FIRST TRUST
First Trust Exchange-Traded Fund VIII
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First Trust Innovation Leaders ETF (ILDR)
First Trust Expanded Technology ETF (XPND)
First Trust Multi-Strategy Alternative ETF (LALT)
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Semi-Annual Report
For the Period Ended
February 28, 2023
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TABLE OF CONTENTS
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FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 28, 2023
Shareholder Letter........................................................... 2
Fund Performance Overview
First Trust Innovation Leaders ETF (ILDR)................................. 3
First Trust Expanded Technology ETF (XPND)................................ 5
First Trust Multi-Strategy Alternative ETF (LALT)......................... 7
Notes to Fund Performance Overview........................................... 9
Portfolio Management......................................................... 10
Understanding Your Fund Expenses............................................. 13
Portfolio of Investments
First Trust Innovation Leaders ETF (ILDR)................................. 14
First Trust Expanded Technology ETF (XPND)................................ 16
First Trust Multi-Strategy Alternative ETF (LALT)......................... 18
Statements of Assets and Liabilities......................................... 19
Statements of Operations..................................................... 20
Statements of Changes in Net Assets.......................................... 21
Financial Highlights......................................................... 23
Notes to Financial Statements................................................ 25
Additional Information....................................................... 32
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CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
any series of First Trust Exchange-Traded Fund VIII (the "Trust") described in
this report (each such series is referred to as a "Fund" and collectively, as
the "Funds") to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. When
evaluating the information included in this report, you are cautioned not to
place undue reliance on these forward-looking statements, which reflect the
judgment of the Advisor and its representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that any Fund described in this report will achieve its
investment objective. Each Fund is subject to market risk, which is the
possibility that the market values of securities owned by the Fund will decline
and that the value of the Fund's shares may therefore be less than what you paid
for them. Accordingly, you can lose money investing in a Fund. See "Risk
Considerations" in the Additional Information section of this report for a
discussion of certain other risks of investing in the Funds.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on each Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about each Fund and presents data and analysis that provide
insight into each Fund's performance and investment approach.
The statistical information that follows may help you understand each Fund's
performance compared to that of relevant market benchmark(s).
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.
Page 1
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SHAREHOLDER LETTER
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FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
FEBRUARY 28, 2023
Dear Shareholders:
First Trust is pleased to provide you with the semi-annual report for certain
series of the First Trust Exchange-Traded Fund VIII (the "Funds"), which
contains detailed information about the Funds for the six-month period ended
February 28, 2023. Please note that the First Trust Multi-Strategy Alternative
ETF ("LALT") was incepted on January 31, 2023, so information in this letter and
the report prior to that date will not apply to this Fund.
As I write this letter in late March, the global financial and banking sectors
are sifting through the rubble of several bank failures in the U.S. and
absorbing the news of a merger between two of Switzerland's largest banks. As
many investors may be aware, despite this news, the Federal Reserve (the "Fed")
announced an additional 25 basis point increase to the Federal Funds target rate
(upper bound) at their March 22, 2023 meeting. This brings the Federal Funds
target rate (upper bound) to 5.0%, its highest level since June 2006. The Fed's
resolve in fighting inflation is notable, but they find themselves in an
unenviable situation, in my opinion. On the one hand, if the Fed becomes overly
restrictive, they could run the risk of ushering in an economic recession. On
the other hand, inflation (which we will discuss further in a moment) is still
well-above the Fed's stated target level of 2.0%, which could indicate that
higher rates may be required to rein in stubbornly high prices.
Since peaking at 9.1% in June 2022, inflation, as measured by the trailing
12-month rate of change in the Consumer Price Index ("CPI"), has been trending
downward. While this is welcome news, the CPI, which stood at 6.0% on February
28, 2023, is still at a level not seen since 1990, according to data from the
U.S. Bureau of Labor Statistics (excluding October 2021, when it was trending
towards its June 2022 peak of 9.1%). In a positive sign, inflation does not
appear to have slowed the pace of U.S. consumer spending. In January 2023,
consumer spending, as measured by personal consumption expenditures ("PCE"),
grew by 1.8% month-over-month, the largest increase in the metric since March
2021, according to Reuters. There is no way to know if this trend will continue,
but a healthy consumer, as measured by continued growth in PCE, may be the key
to the U.S. avoiding a recession, in my opinion.
The Federal Reserve Bank of New York reported that an inverted U.S. yield curve
is a historically reliable signal that a recession could occur in the next
twelve months, according to Forbes. As of March 22, 2023, the yield on the
2-Year Treasury Note ("T-Note") stood 50 basis points above the yield on the
10-Year T-Note. Brian Wesbury, Chief Economist at First Trust, recently noted
that an inverted yield curve "is consistent with risk aversion among investors
and in Corporate America. We expect prolonged weakness in business investment in
equipment as well as in commercial construction. And, after surging rapidly last
year, the pace of inventory accumulation should cool off too. Combined, these
should pose a big headwind for gross domestic product growth later this year."
Whether these headwinds grow into an economic recession remains to be seen, but
the Fed will be paying close attention as they try to achieve their best-case
scenario of a "soft landing" for the U.S. economy.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the
Funds again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 2
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST INNOVATION LEADERS ETF (ILDR)
The First Trust Innovation Leaders ETF (the "Fund") seeks to provide capital
appreciation. Under normal market conditions, the Fund will invest at least 80%
of its net assets (plus any borrowings for investment purposes) in common stock
and depository receipts issued by U.S. and non-U.S. companies that may benefit
from the development or application of scientific and technological innovation.
This includes, but is not limited to, companies that are poised to benefit from
new products or services, scientific research, technological improvements and/or
enhancements to existing products or services related to automation, advanced
medicine, networks, advanced computing, enhanced mobility, energy revolution and
e-commerce. 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 "ILDR."
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year Inception Inception
Ended Ended (5/25/21) (5/25/21)
2/28/23 2/28/23 to 2/28/23 to 2/28/23
FUND PERFORMANCE
NAV 1.05% -17.17% -14.05% -23.45%
Market Price 0.59% -17.19% -13.96% -23.30%
INDEX PERFORMANCE
Russell 3000(R) Growth Index -0.98% -13.01% -5.54% -9.56%
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(See Notes to Fund Performance Overview on page 9.)
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% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
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Information Technology 42.5%
Health Care 26.8
Industrials 15.7
Communication Services 8.6
Consumer Discretionary 5.7
Financials 0.7
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Total 100.0%
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% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
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Microsoft Corp. 5.0%
Amazon.com, Inc. 4.2
Uber Technologies, Inc. 3.4
Siemens AG 3.1
NVIDIA Corp. 2.9
ServiceNow, Inc. 2.9
Seagen, Inc. 2.9
Alphabet, Inc., Class C 2.7
Regeneron Pharmaceuticals, Inc. 2.6
Keysight Technologies, Inc. 2.2
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Total 31.9%
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Page 3
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST INNOVATION LEADERS ETF (ILDR) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
MAY 25, 2021 - FEBRUARY 28, 2023
First Trust Innovation Russell 3000(R)
Leaders ETF Growth Index
5/25/21 $10,000 $10,000
8/31/21 11,435 11,337
2/28/22 9,242 10,396
8/31/22 7,575 9,133
2/28/23 7,655 9,044
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 4
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST EXPANDED TECHNOLOGY ETF (XPND)
The First Trust Expanded Technology ETF (the "Fund") seeks to provide long-term
capital appreciation. Under normal market conditions, the Fund will invest at
least 80% of its net assets (plus any borrowings for investment purposes) in the
common stocks of companies identified by the Fund's investment advisor as either
information technology companies or financial companies and communication
services companies whose operations are principally derived from and/or
dependent upon technology. Prior to March 16, 2023 consumer discretionary
companies were included in the Fund's strategy. As of that date financial
companies replaced consumer discretionary companies in the strategy. 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 "XPND."
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PERFORMANCE
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AVERAGE ANNUAL CUMULATIVE
TOTAL RETURNS TOTAL RETURNS
6 Months 1 Year Inception Inception
Ended Ended (6/14/21) (6/14/21)
2/28/23 2/28/23 to 2/28/23 to 2/28/23
FUND PERFORMANCE
NAV 1.50% -12.35% -8.70% -14.41%
Market Price 1.44% -12.40% -8.73% -14.46%
INDEX PERFORMANCE
S&P 500(R) Information Technology Index 1.21% -10.96% -2.24% -3.80%
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(See Notes to Fund Performance Overview on page 9.)
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% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
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Information Technology 90.0%
Communication Services 10.0
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Total 100.0%
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% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
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Visa, Inc., Class A 4.7%
Mastercard, Inc., Class A 4.5
Apple, Inc. 4.5
Microsoft Corp. 4.5
Broadcom, Inc. 4.4
Alphabet, Inc., Class A 4.1
Cisco Systems, Inc. 3.8
Salesforce, Inc. 3.5
Texas Instruments, Inc. 3.3
Netflix, Inc. 3.3
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Total 40.6%
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Page 5
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST EXPANDED TECHNOLOGY ETF (XPND) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JUNE 14, 2021 - FEBRUARY 28, 2023
First Trust Expanded S&P 500(R) Information
Technology ETF Technology Index
6/14/21 $10,000 $10,000
8/31/21 10,837 11,097
2/28/22 9,764 10,804
8/31/22 8,432 9,505
2/28/23 8,559 9,620
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 6
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST MULTI-STRATEGY ALTERNATIVE ETF (LALT)
The First Trust Multi-Strategy Alternative ETF (the "Fund") seeks to provide
long-term total return. The Fund is an actively managed exchange-traded fund
("ETF") that seeks to achieve long-term total return by allocating its assets
amongst a variety of alternative asset categories and strategies in an effort to
provide lower correlation and diversifying risk exposures compared to
traditional equity and fixed income benchmarks (e.g., the S&P 500(R) Index or
Bloomberg Aggregate Bond Index) over various market cycles. The alternative
asset categories and strategies the Fund may employ include, but are not limited
to, hedged equity, long/short, event driven, managed futures, commodities, real
estate, opportunistic fixed income, relative value, currencies and global macro.
The Fund will primarily gain exposure to these alternative asset categories and
strategies through investments in exchange-traded products ("ETPs") (including
ETFs, exchange-traded notes ("ETNs") and trusts backed by physical commodities
or currencies). 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 "LALT."
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PERFORMANCE
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CUMULATIVE
TOTAL RETURNS
Inception
(1/31/23)
to 2/28/23
FUND PERFORMANCE
NAV -1.10%
Market Price -0.70%
INDEX PERFORMANCE
Hedge Fund Research HFRX Global Hedge Fund Index -0.47%
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(See Notes to Fund Performance Overview on page 9.)
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% OF
FUND ALLOCATION NET ASSETS
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Exchange-Traded Funds 99.9%
Net Other Assets and Liabilities 0.1
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Total 100.0%
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Page 7
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST MULTI-STRATEGY ALTERNATIVE ETF (LALT) (CONTINUED)
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
JANUARY 31, 2023 - FEBRUARY 28, 2023
First Trust Multi-Strategy Hedge Fund Research HFRX
Alternative ETF Golbal Hedge Fund Index
1/31/23 $10,000 $10,000
2/28/23 9,890 9,953
Performance figures assume reinvestment of all distributions and do not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption or sale of Fund shares. An index is a statistical composite that
tracks a specified financial market or sector. Unlike the Fund, the index does
not actually hold a portfolio of securities and therefore does not incur the
expenses incurred by the Fund. These expenses negatively impact the performance
of the Fund. The Fund's past performance does not predict future performance.
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
Information showing the number of days the market price of the Fund's shares was
greater (at a premium) and less (at a discount) than the Fund's net asset value
for the most recently completed year, and the most recently completed calendar
quarters since that year (or life of the Fund, if shorter) is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Page 8
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NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED)
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Total returns for the periods since inception are calculated from the inception
date of each Fund. "Average Annual Total Returns" represent the average annual
change in value of an investment over the periods indicated. "Cumulative Total
Returns" represent the total change in value of an investment over the periods
indicated.
Each Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint of the national best bid and offer price ("NBBO") as of
the time that the Fund's NAV is calculated. Under SEC rules, the NBBO consists
of the highest displayed buy and lowest sell prices among the various exchanges
trading the Fund at the time the Fund's NAV is calculated. Since shares of each
Fund did not trade in the secondary market until after the Fund's inception, for
the period from inception to the first day of secondary market trading in shares
of the Fund, the NAV of each Fund is used as a proxy for the secondary market
trading price to calculate market returns. NAV and market returns assume that
all distributions have been reinvested in each Fund at NAV and Market Price,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, the indices do not actually hold a portfolio of
securities and therefore do not incur the expenses incurred by each Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the indices. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of each
Fund will vary with changes in market conditions. Shares of each Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. Each Fund's past performance is no guarantee of future performance.
Page 9
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PORTFOLIO MANAGEMENT
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FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 28, 2023 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the First Trust Innovation Leaders 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 administrative
services necessary for the management of the Fund.
PORTFOLIO MANAGEMENT TEAM
The following persons serve as portfolio managers of the Fund:
BOB HENSLEY, CFA, VICE PRESIDENT OF FIRST TRUST
DAVID MCGAREL, CFA, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND
MANAGING DIRECTOR OF FIRST TRUST
CHRIS PETERSON, CFA, SENIOR VICE PRESIDENT OF FIRST TRUST
JARED WOLLEN, CFA, VICE PRESIDENT OF FIRST TRUST
Each portfolio manager has served in such capacity for the Fund since May 2021.
Page 10
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PORTFOLIO MANAGEMENT (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 28, 2023 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") serves as the
investment advisor to the First Trust Expanded Technology 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
administrative services necessary for the management of the Fund.
PORTFOLIO MANAGEMENT TEAM
The Fund's portfolio is managed by a team (the "Investment Committee")
consisting of:
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
ERIK RUSSO, VICE PRESIDENT OF FIRST TRUST
OMAR SEPULVEDA, VICE PRESIDENT OF FIRST TRUST
The Investment Committee members are primarily and jointly responsible for the
day-to-day management of the Fund. Each Investment Committee member has served
as a part of the portfolio management team for the Fund since June 2021.
Page 11
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PORTFOLIO MANAGEMENT (CONTINUED)
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FIRST TRUST EXCHANGE-TRADED FUND VIII
SEMI-ANNUAL REPORT
FEBRUARY 28, 2023 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust" or the "Advisor") is the investment
advisor to the First Trust Multi-Strategy Alternative 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
administrative services necessary for the management of the Fund.
PORTFOLIO MANAGEMENT TEAM
The following persons serve as the portfolio managers of the Fund:
JOHN GAMBLA, CFA, FRM, PRM, SENIOR VICE PRESIDENT, CO-HEAD OF THE ALTERNATIVES
INVESTMENT TEAM OF FIRST TRUST
ROB A. GUTTSCHOW, CFA, SENIOR VICE PRESIDENT, CO-HEAD OF THE ALTERNATIVES
INVESTMENT TEAM OF FIRST TRUST
DANIEL J. LINDQUIST, CHAIRMAN OF THE INVESTMENT COMMITTEE AND MANAGING
DIRECTOR OF FIRST TRUST
DAVID G. MCGAREL, CHIEF INVESTMENT OFFICER, CHIEF OPERATING OFFICER AND MANAGING
DIRECTOR OF FIRST TRUST
CHRIS A. PETERSEN, CFA, SENIOR VICE PRESIDENT AND HEAD OF RESEARCH STRATEGY
OF FIRST TRUST
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Fund. Each portfolio manager has served as a part of the
portfolio management team of the Fund since January 2023.
Page 12
FIRST TRUST EXCHANGE-TRADED FUND VIII
UNDERSTANDING YOUR FUND EXPENSES
FEBRUARY 28, 2023 (UNAUDITED)
As a shareholder of First Trust Innovation Leaders ETF, First Trust Expanded
Technology ETF or First Trust Multi-Strategy Alternative ETF (each a "Fund" and
collectively, the "Funds"), you incur two types of costs: (1) transaction costs;
and (2) ongoing costs, including management fees, distribution and/or service
(12b-1) fees, if any, and other Fund expenses. This Example is intended to help
you understand your ongoing costs of investing in the Funds and to compare these
costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period (or since inception) and held through the six-month (or shorter) period
ended February 28, 2023.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Period"
to estimate the expenses you paid on your account during this six-month (or
shorter) period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on each Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
each Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the 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.
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ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
SEPTEMBER 1, 2022 FEBRUARY 28, 2023 PERIOD PERIOD (a)
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FIRST TRUST INNOVATION LEADERS ETF (ILDR)
Actual $1,000.00 $1,010.50 0.75% $3.74
Hypothetical (5% return before expenses) $1,000.00 $1,021.08 0.75% $3.76
FIRST TRUST EXPANDED TECHNOLOGY ETF (XPND)
Actual $1,000.00 $1,015.00 0.65% $3.25
Hypothetical (5% return before expenses) $1,000.00 $1,021.57 0.65% $3.26
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ANNUALIZED EXPENSES PAID
EXPENSE RATIO DURING THE PERIOD
BEGINNING ENDING BASED ON THE JANUARY 31, 2023 (b)
ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO
JANUARY 31, 2023 (b) FEBRUARY 28, 2023 IN THE PERIOD FEBRUARY 28, 2023 (c)
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FIRST TRUST MULTI-STRATEGY ALTERNATIVE ETF (LALT) (d)
Actual $1,000.00 $ 989.00 0.20% $0.16
Hypothetical (5% return before expenses) $1,000.00 $1,023.80 0.20% $1.00
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (September
1, 2022 through February 28, 2023), multiplied by 181/365 (to reflect the
six-month period).
(b) Inception date.
(c) Actual expenses are equal to the annualized expense ratio as indicated in
the table multiplied by the average account value over the period (January
31, 2023 through February 28, 2023), multiplied by 29/365. Hypothetical
expenses are assumed for the most recent six-month period.
(d) Annualized expense ratio and expenses paid during the period do not
include fees and expenses of the underlying funds in which the Fund
invests.
Page 13
FIRST TRUST INNOVATION LEADERS ETF (ILDR)
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 2023 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 96.5%
AEROSPACE & DEFENSE -- 3.7%
499 AeroVironment, Inc. (a) $ 42,784
110 L3Harris Technologies, Inc. 23,231
101 Northrop Grumman Corp. 46,875
-------------
112,890
-------------
AUTOMOBILES -- 1.0%
150 Tesla, Inc. (a) 30,856
-------------
BIOTECHNOLOGY -- 17.4%
235 Alnylam Pharmaceuticals, Inc. (a) 44,991
750 Apellis Pharmaceuticals, Inc. (a) 49,110
1,443 Arcus Biosciences, Inc. (a) 26,277
550 BioMarin Pharmaceutical, Inc. (a) 54,775
4,295 Coherus Biosciences, Inc. (a) 29,077
448 Intellia Therapeutics, Inc. (a) 17,996
1,181 Myovant Sciences Ltd. (a) 31,840
101 Regeneron Pharmaceuticals,
Inc. (a) 76,802
804 REGENXBIO, Inc. (a) 17,889
475 Seagen, Inc. (a) 85,353
1,350 SpringWorks Therapeutics,
Inc. (a) 43,065
200 Vertex Pharmaceuticals, Inc. (a) 58,058
-------------
535,233
-------------
CAPITAL MARKETS -- 0.7%
300 Tradeweb Markets, Inc., Class A 21,267
-------------
COMMUNICATIONS EQUIPMENT
-- 2.0%
270 Arista Networks, Inc. (a) 37,449
499 Ciena Corp. (a) 24,062
-------------
61,511
-------------
CONSTRUCTION & ENGINEERING
-- 0.8%
240 MasTec, Inc. (a) 23,453
-------------
DIVERSIFIED TELECOMMUNICATION
SERVICES -- 0.5%
1,200 Radius Global Infrastructure, Inc.,
Class A (a) 16,356
-------------
ELECTRICAL EQUIPMENT -- 4.4%
1,000 Bloom Energy Corp., Class A (a) 21,690
479 Emerson Electric Co. 39,618
150 Generac Holdings, Inc. (a) 18,002
349 Schneider Electric SE (EUR) 56,153
-------------
135,463
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 4.0%
400 Keysight Technologies, Inc. (a) 63,984
250 TE Connectivity Ltd. 31,830
90 Zebra Technologies Corp.,
Class A (a) 27,022
-------------
122,836
-------------
ENTERTAINMENT -- 1.5%
326 Activision Blizzard, Inc. 24,857
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
ENTERTAINMENT (CONTINUED)
200 Take-Two Interactive Software,
Inc. (a) $ 21,910
-------------
46,767
-------------
HEALTH CARE EQUIPMENT & SUPPLIES
-- 5.1%
180 Align Technology, Inc. (a) 55,710
212 Dexcom, Inc. (a) 23,534
693 Globus Medical, Inc., Class A (a) 40,430
68 Intuitive Surgical, Inc. (a) 15,599
898 Outset Medical, Inc. (a) 20,483
-------------
155,756
-------------
HEALTH CARE PROVIDERS & SERVICES
-- 0.9%
599 Castle Biosciences, Inc. (a) 15,083
400 Fulgent Genetics, Inc. (a) 13,116
-------------
28,199
-------------
INDUSTRIAL CONGLOMERATES -- 3.0%
599 Siemens AG (EUR) 91,676
-------------
INTERACTIVE MEDIA & SERVICES
-- 5.1%
900 Alphabet, Inc., Class C (a) 81,270
300 Meta Platforms, Inc., Class A (a) 52,482
999 ZoomInfo Technologies, Inc. (a) 24,146
-------------
157,898
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 4.5%
1,317 Amazon.com, Inc. (a) 124,101
110 Etsy, Inc. (a) 13,355
-------------
137,456
-------------
IT SERVICES -- 6.4%
15 Adyen N.V. (EUR) (a) (b) (c) 21,342
448 Block, Inc. (a) 34,375
120 MongoDB, Inc. (a) 25,142
350 Shopify, Inc., Class A (a) 14,399
799 Toast, Inc., Class A (a) 15,117
374 Twilio, Inc., Class A (a) 25,137
275 Visa, Inc., Class A 60,484
-------------
195,996
-------------
LIFE SCIENCES TOOLS & SERVICES
-- 2.4%
1,751 Cytek Biosciences, Inc. (a) 18,035
105 Thermo Fisher Scientific, Inc. 56,885
-------------
74,920
-------------
MEDIA -- 1.1%
599 Trade Desk (The), Inc., Class A (a) 33,520
-------------
ROAD & RAIL -- 3.3%
2,996 Uber Technologies, Inc. (a) 99,647
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 7.8%
1,249 Allegro MicroSystems, Inc. (a) 54,556
175 Enphase Energy, Inc. (a) 36,843
Page 14 See Notes to Financial Statements
FIRST TRUST INNOVATION LEADERS ETF (ILDR)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2023 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS (CONTINUED)
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
374 NVIDIA Corp. $ 86,828
200 NXP Semiconductors N.V. 35,696
574 Rambus, Inc. (a) 25,388
-------------
239,311
-------------
SOFTWARE -- 20.9%
125 Aspen Technology, Inc. (a) 26,501
299 Autodesk, Inc. (a) 59,408
399 Bentley Systems, Inc., Class B 16,144
450 Crowdstrike Holdings, Inc.,
Class A (a) 54,311
599 Datadog, Inc., Class A (a) 45,835
110 Intuit, Inc. 44,790
598 Microsoft Corp. 149,153
2,995 Palantir Technologies, Inc.,
Class A (a) 23,481
75 Paylocity Holding Corp. (a) 14,446
200 ServiceNow, Inc. (a) 86,434
250 Sprout Social, Inc., Class A (a) 15,245
1,548 SUSE S.A. (EUR) (a) 30,503
175 Workday, Inc., Class A (a) 32,457
266 Workiva, Inc. (a) 23,727
133 Zscaler, Inc. (a) 17,443
-------------
639,878
-------------
TOTAL COMMON STOCKS
-- 96.5% 2,960,889
(Cost $3,383,407) -------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
MONEY MARKET FUNDS -- 3.5%
107,159 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class
4.41% (d) $ 107,159
(Cost $107,159) -------------
TOTAL INVESTMENTS -- 100.0% 3,068,048
(Cost $3,490,566)
NET OTHER ASSETS AND
LIABILITIES -- (0.0)% (156)
-------------
NET ASSETS -- 100.0% $ 3,067,892
=============
(a) Non-income producing security.
(b) This security is exempt from registration upon resale under Rule 144A of
the Securities Act of 1933, as amended (the "1933 Act") and may be resold
in transactions exempt from registration, normally to qualified
institutional buyers. This security is not restricted on the foreign
exchange where it trades freely without any additional registration. As
such, it does not require the additional disclosure required of restricted
securities.
(c) This security may be resold to qualified foreign investors and foreign
institutional buyers under Regulation S of the 1933 Act.
(d) Rate shown reflects yield as of February 28, 2023.
---------------------------------------------------------------------
% OF TOTAL
CURRENCY EXPOSURE DIVERSIFICATION INVESTMENTS
---------------------------------------------------------------------
USD 93.5%
EUR 6.5
--------
Total 100.0%
========
Currency Abbreviations:
EUR - Euro
USD - United States Dollar
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 28,
2023 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/28/2023 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
Common Stocks*........................................ $ 2,960,889 $ 2,960,889 $ -- $ --
Money Market Funds.................................... 107,159 107,159 -- --
-------------- -------------- -------------- --------------
Total Investments..................................... $ 3,068,048 $ 3,068,048 $ -- $ --
============== ============== ============== ==============
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 15
FIRST TRUST EXPANDED TECHNOLOGY ETF (XPND)
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 2023 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 99.6%
COMMUNICATIONS EQUIPMENT
-- 5.8%
900 Arista Networks, Inc. (a) $ 124,830
4,686 Cisco Systems, Inc. 226,896
-------------
351,726
-------------
ELECTRONIC EQUIPMENT, INSTRUMENTS
& COMPONENTS -- 8.0%
1,603 Amphenol Corp., Class A 124,264
604 CDW Corp. 122,262
3,396 Corning, Inc. 115,294
658 Keysight Technologies, Inc. (a) 105,254
39 Teledyne Technologies, Inc. (a) 16,773
-------------
483,847
-------------
ENTERTAINMENT -- 3.2%
607 Netflix, Inc. (a) 195,533
-------------
INTERACTIVE MEDIA & SERVICES
-- 4.1%
2,713 Alphabet, Inc., Class A (a) 244,333
-------------
IT SERVICES -- 19.8%
160 Akamai Technologies, Inc. (a) 11,616
640 Automatic Data Processing, Inc. 140,685
96 Broadridge Financial Solutions,
Inc. 13,515
40 EPAM Systems, Inc. (a) 12,306
1,346 Fiserv, Inc. (a) 154,911
79 FleetCor Technologies, Inc. (a) 16,968
1,250 International Business Machines
Corp. 161,625
87 Jack Henry & Associates, Inc. 14,289
768 Mastercard, Inc., Class A 272,863
1,014 Paychex, Inc. 111,945
1,270 Visa, Inc., Class A 279,324
-------------
1,190,047
-------------
MEDIA -- 2.7%
351 Charter Communications, Inc.,
Class A (a) 129,031
448 Interpublic Group of (The) Cos.,
Inc. 15,922
195 Omnicom Group, Inc. 17,661
-------------
162,614
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 26.6%
899 Analog Devices, Inc. 164,940
1,455 Applied Materials, Inc. 168,998
441 Broadcom, Inc. 262,082
392 Enphase Energy, Inc. (a) 82,528
335 KLA Corp. 127,092
299 Lam Research Corp. 145,317
1,583 Microchip Technology, Inc. 128,270
1,570 ON Semiconductor Corp. (a) 121,534
1,511 QUALCOMM, Inc. 186,654
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT (CONTINUED)
156 Skyworks Solutions, Inc. $ 17,405
1,141 Texas Instruments, Inc. 195,624
-------------
1,600,444
-------------
SOFTWARE -- 24.4%
595 Adobe, Inc. (a) 192,750
54 ANSYS, Inc. (a) 16,395
621 Autodesk, Inc. (a) 123,387
384 Bentley Systems, Inc., Class B 15,537
750 Cadence Design Systems, Inc. (a) 144,705
419 Intuit, Inc. 170,608
1,081 Microsoft Corp. 269,623
771 Palo Alto Networks, Inc. (a) 145,233
51 Paycom Software, Inc. (a) 14,742
70 Paylocity Holding Corp. (a) 13,483
121 PTC, Inc. (a) 15,165
1,274 Salesforce, Inc. (a) 208,439
390 Synopsys, Inc. (a) 141,866
-------------
1,471,933
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 5.0%
1,847 Apple, Inc. 272,266
903 Hewlett Packard Enterprise Co. 14,096
228 NetApp, Inc. 14,718
-------------
301,080
-------------
TOTAL COMMON STOCKS
-- 99.6% 6,001,557
(Cost $6,461,226) -------------
MONEY MARKET FUNDS -- 0.3%
17,990 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class
4.41% (b) 17,990
(Cost $17,990) -------------
TOTAL INVESTMENTS -- 99.9% 6,019,547
(Cost $6,479,216)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 4,040
-------------
NET ASSETS -- 100.0% $ 6,023,587
=============
(a) Non-income producing security.
(b) Rate shown reflects yield as of February 28, 2023.
Page 16 See Notes to Financial Statements
FIRST TRUST EXPANDED TECHNOLOGY ETF (XPND)
PORTFOLIO OF INVESTMENTS (CONTINUED)
FEBRUARY 28, 2023 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 28,
2023 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/28/2023 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
Common Stocks*........................................ $ 6,001,557 $ 6,001,557 $ -- $ --
Money Market Funds.................................... 17,990 17,990 -- --
-------------- -------------- -------------- --------------
Total Investments..................................... $ 6,019,547 $ 6,019,547 $ -- $ --
============== ============== ============== ==============
* See Portfolio of Investments for industry breakout.
See Notes to Financial Statements Page 17
FIRST TRUST MULTI-STRATEGY ALTERNATIVE ETF (LALT)
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 2023 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
EXCHANGE-TRADED FUNDS -- 99.9%
CAPITAL MARKETS -- 99.9%
7,144 First Trust Alternative Absolute
Return Strategy ETF (a) $ 212,963
4,066 First Trust Global Tactical
Commodity Strategy Fund (a) 95,917
2,033 First Trust Long/Short Equity
ETF (a) 100,207
2,099 First Trust Low Duration
Opportunities ETF (a) 100,017
4,506 First Trust Managed Futures
Strategy Fund (a) 212,593
5,913 First Trust Merger Arbitrage
ETF (a) 118,970
4,121 First Trust TCW Unconstrained
Plus Bond ETF (a) 98,986
516 Invesco Currencyshares Swiss
Franc Trust (b) 48,841
-------------
TOTAL INVESTMENTS -- 99.9% 988,494
(Cost $999,992)
NET OTHER ASSETS AND
LIABILITIES -- 0.1% 1,034
-------------
NET ASSETS -- 100.0% $ 989,528
=============
(a) Investment in an affiliated fund.
(b) Non-income producing security.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of February 28,
2023 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
2/28/2023 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
Exchange-Traded Funds*................................ $ 988,494 $ 988,494 $ -- $ --
============== ============== ============== ==============
* See Portfolio of Investments for industry breakout.
Page 18 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 28, 2023 (UNAUDITED)
FIRST TRUST FIRST TRUST FIRST TRUST
INNOVATION EXPANDED MULTI-STRATEGY
LEADERS ETF TECHNOLOGY ETF ALTERNATIVE ETF
(ILDR) (XPND) (LALT)
---------------- ----------------- -----------------
ASSETS:
Investments, at value - Unaffiliated................................ $ 3,068,048 $ 6,019,547 $ 48,841
Investments, at value - Affiliated.................................. -- -- 939,653
---------------- ----------------- -----------------
Total investments, at value...................................... 3,068,048 6,019,547 988,494
Cash................................................................ -- -- 1,187
Receivables:
Dividends........................................................ 1,344 7,143 --
Reclaims......................................................... 315 -- --
---------------- ----------------- -----------------
Total Assets..................................................... 3,069,707 6,026,690 989,681
---------------- ----------------- -----------------
LIABILITIES:
Investment advisory fees payable.................................... 1,815 3,103 153
---------------- ----------------- -----------------
Total Liabilities................................................ 1,815 3,103 153
---------------- ----------------- -----------------
NET ASSETS.......................................................... $ 3,067,892 $ 6,023,587 $ 989,528
================ ================= =================
NET ASSETS CONSIST OF:
Paid-in capital..................................................... $ 4,272,713 $ 8,877,901 $ 1,000,028
Par value........................................................... 2,000 3,500 500
Accumulated distributable earnings (loss)........................... (1,206,821) (2,857,814) (11,000)
---------------- ----------------- -----------------
NET ASSETS.......................................................... $ 3,067,892 $ 6,023,587 $ 989,528
================ ================= =================
NET ASSET VALUE, per share.......................................... $ 15.34 $ 17.21 $ 19.79
================ ================= =================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share)........................... 200,002 350,002 50,002
================ ================= =================
Investments, at cost - Unaffiliated................................. $ 3,490,566 $ 6,479,216 $ 50,269
================ ================= =================
Investments, at cost - Affiliated................................... $ -- $ -- $ 949,723
================ ================= =================
Total investments, at cost.......................................... $ 3,490,566 $ 6,479,216 $ 999,992
================ ================= =================
See Notes to Financial Statements Page 19
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED FEBRUARY 28, 2023 (UNAUDITED)
FIRST TRUST FIRST TRUST FIRST TRUST
INNOVATION EXPANDED MULTI-STRATEGY
LEADERS ETF TECHNOLOGY ETF ALTERNATIVE ETF
(ILDR) (XPND) (LALT) (a)
---------------- ----------------- -----------------
INVESTMENT INCOME:
Dividends - Unaffiliated............................................ $ 7,170 $ 76,943 $ --
Dividends - Affiliated.............................................. -- -- 654
Foreign withholding tax............................................. (148) -- --
---------------- ----------------- -----------------
Total investment income.......................................... 7,022 76,943 654
---------------- ----------------- -----------------
EXPENSES:
Investment advisory fees............................................ 10,974 45,703 153
---------------- ----------------- -----------------
Total expenses................................................... 10,974 45,703 153
---------------- ----------------- -----------------
NET INVESTMENT INCOME (LOSS)........................................ (3,952) 31,240 501
---------------- ----------------- -----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments - Unaffiliated....................................... (214,118) (1,010,589) (1)
Investments - Affiliated......................................... -- -- (2)
In-kind redemptions - Unaffiliated............................... -- 202,201 --
In-kind redemptions - Affiliated................................. -- -- --
Foreign currency transactions.................................... (39) -- --
---------------- ----------------- -----------------
Net realized gain (loss)............................................ (214,157) (808,388) (3)
---------------- ----------------- -----------------
Net change in unrealized appreciation (depreciation) on:
Investments - Unaffiliated....................................... 250,320 1,318,985 (1,428)
Investments - Affiliated......................................... -- -- (10,070)
Foreign currency translation..................................... (5) -- --
---------------- ----------------- -----------------
Net change in unrealized appreciation (depreciation)................ 250,315 1,318,985 (11,498)
---------------- ----------------- -----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................. 36,158 510,597 (11,501)
---------------- ----------------- -----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.................................................. $ 32,206 $ 541,837 $ (11,000)
================ ================= =================
(a) Inception date is January 31, 2023, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 20 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST
INNOVATION EXPANDED
LEADERS ETF TECHNOLOGY ETF
(ILDR) (XPND)
-------------------------------- --------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
2/28/2023 YEAR ENDED 2/28/2023 YEAR ENDED
(UNAUDITED) 8/31/2022 (UNAUDITED) 8/31/2022
-------------- -------------- -------------- --------------
OPERATIONS:
Net investment income (loss)............................ $ (3,952) $ (16,898) $ 31,240 $ 31,444
Net realized gain (loss)................................ (214,157) (345,905) (808,388) (1,562,992)
Net change in unrealized appreciation (depreciation).... 250,315 (994,121) 1,318,985 (2,600,150)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting from
operations........................................... 32,206 (1,356,924) 541,837 (4,131,698)
-------------- -------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations................................... -- (5,085) (39,630) (16,900)
-------------- -------------- -------------- --------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................... -- 2,079,627 2,346,235 4,886,380
Cost of shares redeemed................................. -- (1,125,105) (12,124,808) (1,837,015)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................. -- 954,522 (9,778,573) 3,049,365
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets................. 32,206 (407,487) (9,276,366) (1,099,233)
NET ASSETS:
Beginning of period..................................... 3,035,686 3,443,173 15,299,953 16,399,186
-------------- -------------- -------------- --------------
End of period........................................... $ 3,067,892 $ 3,035,686 $ 6,023,587 $ 15,299,953
============== ============== ============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................. 200,002 150,002 900,002 750,002
Shares sold............................................. -- 100,000 150,000 250,000
Shares redeemed......................................... -- (50,000) (700,000) (100,000)
-------------- -------------- -------------- --------------
Shares outstanding, end of period....................... 200,002 200,002 350,002 900,002
============== ============== ============== ==============
See Notes to Financial Statements Page 21
FIRST TRUST EXCHANGE-TRADED FUND VIII
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST
MULTI-STRATEGY
ALTERNATIVE ETF
(LALT)
--------------
PERIOD ENDED
2/28/2023
(UNAUDITED) (a)
--------------
OPERATIONS:
Net investment income (loss)............................ $ 501
Net realized gain (loss)................................ (3)
Net change in unrealized appreciation (depreciation).... (11,498)
--------------
Net increase (decrease) in net assets resulting from
operations........................................... (11,000)
--------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations................................... --
--------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold............................... 1,000,528
Cost of shares redeemed................................. --
--------------
Net increase (decrease) in net assets resulting from
shareholder transactions............................. 1,000,528
--------------
Total increase (decrease) in net assets................. 989,528
NET ASSETS:
Beginning of period..................................... --
--------------
End of period........................................... $ 989,528
==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................. --
Shares sold............................................. 50,002
Shares redeemed......................................... --
--------------
Shares outstanding, end of period....................... 50,002
==============
(a) Inception date is January 31, 2023, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 22 See Notes to Financial Statements
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST INNOVATION LEADERS ETF (ILDR)
SIX MONTHS
ENDED YEAR PERIOD
2/28/2023 ENDED ENDED
(UNAUDITED) 8/31/2022 8/31/2021 (a)
-------------- ------------- --------------
Net asset value, beginning of period........................... $ 15.18 $ 22.95 $ 20.07
-------- --------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.02) (0.08) (0.02)
Net realized and unrealized gain (loss)........................ 0.18 (7.66) 2.90
-------- --------- --------
Total from investment operations............................... 0.16 (7.74) 2.88
-------- --------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... -- (0.00) (b) --
Net realized gain.............................................. -- (0.03) --
-------- --------- --------
Total distributions............................................ -- (0.03) --
-------- --------- --------
Net asset value, end of period................................. $ 15.34 $ 15.18 $ 22.95
======== ========= ========
TOTAL RETURN (c)............................................... 1.05% (33.75)% 14.35%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 3,068 $ 3,036 $ 3,443
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.75% (d) 0.75% 0.75% (d)
Ratio of net investment income (loss) to average net assets.... (0.27)% (d) (0.51)% (0.49)% (d)
Portfolio turnover rate (e).................................... 22% 58% 9%
FIRST TRUST EXPANDED TECHNOLOGY ETF (XPND)
SIX MONTHS
ENDED YEAR PERIOD
2/28/2023 ENDED ENDED
(UNAUDITED) 8/31/2022 8/31/2021 (a)
-------------- ------------- --------------
Net asset value, beginning of period........................... $ 17.00 $ 21.87 $ 20.18
-------- --------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.04 0.04 (0.00) (b)
Net realized and unrealized gain (loss)........................ 0.21 (4.89) 1.69
-------- --------- --------
Total from investment operations............................... 0.25 (4.85) 1.69
-------- --------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.04) (0.02) --
-------- --------- --------
Net asset value, end of period................................. $ 17.21 $ 17.00 $ 21.87
======== ========= ========
TOTAL RETURN (c)............................................... 1.50% (22.19)% 8.37%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 6,024 $ 15,300 $ 16,399
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.65% (d) 0.65% 0.65% (d)
Ratio of net investment income (loss) to average net assets.... 0.44% (d) 0.19% (0.03)% (d)
Portfolio turnover rate (e).................................... 43% 88% 0%
(a) Inception dates for ILDR and XPND are May 25, 2021 and June 14, 2021,
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.
(d) Annualized.
(e) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
See Notes to Financial Statements Page 23
FIRST TRUST EXCHANGE-TRADED FUND VIII
FINANCIAL HIGHLIGHTS (CONTINUED)
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST MULTI-STRATEGY ALTERNATIVE ETF (LALT)
PERIOD
ENDED
2/28/2023
(UNAUDITED) (a)
--------------
Net asset value, beginning of period........................... $ 20.01
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... 0.01
Net realized and unrealized gain (loss)........................ (0.23)
--------
Total from investment operations............................... (0.22)
--------
Net asset value, end of period................................. $ 19.79
========
TOTAL RETURN (b)............................................... (1.10)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 990
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.20% (c)
Ratio of net investment income (loss) to average net assets.... 0.66% (c)
Portfolio turnover rate (d).................................... 0%
(a) Inception date is January 31, 2023, which is consistent with the Fund's
commencement of investment operations and is the date the initial creation
units were established.
(b) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at net asset value during the period, and redemption at net
asset value on the last day of the period. The return presented does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption or sale of Fund shares. Total return is
calculated for the time period presented and is not annualized for periods
of less than a year.
(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 24 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 28, 2023 (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 fifty-nine funds that are offering shares. This
report covers the three funds (each a "Fund" and collectively, the "Funds")
listed below. The shares of each Fund are listed and traded on the NYSE Arca,
Inc.
First Trust Innovation Leaders ETF - (ticker "ILDR")
First Trust Expanded Technology ETF - (ticker "XPND")
First Trust Multi-Strategy Alternative ETF - (ticker "LALT")(1)
(1) Commenced investment operations on January 31, 2023.
Each Fund represents a separate series of shares of beneficial interest in the
Trust. Unlike conventional mutual funds, each Fund issues and redeems shares on
a continuous basis, at net asset value ("NAV"), only in large blocks of shares
known as "Creation Units."
Each Fund is an actively managed exchange-traded fund. ILDR's investment
objective seeks to provide capital appreciation. XPND's investment objective
seeks to provide long-term capital appreciation. LALT's investment objective is
long-term total return.
Under normal market conditions, ILDR will invest at least 80% of its net assets
(plus any borrowings for investment purposes) in common stock and depository
receipts issued by U.S. and non-U.S. companies that may benefit from the
development or application of scientific and technological innovation.
Under normal market conditions, XPND will invest at least 80% of its net assets
(plus any borrowings for investment purposes) in the common stocks of companies
identified by the Fund's investment advisor as either information technology
companies or financial companies and communication services companies whose
operations are principally derived from and/or dependent upon technology. Prior
to March 16, 2023 consumer discretionary companies were included in the Fund's
strategy. As of that date financial companies replaced consumer discretionary
companies in the strategy.
Under normal market conditions, LALT allocates its assets amongst a variety of
alternative asset categories and strategies in an effort to provide lower
correlation and diversifying risk exposures compared to traditional equity and
fixed income benchmarks (e.g., the S&P 500(R) Index or Bloomberg Aggregate Bond
Index) over various market cycles.
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. Foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
Each Fund's NAV is calculated by dividing the value of all assets of the Fund
(including accrued interest and dividends), less all liabilities (including
accrued expenses and dividends declared but unpaid), by the total number of
shares outstanding.
Each Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent readily available market quotations such as last sale or
official closing prices from a national or foreign exchange (i.e., a regulated
market) and are primarily obtained from third-party pricing services. Fair value
prices represent any prices not considered market value prices and are either
obtained from a third-party pricing service or are determined by the Pricing
Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First
Trust" or the "Advisor"), in accordance with valuation procedures approved by
the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act
and rules thereunder. Investments valued by the Advisor's Pricing Committee, if
any, are footnoted as such in the footnotes to the Portfolio of Investments.
Each Fund's investments are valued as follows:
Page 25
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 28, 2023 (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 primary exchange for such securities.
Securities trading on foreign exchanges or over-the-counter markets that
close prior to the NYSE close may be valued using a systematic fair
valuation model provided by a third-party pricing service. If these
foreign securities meet certain criteria in relation to the valuation
model, their valuation is systematically adjusted to reflect the impact of
movement in the U.S. market after the close of the foreign markets.
Securities traded in an over-the-counter market are valued at the mean of
their most recent bid and asked price, if available, and otherwise at
their last trade price.
Shares of open-end funds are valued 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 Advisor's Pricing Committee at
fair value. These securities generally include, but are not limited to,
restricted securities (securities which may not be publicly sold without
registration under the Securities Act of 1933, as amended) for which a
third-party pricing service is unable to provide a market price; securities
whose trading has been formally suspended; a security whose market or fair value
price is not available from a pre-established pricing source; a security with
respect to which an event has occurred that is likely to materially affect the
value of the security after the market has closed but before the calculation of
a Fund's NAV or make it difficult or impossible to obtain a reliable market
quotation; and a security whose price, as provided by the third-party pricing
service, does not reflect the security's fair value. As a general principle, the
current fair value of a security would appear to be the amount which the owner
might reasonably expect to receive for the security upon its current sale. When
fair value prices are used, generally they will differ from market quotations or
official closing prices on the applicable exchanges. A variety of factors may be
considered in determining the fair value of such securities, including, but not
limited to, the following:
1) the last sale price on the exchange on which they are principally
traded or, for Nasdaq and AIM securities, the official closing
price;
2) the type of security;
3) the size of the holding;
4) the initial cost of the security;
5) transactions in comparable securities;
6) price quotes from dealers and/or third-party pricing services;
7) relationships among various securities;
8) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
9) an analysis of the issuer's financial statements;
10) the existence of merger proposals or tender offers that might affect
the value of the security; and
11) other relevant factors.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund or exchange-traded fund trading of similar
securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur;
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions; and
9) other relevant factors.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of a Fund, the value of the Fund's
securities may change on the days when investors are not able to transact in the
shares of the Fund. The value of securities denominated in foreign currencies is
converted into U.S. dollars using exchange rates determined daily as of the
close of regular trading on the NYSE.
Page 26
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 28, 2023 (UNAUDITED)
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 28, 2023, is
included with each Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, if any, is
recorded on the accrual basis.
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.
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. FOREIGN CURRENCY
The books and records of the Funds are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statements of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statements of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received and are included in "Net
realized gain (loss) on foreign currency transactions" on the Statements of
Operations. The portion of foreign currency gains and losses related to
fluctuations in exchange rates between the initial purchase settlement date and
subsequent sale trade date is included in "Net realized gain (loss) on
investments" on the Statements of Operations.
D. AFFILIATED TRANSACTIONS
LALT 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
Statements of Operations.
Page 27
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 28, 2023 (UNAUDITED)
Amounts related to these investments at February 28, 2023 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 2/28/2023 1/31/2023 PURCHASES SALES (DEPRECIATION) (LOSS) 2/28/2023 INCOME
------------------------------------------------------------------------------------------------------------------------------------
First Trust
Alternative
Absolute Return
Strategy ETF 7,144 $ -- $ 214,530 $ (211) $ (1,357) $ 1 $ 212,963 $ --
First Trust
Global Tactical
Commodity
Strategy Fund 4,066 -- 100,325 (96) (4,310) (2) 95,917 --
First Trust
Long/Short
Equity ETF 2,033 -- 102,442 (101) (2,134) -- 100,207 --
First Trust
Low Duration
Opportunities ETF 2,099 -- 100,934 (96) (821) -- 100,017 283
First Trust
Managed Futures
Strategy Fund 4,506 -- 212,287 (235) 541 -- 212,593 --
First Trust Merger
Arbitrage ETF 5,913 -- 118,853 (120) 237 -- 118,970 --
First Trust TCW
Unconstrained
Plus Bond ETF 4,121 -- 101,311 (98) (2,226) (1) 98,986 371
--------------------------------------------------------------------------------------------------
$ -- $ 950,682 $ (957) $ (10,070) $ (2) $ 939,653 $ 654
==================================================================================================
E. 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. A Fund may also designate a portion of the amount paid to
redeeming shareholders as a distribution for tax purposes.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on 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, 2022, was as follows:
Distributions Distributions
paid from Distributions paid from
Ordinary paid from Return of
Income Capital Gains Capital
------------- ------------- --------------
First Trust Innovation Leaders ETF $ 5,085 $ -- $ --
First Trust Expanded Technology ETF 16,900 -- --
As of August 31, 2022, 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 Innovation Leaders ETF $ (10,531) $ (528,761) $ (699,735)
First Trust Expanded Technology ETF 14,544 (1,548,181) (1,826,384)
Page 28
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 28, 2023 (UNAUDITED)
F. INCOME TAXES
Each Fund intends to qualify or continue to qualify as a regulated investment
company by complying with the requirements under Subchapter M of the Internal
Revenue Code of 1986, as amended, which includes distributing substantially all
of its net investment income and net realized gains to shareholders.
Accordingly, no provision has been made for federal and state income taxes.
However, due to the timing and amount of distributions, each Fund may be subject
to an excise tax of 4% of the amount by which approximately 98% of each Fund's
taxable income exceeds the distributions from such taxable income for the
calendar year.
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 ILDR and XPND the taxable
years ending 2021 and 2022 remain open to federal and state audit. As of
February 28, 2023, management has evaluated the application of these standards
to the Funds, and has determined that no provision for income tax is required in
the Funds' financial statements for uncertain tax positions.
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, 2022, for
federal income tax purposes, the Funds had a capital loss carryforward available
that is shown in the table below, to the extent provided by regulators, to
offset future capital gains.
Non-Expiring
Capital Loss
Carryforward
-------------
First Trust Innovation Leaders ETF $ 528,761
First Trust Expanded Technology ETF 1,548,181
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, 2022, 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 Innovation Leaders ETF $ 10,531 $ --
First Trust Expanded Technology ETF -- --
As of February 28, 2023, the aggregate cost, gross unrealized appreciation,
gross unrealized depreciation, and net unrealized appreciation/(depreciation) on
investments (including short positions and derivatives, if any) for federal
income tax purposes were as follows:
Gross Gross Net Unrealized
Unrealized Unrealized Appreciation
Tax Cost Appreciation (Depreciation) (Depreciation)
-------------- -------------- -------------- --------------
First Trust Innovation Leaders ETF $ 3,490,566 $ 220,529 $ (643,047) $ (422,518)
First Trust Expanded Technology ETF 6,479,216 254,883 (714,552) (459,669)
First Trust Multi-Strategy Alternative ETF 999,992 778 (12,276) (11,498)
G. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Funds, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the securities
in each Fund's portfolio, managing the Funds' business affairs and providing
certain administrative services necessary for the management of the Funds.
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 fees 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
Page 29
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 28, 2023 (UNAUDITED)
plan, if any, and extraordinary expenses. Effective November 1, 2022, for ILDR
and XPND, and for LALT from its date of inception, January 31, 2023, the annual
unitary management fee payable by each Fund to First Trust for these services
will be reduced at certain levels of each Fund's net assets ("breakpoints") and
calculated pursuant to the schedule below:
Breakpoints ILDR
------------------------------------------------------------------------- --------
Fund net assets up to and including $2.5 billion 0.75000%
Fund net assets greater than $2.5 billion up to and including $5 billion 0.73125%
Fund net assets greater than $5 billion up to and including $7.5 billion 0.71250%
Fund net assets greater than $7.5 billion up to and including $10 billion 0.69375%
Fund net assets greater than $10 billion 0.67500%
Breakpoints XPND LALT
------------------------------------------------------------------------- -------------------
Fund net assets up to and including $2.5 billion 0.65000% 0.20000%
Fund net assets greater than $2.5 billion up to and including $5 billion 0.63375% 0.19500%
Fund net assets greater than $5 billion up to and including $7.5 billion 0.61750% 0.19000%
Fund net assets greater than $7.5 billion up to and including $10 billion 0.60125% 0.18500%
Fund net assets greater than $10 billion up to and including $15 billion 0.58500% 0.18000%
Fund net assets greater than $15 billion 0.55250% 0.17000%
Prior to November 1, 2022, ILDR and XPND paid First Trust an annual unitary
management fee based on each Fund's average daily net assets at the rates set
forth below:
Rate
--------------
First Trust Innovation Leaders ETF 0.75%
First Trust Expanded Technology ETF 0.65%
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services and transfer agency services for
each Fund. As custodian, BNYM is responsible for custody of each Fund's assets.
As fund accountant and administrator, BNYM is responsible for maintaining the
books and records of each Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for each Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a target outcome fund or an index fund.
Additionally, the Lead Independent Trustee and the Chairs of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee Chairs
rotate every three years. The officers and "Interested" Trustee receive no
compensation from the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the fiscal period ended February 28, 2023, the cost of purchases and
proceeds from sales of investments for each Fund, excluding short-term
investments and in-kind transactions, were as follows:
Purchases Sales
-------------- --------------
First Trust Innovation Leaders ETF $ 625,448 $ 694,895
First Trust Expanded Technology ETF 5,667,012 5,684,932
First Trust Multi-Strategy Alternative ETF -- 1,053
For the fiscal period ended February 28, 2023, the cost of in-kind purchases and
proceeds from in-kind sales for each Fund were as follows:
Purchases Sales
-------------- --------------
First Trust Innovation Leaders ETF $ -- $ --
First Trust Expanded Technology ETF 2,338,984 12,093,187
First Trust Multi-Strategy Alternative ETF 1,001,048 --
Page 30
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST EXCHANGE-TRADED FUND VIII
FEBRUARY 28, 2023 (UNAUDITED)
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
Each Fund generally issues and redeems its shares in primary market transactions
through a creation and redemption mechanism and does not sell or redeem
individual shares. Instead, financial entities known as "Authorized
Participants" have contractual arrangements with a Fund or one of the Fund's
service providers to purchase and redeem Fund shares directly with the Fund in
large blocks of shares known as "Creation Units." Prior to the start of trading
on every business day, a Fund publishes through the National Securities Clearing
Corporation ("NSCC") the "basket" of securities, cash or other assets that it
will accept in exchange for a Creation Unit of the Fund's shares. An Authorized
Participant that wishes to effectuate a creation of a Fund's shares deposits
with the Fund the "basket" of securities, cash or other assets identified by the
Fund that day, and then receives the Creation Unit of the Fund's shares in
return for those assets. After purchasing a Creation Unit, the Authorized
Participant may continue to hold the Fund's shares or sell them in the secondary
market. The redemption process is the reverse of the purchase process: the
Authorized Participant redeems a Creation Unit of a Fund's shares for a basket
of securities, cash or other assets. The combination of the creation and
redemption process with secondary market trading in a Fund's shares and
underlying securities provides arbitrage opportunities that are designed to help
keep the market price of a Fund's shares at or close to the NAV per share of the
Fund.
Each Fund imposes fees in connection with the purchase of Creation Units. These
fees may vary based upon various fact-based circumstances, including, but not
limited to, the composition of the securities included in the Creation Unit or
the countries in which the transactions are settled. The price for each Creation
Unit will equal the daily NAV per share of a Fund times the number of shares in
a Creation Unit, plus the fees described above and, if applicable, any
operational processing and brokerage costs, transfer fees, stamp taxes and part
or all of the spread between the expected bid and offer side of the market
related to the securities comprising the creation basket.
Each Fund also imposes fees in connection with the redemption of Creation Units.
These fees may vary based upon various fact-based circumstances, including, but
not limited to, the composition of the securities included in the Creation Unit
or the countries in which the transactions are settled. The price received for
each Creation Unit will equal the daily NAV per share of a Fund times the number
of shares in a Creation Unit, minus the fees described above and, if applicable,
any operational processing and brokerage costs, transfer fees, stamp taxes and
part or all of the spread between the expected bid and offer side of the market
related to the securities comprising the redemption basket. Investors who use
the services of a broker or other such intermediary in addition to an Authorized
Participant to effect a redemption of a Creation Unit may also be assessed an
amount to cover the cost of such services. The redemption fee charged by a Fund
will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no
more than 2% of the value of the shares redeemed.
6. DISTRIBUTION PLAN
The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are
authorized to pay an amount up to 0.25% of their average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Funds, for amounts expended to finance activities primarily intended to result
in the sale of Creation Units or the provision of investor services. FTP may
also use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before December 31, 2023 for
ILDR and XPND, and January 27, 2025 for LALT.
7. INDEMNIFICATION
The Trust, on behalf of the Funds, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds
through the date the financial statements were issued and has determined that
there were no subsequent events requiring recognition or disclosure in the
financial statements that have not already been disclosed.
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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.
CONCENTRATION RISK. To the extent that a fund is able to invest a significant
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the fund's investments
more than if the fund were more broadly diversified. A fund that tracks an index
will be concentrated to the extent the fund's corresponding index is
concentrated. A concentration makes a fund more susceptible to any single
occurrence and may subject the fund to greater market risk than a fund that is
more broadly diversified.
CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments when due and
the related risk that the value of a security may decline because of concerns
about the issuer's ability to make such payments.
CYBER SECURITY RISK. The funds are susceptible to potential operational risks
through breaches in cyber security. A breach in cyber security refers to both
intentional and unintentional events that may cause a fund to lose proprietary
information, suffer data corruption or lose operational capacity. Such events
could cause a fund to incur regulatory penalties, reputational damage,
additional compliance costs associated with corrective measures and/or financial
loss. In addition, cyber security breaches of a fund's third-party service
providers, such as its administrator, transfer agent, custodian, or sub-advisor,
as applicable, or issuers in which the fund invests, can also subject a fund to
many of the same risks associated with direct cyber security breaches.
DEFINED OUTCOME FUNDS RISK. To the extent a fund's investment strategy is
designed to deliver returns tied to the price performance of an underlying ETF,
an investor may not realize the returns the fund seeks to achieve if that
investor does not hold shares for the entire target outcome period. In the event
an investor purchases shares after the first day of the target outcome period or
sells shares prior to the end of the target outcome period, the buffer that the
fund seeks to provide against a decline in the value of the underlying ETF may
not be available, the enhanced returns that the fund seeks to provide (if any)
may not be available and the investor may not participate in a gain in the value
of the underlying ETF up to the cap for the investor's investment period.
Additionally, the fund will not participate in gains of the underlying ETF above
the cap and a shareholder may lose their entire investment. If the fund seeks
enhanced returns, there are certain time periods when the value of the fund may
fall faster than the value of the underlying ETF, and it is very unlikely that,
on any given day during which the underlying ETF share price increases in value,
the fund's share price will increase at the same rate as the enhanced returns
sought by the fund, which is designed for an entire target outcome period.
Trading flexible exchange options involves risks different from, or possibly
greater than, the risks associated with investing directly in securities, such
as less liquidity and correlation and valuation risks. A fund may experience
substantial downside from specific flexible exchange option positions and
certain positions may expire worthless.
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DERIVATIVES RISK. To the extent a fund uses derivative instruments such as
futures contracts, options contracts and swaps, the fund may experience losses
because of adverse movements in the price or value of the underlying asset,
index or rate, which may be magnified by certain features of the derivative.
These risks are heightened when a fund's portfolio managers use derivatives to
enhance the fund's return or as a substitute for a position or security, rather
than solely to hedge (or offset) the risk of a position or security held by the
fund.
EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the
value of the fund's shares will fluctuate with changes in the value of the
equity securities. Equity securities prices fluctuate for several reasons,
including changes in investors' perceptions of the financial condition of an
issuer or the general condition of the relevant stock market, such as market
volatility, or when political or economic events affecting the issuers occur. In
addition, common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
ETF RISK. The shares of an ETF trade like common stock and represent an interest
in a portfolio of securities. The risks of owning an ETF generally reflect the
risks of owning the underlying securities, although lack of liquidity in an ETF
could result in it being more volatile and ETFs have management fees that
increase their costs. Shares of an ETF trade on an exchange at market prices
rather than net asset value, which may cause the shares to trade at a price
greater than net asset value (premium) or less than net asset value (discount).
In times of market stress, decisions by market makers to reduce or step away
from their role of providing a market for an ETF's shares, or decisions by an
ETF's authorized participants that they are unable or unwilling to proceed with
creation and/or redemption orders of an ETF's shares, could result in shares of
the ETF trading at a discount to net asset value and in greater than normal
intraday bid-ask spreads.
FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income
securities, the fund will be subject to credit risk, income risk, interest rate
risk, liquidity risk and prepayment risk. Income risk is the risk that income
from a fund's fixed income investments could decline during periods of falling
interest rates. Interest rate risk is the risk that the value of a fund's fixed
income securities will decline because of rising interest rates. Liquidity risk
is the risk that a security cannot be purchased or sold at the time desired, or
cannot be purchased or sold without adversely affecting the price. Prepayment
risk is the risk that the securities will be redeemed or prepaid by the issuer,
resulting in lower interest payments received by the fund. In addition to these
risks, high yield securities, or "junk" bonds, are subject to greater market
fluctuations and risk of loss than securities with higher ratings, and the
market for high yield securities is generally smaller and less liquid than that
for investment grade securities.
INDEX OR MODEL CONSTITUENT RISK. Certain funds may be a constituent of one or
more indices or ETF models. As a result, such a fund may be included in one or
more index-tracking exchange-traded funds or mutual funds. Being a component
security of such a vehicle could greatly affect the trading activity involving a
fund, the size of the fund and the market volatility of the fund. Inclusion in
an index could increase demand for the fund and removal from an index could
result in outsized selling activity in a relatively short period of time. As a
result, a fund's net asset value could be negatively impacted and the fund's
market price may be significantly below its net asset value during certain
periods. In addition, index rebalances may potentially result in increased
trading activity in a fund's shares.
INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject
to Index Provider Risk. There is no assurance that the Index Provider will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. To correct any such error, the Index Provider may carry out an
unscheduled rebalance or other modification of the Index constituents or
weightings, which may increase the fund's costs. The Index Provider does not
provide any representation or warranty in relation to the quality, accuracy or
completeness of data in the Index, and it does not guarantee that the Index will
be calculated in accordance with its stated methodology. Losses or costs
associated with any Index Provider errors generally will be borne by the fund
and its shareholders.
INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of
other investment vehicles, the fund will incur additional fees and expenses that
would not be present in a direct investment in those investment vehicles.
Furthermore, the fund's investment performance and risks are directly related to
the investment performance and risks of the investment vehicles in which the
fund invests.
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. The United Kingdom's Financial
Conduct Authority, which regulates LIBOR has ceased making LIBOR available as a
reference rate over a phase-out period that began December 31, 2021. There is no
assurance that any alternative reference rate, including the Secured Overnight
Financing Rate ("SOFR") will be similar to or produce the same value or economic
equivalence as LIBOR or that instruments using an alternative rate will have the
same volume or liquidity. The unavailability or replacement of LIBOR may affect
the value, liquidity or return on certain fund investments and may result in
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FEBRUARY 28, 2023 (UNAUDITED)
costs incurred in connection with closing out positions and entering into new
trades. Any potential effects of the transition away from LIBOR on the fund or
on certain instruments in which the fund invests can be difficult to ascertain,
and they may vary depending on a variety of factors, and they could result in
losses to the fund.
MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to
management risk. In managing an actively-managed fund's investment portfolio,
the fund's portfolio managers will apply investment techniques and risk analyses
that may not have the desired result. There can be no guarantee that a fund will
meet its investment objective.
MARKET RISK. Market risk is the risk that a particular security, or shares of a
fund in general, may fall in value. Securities held by a fund, as well as shares
of a fund itself, are subject to market fluctuations caused by factors such as
general economic conditions, political events, regulatory or market
developments, changes in interest rates and perceived trends in securities
prices. Shares of a fund could decline in value or underperform other
investments as a result of the risk of loss associated with these market
fluctuations. In addition, local, regional or global events such as war, acts of
terrorism, spread of infectious diseases or other public health issues,
recessions, or other events could have a significant negative impact on a fund
and its investments. Such events may affect certain geographic regions,
countries, sectors and industries more significantly than others. In February
2022, Russia invaded Ukraine which has caused and could continue to cause
significant market disruptions and volatility within the markets in Russia,
Europe, and the United States. The hostilities and sanctions resulting from
those hostilities could have a significant impact on certain fund investments as
well as fund performance. The COVID-19 global pandemic and the ensuing policies
enacted by governments and central banks have caused and may continue to cause
significant volatility and uncertainty in global financial markets. While the
U.S. has resumed "reasonably" normal business activity, many countries continue
to impose lockdown measures. Additionally, there is no guarantee that vaccines
will be effective against emerging variants of the disease. These events also
adversely affect the prices and liquidity of a fund's portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of
such circumstances could have a materially negative impact on the value of a
fund's shares and result in increased market volatility. During any such events,
a fund's shares may trade at increased premiums or discounts to their net asset
value and the bid/ask spread on a fund's shares may widen.
NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities,
it is subject to additional risks not associated with securities of domestic
issuers. Non-U.S. securities are subject to higher volatility than securities of
domestic issuers due to: possible adverse political, social or economic
developments; restrictions on foreign investment or exchange of securities;
capital controls; lack of liquidity; currency exchange rates; excessive
taxation; government seizure of assets; the imposition of sanctions by foreign
governments; different legal or accounting standards; and less government
supervision and regulation of exchanges in foreign countries. Investments in
non-U.S. securities may involve higher costs than investments in U.S.
securities, including higher transaction and custody costs, as well as
additional taxes imposed by non-U.S. governments. These risks may be heightened
for securities of companies located, or with significant operations, in emerging
market countries.
OPERATIONAL RISK. Each fund is subject to risks arising from various operational
factors, including, but not limited to, human error, processing and
communication errors, errors of a fund's service providers, counterparties or
other third-parties, failed or inadequate processes and technology or systems
failures. Each fund relies on third-parties for a range of services, including
custody. Any delay or failure relating to engaging or maintaining such service
providers may affect a fund's ability to meet its investment objective. Although
the funds and the funds' investment advisor seek to reduce these operational
risks through controls and procedures, there is no way to completely protect
against such risks.
PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund
will invest in the securities included in, or representative of, the index
regardless of their investment merit. A fund generally will not attempt to take
defensive positions in declining markets.
PREFERRED SECURITIES RISK. Preferred securities combine some of the
characteristics of both common stocks and bonds. Preferred securities are
typically subordinated to bonds and other debt securities in a company's capital
structure in terms of priority to corporate income, subjecting them to greater
credit risk than those debt securities. Generally, holders of preferred
securities have no voting rights with respect to the issuing company unless
preferred dividends have been in arrears for a specified number of periods, at
which time the preferred security holders may obtain limited rights. In certain
circumstances, an issuer of preferred securities may defer payment on the
securities and, in some cases, redeem the securities prior to a specified date.
Preferred securities may also be substantially less liquid than other
securities, including common stock.
VALUATION RISK. The valuation of certain securities may carry more risk than
that of common stock. Uncertainties in the conditions of the financial markets,
unreliable reference data, lack of transparency and inconsistency of valuation
models and processes may lead to inaccurate asset pricing. A fund may hold
investments in sizes smaller than institutionally sized round lot positions
(sometimes referred to as odd lots). However, third-party pricing services
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FEBRUARY 28, 2023 (UNAUDITED)
generally provide evaluations on the basis of institutionally-sized round lots.
If a fund sells certain of its investments in an odd lot transaction, the sale
price may be less than the value at which such securities have been held by the
fund. Odd lots often trade at lower prices than institutional round lots. There
is no assurance that the fund will be able to sell a portfolio security at the
price established by the pricing service, which could result in a loss to the
fund.
NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE
ADVISORY AGREEMENTS
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT
FIRST TRUST MULTI-STRATEGY ALTERNATIVE ETF
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"),
including the Independent Trustees, approved the Investment Management Agreement
(the "Agreement") with First Trust Advisors L.P. (the "Advisor"), on behalf of
First Trust Multi-Strategy Alternative ETF (the "Fund"), for an initial two-year
term at a meeting held on December 12, 2022. The Board determined 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 business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law, in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreement for
the 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 the
Fund (including the relevant personnel responsible for these services and their
experience); the proposed unitary fee rate schedule payable by the Fund as
compared to fees charged to a peer group of funds (the "Expense Group") and a
broad peer universe of funds (the "Expense Universe"), each assembled by
Broadridge Financial Solutions, Inc. ("Broadridge"), an independent source, and
as compared to fees charged to other exchange-traded funds ("ETFs") managed by
the Advisor; the estimated expense ratio of the Fund as compared to expense
ratios of the funds in the Fund's Expense Group and Expense Universe; the nature
of expenses to be incurred in providing services to the Fund and the potential
for the Advisor to realize economies of scale, if any; profitability and other
financial data for the Advisor; any indirect 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 the Fund's perspective.
In evaluating whether to approve the Agreement for the 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 funds 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 the Fund and
reviewed all of the services to be provided by the Advisor to the Fund, as well
as the background and experience of the persons responsible for such services.
The Board noted that the Fund will be an actively-managed ETF and considered
that the Advisor manages other ETFs with a similar structure in the First Trust
Fund Complex. 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 the Fund's compliance
with the 1940 Act, as well as the Fund's compliance with its investment
objective, policies and restrictions. At the meeting, the Trustees received a
presentation from members of the portfolio management team and were able to ask
questions about the proposed investment strategy for the Fund. Because the Fund
had yet to commence investment operations, the Board could not consider the
historical investment performance of the Fund. In light of the information
presented and the considerations made, the Board concluded that the nature,
extent and quality of the services to be provided to the Fund by the Advisor
under the Agreement are expected to be satisfactory.
The Board considered the proposed unitary fee rate schedule payable by the Fund
under the Agreement for the services to be provided. The Board noted that, under
the unitary fee arrangement, the Fund would pay the Advisor a unitary fee
starting at an annual rate of 0.20% of its average daily net assets, subject to
a breakpoint schedule pursuant to which the unitary fee rate would be reduced as
assets of the Fund meet certain thresholds. The Board noted that the Advisor
would be responsible for the Fund's expenses, including the cost of transfer
agency, custody, fund administration, legal, audit and other services and
license fees, if any, but excluding the fee payment under the Agreement and
interest, taxes, acquired fund fees and expenses, if any, brokerage commissions
and other expenses connected with the execution of portfolio transactions,
distribution and service fees pursuant to a Rule 12b-1 plan, if any, and
extraordinary expenses, if any. The Board noted that because the Fund will
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invest in underlying ETFs, including ETFs in the First Trust Fund Complex, it
will incur acquired fund fees and expenses, which are not payable out of the
unitary fee, and that such acquired fund fees and expenses will change over time
as assets are reallocated among the underlying ETFs. The Board received and
reviewed information showing the fee rates and expense ratios of the peer funds
in the Expense Group, as well as advisory and unitary fee rates charged by the
Advisor to other ETFs. Because the Fund will pay a unitary fee, the Board
determined that expense ratios were the most relevant comparative data point.
Based on the information provided, the Board noted that the unitary fee rate for
the Fund was below the median total (net) expense ratio (excluding acquired fund
fees and expenses) of the peer funds in the Expense Group. The Board also noted
that the Fund's total (net) expense ratio (including the estimated acquired fund
fees and expenses) was above the median total (net) expense ratio (including
acquired fund fees and expenses) of the peer funds in the Expense Group. With
respect to the Expense Group, the Board discussed with representatives of the
Advisor how the Expense Group was assembled and how the Fund compared and
differed from the peer funds. The Board took this information into account in
considering the peer data. With respect to fees charged to other ETFs managed by
the Advisor, the Board considered the Advisor's statement that the Fund will be
most comparable to two other ETFs in the First Trust Fund Complex that invest in
underlying ETFs, including ETFs in the First Trust Fund Complex, each of which
has a unitary fee rate schedule starting at an annual rate of 0.20% of its
average daily net assets. In light of the information considered and the nature,
extent and quality of the services expected to be provided to the Fund under the
Agreement, the Board determined that the proposed unitary fee was fair and
reasonable.
The Board considered whether there are any potential economies of scale to be
achieved in connection with the Advisor providing investment advisory services
to the Fund and whether the Fund may benefit from any economies of scale. The
Board noted that the proposed unitary fee rate schedule for the Fund includes
breakpoints pursuant to which the unitary fee rate would be reduced as assets of
the Fund meet certain thresholds. The Board considered that the Advisor has
continued to build infrastructure and add new staff to improve the services to
the funds in the First Trust Fund Complex. The Board also noted that under the
unitary fee structure, any reduction in expenses associated with the management
and operations of the Fund generally would benefit the Advisor, but that the
unitary fee structure provides a level of certainty in expenses for shareholders
of the Fund. The Board concluded that the proposed unitary fee rate schedule for
the Fund reflects an appropriate level of sharing of any economies of scale that
may be realized in the management of the Fund at reasonably foreseeable future
asset levels. The Board took into consideration the types of costs to be borne
by the Advisor in connection with its services to be performed for the Fund
under the Agreement. The Board considered the Advisor's estimate of the asset
level for the Fund at which the Advisor expects the Agreement to be profitable
to the Advisor and the Advisor's estimate of the profitability of the Agreement
if the Fund's assets reach $100 million. The Board noted the inherent
limitations in the profitability analysis and concluded that, based on the
information provided, the Advisor's estimated profitability level for the Fund
was not unreasonable. The Board considered indirect benefits described by the
Advisor that may be realized from its relationship with the Fund. The Board
considered that the Advisor had identified as an indirect benefit to the Advisor
and FTP their exposure to investors and brokers who, absent their exposure to
the Fund, may have had no dealings with the Advisor or FTP. The Board also noted
that the Advisor will not utilize soft dollars in connection with the Fund. In
addition, the Board considered that the Advisor, as the investment advisor to
certain of the underlying ETFs in which the Fund would invest, will recognize
additional revenue from such underlying ETFs if the Fund's investment causes
their assets to grow. The Board concluded that the character and amount of
potential indirect benefits to the Advisor were not unreasonable.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, determined that the terms of the
Agreement are fair and reasonable and that the approval of the Agreement is in
the best interests of the Fund. No single factor was determinative in the
Board's analysis.
BOARD CONSIDERATIONS REGARDING APPROVAL OF AMENDMENT TO THE INVESTMENT
MANAGEMENT AGREEMENTS
FIRST TRUST INNOVATION LEADERS ETF
FIRST TRUST EXPANDED TECHNOLOGY ETF
The Board of Trustees of First Trust Exchange-Traded Fund VIII (the "Trust"),
including the Independent Trustees, unanimously approved the amendment (the
"Amendment") of the Investment Management Agreement (the "Agreement") with First
Trust Advisors L.P. (the "Advisor") on behalf of the following two series of the
Trust (each a "Fund" and collectively, the "Funds"):
First Trust Innovation Leaders ETF (ILDR)
First Trust Expanded Technology ETF (XPND)
The Board approved the Amendment for each Fund at a meeting held on October 24,
2022. As part of the review process, the Board reviewed information and had
preliminary discussions with the Advisor regarding the proposed Amendment at
meetings held on April 18, 2022, June 12-13, 2022 and September 18-19, 2022.
Following those preliminary discussions, the Board requested and received
information from the Advisor regarding the proposed Amendment, and that
information was considered at an executive session of the Independent Trustees
and their counsel held prior to the October 24, 2022 meeting, as well as at the
October meeting.
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In reviewing the Amendment for each Fund, the Board considered that the purpose
of the Amendment is to modify the unitary fee rate for each Fund under the
Agreement by introducing a breakpoint schedule pursuant to which the unitary fee
rate paid by each Fund to the Advisor will be reduced as assets of such Fund
meet certain thresholds. The Board noted the Advisor's representations that the
quality and quantity of the services provided to each Fund by the Advisor under
the Agreement will not be reduced or modified as a result of the Amendment, and
that the obligations of the Advisor under the Agreement will remain the same in
all respects.
The Board noted that it, including the Independent Trustees, last approved the
continuation of the Agreement for each Fund for a one-year period ending June
30, 2023 at a meeting held on June 12-13, 2022. The Board noted that in
connection with such approval it had determined for each Fund, based upon the
information provided, that the terms of the Agreement were fair and reasonable
and that the continuation of the Agreement was in the best interests of the Fund
in light of the nature, extent and quality of the services provided and such
other matters as the Board considered to be relevant in the exercise of its
business judgment.
Based on all of the information considered, the Board, including the Independent
Trustees, unanimously determined that the terms of the Amendment are fair and
reasonable and that the Amendment is in the best interests of each Fund.
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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
320 South Canal Street
Chicago, IL 60606
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