First Trust Exchange-Traded Fund III

Annual Report

October 31, 2023

Shareholder Letter	2
Fund Performance Overview
First Trust RiverFront Dynamic Developed International ETF (RFDI)	3
First Trust RiverFront Dynamic Europe ETF (RFEU)	5
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)	7
Notes to Fund Performance Overview	9
Portfolio Commentary	10
Understanding Your Fund Expenses	13
Portfolio of Investments
First Trust RiverFront Dynamic Developed International ETF (RFDI)	14
First Trust RiverFront Dynamic Europe ETF (RFEU)	18
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)	21
Statements of Assets and Liabilities	25
Statements of Operations	26
Statements of Changes in Net Assets	28
Financial Highlights	30
Notes to Financial Statements	33
Report of Independent Registered Public Accounting Firm	42
Additional Information	43
Board of Trustees and Officers	50
Privacy Policy	52

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 RiverFront Investment Group, LLC (“RIG” or the “Sub-Advisor”) and their respective representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as “anticipate,” “estimate,” “intend,” “expect,” “believe,” “plan,” “may,” “should,” “would” or other words that convey uncertainty of future events or outcomes.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund III (the “Trust”) described in this report (each such series is referred to as a “Fund” and collectively, the “Funds”) to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their respective representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.

Performance and Risk Disclosure

There is no assurance that any Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund’s shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in a Fund. See “Risk Considerations” in the Additional Information section of this report for a discussion of certain other risks of investing in the Funds.

Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost.

The Advisor may also periodically provide additional information on Fund performance on each Fund’s web page at www.ftportfolios.com.

How to Read This Report

This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund’s performance and investment approach.

By reading the portfolio commentary by the portfolio management team(s) of the Funds, you may obtain an understanding of how the market environment affected each Fund’s performance. The statistical information that follows may help you understand each Fund’s performance compared to that of a relevant market benchmark.

It is important to keep in mind that the opinions expressed by personnel of the Advisor and/or Sub-Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in the prospectus, the statement of additional information, and other Fund regulatory filings.

Page 1

First Trust Exchange-Traded Fund III

Annual Letter from the Chairman and CEO

October 31, 2023

Dear Shareholders,

First Trust is pleased to provide you with the annual report for the First Trust RiverFront Dynamic International ETFs (the “Funds”), which contains detailed information about the Funds for the twelve months ended October 31, 2023.

The Bureau of Economic Analysis recently announced that U.S. real gross domestic product (“GDP”) grew by a staggering 4.9% in the third quarter of 2023 and is now up 2.9% on a year-over-year basis from where it stood in the third quarter of 2022. The most recent quarter’s GDP data represents the fastest growth rate for any quarter since 2014. Consumer spending, which rose by 4.0% over the period, was responsible for 2.7 percentage points of the total increase in GDP. Whether the consumer can keep up this pace of spending remains to be seen, especially given recent news that excess savings from the pandemic-era stimulus have likely been depleted. From a global perspective, the International Monetary Fund (“IMF”) notes that progress in fighting inflation has led to lower economic growth. In their October 2023 publication of the World Economic Outlook, the IMF projected that the growth in world economic output is expected to slow from 3.5% in 2022 to 2.9% in 2024. The economic growth in advanced economies is projected to plummet from 2.6% in 2022 to 1.4% in 2024.

In the notes to their September 2023 meeting, the Federal Open Market Committee revealed that they may need to keep interest rates “higher for longer” as they continue to battle stubbornly high inflation. As many investors are likely aware, a higher Federal Funds target rate can have deep implications for consumers, such as driving up the cost of borrowing for homes, automobiles, and other large purchases. The American consumer has yet to feel the full weight of those burdens, in my opinion. That said, the data reveals a different story among corporate America. S&P Global Market Intelligence reported that a total of 516 U.S. corporations filed for bankruptcy protection on a year-to-date basis through September 30, 2023, up from a total of 263 corporate bankruptcy filings over the same period last year. Higher interest rates and Treasury bond yields have also sapped demand for commercial property loans. Data from Trepp, LLC, a leading provider of data and analytics to the commercial real estate and banking markets, revealed that just $28.2 billion of loans converted into commercial mortgage-backed securities have been issued in 2023, the lowest figure since 2011.

The financial markets battled a myriad of headwinds over the past year, from geopolitical uncertainty resulting from war (the conflicts between Israel and Hamas and Russia and Ukraine), to slowing global economic growth and sticky inflation. Brian Wesbury, Chief Economist at First Trust, notes that a U.S. economic recession is likely to begin at some point early next year. While calls for a recession may concern some investors, the following may offer solace. Data from Bloomberg reveals that the S&P 500^® Index has posted positive total returns over the 3-year period following every recession since 1948.

Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds again in six months.

Sincerely,

James A. Bowen

Chairman of the Board of Trustees

Chief Executive Officer of First Trust Advisors L.P.

Page 2

First Trust RiverFront Dynamic Developed International ETF (RFDI)

The investment objective of First Trust RiverFront Dynamic Developed International ETF (the “Fund”) is to provide capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of developed market companies, including through investments in common stock, depositary receipts, and common and preferred shares of real estate investment trusts (“REITs”), and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such developed market companies are denominated (each, a “Developed Market currency” and, collectively, the “Developed Market currencies”). Developed market companies are those companies (i) whose securities are traded principally on a stock exchange in a developed market country, (ii) that have a primary business office in a developed market country, or (iii) that have at least 50% of their assets in, or derive at least 50% of their revenues or profits from, a developed market country. Developed market countries currently include the countries comprising the Morgan Stanley Capital International World Index or countries considered to be developed by the World Bank, the International Finance Corporation or the United Nations. Under normal market conditions, the Fund invests in at least three countries and at least 40% of its net assets in countries other than the United States. Shares of the Fund are listed on Nasdaq, Inc. under the ticker symbol “RFDI.”

The Fund utilizes a dynamic currency hedging strategy through the use of forward foreign currency exchange contracts and currency spot transactions to hedge up to 100% of the Fund’s currency exposure. As a result of this hedging strategy, the portion of the Fund’s portfolio securities which are subject to currency hedging transactions may vary widely, from 0% to 100% of the portfolio securities. A forward contract on foreign currency is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days agreed upon by the parties from the date of the contract, at a price set on the date of the contract. A forward foreign currency exchange contract may reduce the Fund’s exposure to changes in the value of the currency it will deliver and increase its exposure to changes in the value of the currency it will receive for the duration of the contract. The effect on the value of the Fund is similar to selling securities denominated in one currency and purchasing securities denominated in another currency. The Fund  also may enter into currency spot transactions as part of its dynamic currency hedging strategy. A currency spot transaction is an agreement between two parties to buy or sell a specific currency for delivery on a date that is typically two business days from the date of the agreement, as opposed to a date set in the future. The underlying currencies of the forward foreign currency exchange contracts and currency spot transactions included in the Fund’s policy relating to the investment of at least 80% of its net assets (including investment borrowings) will be limited to Developed Market currencies.

Performance
		Average Annual Total Returns			Cumulative Total Returns
	1 Year Ended 10/31/23	5 Years Ended 10/31/23	Inception (4/13/16) to 10/31/23		5 Years Ended 10/31/23	Inception (4/13/16) to 10/31/23
Fund Performance
NAV	13.03%	2.35%	3.59%		12.34%	30.47%
Market Price	13.40%	2.35%	3.61%		12.29%	30.69%
Index Performance
MSCI EAFE Index	14.40%	4.10%	4.84%		22.24%	42.89%

(See Notes to Fund Performance Overview on page 9.)

Page 3

First Trust RiverFront Dynamic Developed International ETF (RFDI) (Continued)

Sector Allocation	% of Total Long-Term Investments
Financials	18.2%
Consumer Discretionary	13.3
Industrials	11.7
Health Care	10.3
Energy	8.5
Materials	8.3
Communication Services	7.4
Consumer Staples	7.2
Information Technology	5.4
Real Estate	5.2
Utilities	4.5
Total	100.0%

    

Fund Allocation	% of Net Assets
Common Stocks	99.3%
Net Other Assets and Liabilities	0.7
Total	100.0%

Top Ten Holdings	% of Total Long-Term Investments
Novartis AG	2.1%
TotalEnergies SE	2.0
Shell PLC	1.5
Mitsubishi UFJ Financial Group, Inc.	1.5
Novo Nordisk A.S., Class B	1.5
Nestle S.A.	1.4
Allianz SE	1.4
Unilever PLC	1.4
ASML Holding N.V.	1.4
BHP Group Ltd.	1.3
Total	15.5%

Page 4

First Trust RiverFront Dynamic Europe ETF (RFEU)

The investment objective of First Trust RiverFront Dynamic Europe ETF (the “Fund”) is to provide capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of European companies, including through investments in common stock, depositary receipts, and common and preferred shares of real estate investment trusts (“REITs”), and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such European companies are denominated (each, a “European currency” and, collectively, the “European currencies”). European companies are those companies (i) whose securities are traded principally on a stock exchange in a European country, (ii) that have a primary business office in a European country, or (iii) that have at least 50% of their assets in, or derive at least 50% of their revenues or profits from, a European country. The Fund considers a European country to be any member country of the European Union or any country included in the MSCI Europe Index. The Fund generally focuses its European company  investments in Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the  Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and/or the United Kingdom. Shares of the Fund are listed on Nasdaq, Inc. under the ticker symbol “RFEU.”

The Fund utilizes a dynamic currency hedging strategy through the use of forward foreign currency exchange contracts and currency spot transactions to hedge up to 100% of the Fund’s currency exposure. As a result of this hedging strategy, the portion of the Fund’s portfolio securities which are subject to currency hedging transactions may vary widely, from 0% to 100% of the portfolio securities. A forward contract on foreign currency is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days agreed upon by the parties from the date of the contract, at a price set on the date of the contract. A forward foreign currency exchange contract may reduce the Fund’s exposure to changes in the value of the currency it will deliver and increase its exposure to changes in the value of the currency it will receive for the duration of the contract. The effect on the value of the Fund is similar to selling securities denominated in one currency and purchasing securities denominated in another currency. The Fund also may enter into currency spot transactions as part of its dynamic currency hedging strategy. A currency spot transaction is an agreement between two parties to buy or sell a specific currency for delivery on a date that is typically two business days from the date of the agreement, as opposed to a date set in the future. The underlying currencies of the forward foreign currency exchange contracts and currency spot transactions included in the Fund’s policy relating to the investment of at least 80% of its net assets (including investment borrowings) will be limited to European currencies.

Performance
		Average Annual Total Returns			Cumulative Total Returns
	1 Year Ended 10/31/23	5 Years Ended 10/31/23	Inception (4/13/16) to 10/31/23		5 Years Ended 10/31/23	Inception (4/13/16) to 10/31/23
Fund Performance
NAV	9.47%	2.71%	4.39%		14.33%	38.36%
Market Price	10.07%	2.84%	4.42%		15.02%	38.60%
Index Performance
MSCI Europe Index	15.74%	4.82%	5.02%		26.53%	44.70%

(See Notes to Fund Performance Overview on page 9.)

Page 5

First Trust RiverFront Dynamic Europe ETF (RFEU) (Continued)

Sector Allocation	% of Total Long-Term Investments
Health Care	16.6%
Financials	14.7
Industrials	14.1
Consumer Discretionary	13.1
Consumer Staples	10.0
Energy	10.0
Communication Services	6.5
Information Technology	6.2
Utilities	5.1
Materials	2.8
Real Estate	0.9
Total	100.0%

    

Fund Allocation	% of Net Assets
Common Stocks	99.1%
Net Other Assets and Liabilities	0.9
Total	100.0%

Top Ten Holdings	% of Total Long-Term Investments
Nestle S.A.	4.3%
Novo Nordisk A.S., Class B	4.1
ASML Holding N.V.	3.7
Novartis AG	3.0
LVMH Moet Hennessy Louis Vuitton SE	2.9
TotalEnergies SE	2.8
Roche Holding AG	2.7
Shell PLC	2.4
Unilever PLC	2.2
Allianz SE	1.9
Total	30.0%

Page 6

First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)

The investment objective of First Trust RiverFront Dynamic Emerging Markets ETF (the “Fund”) is to provide capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of emerging market companies, including through investments in common stock, depositary receipts, and common and preferred shares of real estate investment trusts (“REITs”), and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such emerging market companies are denominated (each, an “Emerging Market currency” and, collectively, the “Emerging Market currencies”). The Fund considers an emerging market company to be one (i) domiciled or with a principal place of business or primary securities trading market in an emerging market country, or (ii) that derives a substantial portion of its total revenues or profits from emerging market countries. The Fund considers an emerging market country to be any country whose issuers are included in the Morgan Stanley Capital International Emerging Markets Index and/or those countries considered to be developing by the World Bank, the International Finance Corporation or the United Nations. The Fund generally focuses its emerging market company investments in Brazil, Chile, China, Colombia, the Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, Nigeria, Peru, the Philippines, Poland, Qatar, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey and/or the United Arab Emirates. Shares of the Fund are listed on Nasdaq, Inc. under the ticker symbol “RFEM.”

The Fund utilizes a dynamic currency hedging strategy through the use of forward foreign currency exchange contracts and currency spot transactions to hedge up to 100% of the Fund’s currency exposure. As a result of this hedging strategy, the portion of the Fund’s portfolio securities which are subject to currency hedging transactions may vary widely, from 0% to 100% of the portfolio securities. A forward contract on foreign currency is an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days agreed upon by the parties from the date of the contract, at a price set on the date of the contract. A forward foreign currency exchange contract may reduce the Fund’s exposure to changes in the value of the currency it will deliver and increase its exposure to changes in the value of the currency it will receive for the duration of the contract. The effect on the value of the Fund is similar to selling securities denominated in one currency and purchasing securities denominated in another currency. The Fund also may enter into currency spot transactions as part of its dynamic currency hedging strategy. A currency spot transaction is an agreement between two parties to buy or sell a specific currency for delivery on a date that is typically two business days from the date of the agreement, as opposed to a date set in the future. The underlying currencies of the forward foreign currency exchange contracts and currency spot transactions included in the Fund’s policy relating to the investment of at least 80% of its net assets (including investment borrowings) will be limited to Emerging Market currencies.

Performance
		Average Annual Total Returns			Cumulative Total Returns
	1 Year Ended 10/31/23	5 Years Ended 10/31/23	Inception (6/14/16) to 10/31/23		5 Years Ended 10/31/23	Inception (6/14/16) to 10/31/23
Fund Performance
NAV	16.00%	2.41%	4.38%		12.63%	37.25%
Market Price	16.15%	2.44%	4.36%		12.80%	37.05%
Index Performance
MSCI Emerging Markets Index	10.80%	1.59%	4.32%		8.23%	36.60%

(See Notes to Fund Performance Overview on page 9.)

Page 7

First Trust RiverFront Dynamic Emerging Markets ETF (RFEM) (Continued)

Sector Allocation	% of Total Long-Term Investments
Information Technology	26.7%
Financials	16.8
Materials	10.2
Consumer Discretionary	10.1
Industrials	9.0
Energy	6.9
Consumer Staples	5.9
Communication Services	5.2
Health Care	4.1
Utilities	3.6
Real Estate	1.5
Total	100.0%

    

Fund Allocation	% of Net Assets
Common Stocks	99.6%
Net Other Assets and Liabilities*	0.4
Total	100.0%

    

*	Includes forward foreign currency contracts.

Top Ten Holdings	% of Total Long-Term Investments
Taiwan Semiconductor Manufacturing Co., Ltd.	8.2%
Tencent Holdings Ltd.	3.7
Samsung Electronics Co., Ltd.	3.7
Alibaba Group Holding Ltd.	2.4
MediaTek, Inc.	2.0
ICICI Bank Ltd.	1.8
Vale S.A.	1.6
Tata Consultancy Services Ltd.	1.5
Petroleo Brasileiro S.A.	1.5
Hindustan Unilever Ltd.	1.4
Total	27.8%

Page 8

Total returns for the periods since inception are calculated from the inception date of each Fund. “Average Annual Total Returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative Total Returns” represent the total change in value of an investment over the periods indicated.

Each Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint of the national best bid and offer price (“NBBO”) as of the time that the Fund’s NAV is calculated. Under Securities and Exchange Commission 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. Prior to January 1, 2019,  the price used was the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund were listed for trading as of the time that the Fund’s NAV was calculated. Since shares of each Fund did not trade in the secondary market until after the Fund’s inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively.

An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund’s past performance is no guarantee of future performance.

Page 9

Portfolio Commentary

First Trust Exchange-Traded Fund III

Annual Report

October 31, 2023 (Unaudited)

Advisor

First Trust Advisors L.P. (“First Trust”) serves as the investment advisor to the First Trust RiverFront Dynamic Developed International ETF (“RFDI”), the First Trust RiverFront Dynamic Europe ETF (“RFEU”), and the First Trust RiverFront Dynamic Emerging Markets ETF (“RFEM”) (each a “Fund” and collectively, the “Funds”). First Trust is responsible for the ongoing monitoring of each Fund’s investment portfolio, managing each Fund’s business affairs and providing certain administrative services necessary for the management of each Fund.

Sub-Advisor

RiverFront Investment Group, LLC

RiverFront Investment Group, LLC (“RIG”) is an SEC-registered investment advisor located in Richmond, Virginia. It is majority owned by its employees, and Baird Financial Corporation is a minority owner of RiverFront Investment Holding Group, LLC. The firm provides asset management services to a series of global tactical asset allocation portfolios and registered investment companies, including mutual funds and exchange-traded products.

Portfolio Management Team

The following persons serve as portfolio managers of the Funds.

Adam Grossman, CFA, Portfolio Manager of RIG

Chris Konstantinos, CFA, Portfolio Manager of RIG

Each of the portfolio managers is primarily and jointly responsible for the day-to-day management of the Funds. Adam Grossman and Chris Konstantinos have managed the Funds since 2016.

Commentary

The 12-month period ended October 31, 2023 saw international equity markets lead U.S. equities. Chinese equities had the highest returns during the period, with a total return of 21.1%, as measured by the MSCI China Index. However, Developed International equities outpaced broad Emerging International equities during the same period, with total returns of 14.4% and 10.8%, respectively, as measured by the MSCI EAFE Index and the MSCI Emerging Markets Index. Both European and Japanese markets posted solid total returns, 15.7% and 16.8%, respectively, during the period, as measured by the MSCI Europe Index and the MSCI Japan Index. With a total return of 10.1%, U.S. large cap stocks trailed both Emerging and Developed International equities during the period, as measured by the S&P 500^® Index.

From a style standpoint, Developed International value equities, as measured by the MSCI EAFE Value Index, outperformed broad Developed International equities with a total return of 19.0% for the same period, while Developed International Growth, as measured by the MSCI EAFE Growth Free Index, and Quality, as measured by the MSCI EAFE Quality Index, underperformed the broad EAFE Index, with respective total returns of 10.8% and 13.2%.

First Trust RiverFront Dynamic Developed International ETF (RFDI)

2023 Performance Review

     2023 Performance

RFDI Market

13.40%

RFDI NAV	13.03%
Benchmark: MSCI EAFE Index	14.40%

*Inception date 4/13/16

Fund-Level Attribution

For the 12-month period ended October 31, 2023, the Fund posted net asset value (“NAV”) and market price returns below the Benchmark’s (MSCI EAFE Index) return during the fiscal year.

Currency Hedging

The portfolio had three currency hedges to begin the 12-month period ended October 31, 2023: the British Pound, the Euro, and the Japanese Yen. The Pound was hedged through March 30, 2023, the Euro was hedged through December 30, 2022, and the Yen was hedged through January 3, 2023. All three hedges were detractors to the Fund’s performance during the period.

Page 10

Portfolio Commentary (Continued)

First Trust Exchange-Traded Fund III

Annual Report

October 31, 2023 (Unaudited)

First Trust RiverFront Dynamic Europe ETF (RFEU)

2023 Performance Review

      2023 Performance

RFEU Market

10.07%

RFEU NAV	9.47%
Benchmark: MSCI Europe Index	15.74%

*Inception date 4/13/16

Fund-Level Attribution

For the 12-month period ended October 31, 2023, the Fund posted NAV and market price returns below the Benchmark (MSCI Europe Index) during the fiscal year.

Currency Hedging

The portfolio had two currency hedges to begin the fiscal year: the British Pound and the Euro. The Pound was hedged through March 30, 2023 and the Euro through December 30, 2022. Both hedges were detractors to the Fund’s performance during the period.

First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)

2023 Performance Review

      2023 Performance

RFEM Market

16.15%

RFEM NAV	16.00%
Benchmark: MSCI Emerging Markets Index	10.80%

*Inception date 6/14/16

Fund-Level Attribution

For the 12-month period ended October 31, 2023, the Fund posted NAV and market price returns above the Benchmark’s (MSCI Emerging Markets Index) return during the period.

Currency Hedging

The portfolio had two currency hedges to begin the fiscal year: the Taiwan Dollar and the Korean Won. The Taiwan Dollar was hedged the entire period, while the Won was hedged through March 30, 2023. Both hedges were detractors to the Fund’s performance during the period.

Market Outlook

The 12-month period ended October 31, 2023 saw equity markets snap back after poor performance in 2022. Moving forward, in our view, we see markets trending towards a version of our “Base” Case, as described below.

In our view, we see three likely paths forward for the final quarter of 2023 and moving forward:

1.	Economic Growth: Slowing, but Positive/Inflation: Moderating, but Persistent (BASE CASE/MOST LIKELY OUTCOME)

•

In this scenario, interest rates must go higher to combat inflation. If this plays out, we believe equity investors should expect volatility but directionless markets, an environment where we believe the “Pay Attention To The Yield” theme (a focus on investments with strong yields and free cash flows to support them) would be the most effective strategy.

2.	Economic Growth: Resilient/Inflation: Under Control (BULL CASE)

•

Specifically, a recession or significant slowdown quickly emerges, causing inflation pressures to dissipate quickly. In this scenario, central banks would begin to forecast rate cuts and/or monetary stimulus. In this scenario, quality and growth-oriented equities would be the strongest performers, in our view. Additionally, international stocks would benefit from strong currencies, in our opinion.

3.	Economic Growth: Recessionary/Inflation: Strong (BEAR CASE)

Page 11

Portfolio Commentary (Continued)

First Trust Exchange-Traded Fund III

Annual Report

October 31, 2023 (Unaudited)

•

The most challenging scenario is if we see high inflation and evidence of a recession, which would force central banks to continue to raise rates even in the face of a recession. In that scenario, in our view, bonds and stocks would perform poorly as long interest rates rise and economic and earnings growth fall.

Page 12

First Trust Exchange-Traded Fund III

Understanding Your Fund Expenses

October 31, 2023 (Unaudited)

As a shareholder of First Trust RiverFront Dynamic Developed International ETF, First Trust RiverFront Dynamic Europe ETF or First Trust RiverFront Dynamic Emerging Markets ETF (each a “Fund” and collectively, the “Funds”), you incur two types of costs:  (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs (in U.S. dollars) 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 October 31, 2023.

Actual Expenses

The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Six-Month Period” to estimate the expenses you paid on your account during this six-month period.

Hypothetical Example for Comparison Purposes

The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

	Beginning Account Value May 1, 2023	Ending Account Value October 31, 2023	Annualized Expense Ratio Based on the Six-Month Period	Expenses Paid During the Six-Month Period (a)
First Trust RiverFront Dynamic Developed International ETF (RFDI)
Actual	$1,000.00	$955.00	0.83%	$4.09
Hypothetical (5% return before expenses)	$1,000.00	$1,021.02	0.83%	$4.23
First Trust RiverFront Dynamic Europe ETF (RFEU)
Actual	$1,000.00	$920.00	0.83%	$4.02
Hypothetical (5% return before expenses)	$1,000.00	$1,021.02	0.83%	$4.23
First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)
Actual	$1,000.00	$1,014.90	0.95%	$4.82
Hypothetical (5% return before expenses)	$1,000.00	$1,020.42	0.95%	$4.84

    

(a)	Expenses are equal to the annualized expense ratios as indicated in the table multiplied by the average account value over the period (May 1, 2023 through October 31, 2023), multiplied by 184/365 (to reflect the six-month period).

Page 13

First Trust RiverFront Dynamic Developed International ETF (RFDI)

Portfolio of Investments

October 31, 2023

First Trust RiverFront Dynamic Developed International ETF (RFDI)

Portfolio of Investments (Continued)

October 31, 2023

First Trust RiverFront Dynamic Developed International ETF (RFDI)

Portfolio of Investments (Continued)

October 31, 2023

First Trust RiverFront Dynamic Developed International ETF (RFDI)

Portfolio of Investments (Continued)

October 31, 2023

---

First Trust RiverFront Dynamic Europe ETF (RFEU)

Portfolio of Investments

October 31, 2023

First Trust RiverFront Dynamic Europe ETF (RFEU)

Portfolio of Investments (Continued)

October 31, 2023

First Trust RiverFront Dynamic Europe ETF (RFEU)

Portfolio of Investments (Continued)

October 31, 2023

---

First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)

Portfolio of Investments

October 31, 2023

First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)

Portfolio of Investments (Continued)

October 31, 2023

First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)

Portfolio of Investments (Continued)

October 31, 2023

First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)

Portfolio of Investments (Continued)

October 31, 2023

---

First Trust Exchange-Traded Fund III

Statements of Assets and Liabilities

October 31, 2023

	First Trust RiverFront Dynamic Developed International ETF (RFDI)		First Trust RiverFront Dynamic Europe ETF (RFEU)		First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)
ASSETS:
Investments, at value	$ 110,240,357		$ 8,305,727		$ 31,351,678
Cash	—		—		140,436
Foreign currency	6,122		1,399		5,964
Receivables:
Reclaims	442,193		73,241		1,258
Dividends	381,972		9,741		87,867
Investment securities sold	55,386		5,604		—
Total Assets	111,126,030		8,395,712		31,587,203
LIABILITIES:
Due to custodian	56,289		6,310		—
Unrealized depreciation on forward foreign currency contracts	—		—		9,572
Payables:
Investment advisory fees	79,573		6,010		25,635
Investment securities purchased	1,197		—		—
Deferred foreign capital gains tax	—		—		60,527
Total Liabilities	137,059		12,320		95,734
NET ASSETS	$110,988,971		$8,383,392		$31,491,469
NET ASSETS consist of:
Paid-in capital	$ 196,152,873		$ 30,711,161		$ 56,893,494
Par value	20,674		1,500		6,000
Accumulated distributable earnings (loss)	(85,184,576)		(22,329,269)		(25,408,025)
NET ASSETS	$110,988,971		$8,383,392		$31,491,469
NET ASSET VALUE, per share	$53.69		$55.89		$52.49
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)	2,067,387		150,002		600,002
Investments, at cost	$112,223,060		$9,293,652		$33,011,588
Foreign currency, at cost (proceeds)	$6,106		$1,399		$5,974

See Notes to Financial Statements

Page 25

First Trust Exchange-Traded Fund III

Statements of Operations

For the Year Ended October 31, 2023

		First Trust RiverFront Dynamic Developed International ETF (RFDI)		First Trust RiverFront Dynamic Europe ETF (RFEU)		First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)
INVESTMENT INCOME:
Dividends		$ 5,663,511		$ 481,689		$ 2,098,176
Interest		8,003		957		5,022
Foreign withholding tax		(398,227)		42,083		(275,803)
Other		641		169		106
Total investment income		5,273,928		524,898		1,827,501
EXPENSES:
Investment advisory fees		1,023,880		77,631		311,256
Total expenses		1,023,880		77,631		311,256
NET INVESTMENT INCOME (LOSS)		4,250,048		447,267		1,516,245
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments		1,180,394		(245,773)		(1,258,786)
In-kind redemptions		3,360,989		(539,689)		241,994
Forward foreign currency contracts		(1,159,220)		(131,137)		(11,393)
Foreign currency transactions		(50,859)		(28,099)		(18,208)
Foreign capital gains tax		—		—		(101,132)
Net realized gain (loss)		3,331,304		(944,698)		(1,147,525)
Net change in unrealized appreciation (depreciation) on:
Investments		9,006,007		1,920,465		3,827,412
Forward foreign currency contracts		(410,206)		(77,750)		(9,946)
Foreign currency translation		55,347		13,923		965
Deferred foreign capital gains tax		—		—		34,809
Net change in unrealized appreciation (depreciation)		8,651,148		1,856,638		3,853,240
NET REALIZED AND UNREALIZED GAIN (LOSS)		11,982,452		911,940		2,705,715
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		$ 16,232,500		$ 1,359,207		$ 4,221,960

Page 26

See Notes to Financial Statements

This page intentionally left blank

Page 27

First Trust Exchange-Traded Fund III

Statements of Changes in Net Assets

	First Trust RiverFront Dynamic Developed International ETF (RFDI)				First Trust RiverFront Dynamic Europe ETF (RFEU)
	Year Ended 10/31/2023		Year Ended 10/31/2022		Year Ended 10/31/2023		Year Ended 10/31/2022
OPERATIONS:
Net investment income (loss)	$ 4,250,048		$ 5,437,970		$ 447,267		$ 704,653
Net realized gain (loss)	3,331,304		(14,139,636)		(944,698)		(5,259,007)
Net change in unrealized appreciation (depreciation)	8,651,148		(39,993,438)		1,856,638		(2,592,073)
Net increase (decrease) in net assets resulting from operations	16,232,500		(48,695,104)		1,359,207		(7,146,427)
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations	(4,142,877)		(8,358,471)		(456,021)		(731,214)
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold	—		16,350,807		—		7,163,511
Cost of shares redeemed	(22,247,859)		(13,466,905)		(11,332,405)		(3,439,455)
Net increase (decrease) in net assets resulting from shareholder transactions	(22,247,859)		2,883,902		(11,332,405)		3,724,056
Total increase (decrease) in net assets	(10,158,236)		(54,169,673)		(10,429,219)		(4,153,585)
NET ASSETS:
Beginning of period	121,147,207		175,316,880		18,812,611		22,966,196
End of period	$ 110,988,971		$ 121,147,207		$ 8,383,392		$ 18,812,611
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period	2,467,387		2,417,387		350,002		300,002
Shares sold	—		300,000		—		100,000
Shares redeemed	(400,000)		(250,000)		(200,000)		(50,000)
Shares outstanding, end of period	2,067,387		2,467,387		150,002		350,002

Page 28

See Notes to Financial Statements

First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)
Year Ended 10/31/2023		Year Ended 10/31/2022
$ 1,516,245		$ 2,153,723
(1,147,525)		309,273
3,853,240		(12,935,260)
4,221,960		(10,472,264)
(1,664,765)		(2,105,337)
5,558,285		—
(5,232,255)		(6,186,633)
326,030		(6,186,633)
2,883,225		(18,764,234)
28,608,244		47,372,478
$ 31,491,469		$ 28,608,244
600,002		700,002
100,000		—
(100,000)		(100,000)
600,002		600,002

See Notes to Financial Statements

Page 29

First Trust Exchange-Traded Fund III

Financial Highlights

For a share outstanding throughout each period

First Trust RiverFront Dynamic Developed International ETF (RFDI)  

	Year Ended October 31,
	2023		2022		2021		2020		2019
Net asset value, beginning of period	$ 49.10		$ 72.52		$ 54.60		$ 57.70		$ 55.84
Income from investment operations:
Net investment income (loss)	1.92 (a)		2.23		1.21		0.85		1.54
Net realized and unrealized gain (loss)	4.54		(22.22)		17.89		(2.84)		1.81
Total from investment operations	6.46		(19.99)		19.10		(1.99)		3.35
Distributions paid to shareholders from:
Net investment income	(1.87)		(3.43)		(1.18)		(1.11)		(1.49)
Net asset value, end of period	$53.69		$49.10		$72.52		$54.60		$57.70
Total return (b)	13.03%		(28.21)%		35.11%		(3.45)%		6.12%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000’s)	$ 110,989		$ 121,147		$ 175,317		$ 131,049		$ 245,234
Ratio of total expenses to average net assets	0.83%		0.83%		0.83%		0.83%		0.83%
Ratio of net investment income (loss) to average net assets	3.45%		3.61%		1.79%		1.43%		2.51%
Portfolio turnover rate (c)	81%		95%		45%		96%		87%

    

(a)	Based on average shares outstanding.
(b)	Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(c)	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 30

See Notes to Financial Statements

First Trust Exchange-Traded Fund III

Financial Highlights (Continued)

For a share outstanding throughout each period

First Trust RiverFront Dynamic Europe ETF (RFEU)  

	Year Ended October 31,
	2023		2022		2021		2020		2019
Net asset value, beginning of period	$ 53.75		$ 76.55		$ 55.76		$ 59.49		$ 57.23
Income from investment operations:
Net investment income (loss)	2.83 (a)		2.04		0.98		0.96		1.78
Net realized and unrealized gain (loss)	2.35		(22.71)		21.31		(3.50)		2.20
Total from investment operations	5.18		(20.67)		22.29		(2.54)		3.98
Distributions paid to shareholders from:
Net investment income	(3.04)		(2.13)		(1.50)		(1.19)		(1.72)
Net asset value, end of period	$55.89		$53.75		$76.55		$55.76		$59.49
Total return (b)	9.47%		(27.33)%		40.20%		(4.22)%		7.01%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000’s)	$ 8,383		$ 18,813		$ 22,966		$ 16,729		$ 38,666
Ratio of total expenses to average net assets	0.83%		0.83%		0.83%		0.83%		0.83%
Ratio of net investment income (loss) to average net assets	4.78%		3.15%		1.29%		1.59%		2.77%
Portfolio turnover rate (c)	68%		71%		50%		87%		81%

    

(a)	Based on average shares outstanding.
(b)	Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(c)	Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.

See Notes to Financial Statements

Page 31

First Trust Exchange-Traded Fund III

Financial Highlights (Continued)

For a share outstanding throughout each period

First Trust RiverFront Dynamic Emerging Markets ETF (RFEM)  

	Year Ended October 31,
	2023		2022		2021		2020		2019
Net asset value, beginning of period	$ 47.68		$ 67.67		$ 61.57		$ 60.76		$ 56.40
Income from investment operations:
Net investment income (loss)	2.48 (a)		3.48		1.61		1.10		1.79
Net realized and unrealized gain (loss)	5.10		(20.11)		5.85		1.81		3.94
Total from investment operations	7.58		(16.63)		7.46		2.91		5.73
Distributions paid to shareholders from:
Net investment income	(2.77)		(3.36)		(1.36)		(1.73)		(1.37)
Return of capital	—		—		—		(0.37)		—
Total distributions	(2.77)		(3.36)		(1.36)		(2.10)		(1.37)
Net asset value, end of period	$52.49		$47.68		$67.67		$61.57		$60.76
Total return (b)	16.00%		(24.97)%		12.01%		4.74%		10.32%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000’s)	$ 31,491		$ 28,608		$ 47,372		$ 46,178		$ 72,917
Ratio of total expenses to average net assets	0.95%		0.95%		0.95%		0.95%		0.95%
Ratio of net investment income (loss) to average net assets	4.63%		5.47%		2.19%		1.92%		2.60%
Portfolio turnover rate (c)	90%		75%		32%		89%		116%

    

(a)	Based on average shares outstanding.
(b)	Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year.
(c)	Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.

Page 32

See Notes to Financial Statements

Notes to Financial Statements

First Trust Exchange-Traded Fund III

October 31, 2023

1. Organization

First Trust Exchange-Traded Fund III (the “Trust”) is an open-end management investment company organized as a Massachusetts business trust on January 9, 2008, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”).

The Trust consists of seventeen funds that are currently offering shares. This report covers the three funds (each a “Fund” and collectively, the “Funds”) listed below, each a diversified series of the Trust. The shares of each Fund are listed and traded on Nasdaq, Inc. (“Nasdaq”).

First Trust RiverFront Dynamic Developed International ETF – (ticker “RFDI”)

First Trust RiverFront Dynamic Europe ETF – (ticker “RFEU”)

First Trust RiverFront Dynamic Emerging Markets ETF – (ticker “RFEM”)

Each Fund represents a separate series of shares of beneficial interest in the Trust. Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value (“NAV”), only in large blocks of shares known as “Creation Units.”

Each Fund is an actively-managed exchange-traded fund. The investment objective of each Fund is to provide capital appreciation.

Under normal market conditions, RFDI seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of developed market companies, including through investments in common stocks, depositary receipts, common and preferred shares of real estate investment trusts (“REITs”), and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such developed market companies are denominated.

Under normal market conditions, RFEU seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of European companies, including through investments in common stocks, depositary receipts, common and preferred shares of REITs, and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such European companies are denominated.

Under normal market conditions, RFEM seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in a portfolio of equity securities of emerging market companies, including through investments in common stocks, depositary receipts, common and preferred shares of REITs, and forward foreign currency exchange contracts and currency spot transactions used to hedge the Fund’s exposure to the currencies in which the equity securities of such emerging market companies are denominated.

There can be no assurance that a Fund will achieve its investment objective. The Funds may not be appropriate for all investors.

2. Significant Accounting Policies

The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, “Financial Services-Investment Companies.” The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.

A. Portfolio Valuation

Each Fund’s NAV is determined daily as of the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. Each Fund’s NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.

Each Fund’s investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds’ investment advisor, First Trust Advisors L.P. (“First Trust” or the “Advisor”), in accordance with

Page 33

Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

October 31, 2023

valuation procedures approved by the Trust’s Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor’s Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund’s investments are valued as follows:

Common stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market (“AIM”)) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the primary exchange for such securities.

Securities trading on foreign exchanges or over-the-counter markets that close prior to the NYSE close may be valued using a systematic fair valuation model provided by a third-party pricing service.  If these foreign securities meet certain criteria in relation to the valuation model, their valuation is systematically adjusted to reflect the impact of movement in the U.S. market after the close of the foreign markets.

Forward foreign currency contracts are valued at the current day’s interpolated foreign exchange rate, as calculated using the current day’s spot rate, and the thirty, sixty, ninety, and one-hundred eighty day forward rates provided by a third-party pricing service.

Equity securities traded in an over-the-counter market are valued at the close price or the last trade price.

Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Advisor’s Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security’s fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:

1)	the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price;
2)	the type of security;
3)	the size of the holding;
4)	the initial cost of the security;
5)	transactions in comparable securities;
6)	price quotes from dealers and/or third-party pricing services;
7)	relationships among various securities;
8)	information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
9)	an analysis of the issuer’s financial statements;
10)	the existence of merger proposals or tender offers that might affect the value of the security; and
11)	other relevant factors.

If the securities in question are foreign securities, the following additional information may be considered:

1)	the last sale price on the exchange on which they are principally traded;
2)	the value of similar foreign securities traded on other foreign markets;
3)	ADR trading of similar securities;
4)	closed-end fund or exchange-traded fund trading of similar securities;
5)	foreign currency exchange activity;
6)	the trading prices of financial products that are tied to baskets of foreign securities;
7)	factors relating to the event that precipitated the pricing problem;
8)	whether the event is likely to recur;
9)	whether the effects of the event are isolated or whether they affect entire markets, countries or regions; and
10)	other relevant factors.

Page 34

Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

October 31, 2023

Because foreign markets may be open on different days than the days during which investors may transact in the shares of a Fund, the value of the Fund’s securities may change on the days when investors are not able to transact in the shares of the Fund. The value of securities denominated in foreign currencies is converted into U.S. dollars using exchange rates determined daily as of the close of regular trading on the NYSE.

The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows:

•	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.
•	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.

•	Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment.

The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund’s investments as of October 31, 2023, is included with each Fund’s Portfolio of Investments.

B. Securities Transactions and Investment Income

Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date except that certain dividends from foreign securities are recorded as soon as the information becomes available after the ex-dividend date. Interest income, if any, is recorded on the accrual basis.

Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund’s understanding of the applicable country’s tax rules and rates.

Distributions received from a Fund’s investments in REITs may be comprised of return of capital, capital gains, and income. The actual character of the amounts received during the year are not known until after the REITs’ fiscal year end. A Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude.

C. Forward Foreign Currency Contracts

The Funds are subject to foreign currency risk in the normal course of pursuing their investment objectives. Forward foreign currency contracts are agreements between two parties (“Counterparties”) to exchange one currency for another at a future date and at a specified price. The Funds use forward foreign currency contracts to facilitate transactions in foreign securities and to manage each Fund’s foreign currency exposure. These contracts are valued daily, and each Fund’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in “Unrealized appreciation on forward foreign currency contracts” and “Unrealized depreciation on forward foreign currency contracts” on the Statements of Assets and Liabilities. The change in unrealized appreciation (depreciation) is included in “Net change in unrealized appreciation (depreciation) on forward foreign currency contracts” on the Statements of Operations. When the forward contract is closed, a Fund records a realized gain or loss equal to the difference between the proceeds from (or the cost of) the closing transaction and the Fund’s basis in the contract. This realized gain or loss is included in “Net realized gain (loss) on forward foreign currency contracts” on the Statements of Operations. Risks arise from the possible inability of Counterparties to meet the terms of their contracts and from movement in currency, securities values and interest rates. Due to the risks, the Funds could incur losses in excess of the net unrealized value shown on the Forward Foreign Currency

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Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

October 31, 2023

Contracts table in each Fund’s Portfolio of Investments. In the event of default by the Counterparty, a Fund will provide notice to the Counterparty of the Fund’s intent to convert the currency held by the Fund into the currency that the Counterparty agreed to exchange with that Fund. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Funds may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Funds may obtain only limited recovery or may obtain no recovery in such circumstances.

D. Foreign Currency

The books and records of the Funds are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in “Net change in unrealized appreciation (depreciation) on foreign currency translation” on the Statements of Operations. Unrealized gains and losses on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are included in “Net change in unrealized appreciation (depreciation) on investments” on the Statements of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are included in “Net realized gain (loss) on foreign currency transactions” on the Statements of Operations. The portion of foreign currency gains and losses related to fluctuations in exchange rates between the initial purchase settlement date and subsequent sale trade date is included in “Net realized gain (loss) on investments” on the Statements of Operations.

E. Dividends and Distributions to Shareholders

Dividends from net investment income of each Fund, if any, are declared and paid quarterly, or as the Board of Trustees may determine from time to time. Distributions of net realized capital gains earned by each Fund, if any, are distributed at least annually. A Fund may also designate a portion of the amount paid to redeeming shareholders as a distribution for tax purposes.

Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future.

The tax character of distributions paid by each Fund during the fiscal year ended October 31, 2023, was as follows:

	Distributions paid from Ordinary Income		Distributions paid from Capital Gains		Distributions paid from Return of Capital
First Trust RiverFront Dynamic Developed International ETF	$ 4,142,877		$ —		$ —
First Trust RiverFront Dynamic Europe ETF	456,021		—		—
First Trust RiverFront Dynamic Emerging Markets ETF	1,664,765		—		—

The tax character of distributions paid by each Fund during the fiscal year ended October 31, 2022, was as follows:

	Distributions paid from Ordinary Income		Distributions paid from Capital Gains		Distributions paid from Return of Capital
First Trust RiverFront Dynamic Developed International ETF	$ 8,358,471		$ —		$ —
First Trust RiverFront Dynamic Europe ETF	731,214		—		—
First Trust RiverFront Dynamic Emerging Markets ETF	2,105,337		—		—

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Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

October 31, 2023

As of October 31, 2023, the components of distributable earnings on a tax basis for each Fund were as follows:

	Undistributed Ordinary Income		Accumulated Capital and Other Gain (Loss)		Net Unrealized Appreciation (Depreciation)
First Trust RiverFront Dynamic Developed International ETF	$ —		$ (82,297,648)		$ (2,886,928)
First Trust RiverFront Dynamic Europe ETF	—		(21,297,780)		(1,031,489)
First Trust RiverFront Dynamic Emerging Markets ETF	239,837		(23,720,171)		(1,927,691)

F. Income and Other Taxes

Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund’s taxable income exceeds the distributions from such taxable income for the calendar year.

Certain countries assess a capital gains tax on securities sold in their local markets. This tax is accrued as the securities in these foreign markets appreciate in value and is paid at the time of sale to the extent a capital gain is realized. Taxes accrued on securities in an unrealized appreciation position are included in “Net change in unrealized appreciation (depreciation) on deferred foreign capital gains tax” on the Statements of Operations. The capital gains tax paid on securities sold is included in “Net realized gain (loss) on foreign capital gains tax” on the Statements of Operations.

India’s Finance Bill, 2018 (“Finance Bill, 2018”) was enacted into law on March 29, 2018 and amongst other provisions, it introduced a long-term capital gains tax beginning April 1, 2018. Long-term capital gains on the sale of listed shares in excess of INR 0.1 million are taxed at the rate of 10% (plus applicable surcharge and cess (which is a type of tax)) subject to satisfaction of certain conditions. Long-term capital gains accruing as of January 31, 2018 are considered exempt due to a grandfather clause in the provision. The aforesaid exemption from long-term capital gains tax is available with respect to shares acquired between October 1, 2004 and March 31, 2018 only if on such acquisitions Securities Transaction Tax (“STT”) was chargeable. Certain exceptions in this regard, such as acquisition of shares in a public offer, bonus, rights issued, etc. for which the condition of chargeability of STT on acquisition is not applicable, have been notified.

In the case of the sale of listed shares held by a Fund for one year or less, the income is classified as short-term capital gains and is taxable at 15% (plus applicable surcharge and cess) provided the shares are sold on the stock exchange and subjected to STT. For above purposes, the applicable rate of surcharge is 2% or 5% (depending on the level of income of the Fund). The Finance Bill, 2018 increases the cess imposed on the sum of tax and surcharge from 3% to 4%. The cess 4% rate is applied to the capital gains tax, resulting in a higher effective rate of capital gains tax.

Where the sale of shares is outside the stock exchange and not subject to STT, the long-term capital gains are taxed at 10% (plus applicable surcharge and cess) and short-term capital gains are taxed at 30% (plus applicable surcharge and cess). The Finance Bill, 2018, approves the carry forward of long-term capital losses to be offset against long-term capital gains. Short-term losses can be netted against both short-term gains and long-term gains.

Until March 31, 2020, dividends received by a Fund from Indian companies were exempt from tax in India because Indian companies were required to pay dividend distribution tax. The Indian Finance Act, 2020 has amended the dividend taxation framework effective April 1, 2020 and accordingly dividends would now be taxable in the hands of the shareholders at 20%, plus applicable surcharge and cess. Subsequent to the Indian Finance Act, 2020, “The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Bill, 2020” (the “Bill”) was enacted into law and is effective retroactively to April 1, 2020. The Bill caps the maximum surcharge at 15% of the tax on dividend income earned by the Fund. The highest effective tax rate proposed for non-corporate entities on dividends will be 23.92%. Note, the Fund will not obtain relief under the US-India tax treaty as the treaty rate of 25% is higher than the domestic rate. Any excess taxes withheld can be off-set against capital gains tax liability during the year or claimed as a refund in the annual tax return.

Please note that the above description is based on current provisions of Indian law, and any change or modification made by subsequent legislation, regulation, or administrative or judicial decision could increase the Indian tax liability of a Fund and thus reduce the return to a Fund’s shareholders. There can be no assurance that the Indian tax authorities and/or regulators will not take a position contrary to the views expressed herein. If the Indian tax authorities and/or regulators take a position contrary to the views expressed herein, adverse unpredictable consequences may follow.

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Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

October 31, 2023

The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ended 2020, 2021, 2022, and 2023 remain open to federal and state audit. As of October 31, 2023, management has evaluated the application of these standards to the Funds and has determined that no provision for income tax is required in the Funds’ financial statements for uncertain tax positions.

The Funds intend to utilize provisions of the federal income tax laws, which allow them 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 Funds are 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 October 31, 2023, the Funds had non-expiring capital loss carryforwards for federal income tax purposes as follows:

	Non-Expiring Capital Loss Carryforward
First Trust RiverFront Dynamic Developed International ETF	$ 82,297,648
First Trust RiverFront Dynamic Europe ETF	21,297,780
First Trust RiverFront Dynamic Emerging Markets ETF	23,720,171

In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended October 31, 2023, the adjustments for each Fund were as follows:

	Accumulated Net Investment Income (Loss)		Accumulated Net Realized Gain (Loss) on Investments		Paid-in Capital
First Trust RiverFront Dynamic Developed International ETF	$ (657,537)		$ (2,080,816)		$ 2,738,353
First Trust RiverFront Dynamic Europe ETF	(67,668)		697,858		(630,190)
First Trust RiverFront Dynamic Emerging Markets ETF	124,915		(345,377)		220,462

As of October 31, 2023, the aggregate cost, gross unrealized appreciation, gross unrealized depreciation, and net unrealized appreciation/(depreciation) on investments (including short positions and derivatives, if any) for federal income tax purposes were as follows:

	Tax Cost		Gross Unrealized Appreciation		Gross Unrealized (Depreciation)		Net Unrealized Appreciation (Depreciation)
First Trust RiverFront Dynamic Developed International ETF	$ 112,592,663		$ 7,405,263		$ (9,757,569)		$ (2,352,306)
First Trust RiverFront Dynamic Europe ETF	9,333,591		475,069		(1,502,933)		(1,027,864)
First Trust RiverFront Dynamic Emerging Markets ETF	33,199,143		2,504,649		(4,361,686)		(1,857,037)

G. Expenses

Expenses, other than the investment advisory fee and other excluded expenses, are paid by the Advisor (See Note 3).

3. Investment Advisory Fee, Affiliated Transactions and Other Fee Arrangements

First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for supervising the selection and ongoing monitoring of the securities in each Fund’s portfolio, managing the Funds’ business affairs and providing certain administrative services necessary for the management of the Funds.

Page 38

Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

October 31, 2023

Pursuant to the Investment Management Agreement between First Trust and the Trust, First Trust supervises the investment of the Funds’ assets and is responsible for the expenses of each Fund 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, brokerage commissions, acquired fund fees and expenses, if any, distribution and service fees payable pursuant to a Rule 12b-1 plan, if any, expenses associated with the execution of portfolio transactions, and extraordinary expenses, which are paid by each respective Fund. First Trust also provides fund reporting services to each Fund for a flat annual fee in the amount of $9,250, which is covered under the annual unitary management fee. The annual unitary management fee payable by each Fund to First Trust for these services is reduced at certain levels of each Fund’s net assets (“breakpoints”) and calculated pursuant to the following schedule:

Breakpoints	RFDI	RFEU	RFEM
Fund net assets up to and including $2.5 billion	0.83000%	0.83000%	0.95000%
Fund net assets greater than $2.5 billion up to and including $5 billion	0.80925%	0.80925%	0.92625%
Fund net assets greater than $5 billion up to and including $7.5 billion	0.78850%	0.78850%	0.90250%
Fund net assets greater than $7.5 billion up to and including $10 billion	0.76775%	0.76775%	0.87875%
Fund net assets greater than $10 billion	0.74700%	0.74700%	0.85500%