Inc. 1.01 Tyler Technologies, Inc. 0.94 -------- Total 11.17% ======== |
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 3, 2019 - FEBRUARY 29, 2020 First Trust Active Factor S&P MidCap Mid Cap ETF 400 Index 12/3/19 $10,000 $10,000 2/29/20 9,126 9,181 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period December 4, 2019 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% =2.00% 12/4/19 - 2/29/20 58 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 12/4/19 - 2/29/20 1 0 0 0 |
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
The First Trust Active Factor Small Cap ETF (the "Fund") seeks to provide capital appreciation. Under normal market conditions, the Fund will invest at least 80% of its net assets (including investment borrowings) in U.S.-listed equity securities issued by small capitalization companies. The Fund defines small capitalization companies as those that, at the time of investment, have a market capitalization between a minimum of $250 million and the maximum market capitalization of a widely recognized index of small capitalization companies based upon the composition of the index at the time of investment. The Fund is actively managed primarily relying on a multi-factor quantitative methodology with active risk management to construct a portfolio of securities exhibiting exposures to one or more investing factors. The multi-factor quantitative methodology currently used by the Fund may take into account the following factors: (i) value; (ii) momentum; (iii) quality; and (iv) low volatility. The Fund is classified as "non-diversified" under the Investment Company Act of 1940, as amended. The shares of the Fund are listed and traded on the NYSE Arca, Inc., under the ticker symbol "AFSM."
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (12/3/19) to 2/29/20 FUND PERFORMANCE NAV -10.19% Market Price -10.14% INDEX PERFORMANCE Russell 2000(R) Index -7.56% ------------------------------------------------------------------------------------------------------------------------------------ |
(See Notes to Fund Performance Overview on page 8.)
---------------------------------------------------------- % OF TOTAL LONG-TERM SECTOR CLASSIFICATION INVESTMENTS ---------------------------------------------------------- Health Care 18.74% Industrials 15.52 Financials 14.64 Information Technology 13.88 Consumer Discretionary 11.99 Real Estate 10.43 Utilities 3.85 Materials 3.76 Consumer Staples 2.70 Energy 2.28 Communication Services 2.21 -------- Total 100.00% ======== ---------------------------------------------------------- % OF TOTAL LONG-TERM TOP TEN HOLDINGS INVESTMENTS ---------------------------------------------------------- Select Medical Holdings Corp. 1.13% Avista Corp. 0.95 NorthWestern Corp. 0.85 Hilltop Holdings, Inc. 0.80 Syneos Health, Inc. 0.77 Generac Holdings, Inc. 0.75 Portland General Electric Co. 0.75 Radian Group, Inc. 0.74 Integer Holdings Corp. 0.74 Benchmark Electronics, Inc. 0.74 -------- Total 8.22% ======== |
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 3, 2019 - FEBRUARY 29, 2020 First Trust Active Factor Russell 2000(R) Small Cap ETF Index 12/3/19 $10,000 $10,000 2/29/20 8,981 9,244 |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
BID/ASK MIDPOINT VS. NAV THROUGH FEBRUARY 29, 2020
The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period December 4, 2019 (commencement of trading) through February 29, 2020. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results.
-------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 12/4/19 - 2/29/20 58 0 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 12/4/19 - 2/29/20 1 0 0 0 |
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.
FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 29, 2020 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") serves as the investment advisor to the Funds. First Trust is responsible for the selection and ongoing monitoring of the securities in the Fund's portfolio and certain other services necessary for the management of the portfolios.
PORTFOLIO MANAGEMENT TEAM
DANIEL J. LINDQUIST, CHAIRMAN OF THE INVESTMENT COMMITTEE AND MANAGING DIRECTOR OF FIRST TRUST
JON C. ERICKSON, SENIOR VICE PRESIDENT OF FIRST TRUST
DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND MANAGING DIRECTOR OF FIRST TRUST
ROGER F. TESTIN, SENIOR VICE PRESIDENT OF FIRST TRUST
STAN UELAND, SENIOR VICE PRESIDENT OF FIRST TRUST
CHRIS A. PETERSON, SENIOR VICE PRESIDENT OF FIRST TRUST
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 29, 2020 (UNAUDITED)
As a shareholder of First Trust Active Factor Large Cap ETF, First Trust Active Factor Mid Cap ETF or First Trust Active Factor Small Cap ETF (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the period (or since inception) and held through the six-month period (or shorter) ended February 29, 2020.
ACTUAL EXPENSES
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
-------------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSES PAID EXPENSE RATIO DURING THE PERIOD BEGINNING ENDING BASED ON THE DECEMBER 3, 2019 (a) ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO DECEMBER 3, 2019 (a) FEBRUARY 29, 2020 IN THE PERIOD FEBRUARY 29, 2020 (b) -------------------------------------------------------------------------------------------------------------------------------- FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG) Actual $1,000.00 $ 934.40 0.55% $1.29 Hypothetical (5% return before expenses) $1,000.00 $1,022.13 0.55% $2.77 FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC) Actual $1,000.00 $ 912.60 0.65% $1.51 Hypothetical (5% return before expenses) $1,000.00 $1,021.63 0.65% $3.27 FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM) Actual $1,000.00 $ 898.10 0.75% $1.73 Hypothetical (5% return before expenses) $1,000.00 $1,021.13 0.75% $3.77 |
(a) Inception date.
(b) Actual expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (December 3, 2019 through February 29, 2020), multiplied by 89/366. Hypothetical expenses are assumed for the most recent six-month period.
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS -- 99.5% AEROSPACE & DEFENSE -- 1.3% 220 Arconic, Inc. $ 6,457 14 Lockheed Martin Corp. 5,178 28 Teledyne Technologies, Inc. (a) 9,445 62 Textron, Inc. 2,517 ------------- 23,597 ------------- AIR FREIGHT & LOGISTICS -- 0.1% 28 C.H. Robinson Worldwide, Inc. 1,929 ------------- AIRLINES -- 0.5% 193 Southwest Airlines Co. 8,915 ------------- AUTO COMPONENTS -- 0.3% 185 BorgWarner, Inc. 5,846 ------------- AUTOMOBILES -- 0.1% 56 Harley-Davidson, Inc. 1,706 ------------- BANKS -- 4.1% 218 Citigroup, Inc. 13,834 273 Citizens Financial Group, Inc. 8,652 148 Comerica, Inc. 7,791 164 JPMorgan Chase & Co. 19,042 391 Regions Financial Corp. 5,286 333 Wells Fargo & Co. 13,603 205 Zions Bancorp N.A. 8,190 ------------- 76,398 ------------- BEVERAGES -- 1.0% 77 Brown-Forman Corp., Class B 4,729 90 Coca-Cola (The) Co. 4,814 64 PepsiCo, Inc. 8,450 ------------- 17,993 ------------- BIOTECHNOLOGY -- 2.5% 144 AbbVie, Inc. 12,342 57 Amgen, Inc. 11,385 26 Biogen, Inc. (a) 8,018 201 Gilead Sciences, Inc. 13,941 ------------- 45,686 ------------- BUILDING PRODUCTS -- 0.8% 53 Allegion PLC 6,094 94 Fortune Brands Home & Security, Inc. 5,805 48 Johnson Controls International PLC 1,755 22 Masco Corp. 909 ------------- 14,563 ------------- CAPITAL MARKETS -- 3.0% 8 Ameriprise Financial, Inc. 1,130 4 BlackRock, Inc. 1,852 182 Blackstone Group (The), Inc., Class A 9,799 19 Cboe Global Markets, Inc. 2,166 367 Franklin Resources, Inc. 7,986 27 Moody's Corp. 6,481 26 Morgan Stanley 1,171 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- CAPITAL MARKETS (CONTINUED) 35 MSCI, Inc. $ 10,340 10 Nasdaq, Inc. 1,025 25 S&P Global, Inc. 6,648 16 SEI Investments Co. 875 53 T. Rowe Price Group, Inc. 6,255 ------------- 55,728 ------------- CHEMICALS -- 2.4% 25 Air Products and Chemicals, Inc. 5,490 9 Celanese Corp. 844 122 DuPont de Nemours, Inc. 5,234 26 Eastman Chemical Co. 1,599 107 FMC Corp. 9,962 34 Linde PLC 6,494 22 LyondellBasell Industries N.V., Class A 1,572 22 PPG Industries, Inc. 2,298 20 Sherwin-Williams (The) Co. 10,335 ------------- 43,828 ------------- COMMERCIAL SERVICES & SUPPLIES -- 0.8% 22 Cintas Corp. 5,869 115 Copart, Inc. (a) 9,715 ------------- 15,584 ------------- COMMUNICATIONS EQUIPMENT -- 1.8% 381 Cisco Systems, Inc. 15,213 72 F5 Networks, Inc. (a) 8,637 401 Juniper Networks, Inc. 8,509 8 Ubiquiti, Inc. 1,085 ------------- 33,444 ------------- CONSTRUCTION & ENGINEERING -- 0.1% 23 Jacobs Engineering Group, Inc. 2,124 ------------- CONSUMER FINANCE -- 0.9% 307 Ally Financial, Inc. 7,697 293 Synchrony Financial 8,526 ------------- 16,223 ------------- CONTAINERS & PACKAGING -- 1.2% 75 Avery Dennison Corp. 8,587 81 Crown Holdings, Inc. (a) 5,710 234 International Paper Co. 8,649 ------------- 22,946 ------------- DISTRIBUTORS -- 0.4% 228 LKQ Corp. (a) 6,744 ------------- DIVERSIFIED FINANCIAL SERVICES -- 0.5% 447 Equitable Holdings, Inc. 9,566 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.7% 955 AT&T, Inc. 33,635 |
See Notes to Financial Statements Page 11
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED) 321 Verizon Communications, Inc. $ 17,386 ------------- 51,021 ------------- ELECTRIC UTILITIES -- 4.2% 91 Entergy Corp. 10,639 163 Evergy, Inc. 10,652 12 Eversource Energy 1,037 260 Exelon Corp. 11,209 160 FirstEnergy Corp. 7,125 58 NextEra Energy, Inc. 14,660 118 Pinnacle West Capital Corp. 10,560 196 Southern (The) Co. 11,830 ------------- 77,712 ------------- ELECTRICAL EQUIPMENT -- 1.3% 198 Eaton Corp. PLC 17,963 92 Emerson Electric Co. 5,898 ------------- 23,861 ------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.2% 49 CDW Corp. 5,597 38 FLIR Systems, Inc. 1,614 42 Keysight Technologies, Inc. (a) 3,980 122 TE Connectivity Ltd. 10,110 5 Zebra Technologies Corp., Class A (a) 1,055 ------------- 22,356 ------------- ENTERTAINMENT -- 0.1% 18 Activision Blizzard, Inc. 1,047 39 Liberty Media Corp.-Liberty Formula One, Series C (a) 1,523 ------------- 2,570 ------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 5.8% 30 American Tower Corp. 6,804 143 Equity LifeStyle Properties, Inc. 9,771 48 Equity Residential 3,605 46 Gaming and Leisure Properties, Inc. 2,055 606 Host Hotels & Resorts, Inc. 8,775 200 Invitation Homes, Inc. 5,738 77 Mid-America Apartment Communities, Inc. 9,953 67 Prologis, Inc. 5,647 52 Public Storage 10,874 161 Regency Centers Corp. 9,248 78 Simon Property Group, Inc. 9,600 66 SL Green Realty Corp. 5,177 39 Sun Communities, Inc. 5,962 196 VICI Properties, Inc. 4,912 163 Vornado Realty Trust 8,733 ------------- 106,854 ------------- SHARES DESCRIPTION VALUE --------------------------------------------------------------------- FOOD & STAPLES RETAILING -- 2.5% 39 Costco Wholesale Corp. $ 10,964 146 Sysco Corp. 9,731 193 Walgreens Boots Alliance, Inc. 8,832 166 Walmart, Inc. 17,875 ------------- 47,402 ------------- FOOD PRODUCTS -- 2.1% 220 Archer-Daniels-Midland Co. 8,283 109 Campbell Soup Co. 4,918 210 General Mills, Inc. 10,290 36 Hershey (The) Co. 5,184 96 J.M. Smucker (The) Co. 9,887 ------------- 38,562 ------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 1.9% 24 Edwards Lifesciences Corp. (a) 4,916 18 Insulet Corp. (a) 3,419 71 Medtronic PLC 7,148 64 ResMed, Inc. 10,173 62 West Pharmaceutical Services, Inc. 9,335 ------------- 34,991 ------------- HEALTH CARE PROVIDERS & SERVICES -- 4.4% 24 AmerisourceBergen Corp. 2,024 10 Anthem, Inc. 2,571 20 Cardinal Health, Inc. 1,042 181 CVS Health Corp. 10,711 98 DaVita, Inc. (a) 7,607 227 Henry Schein, Inc. (a) 13,833 48 Humana, Inc. 15,345 12 Laboratory Corp. of America Holdings (a) 2,108 22 McKesson Corp. 3,077 56 Quest Diagnostics, Inc. 5,939 58 UnitedHealth Group, Inc. 14,788 16 Universal Health Services, Inc., Class B 1,980 ------------- 81,025 ------------- HOTELS, RESTAURANTS & LEISURE -- 0.7% 43 Hilton Worldwide Holdings, Inc. 4,180 191 Norwegian Cruise Line Holdings Ltd. (a) 7,117 15 Starbucks Corp. 1,176 ------------- 12,473 ------------- HOUSEHOLD DURABLES -- 3.0% 129 D.R. Horton, Inc. 6,872 69 Garmin Ltd. 6,099 97 Leggett & Platt, Inc. 3,847 116 Lennar Corp., Class A 6,999 1 NVR, Inc. (a) 3,667 514 PulteGroup, Inc. 20,663 |
Page 12 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) HOUSEHOLD DURABLES (CONTINUED) 56 Whirlpool Corp. $ 7,160 ------------- 55,307 ------------- HOUSEHOLD PRODUCTS -- 0.5% 88 Procter & Gamble (The) Co. 9,964 ------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.4% 371 Vistra Energy Corp. 7,134 ------------- INSURANCE -- 4.8% 70 Allstate (The) Corp. 7,367 26 Aon PLC 5,408 54 Arthur J. Gallagher & Co. 5,264 47 Assurant, Inc. 5,668 157 Brown & Brown, Inc. 6,753 4 Everest Re Group Ltd. 992 103 Fidelity National Financial, Inc. 3,992 10 Globe Life, Inc. 927 205 Loews Corp. 9,354 110 Marsh & McLennan Cos., Inc. 11,502 230 MetLife, Inc. 9,826 120 Prudential Financial, Inc. 9,054 16 Travelers (The) Cos., Inc. 1,917 333 Unum Group 7,762 59 W.R. Berkley Corp. 3,961 ------------- 89,747 ------------- INTERACTIVE MEDIA & SERVICES -- 1.5% 14 Alphabet, Inc., Class A (a) 18,750 47 Facebook, Inc., Class A (a) 9,046 ------------- 27,796 ------------- INTERNET & DIRECT MARKETING RETAIL -- 0.6% 311 eBay, Inc. 10,773 ------------- IT SERVICES -- 4.6% 74 Accenture PLC, Class A 13,364 16 Black Knight, Inc. (a) 1,067 45 Booz Allen Hamilton Holding Corp. 3,209 18 Broadridge Financial Solutions, Inc. 1,878 177 Cognizant Technology Solutions Corp., Class A 10,785 17 EPAM Systems, Inc. (a) 3,794 54 Fiserv, Inc. (a) 5,905 29 Global Payments, Inc. 5,335 108 International Business Machines Corp. 14,056 8 Jack Henry & Associates, Inc. 1,214 129 Leidos Holdings, Inc. 13,242 551 Western Union (The) Co. 12,337 ------------- 86,186 ------------- SHARES DESCRIPTION VALUE --------------------------------------------------------------------- MACHINERY -- 2.1% 60 Cummins, Inc. $ 9,077 58 Dover Corp. 5,959 51 Illinois Tool Works, Inc. 8,557 42 Ingersoll-Rand PLC 5,420 64 Snap-on, Inc. 9,264 ------------- 38,277 ------------- MEDIA -- 3.2% 2 Cable One, Inc. 3,146 25 Charter Communications, Inc., Class A (a) 12,329 393 Comcast Corp., Class A 15,889 88 Discovery, Inc., Series A (a) 2,262 62 Liberty Broadband Corp., Class C (a) 7,805 332 Liberty Media Corp.-Liberty SiriusXM, Series C (a) 14,814 26 Omnicom Group, Inc. 1,801 52 ViacomCBS, Inc., Class B 1,280 ------------- 59,326 ------------- METALS & MINING -- 0.4% 191 Nucor Corp. 7,898 ------------- MULTILINE RETAIL -- 1.0% 36 Dollar General Corp. 5,411 126 Kohl's Corp. 4,933 81 Target Corp. 8,343 ------------- 18,687 ------------- OIL, GAS & CONSUMABLE FUELS -- 3.0% 150 Cabot Oil & Gas Corp. 2,089 192 Chevron Corp. 17,921 302 ConocoPhillips 14,623 4 Devon Energy Corp. 65 38 HollyFrontier Corp. 1,280 50 Kinder Morgan, Inc. 959 154 ONEOK, Inc. 10,275 69 Phillips 66 5,165 59 Valero Energy Corp. 3,909 ------------- 56,286 ------------- PHARMACEUTICALS -- 5.7% 515 Bristol-Myers Squibb Co. 30,416 54 Eli Lilly & Co. 6,811 220 Johnson & Johnson 29,585 266 Merck & Co., Inc. 20,365 466 Pfizer, Inc. 15,574 18 Zoetis, Inc. 2,398 ------------- 105,149 ------------- PROFESSIONAL SERVICES -- 0.8% 90 IHS Markit Ltd. 6,411 175 Robert Half International, Inc. 8,822 ------------- 15,233 ------------- |
See Notes to Financial Statements Page 13
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) ROAD & RAIL -- 1.0% 58 Kansas City Southern $ 8,739 50 Old Dominion Freight Line, Inc. 9,690 ------------- 18,429 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.9% 70 Advanced Micro Devices, Inc. (a) 3,184 18 Applied Materials, Inc. 1,046 339 Intel Corp. 18,821 28 KLA Corp. 4,304 29 Lam Research Corp. 8,510 24 NVIDIA Corp. 6,482 35 Qorvo, Inc. (a) 3,520 23 QUALCOMM, Inc. 1,801 17 Teradyne, Inc. 999 38 Texas Instruments, Inc. 4,337 ------------- 53,004 ------------- SOFTWARE -- 6.3% 41 ANSYS, Inc. (a) 9,930 148 Citrix Systems, Inc. 15,302 21 Fair Isaac Corp. (a) 7,897 336 Microsoft Corp. 54,435 168 NortonLifeLock, Inc. 3,197 260 Oracle Corp. 12,860 10 RingCentral, Inc., Class A (a) 2,357 10 Synopsys, Inc. (a) 1,379 31 Tyler Technologies, Inc. (a) 9,714 ------------- 117,071 ------------- SPECIALTY RETAIL -- 2.2% 1 AutoZone, Inc. (a) 1,032 44 Best Buy Co., Inc. 3,329 54 CarMax, Inc. (a) 4,715 52 Home Depot (The), Inc. 11,328 57 Lowe's Cos., Inc. 6,074 51 Ross Stores, Inc. 5,548 134 TJX (The) Cos., Inc. 8,013 ------------- 40,039 ------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 6.3% 362 Apple, Inc. 98,956 401 Hewlett Packard Enterprise Co. 5,129 102 HP, Inc. 2,121 51 Seagate Technology PLC 2,445 265 Xerox Holdings Corp. 8,533 ------------- 117,184 ------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.5% 103 NIKE, Inc., Class B 9,206 ------------- TOTAL COMMON STOCKS -- 99.5% 1,844,343 (Cost $2,060,572) ------------- SHARES DESCRIPTION VALUE --------------------------------------------------------------------- MONEY MARKET FUNDS -- 0.3% 4,956 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.44% (b) $ 4,956 (Cost $4,956) ------------- TOTAL INVESTMENTS -- 99.8% 1,849,299 (Cost $2,065,528) (c) NET OTHER ASSETS AND LIABILITIES -- 0.2% 3,322 ------------- NET ASSETS -- 100.0% $ 1,852,621 ============= |
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $470 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $216,699. The net unrealized depreciation was $216,229.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS --------------------------------------- Common Stocks* $1,844,343 $ -- $ -- Money Market Funds 4,956 -- -- --------------------------------------- Total Investments $1,849,299 $ -- $ -- ======================================= |
* See Portfolio of Investments for industry breakout.
Page 14 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS -- 99.7% AEROSPACE & DEFENSE -- 1.4% 157 BWX Technologies, Inc. $ 8,610 48 Teledyne Technologies, Inc. (a) 16,191 ------------- 24,801 ------------- AIR FREIGHT & LOGISTICS -- 0.3% 70 XPO Logistics, Inc. (a) 5,178 ------------- AIRLINES -- 0.6% 683 JetBlue Airways Corp. (a) 10,778 ------------- AUTO COMPONENTS -- 1.4% 228 BorgWarner, Inc. 7,205 320 Gentex Corp. 8,544 84 Lear Corp. 9,341 ------------- 25,090 ------------- AUTOMOBILES -- 0.1% 56 Harley-Davidson, Inc. 1,706 ------------- BANKS -- 5.9% 545 Associated Banc-Corp. 9,227 136 Bank of Hawaii Corp. 10,121 282 BankUnited, Inc. 8,376 216 CIT Group, Inc. 8,577 175 Commerce Bancshares, Inc. 10,682 19 First Citizens BancShares, Inc., Class A 8,613 357 First Hawaiian, Inc. 8,550 670 Fulton Financial Corp. 9,682 325 PacWest Bancorp 10,283 593 Sterling Bancorp 9,832 508 Valley National Bancorp 4,724 196 Zions Bancorp N.A. 7,830 ------------- 106,497 ------------- BIOTECHNOLOGY -- 1.0% 52 ACADIA Pharmaceuticals, Inc. (a) 2,223 50 Arrowhead Pharmaceuticals, Inc. (a) 1,768 276 Exelixis, Inc. (a) 5,131 62 Ligand Pharmaceuticals, Inc. (a) 5,803 84 Momenta Pharmaceuticals, Inc. (a) 2,376 ------------- 17,301 ------------- BUILDING PRODUCTS -- 1.3% 106 Advanced Drainage Systems, Inc. 4,437 144 Fortune Brands Home & Security, Inc. 8,892 123 Simpson Manufacturing Co., Inc. 9,770 ------------- 23,099 ------------- CAPITAL MARKETS -- 1.6% 101 Cohen & Steers, Inc. 6,328 32 Eaton Vance Corp. 1,320 92 Houlihan Lokey, Inc. 4,712 297 Janus Henderson Group PLC 6,297 12 LPL Financial Holdings, Inc. 954 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- CAPITAL MARKETS (CONTINUED) 178 SEI Investments Co. $ 9,738 ------------- 29,349 ------------- CHEMICALS -- 1.6% 10 NewMarket Corp. 3,886 559 Olin Corp. 9,050 141 RPM International, Inc. 9,039 24 Scotts Miracle-Gro (The) Co. 2,544 264 Valvoline, Inc. 5,148 ------------- 29,667 ------------- COMMERCIAL SERVICES & SUPPLIES -- 2.4% 20 Deluxe Corp. 666 252 HNI Corp. 8,273 521 KAR Auction Services, Inc. 10,029 48 MSA Safety, Inc. 5,840 209 Stericycle, Inc. (a) 12,003 16 Tetra Tech, Inc. 1,294 24 UniFirst Corp. 4,460 ------------- 42,565 ------------- COMMUNICATIONS EQUIPMENT -- 2.1% 234 EchoStar Corp., Class A (a) 8,171 34 F5 Networks, Inc. (a) 4,078 387 Juniper Networks, Inc. 8,212 133 Lumentum Holdings, Inc. (a) 10,350 82 NetScout Systems, Inc. (a) 2,108 331 Viavi Solutions, Inc. (a) 4,366 ------------- 37,285 ------------- CONSTRUCTION & ENGINEERING -- 1.6% 316 AECOM (a) 14,201 142 EMCOR Group, Inc. 10,923 92 MasTec, Inc. (a) 4,515 ------------- 29,639 ------------- CONSUMER FINANCE -- 1.3% 866 Navient Corp. 9,725 114 OneMain Holdings, Inc. 4,190 420 Santander Consumer USA Holdings, Inc. 10,248 ------------- 24,163 ------------- CONTAINERS & PACKAGING -- 0.5% 635 Graphic Packaging Holding Co. 8,585 ------------- DISTRIBUTORS -- 0.8% 65 Pool Corp. 13,712 ------------- DIVERSIFIED CONSUMER SERVICES -- 0.6% 319 Adtalem Global Education, Inc. (a) 9,848 ------------- DIVERSIFIED FINANCIAL SERVICES -- 0.8% 296 Jefferies Financial Group, Inc. 5,834 |
See Notes to Financial Statements Page 15
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) DIVERSIFIED FINANCIAL SERVICES (CONTINUED) 168 Voya Financial, Inc. $ 8,844 ------------- 14,678 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.8% 70 Cogent Communications Holdings, Inc. 5,111 136 GCI Liberty, Inc., Class A (a) 9,399 ------------- 14,510 ------------- ELECTRIC UTILITIES -- 2.4% 563 Hawaiian Electric Industries, Inc. 24,119 350 Portland General Electric Co. 19,043 ------------- 43,162 ------------- ELECTRICAL EQUIPMENT -- 1.9% 118 Generac Holdings, Inc. (a) 12,153 452 GrafTech International Ltd. 3,688 49 Hubbell, Inc. 6,529 144 Regal Beloit Corp. 11,180 ------------- 33,550 ------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 4.7% 168 Arrow Electronics, Inc. (a) 11,266 194 Avnet, Inc. 5,952 30 Dolby Laboratories, Inc., Class A 1,971 38 FLIR Systems, Inc. 1,614 567 Jabil, Inc. 18,172 14 Littelfuse, Inc. 2,236 171 SYNNEX Corp. 21,380 140 Trimble, Inc. (a) 5,527 591 Vishay Intertechnology, Inc. 11,052 31 Zebra Technologies Corp., Class A (a) 6,540 ------------- 85,710 ------------- ENERGY EQUIPMENT & SERVICES -- 0.4% 94 Helmerich & Payne, Inc. 3,468 795 Patterson-UTI Energy, Inc. 4,555 ------------- 8,023 ------------- ENTERTAINMENT -- 0.1% 62 Cinemark Holdings, Inc. 1,609 ------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 9.8% 492 Alexander & Baldwin, Inc. 9,250 182 American Homes 4 Rent, Class A 4,712 625 Apple Hospitality REIT, Inc. 8,169 310 Brixmor Property Group, Inc. 5,645 28 Camden Property Trust 2,967 720 CoreCivic, Inc. 10,663 96 EastGroup Properties, Inc. 12,070 304 Equity Commonwealth 9,564 305 First Industrial Realty Trust, Inc. 11,742 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- EQUITY REAL ESTATE INVESTMENT TRUSTS (CONTINUED) 222 Gaming and Leisure Properties, Inc. $ 9,917 772 GEO Group (The), Inc. 11,302 160 Healthcare Trust of America, Inc., Class A 4,982 30 Highwoods Properties, Inc. 1,346 231 Kimco Realty Corp. 4,008 52 Life Storage, Inc. 5,611 381 Macerich (The) Co. 7,780 182 Omega Healthcare Investors, Inc. 7,207 575 Park Hotels & Resorts, Inc. 10,500 6 PS Business Parks, Inc. 891 206 Rexford Industrial Realty, Inc. 9,635 529 Service Properties Trust 9,564 125 Spirit Realty Capital, Inc. 5,688 122 STORE Capital Corp. 4,009 170 Terreno Realty Corp. 9,328 34 Weingarten Realty Investors 916 ------------- 177,466 ------------- FOOD & STAPLES RETAILING -- 0.4% 39 Casey's General Stores, Inc. 6,358 22 Performance Food Group Co. (a) 933 ------------- 7,291 ------------- FOOD PRODUCTS -- 1.2% 180 Hain Celestial Group (The), Inc. (a) 4,272 174 Ingredion, Inc. 14,494 175 Pilgrim's Pride Corp. (a) 3,703 ------------- 22,469 ------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 2.5% 46 Hill-Rom Holdings, Inc. 4,418 40 Integra LifeSciences Holdings Corp. (a) 2,084 16 Masimo Corp. (a) 2,613 46 Nevro Corp. (a) 5,987 46 NuVasive, Inc. (a) 3,027 10 Penumbra, Inc. (a) 1,659 60 STERIS PLC 9,517 12 Tandem Diabetes Care, Inc. (a) 896 105 West Pharmaceutical Services, Inc. 15,809 ------------- 46,010 ------------- HEALTH CARE PROVIDERS & SERVICES -- 5.5% 74 Amedisys, Inc. (a) 12,877 70 AMN Healthcare Services, Inc. (a) 5,152 32 Chemed Corp. 13,364 255 DaVita, Inc. (a) 19,793 222 Encompass Health Corp. 16,614 32 LHC Group, Inc. (a) 3,887 76 MEDNAX, Inc. (a) 1,299 |
Page 16 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) HEALTH CARE PROVIDERS & SERVICES (CONTINUED) 76 Molina Healthcare, Inc. (a) $ 9,314 607 Patterson Cos., Inc. 14,441 66 Tenet Healthcare Corp. (a) 1,734 ------------- 98,475 ------------- HEALTH CARE TECHNOLOGY -- 0.5% 192 Inovalon Holdings, Inc., Class A (a) 3,740 43 Teladoc Health, Inc. (a) 5,373 ------------- 9,113 ------------- HOTELS, RESTAURANTS & LEISURE -- 0.9% 42 Churchill Downs, Inc. 5,277 63 Marriott Vacations Worldwide Corp. 6,097 86 Papa John's International, Inc. 4,954 ------------- 16,328 ------------- HOUSEHOLD DURABLES -- 3.3% 34 Helen of Troy Ltd. (a) 5,596 158 KB Home 5,149 93 Leggett & Platt, Inc. 3,688 71 Tempur Sealy International, Inc. (a) 5,307 321 Toll Brothers, Inc. 11,887 89 TopBuild Corp. (a) 8,989 720 TRI Pointe Group, Inc. (a) 11,038 68 Whirlpool Corp. 8,695 ------------- 60,349 ------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.6% 64 Ormat Technologies, Inc. 4,459 316 TerraForm Power, Inc., Class A 5,938 ------------- 10,397 ------------- INDUSTRIAL CONGLOMERATES -- 0.5% 66 Carlisle Cos., Inc. 9,589 ------------- INSURANCE -- 4.0% 73 Assurant, Inc. 8,803 256 Brighthouse Financial, Inc. (a) 9,175 372 Brown & Brown, Inc. 16,000 638 CNO Financial Group, Inc. 10,221 221 First American Financial Corp. 12,619 12 Hanover Insurance Group (The), Inc. 1,422 319 Old Republic International Corp. 6,291 325 Unum Group 7,576 ------------- 72,107 ------------- IT SERVICES -- 3.4% 20 Alliance Data Systems Corp. 1,718 82 CACI International, Inc., Class A (a) 20,092 50 CoreLogic, Inc. 2,268 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- IT SERVICES (CONTINUED) 614 KBR, Inc. $ 15,939 102 MAXIMUS, Inc. 6,428 440 Perspecta, Inc. 10,987 152 Sabre Corp. 2,069 28 Science Applications International Corp. 2,244 ------------- 61,745 ------------- LIFE SCIENCES TOOLS & SERVICES -- 2.9% 53 Bio-Rad Laboratories, Inc., Class A (a) 18,657 43 Bruker Corp. 1,873 82 Charles River Laboratories International, Inc. (a) 12,757 12 Medpace Holdings, Inc. (a) 1,079 124 NeoGenomics, Inc. (a) 3,513 36 PRA Health Sciences, Inc. (a) 3,391 182 Syneos Health, Inc. (a) 11,530 ------------- 52,800 ------------- MACHINERY -- 2.8% 18 AGCO Corp. 1,088 206 Allison Transmission Holdings, Inc. 8,364 50 Graco, Inc. 2,466 60 Nordson Corp. 8,718 146 Oshkosh Corp. 10,534 62 Snap-on, Inc. 8,974 224 Timken (The) Co. 10,044 10 Watts Water Technologies, Inc., Class A 939 ------------- 51,127 ------------- MEDIA -- 1.9% 270 AMC Networks, Inc., Class A (a) 8,370 8 Cable One, Inc. 12,584 244 Meredith Corp. 6,429 176 New York Times (The) Co., Class A 6,593 ------------- 33,976 ------------- METALS & MINING -- 2.6% 290 Commercial Metals Co. 5,295 244 Reliance Steel & Aluminum Co. 24,959 60 Royal Gold, Inc. 5,788 422 Steel Dynamics, Inc. 11,238 ------------- 47,280 ------------- MULTILINE RETAIL -- 1.5% 121 Dillard's, Inc., Class A 6,811 168 Kohl's Corp. 6,577 512 Macy's, Inc. 6,774 206 Nordstrom, Inc. 7,148 ------------- 27,310 ------------- MULTI-UTILITIES -- 2.0% 102 Avista Corp. 4,809 448 MDU Resources Group, Inc. 12,423 |
See Notes to Financial Statements Page 17
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) MULTI-UTILITIES (CONTINUED) 260 NorthWestern Corp. $ 18,289 ------------- 35,521 ------------- OIL, GAS & CONSUMABLE FUELS -- 1.0% 123 Cabot Oil & Gas Corp. 1,713 23 CVR Energy, Inc. 654 439 Devon Energy Corp. 7,129 38 HollyFrontier Corp. 1,280 175 Murphy Oil Corp. 3,299 132 World Fuel Services Corp. 3,733 ------------- 17,808 ------------- PAPER & FOREST PRODUCTS -- 0.8% 294 Domtar Corp. 8,459 194 Louisiana-Pacific Corp. 5,519 ------------- 13,978 ------------- PERSONAL PRODUCTS -- 0.3% 202 Nu Skin Enterprises, Inc., Class A 4,953 ------------- PHARMACEUTICALS -- 0.8% 318 Prestige Consumer Healthcare, Inc. (a) 11,881 11 Reata Pharmaceuticals, Inc., Class A (a) 2,142 ------------- 14,023 ------------- PROFESSIONAL SERVICES -- 0.9% 56 FTI Consulting, Inc. (a) 6,305 138 ManpowerGroup, Inc. 10,480 ------------- 16,785 ------------- ROAD & RAIL -- 0.7% 66 Old Dominion Freight Line, Inc. 12,791 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.0% 142 Cirrus Logic, Inc. (a) 9,747 94 Entegris, Inc. 5,012 114 Synaptics, Inc. (a) 7,530 220 Teradyne, Inc. 12,927 ------------- 35,216 ------------- SOFTWARE -- 3.7% 40 Appfolio, Inc., Class A (a) 4,919 68 CDK Global, Inc. 3,129 60 Envestnet, Inc. (a) 4,529 42 Fair Isaac Corp. (a) 15,793 129 j2 Global, Inc. 11,266 19 Manhattan Associates, Inc. (a) 1,280 228 Nuance Communications, Inc. (a) 4,929 52 Pegasystems, Inc. 4,706 54 Tyler Technologies, Inc. (a) 16,921 ------------- 67,472 ------------- SPECIALTY RETAIL -- 3.7% 627 American Eagle Outfitters, Inc. 8,076 335 AutoNation, Inc. (a) 14,314 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- SPECIALTY RETAIL (CONTINUED) 142 Dick's Sporting Goods, Inc. $ 5,170 256 Foot Locker, Inc. 9,280 12 Lithia Motors, Inc., Class A 1,430 50 Murphy USA, Inc. (a) 4,875 233 Penske Automotive Group, Inc. 10,723 35 RH (a) 6,349 117 Williams-Sonoma, Inc. 7,300 ------------- 67,517 ------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.8% 72 NCR Corp. (a) 1,814 410 Xerox Holdings Corp. 13,202 ------------- 15,016 ------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.8% 16 Deckers Outdoor Corp. (a) 2,781 188 Hanesbrands, Inc. 2,489 80 PVH Corp. 5,929 115 Steven Madden Ltd. 3,760 ------------- 14,959 ------------- THRIFTS & MORTGAGE FINANCE -- 1.5% 699 MGIC Investment Corp. 8,409 1,278 New York Community Bancorp, Inc. 13,815 40 Radian Group, Inc. 850 156 Washington Federal, Inc. 4,678 ------------- 27,752 ------------- TRADING COMPANIES & DISTRIBUTORS -- 0.8% 52 HD Supply Holdings, Inc. (a) 1,977 156 MSC Industrial Direct Co., Inc., Class A 9,644 36 SiteOne Landscape Supply, Inc. (a) 3,573 ------------- 15,194 ------------- TOTAL COMMON STOCKS -- 99.7% 1,803,322 (Cost $2,049,741) ------------- MONEY MARKET FUNDS -- 0.2% 3,659 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.44% (b) 3,659 (Cost $3,659) ------------- TOTAL INVESTMENTS -- 99.9% 1,806,981 (Cost $2,053,400) (c) NET OTHER ASSETS AND LIABILITIES -- 0.1% 1,813 ------------- NET ASSETS -- 100.0% $ 1,808,794 ============= |
Page 18 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $2,747 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $249,166. The net unrealized depreciation was $246,419.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS --------------------------------------- Common Stocks* $1,803,322 $ -- $ -- Money Market Funds 3,659 -- -- --------------------------------------- Total Investments $1,806,981 $ -- $ -- ======================================= |
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 19
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS
FEBRUARY 29, 2020 (UNAUDITED)
160 Maxar Technologies, Inc. $ 2,433 127 Triumph Group, Inc. 2,413 76 Vectrus, Inc. (a) 3,959 ------------- 8,805 ------------- AUTO COMPONENTS -- 1.1% 663 Dana, Inc. 9,534 106 LCI Industries 10,234 ------------- 19,768 ------------- AUTOMOBILES -- 0.4% 127 Winnebago Industries, Inc. 6,590 ------------- BANKS -- 6.5% 902 Boston Private Financial Holdings, Inc. 8,799 154 Cathay General Bancorp 4,740 152 Columbia Banking System, Inc. 5,046 659 Fulton Financial Corp. 9,523 316 Great Western Bancorp, Inc. 8,491 680 Hilltop Holdings, Inc. 14,164 746 Hope Bancorp, Inc. 9,109 142 International Bancshares Corp. 4,842 933 Investors Bancorp, Inc. 9,834 336 Pacific Premier Bancorp, Inc. 8,679 312 Renasant Corp. 8,839 68 South State Corp. 4,632 130 Triumph Bancorp, Inc. (a) 4,403 209 Trustmark Corp. 5,622 180 United Community Banks, Inc. 4,459 498 Valley National Bancorp 4,631 ------------- 115,813 ------------- BIOTECHNOLOGY -- 3.8% 77 ACADIA Pharmaceuticals, Inc. (a) 3,291 180 Anika Therapeutics, Inc. (a) 7,517 108 Arena Pharmaceuticals, Inc. (a) 4,817 89 Arrowhead Pharmaceuticals, Inc. (a) 3,147 46 Constellation Pharmaceuticals, Inc. (a) 1,626 38 Eagle Pharmaceuticals, Inc. (a) 1,744 76 Eidos Therapeutics, Inc. (a) 3,844 168 Enanta Pharmaceuticals, Inc. (a) 8,548 50 Kodiak Sciences, Inc. (a) 3,198 48 Krystal Biotech, Inc. (a) 2,565 100 Ligand Pharmaceuticals, Inc. (a) 9,360 184 Molecular Templates, Inc. (a) 2,960 130 Momenta Pharmaceuticals, Inc. (a) 3,678 80 Myriad Genetics, Inc. (a) 1,410 85 Natera, Inc. (a) 3,222 46 Principia Biopharma, Inc. (a) 2,970 431 Vanda Pharmaceuticals, Inc. (a) 4,754 ------------- 68,651 ------------- SHARES DESCRIPTION VALUE --------------------------------------------------------------------- BUILDING PRODUCTS -- 3.0% 22 Advanced Drainage Systems, Inc. $ 921 58 American Woodmark Corp. (a) 4,859 444 Builders FirstSource, Inc. (a) 10,083 121 Gibraltar Industries, Inc. (a) 6,131 85 Masonite International Corp. (a) 6,247 224 Patrick Industries, Inc. 11,834 83 Simpson Manufacturing Co., Inc. 6,593 136 Universal Forest Products, Inc. 6,373 ------------- 53,041 ------------- CAPITAL MARKETS -- 2.5% 148 Ares Management Corp., Class A 5,119 337 Artisan Partners Asset Management, Inc., Class A 9,632 93 Cohen & Steers, Inc. 5,826 205 Federated Hermes, Inc. 5,914 342 Hercules Capital, Inc. 4,514 84 Houlihan Lokey, Inc. 4,303 652 Waddell & Reed Financial, Inc., Class A 8,972 ------------- 44,280 ------------- CHEMICALS -- 1.0% 92 Innospec, Inc. 7,962 586 Olin Corp. 9,487 ------------- 17,449 ------------- COMMERCIAL SERVICES & SUPPLIES -- 2.3% 97 Brady Corp., Class A 4,592 8 Cimpress PLC (a) 931 20 Deluxe Corp. 666 21 Herman Miller, Inc. 719 448 KAR Auction Services, Inc. 8,624 192 Knoll, Inc. 3,387 70 McGrath RentCorp 4,862 55 MSA Safety, Inc. 6,692 66 Tetra Tech, Inc. 5,337 28 UniFirst Corp. 5,203 ------------- 41,013 ------------- COMMUNICATIONS EQUIPMENT -- 1.3% 425 Comtech Telecommunications Corp. 11,908 78 Lumentum Holdings, Inc. (a) 6,070 387 Viavi Solutions, Inc. (a) 5,105 ------------- 23,083 ------------- CONSTRUCTION & ENGINEERING -- 0.8% 114 Arcosa, Inc. 4,897 197 MasTec, Inc. (a) 9,669 ------------- 14,566 ------------- CONSUMER FINANCE -- 0.6% 1,027 Navient Corp. 11,533 ------------- |
Page 20 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) DIVERSIFIED FINANCIAL SERVICES -- 0.6% 289 Cannae Holdings, Inc. (a) $ 10,777 ------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.7% 165 Cogent Communications Holdings, Inc. 12,047 ------------- ELECTRIC UTILITIES -- 0.7% 244 Portland General Electric Co. 13,276 ------------- ELECTRICAL EQUIPMENT -- 1.4% 268 Atkore International Group, Inc. (a) 9,892 38 AZZ, Inc. 1,402 129 Generac Holdings, Inc. (a) 13,285 20 Vicor Corp. (a) 865 ------------- 25,444 ------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 3.7% 16 Badger Meter, Inc. 963 482 Benchmark Electronics, Inc. 13,101 168 Insight Enterprises, Inc. (a) 9,255 143 Methode Electronics, Inc. 4,384 150 Plexus Corp. (a) 9,953 234 Sanmina Corp. (a) 6,152 814 TTM Technologies, Inc. (a) 10,574 584 Vishay Intertechnology, Inc. 10,921 ------------- 65,303 ------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 9.2% 96 Alexander & Baldwin, Inc. 1,805 114 Chatham Lodging Trust 1,589 705 CoreCivic, Inc. 10,441 24 CorEnergy Infrastructure Trust, Inc. 838 459 Easterly Government Properties, Inc. 10,910 47 EastGroup Properties, Inc. 5,909 293 First Industrial Realty Trust, Inc. 11,280 762 GEO Group (The), Inc. 11,156 340 Global Medical REIT, Inc. 4,750 156 Hannon Armstrong Sustainable Infrastructure Capital, Inc. 5,296 736 Hersha Hospitality Trust 8,486 708 Independence Realty Trust, Inc. 9,388 68 Investors Real Estate Trust 4,791 344 iStar, Inc. 5,205 3 Kite Realty Group Trust 48 48 Office Properties Income Trust 1,398 56 Piedmont Office Realty Trust, Inc., Class A 1,209 685 RLJ Lodging Trust 9,049 72 RPT Realty 933 96 Safehold, Inc. 5,243 892 Summit Hotel Properties, Inc. 8,269 832 Sunstone Hotel Investors, Inc. 9,110 SHARES DESCRIPTION VALUE --------------------------------------------------------------------- EQUITY REAL ESTATE INVESTMENT TRUSTS (CONTINUED) 695 Tanger Factory Outlet Centers, Inc. $ 8,326 202 Terreno Realty Corp. 11,084 91 Universal Health Realty Income Trust 9,803 534 Xenia Hotels & Resorts, Inc. 7,989 ------------- 164,305 ------------- FOOD & STAPLES RETAILING -- 0.1% 102 Sprouts Farmers Market, Inc. (a) 1,630 ------------- FOOD PRODUCTS -- 1.3% 648 B&G Foods, Inc. 9,590 224 Darling Ingredients, Inc. (a) 5,757 78 Freshpet, Inc. (a) 5,184 51 John B. Sanfilippo & Son, Inc. 3,580 ------------- 24,111 ------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 4.6% 667 AngioDynamics, Inc. (a) 7,664 130 AtriCure, Inc. (a) 4,995 68 CONMED Corp. 6,436 84 CryoLife, Inc. (a) 2,153 40 Globus Medical, Inc., Class A (a) 1,809 12 Heska Corp. (a) 1,146 146 Integer Holdings Corp. (a) 13,165 314 Merit Medical Systems, Inc. (a) 11,307 64 Natus Medical, Inc. (a) 1,720 68 Nevro Corp. (a) 8,850 64 Novocure Ltd. (a) 4,656 108 NuVasive, Inc. (a) 7,107 46 Orthofix Medical, Inc. (a) 1,626 17 Tactile Systems Technology, Inc. (a) 857 14 Tandem Diabetes Care, Inc. (a) 1,045 352 Varex Imaging Corp. (a) 8,173 ------------- 82,709 ------------- HEALTH CARE PROVIDERS & SERVICES -- 5.2% 64 Acadia Healthcare Co., Inc. (a) 1,894 58 Addus HomeCare Corp. (a) 4,424 71 Amedisys, Inc. (a) 12,355 114 AMN Healthcare Services, Inc. (a) 8,390 46 BioTelemetry, Inc. (a) 1,965 26 CorVel Corp. (a) 1,792 48 Ensign Group (The), Inc. 2,136 101 LHC Group, Inc. (a) 12,267 150 Magellan Health, Inc. (a) 9,001 76 MEDNAX, Inc. (a) 1,299 150 Patterson Cos., Inc. 3,569 178 RadNet, Inc. (a) 3,637 838 Select Medical Holdings Corp. (a) 20,062 140 Tenet Healthcare Corp. (a) 3,679 382 Tivity Health, Inc. (a) 4,840 |
See Notes to Financial Statements Page 21
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) HEALTH CARE PROVIDERS & SERVICES (CONTINUED) 18 US Physical Therapy, Inc. $ 1,876 ------------- 93,186 ------------- HEALTH CARE TECHNOLOGY -- 1.5% 66 HMS Holdings Corp. (a) 1,516 539 Inovalon Holdings, Inc., Class A (a) 10,500 26 Omnicell, Inc. (a) 2,118 146 Simulations Plus, Inc. 4,754 70 Teladoc Health, Inc. (a) 8,747 ------------- 27,635 ------------- HOTELS, RESTAURANTS & LEISURE -- 0.5% 38 Marriott Vacations Worldwide Corp. 3,678 84 Papa John's International, Inc. 4,839 ------------- 8,517 ------------- HOUSEHOLD DURABLES -- 3.2% 146 Century Communities, Inc. (a) 4,866 32 Helen of Troy Ltd. (a) 5,267 97 Installed Building Products, Inc. (a) 6,407 318 KB Home 10,364 120 M/I Homes, Inc. (a) 4,468 26 Meritage Homes Corp. (a) 1,650 90 Taylor Morrison Home Corp. (a) 2,027 104 TopBuild Corp. (a) 10,504 723 TRI Pointe Group, Inc. (a) 11,083 ------------- 56,636 ------------- HOUSEHOLD PRODUCTS -- 0.5% 362 Central Garden & Pet Co., Class A (a) 9,162 ------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 1.3% 564 Clearway Energy, Inc., Class C 11,867 73 Ormat Technologies, Inc. 5,087 331 TerraForm Power, Inc., Class A 6,219 ------------- 23,173 ------------- INSURANCE -- 2.0% 90 AMERISAFE, Inc. 5,865 630 CNO Financial Group, Inc. 10,093 248 Employers Holdings, Inc. 9,558 46 Kinsale Capital Group, Inc. 5,588 61 RLI Corp. 4,903 ------------- 36,007 ------------- INTERACTIVE MEDIA & SERVICES -- 0.1% 62 EverQuote, Inc., Class A (a) 2,518 ------------- INTERNET & DIRECT MARKETING RETAIL -- 0.1% 38 PetMed Express, Inc. 1,003 ------------- |
116 Cardtronics PLC, Class A (a) $ 4,207 130 CSG Systems International, Inc. 5,752 329 KBR, Inc. 8,541 4 ManTech International Corp., Class A 300 32 MAXIMUS, Inc. 2,017 238 NIC, Inc. 4,353 231 Perficient, Inc. (a) 9,464 440 Perspecta, Inc. 10,987 364 Sykes Enterprises, Inc. (a) 11,532 23 TTEC Holdings, Inc. 861 2 Verra Mobility Corp. (a) 30 ------------- 58,044 ------------- LEISURE PRODUCTS -- 0.0% 34 Acushnet Holdings Corp. 865 ------------- LIFE SCIENCES TOOLS & SERVICES -- 1.3% 42 Medpace Holdings, Inc. (a) 3,778 174 NeoGenomics, Inc. (a) 4,929 216 Syneos Health, Inc. (a) 13,684 ------------- 22,391 ------------- MACHINERY -- 2.6% 24 Astec Industries, Inc. 901 58 ESCO Technologies, Inc. 5,273 526 Evoqua Water Technologies Corp. (a) 11,030 19 Franklin Electric Co., Inc. 982 435 Meritor, Inc. (a) 9,870 286 Spartan Motors, Inc. 4,219 114 SPX Corp. (a) 4,780 14 Tennant Co. 1,002 659 Wabash National Corp. 7,236 11 Watts Water Technologies, Inc., Class A 1,033 ------------- 46,326 ------------- MEDIA -- 0.9% 246 AMC Networks, Inc., Class A (a) 7,626 71 Cardlytics, Inc. (a) 5,637 58 Meredith Corp. 1,528 120 MSG Networks, Inc., Class A (a) 1,517 ------------- 16,308 ------------- METALS & MINING -- 1.3% 282 Commercial Metals Co. 5,149 482 Schnitzer Steel Industries, Inc., Class A 7,944 538 Warrior Met Coal, Inc. 9,533 ------------- 22,626 ------------- MULTILINE RETAIL -- 0.8% 425 Big Lots, Inc. 6,719 124 Dillard's, Inc., Class A 6,980 ------------- 13,699 ------------- |
Page 22 See Notes to Financial Statements
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) MULTI-UTILITIES -- 1.8% 360 Avista Corp. $ 16,974 216 NorthWestern Corp. 15,193 ------------- 32,167 ------------- OIL, GAS & CONSUMABLE FUELS -- 2.3% 137 Arch Coal, Inc., Class A 6,898 23 CVR Energy, Inc. 654 685 Dorian LPG Ltd. (a) 7,617 205 Par Pacific Holdings, Inc. (a) 3,401 368 PDC Energy, Inc. (a) 7,003 20 Renewable Energy Group, Inc. (a) 529 126 Scorpio Tankers, Inc. 2,492 369 SFL Corp. Ltd. 4,480 238 Teekay Tankers Ltd., Class A (a) 3,939 130 World Fuel Services Corp. 3,676 ------------- 40,689 ------------- PAPER & FOREST PRODUCTS -- 1.5% 280 Boise Cascade Co. 9,934 262 Domtar Corp. 7,538 186 Louisiana-Pacific Corp. 5,292 123 Schweitzer-Mauduit International, Inc. 4,147 ------------- 26,911 ------------- PERSONAL PRODUCTS -- 0.1% 54 Nu Skin Enterprises, Inc., Class A 1,324 ------------- PHARMACEUTICALS -- 2.2% 174 ANI Pharmaceuticals, Inc. (a) 8,354 34 Axsome Therapeutics, Inc. (a) 2,652 421 Corcept Therapeutics, Inc. (a) 5,313 156 Innoviva, Inc. (a) 2,101 86 Phibro Animal Health Corp., Class A 2,172 314 Prestige Consumer Healthcare, Inc. (a) 11,731 388 Supernus Pharmaceuticals, Inc. (a) 6,980 ------------- 39,303 ------------- PROFESSIONAL SERVICES -- 1.3% 16 CBIZ, Inc. (a) 417 56 FTI Consulting, Inc. (a) 6,305 292 Korn Ferry 10,214 448 TrueBlue, Inc. (a) 6,666 ------------- 23,602 ------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 1.2% 421 Newmark Group, Inc., Class A 4,020 608 Realogy Holdings Corp. 5,636 144 Redfin Corp. (a) 3,897 212 RMR Group (The), Inc., Class A 7,899 ------------- 21,452 ------------- SHARES DESCRIPTION VALUE --------------------------------------------------------------------- ROAD & RAIL -- 0.4% 362 ArcBest Corp. $ 7,171 ------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.7% 63 Ambarella, Inc. (a) 3,745 100 Cirrus Logic, Inc. (a) 6,864 238 Diodes, Inc. (a) 10,474 168 Enphase Energy, Inc. (a) 8,227 209 Lattice Semiconductor Corp. (a) 3,752 348 Rambus, Inc. (a) 4,865 216 SMART Global Holdings, Inc. (a) 5,798 128 Synaptics, Inc. (a) 8,454 314 Ultra Clean Holdings, Inc. (a) 6,566 438 Xperi Corp. 7,529 ------------- 66,274 ------------- SOFTWARE -- 1.9% 90 Appfolio, Inc., Class A (a) 11,067 314 Ebix, Inc. 8,302 70 Envestnet, Inc. (a) 5,284 339 Model N, Inc. (a) 9,831 ------------- 34,484 ------------- SPECIALTY RETAIL -- 5.2% 444 Abercrombie & Fitch Co., Class A 5,830 54 America's Car-Mart, Inc. (a) 5,550 754 American Eagle Outfitters, Inc. 9,711 50 Asbury Automotive Group, Inc. (a) 4,432 220 Buckle (The), Inc. 4,979 278 Genesco, Inc. (a) 9,566 95 Group 1 Automotive, Inc. 8,097 52 Guess?, Inc. 842 388 Hibbett Sports, Inc. (a) 7,574 36 Lithia Motors, Inc., Class A 4,290 9 Murphy USA, Inc. (a) 877 417 Rent-A-Center, Inc. 8,878 44 RH (a) 7,982 264 Signet Jewelers Ltd. 6,156 21 Sleep Number Corp. (a) 925 98 Sonic Automotive, Inc., Class A 2,744 222 Urban Outfitters, Inc. (a) 5,219 ------------- 93,652 ------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.7% 58 Crocs, Inc. (a) 1,518 32 Deckers Outdoor Corp. (a) 5,561 334 Movado Group, Inc. 4,910 24 Steven Madden Ltd. 785 ------------- 12,774 ------------- THRIFTS & MORTGAGE FINANCE -- 2.4% 164 HomeStreet, Inc. 4,443 140 Meta Financial Group, Inc. 4,599 154 PennyMac Financial Services, Inc. 5,430 |
See Notes to Financial Statements Page 23
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 29, 2020 (UNAUDITED)
SHARES DESCRIPTION VALUE --------------------------------------------------------------------- COMMON STOCKS (CONTINUED) THRIFTS & MORTGAGE FINANCE (CONTINUED) 620 Radian Group, Inc. $ 13,169 156 Walker & Dunlop, Inc. 10,117 154 Washington Federal, Inc. 4,618 ------------- 42,376 ------------- TOBACCO -- 0.7% 204 Universal Corp. 10,068 157 Vector Group Ltd. 1,824 ------------- 11,892 ------------- TRADING COMPANIES & DISTRIBUTORS -- 3.2% 497 BMC Stock Holdings, Inc. (a) 12,191 305 Foundation Building Materials, Inc. (a) 4,758 410 GMS, Inc. (a) 9,369 916 NOW, Inc. (a) 8,088 46 Rush Enterprises, Inc., Class A 1,928 54 SiteOne Landscape Supply, Inc. (a) 5,360 210 Triton International Ltd. 7,218 184 WESCO International, Inc. (a) 7,465 ------------- 56,377 ------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.5% 419 Telephone & Data Systems, Inc. 8,439 ------------- TOTAL COMMON STOCKS -- 99.7% 1,781,177 (Cost $2,040,333) ------------- MONEY MARKET FUNDS -- 0.3% 4,825 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 1.44% (b) 4,825 (Cost $4,825) ------------- TOTAL INVESTMENTS -- 100.0% 1,786,002 (Cost $2,045,158) (c) NET OTHER ASSETS AND LIABILITIES -- (0.0)% (22) ------------- NET ASSETS -- 100.0% $ 1,785,980 ============= |
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 29, 2020.
(c) Aggregate cost for financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of February 29, 2020, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $5,211 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $264,367. The net unrealized depreciation was $259,156.
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 29, 2020 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT QUOTED OBSERVABLE UNOBSERVABLE PRICES INPUTS INPUTS --------------------------------------- Common Stocks* $1,781,177 $ -- $ -- Money Market Funds 4,825 -- -- --------------------------------------- Total Investments $1,786,002 $ -- $ -- ======================================= |
* See Portfolio of Investments for industry breakout.
Page 24 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST FIRST TRUST FIRST TRUST ACTIVE FACTOR ACTIVE FACTOR ACTIVE FACTOR LARGE CAP ETF MID CAP ETF SMALL CAP ETF (AFLG) (AFMC) (AFSM) --------------- --------------- --------------- ASSETS: Investments, at value............................................. $ 1,849,299 $ 1,806,981 $ 1,786,002 Dividends receivable.............................................. 4,274 2,918 1,237 --------------- --------------- --------------- Total Assets................................................... 1,853,573 1,809,899 1,787,239 --------------- --------------- --------------- LIABILITIES: Investment advisory fees payable.................................. 952 1,105 1,259 --------------- --------------- --------------- Total Liabilities.............................................. 952 1,105 1,259 --------------- --------------- --------------- NET ASSETS........................................................ $ 1,852,621 $ 1,808,794 $ 1,785,980 =============== =============== =============== NET ASSETS CONSIST OF: Paid-in capital................................................... $ 1,995,473 $ 1,997,128 $ 2,006,314 Par value......................................................... 1,000 1,000 1,000 Accumulated distributable earnings (loss)......................... (143,852) (189,334) (221,334) --------------- --------------- --------------- NET ASSETS........................................................ $ 1,852,621 $ 1,808,794 $ 1,785,980 =============== =============== =============== NET ASSET VALUE, per share........................................ $ 18.53 $ 18.09 $ 17.86 =============== =============== =============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)......................... 100,002 100,002 100,002 =============== =============== =============== Investments, at cost.............................................. $ 2,065,528 $ 2,053,400 $ 2,045,158 =============== =============== =============== |
See Notes to Financial Statements Page 25
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE PERIOD DECEMBER 3, 2019 (a) THROUGH FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST FIRST TRUST FIRST TRUST ACTIVE FACTOR ACTIVE FACTOR ACTIVE FACTOR LARGE CAP ETF MID CAP ETF SMALL CAP ETF (AFLG) (AFMC) (AFSM) --------------- --------------- --------------- INVESTMENT INCOME: Dividends......................................................... $ 11,113 $ 10,595 $ 8,867 --------------- --------------- --------------- Total investment income........................................ 11,113 10,595 8,867 --------------- --------------- --------------- EXPENSES: Investment advisory fees.......................................... 2,770 3,243 3,735 --------------- --------------- --------------- Total expenses................................................. 2,770 3,243 3,735 --------------- --------------- --------------- NET INVESTMENT INCOME (LOSS)...................................... 8,343 7,352 5,132 --------------- --------------- --------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments.................................................... (23,973) (35,612) (65,242) In-kind redemptions............................................ 92,007 91,345 104,432 --------------- --------------- --------------- Net realized gain (loss).......................................... 68,034 55,733 39,190 --------------- --------------- --------------- Net change in unrealized appreciation (depreciation) on investments.................................................... (216,229) (246,419) (259,156) --------------- --------------- --------------- NET REALIZED AND UNREALIZED GAIN (LOSS)........................... (148,195) (190,686) (219,966) --------------- --------------- --------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ (139,852) $ (183,334) $ (214,834) =============== =============== =============== |
(a) Inception date is consistent with the commencement of investment operations and is the date the initial creation units were established.
Page 26 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 3, 2019 (a) THROUGH FEBRUARY 29, 2020 (UNAUDITED)
FIRST TRUST FIRST TRUST FIRST TRUST ACTIVE FACTOR ACTIVE FACTOR ACTIVE FACTOR LARGE CAP ETF MID CAP ETF SMALL CAP ETF (AFLG) (AFMC) (AFSM) --------------- --------------- --------------- OPERATIONS: Net investment income (loss)...................................... $ 8,343 $ 7,352 $ 5,132 Net realized gain (loss).......................................... 68,034 55,733 39,190 Net change in unrealized appreciation (depreciation).............. (216,229) (246,419) (259,156) --------------- --------------- --------------- Net increase (decrease) in net assets resulting from operations... (139,852) (183,334) (214,834) --------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations............................................. (4,000) (6,000) (6,500) --------------- --------------- --------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold......................................... 3,045,020 3,032,718 3,026,068 Cost of shares redeemed........................................... (1,048,547) (1,034,590) (1,018,754) --------------- --------------- --------------- Net increase (decrease) in net assets resulting from shareholder transactions................................................... 1,996,473 1,998,128 2,007,314 --------------- --------------- --------------- Total increase (decrease) in net assets........................... 1,852,621 1,808,794 1,785,980 NET ASSETS: Beginning of period............................................... -- -- -- --------------- --------------- --------------- End of period..................................................... $ 1,852,621 $ 1,808,794 $ 1,785,980 =============== =============== =============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period........................... -- -- -- Shares sold....................................................... 150,002 150,002 150,002 Shares redeemed................................................... (50,000) (50,000) (50,000) --------------- --------------- --------------- Shares outstanding, end of period................................. 100,002 100,002 100,002 =============== =============== =============== |
(a) Inception date is consistent with the commencement of investment operations and is the date the initial creation units were established.
See Notes to Financial Statements Page 27
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST ACTIVE FACTOR LARGE CAP ETF (AFLG)
PERIOD ENDED 2/29/2020 (a) (UNAUDITED) --------------- Net asset value, beginning of period........................... $ 19.87 --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... 0.08 Net realized and unrealized gain (loss)........................ (1.38) --------- Total from investment operations............................... (1.30) --------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................................... (0.04) --------- Net asset value, end of period................................. $ 18.53 ========= TOTAL RETURN (b)............................................... (6.56)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 1,853 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.55% (c) Ratio of net investment income (loss) to average net assets.... 1.66% (c) Portfolio turnover rate (d).................................... 18% |
FIRST TRUST ACTIVE FACTOR MID CAP ETF (AFMC)
PERIOD ENDED 2/29/2020 (a) (UNAUDITED) --------------- Net asset value, beginning of period........................... $ 19.88 --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... 0.07 Net realized and unrealized gain (loss)........................ (1.80) --------- Total from investment operations............................... (1.73) --------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................................... (0.06) --------- Net asset value, end of period................................. $ 18.09 ========= TOTAL RETURN (b)............................................... (8.74)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 1,809 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.65% (c) Ratio of net investment income (loss) to average net assets.... 1.47% (c) Portfolio turnover rate (d).................................... 25% |
(a) Inception date is December 3, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(c) Annualized.
(d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.
Page 28 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST ACTIVE FACTOR SMALL CAP ETF (AFSM)
PERIOD ENDED 2/29/2020 (a) (UNAUDITED) --------------- Net asset value, beginning of period........................... $ 19.95 --------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)................................... 0.06 Net realized and unrealized gain (loss)........................ (2.08) --------- Total from investment operations............................... (2.02) --------- DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income.......................................... (0.07) --------- Net asset value, end of period................................. $ 17.86 ========= TOTAL RETURN (b)............................................... (10.19)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's)........................... $ 1,786 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets.................. 0.75% (c) Ratio of net investment income (loss) to average net assets.... 1.03% (c) Portfolio turnover rate (d).................................... 27% |
(a) Inception date is December 3, 2019, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(c) Annualized.
(d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.
See Notes to Financial Statements Page 29
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
1. ORGANIZATION
First Trust Exchange-Traded Fund VIII (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on February 22, 2016, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of sixteen funds that are offering shares. This report covers the three funds listed below. The shares of each fund are listed and traded on the NYSE Arca, Inc. ("NYSE Arca").
First Trust Active Factor Large Cap ETF - (NYSE Arca ticker "AFLG")(1) First Trust Active Factor Mid Cap ETF - (NYSE Arca ticker "AFMC")(1) First Trust Active Factor Small Cap ETF - (NYSE Arca ticker "AFSM")(1)
(1) Commenced investment operations on December 3, 2019.
Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Each Fund's Creation Units are generally issued and redeemed in-kind for securities in which the Fund invests, and in certain circumstances, for cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities.
Each Fund is an actively managed exchange-traded fund. Each Fund's investment objective is to seek to provide capital appreciation.
Under normal market conditions, AFLG will invest at least 80% of its net assets (including investment borrowings) in U.S.-listed equity securities issued by large capitalization companies.
Under normal market conditions, AFMC will invest at least 80% of its net assets (including investment borrowings) in U.S.-listed equity securities issued by mid capitalization companies.
Under normal market conditions, AFSM will invest at least 80% of its net assets (including investment borrowings) in U.S.-listed equity securities issued by small capitalization companies.
There can be no assurance that a Fund will achieve its investment objective. The Funds may not be appropriate for all investors.
2. SIGNIFICANT ACCOUNTING POLICIES
The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Each Fund's NAV is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows:
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Common stocks and other equity securities listed on any national or foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities.
Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.
Shares of open-end funds are valued at fair value which is based on NAV per share.
Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect the value of the security.
The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly.
o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates).
o Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment.
The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of February 29, 2020, is included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Distributions received from a Fund's investments in real estate investment trusts ("REITs") may be comprised of return of capital, capital gains and income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. A Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude.
C. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income of each Fund, if any, are declared and paid quarterly, or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually.
Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.
D. INCOME TAXES
Each Fund intends to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year.
The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. As of February 29, 2020, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions.
Each Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. Each Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership.
E. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for supervising the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds.
Pursuant to the Investment Management Agreement between the Trust and the Advisor, First Trust manages the investment of each Fund's assets and is responsible for the expenses of each Fund, including the cost of transfer agency, custody, fund administration, legal, audit, license and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, pro rata share of fees and expenses attributable to investments in other investment companies ("acquired fund fees and expenses"), brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. Each Fund has agreed to pay First Trust an annual unitary management fee based on each Fund's average daily net assets at a rate set forth below:
Rate --------------- First Trust Active Factor Large Cap ETF 0.55% First Trust Active Factor Mid Cap ETF 0.65% First Trust Active Factor Small Cap ETF 0.75% |
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the period ended February 29, 2020, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows:
Purchases Sales ------------ ------------ First Trust Active Factor Large Cap ETF $ 362,174 $ 363,243 First Trust Active Factor Mid Cap ETF 483,261 482,506 First Trust Active Factor Small Cap ETF 520,320 521,672 |
For the period ended February 29, 2020, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
Purchases Sales ------------ ------------ First Trust Active Factor Large Cap ETF $ 3,039,172 $ 1,045,512 First Trust Active Factor Mid Cap ETF 3,027,702 1,034,199 First Trust Active Factor Small Cap ETF 3,021,362 1,018,636 |
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). In order to purchase Creation Units of each Fund, an Authorized Participant must deposit (i) a designated portfolio of securities determined by First Trust (the "Deposit Securities") and generally make or receive a cash payment referred to as the "Cash Component," which is an amount equal to the difference between the NAV of the Fund Shares (per Creation Unit Aggregation) and the market value of the Deposit Securities, and/or (ii) cash in lieu of all or a portion of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a creation transaction fee (the "Creation Transaction Fee") regardless of the number of Creation Units purchased in the transaction. The Creation Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Creation Transaction Fee may increase or decrease with changes in each Fund's portfolio. The price for each Creation Unit will equal the daily NAV per share times the number of shares in a Creation Unit plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees or stamp taxes. When a Fund permits an Authorized Participant to substitute cash or a different security in lieu of depositing one or more of the requisite Deposit Securities, the Authorized Participant may also be assessed an amount to cover the cost of purchasing the Deposit Securities and/or disposing of the substituted securities, including operational processing and brokerage costs, transfer fees, stamp taxes, and part or all of the spread between the expected bid and offer side of the market related to such Deposit Securities and/or substitute securities.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a redemption transaction fee (the "Redemption Transaction Fee"), regardless of the number of Creation Units redeemed in the transaction. The Redemption Transaction Fee may vary and is based on the composition of the securities included in each Fund's portfolio and the countries in which the transactions are settled. The Redemption Transaction Fee may increase or decrease with changes in each Fund's portfolio. Each Fund reserves the right to effect redemptions in cash. An Authorized Participant may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before November 24, 2021.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there was the following subsequent event:
Beginning in December 2019, the outbreak of the respiratory disease designated as COVID-19 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short-term or may last for an extended period of time and, in either case, could result in a substantial economic downturn or recession. Management is continuing to monitor this event.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC's website at www.sec.gov. Each Fund's complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund's Forms N-PORT and Forms N-CSR are available on the SEC's website listed above.
RISK CONSIDERATIONS
RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND.
CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.
DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.
INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate ("LIBOR") as a reference interest rate, it is subject to LIBOR Risk. In 2017, the United Kingdom's Financial Conduct Authority announced that LIBOR will cease to be available for use after 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors. Any such effects of the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.
MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of this COVID-19 pandemic may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.
Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENT
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"), including the Independent Trustees, unanimously approved the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor"), on behalf of the following three series of the Trust (each a "Fund" and collectively, the "Funds"):
First Trust Active Factor Large Cap ETF (AFLG) First Trust Active Factor Mid Cap ETF (AFMC) First Trust Active Factor Small Cap ETF (AFSM)
The Board approved the Agreement for each Fund for an initial two-year term at a meeting held on September 9, 2019. The Board determined for each Fund that the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services expected to be provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment.
To reach this determination for each Fund, the Board considered its duties under the Investment Company Act of 1940, as amended (the "1940 Act"), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. To assist the Board in its evaluation of the Agreement for each Fund, the Independent Trustees received a report from the Advisor in advance of the Board meeting responding to a request for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services to be provided by the Advisor to each Fund (including the relevant personnel responsible for these services and their experience); the proposed unitary fee rate payable by each Fund as compared to fees charged to a peer group of funds (the "Expense Group") and a broad peer universe of funds (the "Expense Universe"), each assembled by Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds ("ETFs") managed by the Advisor; the estimated expense ratio of each Fund as compared to expense ratios of the funds in the Fund's Expense Group and Expense Universe; the nature of expenses to be incurred in providing services to each Fund and the potential for economies of scale, if any; financial data on the Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Independent Trustees and their counsel also met separately to discuss the information provided by the Advisor. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor is a reasonable business arrangement from each Fund's perspective.
In evaluating whether to approve the Agreement for each Fund, the Board considered the nature, extent and quality of the services to be provided by the Advisor under the Agreement and considered that employees of the Advisor provide management services to other ETFs and to other investment companies in the First Trust Fund Complex with diligence and care. The Board considered that the Advisor will be responsible for the overall management and administration of each Fund and reviewed all of the services to be provided by the Advisor to the Funds, as well as the background and experience of the persons responsible for such services. The Board noted that each Fund will be an actively-managed ETF and noted that the Advisor's Investment Committee will be responsible for the day-to-day management of the Fund's investments. The Board considered the background and experience of the members of the Investment Committee. The Board considered the investment models to be used in implementing the Funds'
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 29, 2020 (UNAUDITED)
investment strategies, including the process for reviewing and testing the models and the personnel responsible for developing the models and their experience. In reviewing the services to be provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor's and each Fund's compliance with the 1940 Act, as well as each Fund's compliance with its investment objective, policies and restrictions. At the meeting, the Trustees received a presentation from the members of the Advisor's Strategy Research Group who developed the investment models on which the Funds will be based, and were able to ask questions about the operation of the models and the proposed investment strategies for the Funds. Because the Funds had yet to commence investment operations, the Board could not consider the historical investment performance of the Funds; however, the Board considered the historical investment performance of seed accounts that are based on the same investment models on which the Funds will be based. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services to be provided to each Fund by the Advisor under the Agreement are expected to be satisfactory.
The Board considered the proposed unitary fee rate payable by each Fund under the Agreement for the services to be provided. The Board noted that, under the unitary fee arrangement, AFLG would pay the Advisor a unitary fee equal to an annual rate of 0.55% of its average daily net assets, AFMC would pay the Advisor a unitary fee equal to an annual rate of 0.65% of its average daily net assets, and AFSM would pay the Advisor a unitary fee equal to an annual rate of 0.75% of its average daily net assets. The Board noted that the Advisor would be responsible for each Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Board received and reviewed information showing the advisory or unitary fee rates and expense ratios of the peer funds in the Expense Groups, as well as advisory and unitary fee rates charged by the Advisor to other fund (including ETF) and non-fund clients, as applicable. Because each Fund will pay a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee for each of AFLG and AFSM was below the median total (net) expense ratio of the peer funds in its Expense Group and that the unitary fee for AFMC was above the median total (net) expense ratio of the peer funds in its Expense Group. With respect to the Expense Groups, the Board discussed with representatives of the Advisor how the Expense Groups were assembled and how each Fund compared and differed from the peer funds. The Board took this information into account in considering the peer data. With respect to fees charged to other clients, the Board considered differences between each Fund and other clients that limited their comparability, noting the Advisor's statements that each Fund is unique within the First Trust Fund Complex, as it is a systemic and risk-managed approach to dynamic factor investing, and that the Advisor does not provide advisory services to any non-fund clients with investment objectives and policies similar to those of the Funds. The Board also noted the Advisor's explanations for the differences in the unitary fees across the Funds. In light of the information considered and the nature, extent and quality of the services expected to be provided to each Fund under the Agreement, the Board determined that the proposed unitary fee for each Fund was fair and reasonable.
The Board noted that the proposed unitary fee for each Fund was not structured to pass on to shareholders the benefits of any economies of scale as the Fund's assets grow. The Board noted that any reduction in fixed costs associated with the management of the Funds would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Funds. The Board noted that the Advisor has continued to hire personnel and build infrastructure, including technology, to improve the services to the funds in the First Trust Fund Complex. The Board took into consideration the types of costs to be borne by the Advisor in connection with its services to be performed for each Fund under the Agreement and noted that the Advisor was unable to estimate the profitability of the Agreement for each Fund to the Advisor at this time. In addition, the Board considered fall-out benefits described by the Advisor that may be realized from its relationship with the Funds. The Board considered that the Advisor had identified as a fall-out benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Funds, may have had no dealings with the Advisor or FTP. The Board also noted that the Advisor would not utilize soft dollars in connection with the Funds. The Board concluded that the character and amount of potential fall-out benefits to the Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement are fair and reasonable and that the approval of the Agreement is in the best interests of each Fund. No single factor was determinative in the Board's analysis.
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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]
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
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) Not applicable.
(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.
By (Signature and Title)* /s/ James M. Dykas ---------------------------------------- James M. Dykas, President and Chief Executive Officer (principal executive officer) Date: May 8, 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: May 8, 2020 ------------ By (Signature and Title)* /s/ Donald P. Swade ---------------------------------------- Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) Date: May 8, 2020 ------------ |
* Print the name and title of each signing officer under his or her signature.
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