FIRST TRUST
First Trust Exchange-Traded Fund VIII
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First Trust SkyBridge Crypto Industry and Digital
Economy ETF (CRPT)
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Annual Report
For the Period
September 20, 2021
(Commencement of Operations)
through August 31, 2022
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TABLE OF CONTENTS
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
ANNUAL REPORT
AUGUST 31, 2022
Shareholder Letter........................................................... 1
Fund Performance Overview.................................................... 2
Portfolio Commentary......................................................... 4
Understanding Your Fund Expenses............................................. 5
Portfolio of Investments..................................................... 6
Statement of Assets and Liabilities.......................................... 7
Statement of Operations...................................................... 8
Statement of Changes in Net Assets........................................... 9
Financial Highlights......................................................... 10
Notes to Financial Statements................................................ 11
Report of Independent Registered Public Accounting Firm...................... 17
Additional Information....................................................... 18
Board of Trustees and Officers............................................... 23
Privacy Policy............................................................... 25
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or SkyBridge Capital II, LLC ("SkyBridge" or the
"Sub-Advisor") and their representatives, taking into account the information
currently available to them. Forward-looking statements include all statements
that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the series of First Trust Exchange-Traded Fund VIII (the "Trust") described in
this report (First Trust SkyBridge Crypto Industry and Digital Economy ETF;
hereinafter referred to as the "Fund") to be materially different from any
future results, performance or achievements expressed or implied by the
forward-looking statements. When evaluating the information included in this
report, you are cautioned not to place undue reliance on these forward-looking
statements, which reflect the judgment of the Advisor and/or Sub-Advisor and
their representatives only as of the date hereof. We undertake no obligation to
publicly revise or update these forward-looking statements to reflect events and
circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objective. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund's
shares may therefore be less than what you paid for them. Accordingly, you can
lose money investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
www.ftportfolios.com or speak with your financial advisor. Investment returns,
net asset value and share price will fluctuate and Fund shares, when sold, may
be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
By reading the portfolio commentary from the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of a relevant market
benchmark.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor and/or Sub-Advisor are just that: informed opinions. They should not be
considered to be promises or advice. The opinions, like the statistics, cover
the period through the date on the cover of this report. The material risks of
investing in the Fund are spelled out in the prospectus, the statement of
additional information, and other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
AUGUST 31, 2022
Dear Shareholders:
First Trust is pleased to provide you with the annual report for the First Trust
SkyBridge Crypto Industry and Digital Economy ETF (the "Fund"), which contains
detailed information about the Fund for the period from the Fund's inception on
September 20, 2021 through August 31, 2022. Please note that information in this
letter and the report prior to the Fund's inception date will not apply to the
Fund.
At their most recent meeting (September 20-21, 2022), the Federal Open Market
Committee announced a 75 basis point interest rate hike, the third rate hike in
as many meetings. Overall, the Federal Reserve (the "Fed") has raised its
benchmark Federal Funds target rate (upper bound) from 0.25% this past March to
3.25% as of September 30, 2022, the fastest pace for rate hikes since 1994. The
Fed is hiking interest rates aggressively to combat the surge in inflation that
commenced in the second quarter of 2021. Perhaps the most common measure of
inflation is the Consumer Price Index ("CPI"). The CPI has averaged 3.0% per
year since 1926 but stood at an eye-popping 8.3% on a trailing 12-month basis in
August 2022. Its recent high point was 9.1% in June 2022. For borrowers, these
rate hikes will raise the cost of capital, making it tougher to secure loans for
consumers and businesses. The goal is to raise interest rates high enough to
cool some of the demand for goods and services so that inflation can begin to
moderate. The Fed would eventually like to see the CPI back near the 2.0% level.
It will take some time to play out. Guidance from Fed Chairman Jerome Powell
indicates that more rate hikes are coming, perhaps as much as another 100 basis
points by year-end. We'll see.
One of the areas that has yet to cool off is the housing market, in my opinion.
We have seen a substantial selloff this year in the stock and bond markets, but
not housing. Prices appreciated markedly across the U.S. during the coronavirus
("COVID-19") pandemic. Demand was high and inventories were uncharacteristically
low. Simply put, housing affordability has become a huge challenge for many
prospective buyers. The S&P CoreLogic Case-Shiller U.S. National Home Price
Index, which tracks the value of single-family homes, soared 45.2% from the end
of 2019 through June 2022. Keep in mind, historically, home prices tend to rise
with inflation over time. They are not supposed to increase 45% over 30 months.
The rapid increase in short-term lending rates has caused the rate on a 30-year
fixed-rate mortgage to nearly double from 3.27% at the end of 2021 to 6.43% as
of September 21, 2022, according to Bankrate. The sharp rise in mortgage rates
is just beginning to have a slight effect on demand. Redfin reported that close
to 63,000 deals on existing homes fell through in July 2022, or around 16% of
homes under contract that month, according to CNBC.
Fed Chairman Powell is trying to engineer a soft landing for the economy via
monetary policy. In other words, the Fed is trying to avoid a deep and lengthy
recession. That is why the relative resilience of the real estate markets, both
residential and commercial, is so critical at this juncture. One other plus
going for the U.S. economy today is the strong labor market. As of this report,
companies are still hiring. If these sources of strength eventually succumb to
the economic headwinds and turn weaker, the odds of achieving a soft landing
drop dramatically, in my opinion. For those investors who like to follow the
news closely, in addition to monitoring the state of the economy, keep an eye on
the war between Russia and Ukraine as well as the COVID-19-induced lockdowns of
cities in China. Any good news on those two fronts could be a net positive for
the markets moving forward. As I previously noted, it is going to take some time
to remedy this situation. As always, we encourage investors to be diversified
and stay the course.
Thank you for giving First Trust the opportunity to play a role in your
financial future. We value our relationship with you and will report on the Fund
again in six months.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
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FUND PERFORMANCE OVERVIEW (UNAUDITED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
The First Trust SkyBridge Crypto Industry and Digital Economy ETF's (the "Fund")
investment objective is to provide investors with capital appreciation. Under
normal market conditions, the Fund will invest at least 80% of its net assets
(plus any investment borrowings) in the common stocks and American Depositary
Receipts ("ADRs") of Crypto Industry Companies and Digital Economy Companies.
Under normal market conditions, the Fund will invest at least 50% of its net
assets (plus any investment borrowings) in Crypto Industry Companies. The
remainder of the Fund's net assets used to satisfy the 80% test set forth above
will be invested in Digital Economy Companies. The Fund's selection universe
includes common stocks and ADRs listed on global securities exchanges, including
U.S. dollar denominated and non-U.S. dollar denominated securities issued by
U.S. and non-U.S. companies, including companies operating in emerging market
countries.
"Crypto Industry Companies" are those companies that (i) derive at least 50% of
their revenue or profits directly from goods produced or sold, investments made,
or services performed in the crypto industry and/or (ii) have at least 50% of
their net assets accounted for by direct holdings of bitcoin, ether or another
cryptocurrency. "Digital Economy Companies" are those companies that derive at
least 50% of their revenue or profits directly from goods produced or sold,
investments made, or services performed in the digital economy ecosystem. The
Fund will not directly invest in digital assets (including bitcoin, other
cryptocurrencies or initial coin offerings), or indirectly through the use of
derivatives or through investments in funds or trusts that hold digital assets.
As the Fund does not directly or indirectly invest in cryptocurrencies or other
digital assets, the Fund does not expect to track the price movement of any
cryptocurrencies or other digital assets.
The Fund is classified as "non-diversified" under the Investment Company Act of
1940, as amended (the "1940 Act").
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PERFORMANCE
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CUMULATIVE
TOTAL RETURNS
Inception (9/20/21)
to 8/31/22
FUND PERFORMANCE
NAV -66.46%
Market Price -66.46%
INDEX PERFORMANCE
S&P 500(R) Index -7.94%
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Total returns for the period since inception are calculated from the inception
date of the Fund. "Cumulative Total Returns" represent the total change in value
of an investment over the period indicated.
The Fund's per share net asset value ("NAV") is the value of one share of the
Fund and is computed by dividing the value of all assets of the Fund (including
accrued interest and dividends), less all liabilities (including accrued
expenses and dividends declared but unpaid), by the total number of outstanding
shares. The price used to calculate market return ("Market Price") is determined
by using the midpoint 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 the
Fund did not trade in the secondary market until after the Fund's inception, for
the period from inception to the first day of secondary market trading in shares
of the Fund, the NAV of the Fund is used as a proxy for the secondary market
trading price to calculate market returns. NAV and market returns assume that
all distributions have been reinvested in the Fund at NAV and Market Price,
respectively.
An index is a statistical composite that tracks a specified financial market or
sector. Unlike the Fund, the 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. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns presented reflect the reinvestment of dividends on
securities in the index. The returns presented do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund shares. The investment return and principal value of shares of the
Fund will vary with changes in market conditions. Shares of the Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. The Fund's past performance is no guarantee of future performance.
Page 2
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FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT) (CONTINUED)
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% OF TOTAL
LONG-TERM
SECTOR CLASSIFICATION INVESTMENTS
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Information Technology 47.1%
Financials 39.1
Communication Services 8.2
Consumer Discretionary 5.6
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Total 100.0%
========
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% OF TOTAL
LONG-TERM
COUNTRY ALLOCATION(1) INVESTMENTS
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United States 75.2%
Cayman Islands 15.1
Canada 9.1
United Kingdom 0.6
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Total 100.0%
========
(1) Portfolio securities are categorized based on their country of
incorporation.
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% OF TOTAL
LONG-TERM
TOP TEN HOLDINGS INVESTMENTS
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Galaxy Digital Holdings Ltd. 14.6%
Coinbase Global, Inc., Class A 14.3
MicroStrategy, Inc., Class A 14.1
Hut 8 Mining Corp. 4.9
Block, Inc. 4.8
Riot Blockchain, Inc. 4.7
Silvergate Capital Corp., Class A 4.6
Meta Platforms, Inc., Class A 4.4
Tesla, Inc. 3.9
Alphabet, Inc., Class C 3.8
--------
Total 74.1%
========
PERFORMANCE OF A $10,000 INITIAL INVESTMENT
SEPTEMBER 20, 2021 - AUGUST 31, 2022
First Trust SkyBridge
Crypto Industry and S&P 500(R)
Digital Economy ETF Index
9/20/21 $10,000 $10,000
2/28/22 7,431 10,099
8/31/22 3,354 9,206
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 3
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PORTFOLIO COMMENTARY
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
ANNUAL REPORT
AUGUST 31, 2022 (UNAUDITED)
ADVISOR
First Trust Advisors, L.P. ("First Trust" or the "Advisor") is the investment
advisor to the First Trust SkyBridge Crypto Industry and Digital Economy ETF
("CRPT" or 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.
SUB-ADVISOR
SkyBridge Capital II, LLC ("SkyBridge" or the "Sub-Advisor") is the sub-advisor
to the Fund and is a registered investment advisor based in New York, New York.
SKYBRIDGE CAPITAL II, LLC PORTFOLIO MANAGEMENT TEAM
ANTHONY SCARAMUCCI - FOUNDER AND MANAGING PARTNER
BRETT MESSING - PRESIDENT AND CO-CHIEF INVESTMENT OFFICER
The portfolio managers are primarily and jointly responsible for the day-to-day
management of the Fund. Each portfolio manager has served as part of the
portfolio management team of the Fund since September 2021.
MARKET RECAP
While markets broadly have sold off this year driven by macroeconomic headwinds,
including a rising rates environment and continued inflationary pressures, the
Fund's performance has also been negatively impacted by several crypto
industry-specific adverse events. These include the demise of crypto stablecoin,
Terra Luna, crypto "banking" platform Celsius and crypto hedge fund Three Arrows
Capital. The resulting contagion effect impacted all digital assets including
Bitcoin and Ethereum, the two largest digital assets by market capitalization.
Bitcoin and Ethereum are often used as collateral in the digital asset
eco-system, and they were adversely impacted by deleveraging/forced
liquidations. As prices of digital assets declined sharply, many of the
crypto-related equities held by the Fund sold off sharply as well.
PERFORMANCE ANALYSIS
Since the Fund's launch in September 2021, we have aimed to execute on its
thematic mandate to provide exposure to companies that SkyBridge views as
"Crypto Industry and Digital Economy Leaders," meaning firms that are driving
cryptocurrency and crypto assets-related innovation. However, performance has
been disappointing with the Fund returning -66.46% (at the market price and net
asse value) from its inception on September 20, 2021 through August 31, 2022.
Over the same period, the S&P 500(R) Index has returned -7.94%. The Fund's
underperformance relative to the S&P 500(R) Index is due primarily to its
exposure to growth stocks generally (which have underperformed value stocks, for
example) as well as its exposure to crypto industry equities (for example,
crypto exchange Coinbase, Inc. and Bitcoin miner Riot Blockchain, Inc.) that
have been fundamentally negatively impacted by the decline in value of digital
assets, including Bitcoin and Ethereum.
MARKET AND FUND OUTLOOK
In the wake of the selloff earlier this year, SkyBridge has taken a hard look at
our digital asset investment thesis. We anticipated a bear market, but the
magnitude of the recent selloff was more severe than we expected given the
maturation of the asset class. We believe the two critical elements of our
digital asset bull case are firmly intact: First, Bitcoin is a singular digital
asset on a course of adoption as the preeminent non-sovereign alternative to
fiat currency. We anticipate that the price of Bitcoin will stabilize and then
rise over time because its core virtues are intact - it is decentralized,
scarce, portable, and secure. The next halving in May 2024 will further
contribute to its scarcity and appreciation. Second, Ethereum (and Solana, etc.)
represents a generational technology transition ("Web3") as promising as the
emergence of the internet. Web3 can be deployed in many markets: IT storage,
video distribution, web hosting, search, etc. This new decentralized business
model undercuts the profit pools associated with centralization by coordinating
a community to deploy capital. The enormous flow of capital and talent into an
innovative technology like this has historically generated outstanding returns
for investors. The macro-driven selloff across risk assets this year has no
bearing on these views, and we believe the crypto industry-specific adverse
events noted earlier - even as they have understandably shaken investor
confidence - have not disrupted the evolutionary course of either Bitcoin or
Ethereum. We believe the Fund will continue to successfully provide thematic
exposure to investors seeking exposure to the public equity of firms that are
driving cryptocurrency and crypto assets-related innovation.
Page 4
FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
UNDERSTANDING YOUR FUND EXPENSES
AUGUST 31, 2022 (UNAUDITED)
As a shareholder of First Trust SkyBridge Crypto Industry and Digital Economy
ETF (the "Fund"), you incur two types of costs: (1) transaction costs; and (2)
ongoing costs, including management fees, distribution and/or service (12b-1)
fees, if any, and other Fund expenses. This Example is intended to help you
understand your ongoing costs of investing in the Fund and to compare these
costs with the ongoing costs of investing in other funds.
The Example is based on an investment of $1,000 invested at the beginning of the
period and held through the six-month period ended August 31, 2022.
ACTUAL EXPENSES
The first line in the following table provides information about actual account
values and actual expenses. You may use the information in this line, together
with the amount you invested, to estimate the expenses that you paid over the
period. Simply divide your account value by $1,000 (for example, an $8,600
account value divided by $1,000 = 8.6), then multiply the result by the number
in the first line under the heading entitled "Expenses Paid During the Six-Month
Period" to estimate the expenses you paid on your account during this six-month
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following table provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs such as brokerage
commissions. Therefore, the second line in the table is useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. In addition, if these transactional costs were included,
your costs would have been higher.
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ANNUALIZED
EXPENSE RATIO EXPENSES PAID
BEGINNING ENDING BASED ON THE DURING THE
ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH
MARCH 1, 2022 AUGUST 31, 2022 PERIOD PERIOD (a)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL
ECONOMY ETF (CRPT)
Actual $1,000.00 $ 451.40 0.85% $3.11
Hypothetical (5% return before expenses) $1,000.00 $1,020.92 0.85% $4.33
(a) Expenses are equal to the annualized expense ratio as indicated in the
table multiplied by the average account value over the period (March 1,
2022 through August 31, 2022), multiplied by 184/365 (to reflect the
six-month period).
Page 5
FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 2022
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
COMMON STOCKS -- 99.9%
AUTOMOBILES -- 3.9%
3,775 Tesla, Inc. (a) $ 1,040,428
-------------
BANKS -- 8.0%
5,110 Signature Bank 890,980
13,560 Silvergate Capital Corp.,
Class A (a) 1,235,587
-------------
2,126,567
-------------
CAPITAL MARKETS -- 31.1%
56,794 Coinbase Global, Inc., Class A (a) 3,793,839
709,695 Galaxy Digital Holdings Ltd.
(CAD) (a) 3,885,261
3,938 Interactive Brokers Group, Inc.,
Class A 242,541
36,649 Robinhood Markets, Inc.,
Class A (a) 349,998
-------------
8,271,639
-------------
INTERACTIVE MEDIA & SERVICES
-- 8.2%
9,178 Alphabet, Inc., Class C (a) 1,001,779
7,251 Meta Platforms, Inc., Class A (a) 1,181,405
-------------
2,183,184
-------------
INTERNET & DIRECT MARKETING RETAIL
-- 1.7%
323 MercadoLibre, Inc. (a) 276,281
7,224 Overstock.com, Inc. (a) 188,547
-------------
464,828
-------------
IT SERVICES -- 11.0%
18,370 Block, Inc. (a) 1,265,877
357,665 Core Scientific, Inc. (a) 786,863
604 Mastercard, Inc., Class A 195,919
2,900 PayPal Holdings, Inc. (a) 270,976
6,264 Shopify, Inc., Class A (a) 198,256
1,115 Visa, Inc., Class A 221,562
-------------
2,939,453
-------------
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT -- 1.7%
2,625 Advanced Micro Devices, Inc. (a) 222,784
1,524 NVIDIA Corp. 230,032
-------------
452,816
-------------
SHARES DESCRIPTION VALUE
---------------------------------------------------------------------
SOFTWARE -- 33.8%
34,663 Argo Blockchain PLC, ADR (a) $ 164,996
579,448 Bitfarms Ltd. (a) 753,282
157,835 Cipher Mining, Inc. (a) 317,248
34,727 Cleanspark, Inc. (a) 148,632
32,274 Hive Blockchain Technologies
Ltd. (a) 164,275
640,683 Hut 8 Mining Corp. (a) 1,300,587
71,351 Marathon Digital Holdings,
Inc. (a) 845,509
16,181 MicroStrategy, Inc., Class A (a) 3,746,872
173,844 Riot Blockchain, Inc. (a) 1,246,462
7,552 Unity Software, Inc. (a) 322,621
-------------
9,010,484
-------------
TECHNOLOGY HARDWARE, STORAGE
& PERIPHERALS -- 0.5%
36,120 Canaan, Inc., ADR (a) 126,781
-------------
TOTAL COMMON STOCKS -- 99.9% 26,616,180
(Cost $52,540,630) -------------
MONEY MARKET FUNDS -- 0.2%
40,942 Morgan Stanley Institutional Liquidity
Funds - Treasury Portfolio -
Institutional Class - 2.06% (b) 40,942
(Cost $40,942) -------------
TOTAL INVESTMENTS -- 100.1% 26,657,122
(Cost $52,581,572)
NET OTHER ASSETS AND
LIABILITIES -- (0.1)% (20,593)
-------------
NET ASSETS -- 100.0% $ 26,636,529
=============
(a) Non-income producing security.
(b) Rate shown reflects yield as of August 31, 2022.
ADR - American Depositary Receipt
Currency Abbreviation:
CAD - Canadian Dollar
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
2022 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
8/31/2022 PRICES INPUTS INPUTS
-------------- -------------- -------------- --------------
Common Stocks*.................................. $ 26,616,180 $ 26,616,180 $ -- $ --
Money Market Funds.............................. 40,942 40,942 -- --
-------------- -------------- -------------- --------------
Total Investments............................... $ 26,657,122 $ 26,657,122 $ -- $ --
============== ============== ============== ==============
* See Portfolio of Investments for industry breakout.
Page 6 See Notes to Financial Statements
FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2022
ASSETS:
Investments, at value.................................................. $ 26,657,122
Receivables:
Investment securities sold.......................................... 2,616,077
Dividends........................................................... 854
----------------
Total Assets........................................................ 29,274,053
----------------
LIABILITIES:
Payables:
Investment securities purchased..................................... 2,614,789
Investment advisory fees............................................ 22,735
----------------
Total Liabilities................................................... 2,637,524
----------------
NET ASSETS............................................................. $ 26,636,529
================
NET ASSETS CONSIST OF:
Paid-in capital........................................................ $ 76,995,779
Par value.............................................................. 42,500
Accumulated distributable earnings (loss).............................. (50,401,750)
----------------
NET ASSETS............................................................. $ 26,636,529
================
NET ASSET VALUE, per share............................................. $ 6.27
================
Number of shares outstanding (unlimited number of shares
authorized, par value $0.01 per share).............................. 4,250,002
================
Investments, at cost................................................... $ 52,581,572
================
See Notes to Financial Statements Page 7
FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED AUGUST 31, 2022 (a)
INVESTMENT INCOME:
Dividends.............................................................. $ 28,326
----------------
Total investment income............................................. 28,326
----------------
EXPENSES:
Investment advisory fees............................................... 282,714
----------------
Total expenses...................................................... 282,714
----------------
NET INVESTMENT INCOME (LOSS)........................................... (254,388)
----------------
REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments......................................................... (26,151,728)
In-kind redemptions................................................. (1,633,934)
Foreign currency transactions....................................... (1,383)
----------------
Net realized gain (loss)............................................... (27,787,045)
----------------
Net change in unrealized appreciation (depreciation) on investments.... (25,924,450)
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)................................ (53,711,495)
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS..................................................... $ (53,965,883)
================
(a) Inception date is September 20, 2021, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
Page 8 See Notes to Financial Statements
FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
STATEMENT OF CHANGES IN NET ASSETS
PERIOD
ENDED
8/31/2022 (a)
----------------
OPERATIONS:
Net investment income (loss)........................................... $ (254,388)
Net realized gain (loss)............................................... (27,787,045)
Net change in unrealized appreciation (depreciation)................... (25,924,450)
----------------
Net increase (decrease) in net assets resulting from operations........ (53,965,883)
----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations.................................................. (500,000)
----------------
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold.............................................. 89,544,101
Cost of shares redeemed................................................ (8,441,689)
----------------
Net increase (decrease) in net assets resulting from shareholder
transactions........................................................ 81,102,412
----------------
Total increase (decrease) in net assets................................ 26,636,529
NET ASSETS:
Beginning of period.................................................... --
----------------
End of period.......................................................... $ 26,636,529
================
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period................................ --
Shares sold............................................................ 5,450,002
Shares redeemed........................................................ (1,200,000)
----------------
Shares outstanding, end of period...................................... 4,250,002
================
(a) Inception date is September 20, 2021, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
See Notes to Financial Statements Page 9
FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
PERIOD
ENDED
8/31/2022 (a)
--------------
Net asset value, beginning of period........................... $ 18.91
--------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................................... (0.08) (b)
Net realized and unrealized gain (loss)........................ (12.36)
--------
Total from investment operations............................... (12.44)
--------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.......................................... (0.20)
Net realized gain.............................................. (0.00) (c)
--------
Total distributions............................................ (0.20)
--------
Net asset value, end of period................................. $ 6.27
========
TOTAL RETURN (d)............................................... (66.46)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........................... $ 26,637
RATIOS TO AVERAGE NET ASSETS:
Ratio of total expenses to average net assets.................. 0.85% (e)
Ratio of net investment income (loss) to average net assets.... (0.76)% (e)
Portfolio turnover rate (f).................................... 90%
(a) Inception date is September 20, 2021, which is consistent with the
commencement of investment operations and is the date the initial creation
units were established.
(b) Based on average shares outstanding.
(c) Amount is less than $0.01.
(d) 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.
(e) Annualized.
(f) Portfolio turnover is calculated for the time period presented and is not
annualized for periods of less than a year and does not include securities
received or delivered from processing creations or redemptions and in-kind
transactions.
Page 10 See Notes to Financial Statements
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NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022
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 ("SEC")
under the Investment Company Act of 1940, as amended (the "1940 Act").
The Trust currently consists of fifty-six funds that are offering shares. This
report covers the First Trust SkyBridge Crypto Industry and Digital Economy ETF
(the "Fund"), which trades under the ticker "CRPT" on the NYSE Arca, Inc. ("NYSE
Arca"). The Fund represents a separate series of shares of beneficial interest
in the Trust. Unlike conventional mutual funds, the Fund issues and redeems
shares on a continuous basis, at net asset value ("NAV"), only in large blocks
of shares known as "Creation Units."
The Fund is an actively managed exchange-traded fund. The Fund seeks to provide
investors with capital appreciation. Under normal market conditions, the Fund
invests at least 80% of its net assets (plus any investment borrowings) in the
common stocks and American Depositary Receipts ("ADRs") of Crypto Industry
Companies and Digital Economy Companies. Under normal market conditions, the
Fund will invest at least 50% of its net assets (plus any investment borrowings)
in Crypto Industry Companies. The remainder of the Fund's net assets used to
satisfy the 80% test set forth above will be invested in Digital Economy
Companies.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies." The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of the financial statements. The preparation of
the financial statements in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's NAV is determined daily as of the close of regular trading on the New
York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the
NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV
is determined as of that time. The Fund's NAV is calculated by dividing the
value of all assets of the Fund (including accrued interest and dividends), less
all liabilities (including accrued expenses and dividends declared but unpaid),
by the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor")
in accordance with valuation procedures adopted by the Trust's Board of
Trustees, and in accordance with provisions of the 1940 Act. Investments valued
by the Advisor's Pricing Committee, if any, are footnoted as such in the
footnotes to the Portfolio of Investments. The Fund's investments are valued as
follows:
Common stocks and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
Securities 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.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Trust's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a third-party pricing service is unable to provide a
market price; securities whose trading has been formally suspended; a security
whose market or fair value price is not available from a pre-established pricing
Page 11
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of the Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the third-party pricing service, does not reflect the security's fair value. As
a general principle, the current fair value of a security would appear to be the
amount which the owner might reasonably expect to receive for the security upon
its current sale. When fair value prices are used, generally they will differ
from market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
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; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
Because foreign markets may be open on different days than the days during which
investors may transact in the shares of the 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.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of August 31, 2022, is
included with the Fund's Portfolio of Investments.
In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing
requirements to determine fair value in good faith for purposes of the 1940 Act.
The rule permits fund boards to designate a fund's investment adviser to perform
fair value determinations, subject to board oversight and certain other
conditions. The rule also defines when market quotations are "readily available"
Page 12
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022
for purposes of the 1940 Act and requires a fund to fair value a portfolio
investment when a market quotation is not readily available. The SEC also
adopted new Rule 31a-4 under the 1940 Act, which sets forth recordkeeping
requirements associated with fair value determinations. The compliance date for
Rule 2a-5 and Rule 31a-4 is September 8, 2022.
Effective September 8, 2022 and pursuant to the requirements of Rule 2a-5, the
Trust's Board of Trustees designated the Advisor as its valuation designee to
perform fair value determinations and approved new Advisor Valuation Procedures
for the Trust.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date.
C. FOREIGN CURRENCY
The books and records of the Fund 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 would be included in "Net
change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statement 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 would be
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statement 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 is included in "Net
realized gain (loss) on foreign currency transactions" on the Statement 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 Statement of Operations.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid quarterly by
the Fund, or as the Board of Trustees may determine from time to time.
Distributions of net realized gains earned by the Fund, if any, are distributed
at least annually.
Distributions from net investment income and realized capital gains are
determined in accordance with federal income tax regulations, which may differ
from U.S. GAAP. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These permanent differences are primarily due to the varying
treatment of income and gain/loss on portfolio securities held by the Fund and
have no impact on net assets or NAV per share. Temporary differences, which
arise from recognizing certain items of income, expense and gain/loss in
different periods for financial statement and tax purposes, will reverse at some
time in the future.
The tax character of distributions during the fiscal period ended August 31,
2022 was as follows:
Distributions paid from:
Ordinary income $ 500,000
Capital gains --
Return of capital --
As of August 31, 2022, the components of distributable earnings on a tax basis
for the Fund were as follows:
Undistributed ordinary income $ (593,091)
Accumulated capital and other gain (loss) (14,652,625)
Net unrealized appreciation (depreciation) (35,156,034)
E. INCOME TAXES
The Fund intends to qualify as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, which includes distributing substantially all of its net investment
income and net realized gains to shareholders. Accordingly, no provision has
been made for federal and state income taxes. However, due to the timing and
amount of distributions, the Fund may be subject to an excise tax of 4% of the
amount by which approximately 98% of the Fund's taxable income exceeds the
distributions from such taxable income for the calendar year.
Page 13
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable period ended 2022
remains open to federal and state audit. As of August 31, 2022, management has
evaluated the application of these standards to the Fund and has determined that
no provision for income tax is required in the Fund's financial statements for
uncertain tax positions.
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At August 31, 2022, the
Fund had no capital loss carryforward for federal income tax purposes.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal period ended August 31, 2022, the Fund
incurred and elected to defer net late year ordinary or capital losses as
follows:
Qualified Late Year Losses
------------------------------------
Ordinary Losses Capital Losses
----------------- ----------------
$ 597,238 $ 14,652,625
In order to present paid-in capital and accumulated distributable earnings
(loss) (which consists of accumulated net investment income (loss), accumulated
net realized gain (loss) on investments and net unrealized appreciation
(depreciation) on investments) on the Statement of Assets and Liabilities that
more closely represent their tax character, certain adjustments have been made
to paid-in capital, accumulated net investment income (loss) and accumulated net
realized gain (loss) on investments. These adjustments are primarily due to the
difference between book and tax treatments of income and gains on various
investment securities held by the Fund and in-kind transactions. The results of
operations and net assets were not affected by these adjustments. For the fiscal
period ended August 31, 2022, the adjustments for the Fund were as follows:
Accumulated
Accumulated Net Realized
Net Investment Gain (Loss) Paid-in
Income (Loss) on Investments Capital
--------------------- --------------------- ---------------------
$ (859) $ 4,064,992 $ (4,064,133)
As of August 31, 2022, 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)
--------------------- --------------------- --------------------- ---------------------
$ 61,813,156 $ 628,776 $ (35,784,810) $ (35,156,034)
F. EXPENSES
Expenses, other than the investment advisory fee and other excluded expenses,
are paid by the Advisor (see Note 3).
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for supervising the selection and ongoing monitoring of the
securities in the Fund's portfolio, managing the Fund's business affairs and
providing certain administrative services necessary for the management of the
Fund.
SkyBridge Capital II, LLC ("SkyBridge" or the "Sub-Advisor") serves as the
Fund's sub-advisor and manages the Fund's portfolio subject to First Trust's
supervision. Pursuant to the Investment Management Agreement, between the Trust,
on behalf of the Fund, and the Advisor, and the Investment Sub-Advisory
Agreement among the Trust, on behalf of the Fund, the Advisor and SkyBridge,
First Trust will supervise SkyBridge and its management of the investment of the
Fund's assets and will pay SkyBridge for its services as the Fund's sub-advisor.
SkyBridge receives a sub-advisory fee equal to 50% of any remaining monthly
unitary management fee paid to the Advisor after the average Fund's expenses
accrued during the most recent twelve months are subtracted from the unitary
Page 14
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022
management fee for that month. First Trust will also be responsible for the
Fund's expenses, including the cost of transfer agency, sub-advisory, custody,
fund administration, legal, audit and other services, but excluding fee payments
under the Investment Management Agreement, interest, taxes, acquired fund fees
and expenses, if any, brokerage commissions and other expenses connected with
the execution of portfolio transactions, distribution and service fees payable
pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Fund has
agreed to pay First Trust an annual unitary management fee equal to 0.85% of its
average daily net assets.
The Trust has multiple service agreements with The Bank of New York Mellon
("BNYM"). Under the service agreements, BNYM performs custodial, fund
accounting, certain administrative services, and transfer agency services for
the Fund. As custodian, BNYM is responsible for custody of the Fund's assets. As
fund accountant and administrator, BNYM is responsible for maintaining the books
and records of the Fund's securities and cash. As transfer agent, BNYM is
responsible for maintaining shareholder records for the Fund. BNYM is a
subsidiary of The Bank of New York Mellon Corporation, a financial holding
company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
a defined-outcome fund or 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 August 31, 2022, the cost of purchases and proceeds
from sales of investments, excluding short-term investments and in-kind
transactions, were $29,297,405 and $29,157,171, respectively.
For the fiscal period ended August 31, 2022, the cost of in-kind purchases and
proceeds from in-kind sales were $88,491,974 and $8,305,916, respectively.
5. CREATIONS, REDEMPTIONS AND TRANSACTION FEES
The 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 the 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, the 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 the 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 the 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 the Fund's
shares and underlying securities provides arbitrage opportunities that are
designed to help keep the market price of the Fund's shares at or close to the
NAV per share of the Fund.
The 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 the 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.
The 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 the 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
Page 15
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022
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 the 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 Fund is
authorized to pay an amount up to 0.25% of its average daily net assets each
year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the
Fund, for amounts expended to finance activities primarily intended to result in
the sale of Creation Units or the provision of investor services. FTP may also
use this amount to compensate securities dealers or other persons that are
Authorized Participants for providing distribution assistance, including
broker-dealer and shareholder support and educational and promotional services.
No 12b-1 fees are currently paid by the Fund, and pursuant to a contractual
arrangement, no 12b-1 fees will be paid any time before September 16, 2023.
7. INDEMNIFICATION
The Trust, on behalf of the Fund, has a variety of indemnification obligations
under contracts with its service providers. The Trust's maximum exposure under
these arrangements is unknown. However, the Trust has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued and has determined that there were
no subsequent events requiring recognition or disclosure in the financial
statements that have not already been disclosed.
Page 16
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED
FUND VIII:
OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS
We have audited the accompanying statement of assets and liabilities of First
Trust SkyBridge Crypto Industry and Digital Economy ETF (the "Fund"), a series
of the First Trust Exchange-Traded Fund VIII, including the portfolio of
investments, as of August 31, 2022, the related statement of operations, the
statement of changes in net assets, and the financial highlights for the period
from September 20, 2021 (commencement of operations) through August 31, 2022,
and the related notes. In our opinion, the financial statements and financial
highlights present fairly, in all material respects, the financial position of
the Fund as of August 31, 2022, and the results of its operations, the changes
in its net assets, and the financial highlights for the period from September
20, 2021 (commencement of operations) through August 31, 2022, in conformity
with accounting principles generally accepted in the United States of America.
BASIS FOR OPINION
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on the Fund's
financial statements and financial highlights based on our audit. We are a
public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to
the Fund in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement, whether due to error or fraud. The Fund is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audit, we are required to
obtain an understanding of internal control over financial reporting but not for
the purpose of expressing an opinion on the effectiveness of the Fund's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements and financial highlights. Our audit
also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2022, by correspondence with
the custodian and brokers; when replies were not received from brokers, we
performed other auditing procedures. We believe that our audit provides a
reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
October 21, 2022
We have served as the auditor of one or more First Trust investment companies
since 2001.
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ADDITIONAL INFORMATION
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022 (UNAUDITED)
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Trust uses to determine
how to vote proxies and information on how the Fund voted proxies relating to
its portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website at www.ftportfolios.com; and (3) on the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files portfolio holdings information for each month in a fiscal quarter
within 60 days after the end of the relevant fiscal quarter on Form N-PORT.
Portfolio holdings information for the third month of each fiscal quarter will
be publicly available on the SEC's website at www.sec.gov. The Fund's complete
schedule of portfolio holdings for the second and fourth quarters of each fiscal
year is included in the semi-annual and annual reports to shareholders,
respectively, and is filed with the SEC on Form N-CSR. The semi-annual and
annual report for the Fund is available to investors within 60 days after the
period to which it relates. The Fund's Forms N-PORT and Forms N-CSR are
available on the SEC's website listed above.
FEDERAL TAX INFORMATION
For the taxable period ended August 31, 2022, the following percentages of
income dividend paid by the Fund qualify for the dividends received deduction
available to corporations and are hereby designated as qualified dividend
income:
Dividends Received Deduction Qualified Dividend Income
---------------------------- -------------------------
3.99% 3.99%
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
Page 18
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022 (UNAUDITED)
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.
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.
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022 (UNAUDITED)
LIBOR RISK. To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as a reference
interest rate, it is subject to LIBOR Risk. 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
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 the 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 the
Fund's shares and result in increased market volatility. During any such events,
the Fund's shares may trade at increased premiums or discounts to their net
asset value and the bid/ask spread on the 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.
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
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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022 (UNAUDITED)
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
REMUNERATION
First Trust Advisors L.P. ("First Trust") is authorised and regulated by the
U.S. Securities and Exchange Commission and is entitled to market shares of
certain funds it manages, including First Trust SkyBridge Crypto Industry and
Digital Economy ETF (the "Fund") in certain member states in the European
Economic Area in accordance with the cooperation arrangements in Article 42 of
the Alternative Investment Fund Managers Directive (the "Directive"). First
Trust is required under the Directive to make disclosures in respect of
remuneration. The following disclosures are made in line with First Trust's
interpretation of currently available regulatory guidance on remuneration
disclosures.
During the period from the Fund's inception on September 20, 2021 through
December 31, 2021, the amount of remuneration paid (or to be paid) by First
Trust Advisors L.P. in respect of the Fund is $15,436. This figure is comprised
of $594 paid (or to be paid) in fixed compensation and $14,842 paid (or to be
paid) in variable compensation. There were a total of 24 beneficiaries of the
remuneration described above. Those amounts include $7,927 paid (or to be paid)
to senior management of First Trust Advisors L.P. and $7,509 paid (or to be
paid) to other employees whose professional activities have a material impact on
the risk profiles of First Trust Advisors L.P. or the Fund (collectively, "Code
Staff").
Code Staff included in the aggregated figures disclosed above are rewarded in
line with First Trust's remuneration policy (the "Remuneration Policy") which is
determined and implemented by First Trust's senior management. The Remuneration
Policy reflects First Trust's ethos of good governance and encapsulates the
following principal objectives:
i. to provide a clear link between remuneration and performance of
First Trust and to avoid rewarding for failure;
ii. to promote sound and effective risk management consistent with the
risk profiles of the funds managed by First Trust; and
iii. to remunerate staff in line with the business strategy, objectives,
values and interests of First Trust and the funds managed by First
Trust in a manner that avoids conflicts of interest.
First Trust assesses various risk factors which it is exposed to when
considering and implementing remuneration for Code Staff and considers whether
any potential award to such person(s) would give rise to a conflict of interest.
First Trust does not reward failure, or consider the taking of risk or failure
to take risk in its remuneration of Code Staff.
First Trust assesses performance for the purposes of determining payments in
respect of performance-related remuneration of Code Staff by reference to a
broad range of measures including (i) individual performance (using financial
and non-financial criteria), and (ii) the overall performance of First Trust.
Remuneration is not based upon the performance of the Fund.
The elements of remuneration are balanced between fixed and variable and the
senior management sets fixed salaries at a level sufficient to ensure that
variable remuneration incentivises and rewards strong individual performance but
does not encourage excessive risk taking.
No individual is involved in setting his or her own remuneration.
LIQUIDITY RISK MANAGEMENT PROGRAM
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund and each other fund in the First Trust Fund
Complex, other than the closed-end funds, have adopted and implemented a
liquidity risk management program (the "Program") reasonably designed to assess
and manage the funds' liquidity risk, i.e., the risk that a fund could not meet
requests to redeem shares issued by the fund without significant dilution of
remaining investors' interests in the fund. The Board of Trustees of the First
Trust Funds has appointed First Trust Advisors, L.P. (the "Advisor") as the
person designated to administer the Program, and in this capacity the Advisor
performs its duties primarily through the activities and efforts of the First
Trust Liquidity Committee (the "Liquidity Committee").
Pursuant to the Program, the Liquidity Committee classifies the liquidity of
each fund's portfolio investments into one of the four liquidity categories
specified by Rule 22e-4: highly liquid investments, moderately liquid
investments, less liquid investments and illiquid investments. The Liquidity
Committee determines certain of the inputs for this classification process,
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022 (UNAUDITED)
including reasonably anticipated trade sizes and significant investor dilution
thresholds. The Liquidity Committee also determines and periodically reviews a
highly liquid investment minimum for certain funds, monitors the funds' holdings
of assets classified as illiquid investments to seek to ensure they do not
exceed 15% of a fund's net assets and establishes policies and procedures
regarding redemptions in kind.
At the April 18, 2022 meeting of the Board of Trustees, as required by Rule
22e-4 and the Program, the Advisor provided the Board with a written report
prepared by the Advisor that addressed the operation of the Program during the
period from March 16, 2021 through the Liquidity Committee's annual meeting held
on March 17, 2022 and assessed the Program's adequacy and effectiveness of
implementation during this period, including the operation of the highly liquid
investment minimum for each fund that is required under the Program to have one,
and any material changes to the Program. Note that because the Fund primarily
holds assets that are highly liquid investments, the Fund has not adopted any
highly liquid investment minimum.
As stated in the written report, during the review period, no fund breached the
15% limitation on illiquid investments, no fund with a highly liquid investment
minimum breached that minimum and no fund filed a Form N-LIQUID. The Advisor
concluded that each fund's investment strategy is appropriate for an open-end
fund; that the Program operated effectively in all material respects during the
review period; and that the Program is reasonably designed to assess and manage
the liquidity risk of each fund and to maintain compliance with Rule 22e-4.
Page 22
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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022 (UNAUDITED)
The following tables identify the Trustees and Officers of the Trust. Unless
otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite
400, Wheaton, IL 60187.
The Trust's statement of additional information includes additional information
about the Trustees and is available, without charge, upon request, by calling
(800) 988-5891.
NUMBER OF OTHER
PORTFOLIOS IN TRUSTEESHIPS OR
TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS
NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE
YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST
POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Indefinite Term Physician, Edward-Elmhurst Medical 220 None
(1951) Group; Physician and Officer,
o Since Inception Wheaton Orthopedics (1990 to 2021)
Thomas R. Kadlec, Trustee o Indefinite Term Retired; President, ADM Investors 220 Director, National Futures
(1957) Services, Inc. (Futures Commission Association and ADMIS
o Since Inception Merchant) (2010 to July 2022) Singapore Ltd.; Formerly,
Director of ADM Investor
Services, Inc., ADM
Investor Services
International, ADMISHong
Kong Ltd., and
Futures Industry
Association
Denise M. Keefe, Trustee o Indefinite Term Executive Vice President, Advocate 220 Director and Board Chair
(1964) Aurora Health and President, of Advocate Home Health
o Since 2021 Advocate Aurora Continuing Health Services, Advocate Home
Division (Integrated Healthcare Care Products and
System) Advocate Hospice;
Director and Board Chair
of Aurora At Home (since
2018); Director of
Advocate Physician
Partners Accountable Care
Organization; Director and
Board Chair of RML Long
Term Acute Care
Hospitals; and Director of
Senior Helpers (since
2021)
Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises 220 Formerly, Director of
(1956) (Financial and Management Trust Company of Illinois
o Since Inception Consulting)
Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (2018 to Present), 220 None
(1954) Managing Director and Chief
o Since Inception Operating Officer (2015 to 2018),
Pelita Harapan Educational
Foundation (Educational
Products and Services)
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First 220 None
Chairman of the Board Trust Advisors L.P. and First Trust
(1955) o Since Inception Portfolios L.P., Chairman of the
Board of Directors, BondWave LLC
(Software Development Company) and
Stonebridge Advisors LLC
(Investment Advisor)
-----------------------------
(1) Mr. Bowen is deemed an "interested person" of the Trust due to his
position as Chief Executive Officer of First Trust Advisors L.P.,
investment advisor of the Trust.
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BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022 (UNAUDITED)
POSITION AND TERM OF OFFICE
NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS
YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS(2)
------------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer, First
(1966) Executive Officer Trust Advisors L.P. and First Trust Portfolios L.P.;
o Since Inception Chief Financial Officer, BondWave LLC (Software
Development Company) and Stonebridge Advisors
LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1972) Officer and Chief First Trust Portfolios L.P.
Accounting Officer o Since Inception
W. Scott Jardine Secretary and Chief Legal o Indefinite Term General Counsel, First Trust Advisors L.P. and First
(1960) Officer Trust Portfolios L.P.; Secretary and General Counsel,
o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC
Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and First
(1970) Trust Portfolios L.P.
o Since Inception
Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. and
(1966) and Assistant Secretary First Trust Portfolios L.P.
o Since Inception
Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1966) First Trust Portfolios L.P.
o Since Inception
Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. and
(1970) First Trust Portfolios L.P.
o Since Inception
-----------------------------
(2) The term "officer" means the president, vice president, secretary,
treasurer, controller or any other officer who performs a policy making
function.
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PRIVACY POLICY
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FIRST TRUST SKYBRIDGE CRYPTO INDUSTRY AND DIGITAL ECONOMY ETF (CRPT)
AUGUST 31, 2022 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
professional or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies."
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
USE OF WEBSITE ANALYTICS
We currently use third party analytics tools, Google Analytics and AddThis, to
gather information for purposes of improving First Trust's website and marketing
our products and services to you. These tools employ cookies, which are small
pieces of text stored in a file by your web browser and sent to websites that
you visit, to collect information, track website usage and viewing trends such
as the number of hits, pages visited, videos and PDFs viewed and the length of
user sessions in order to evaluate website performance and enhance navigation of
the website. We may also collect other anonymous information, which is generally
limited to technical and web navigation information such as the IP address of
your device, internet browser type and operating system for purposes of
analyzing the data to make First Trust's website better and more useful to our
users. The information collected does not include any personal identifiable
information such as your name, address, phone number or email address unless you
provide that information through the website for us to contact you in order to
answer your questions or respond to your requests. To find out how to opt-out of
these services click on: Google Analytics and AddThis.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2022
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FIRST TRUST
First Trust Exchange-Traded Fund VIII
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
SkyBridge Capital II, LLC
527 Madison Avenue, 4th Floor
New York, NY 10022
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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