Table of Contents

First Trust Exchange-Traded Fund III

Semi-Annual Report

January 31, 2022

Shareholder Letter	1
Fund Performance Overview
First Trust California Municipal High Income ETF (FCAL)	2
First Trust New York Municipal High Income ETF (FMNY)	5
Notes to Fund Performance Overview	7
Portfolio Management	8
Understanding Your Fund Expenses	9
Portfolio of Investments
First Trust California Municipal High Income ETF (FCAL)	10
First Trust New York Municipal High Income ETF (FMNY)	19
Statements of Assets and Liabilities	21
Statements of Operations	22
Statements of Changes in Net Assets	23
Financial Highlights	24
Notes to Financial Statements	26
Additional Information	34

Caution Regarding Forward-Looking Statements

This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. (“First Trust” or the “Advisor”) and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as “anticipate,” “estimate,” “intend,” “expect,” “believe,” “plan,” “may,” “should,” “would” or other words that convey uncertainty of future events or outcomes.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund 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 its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.

Performance and Risk Disclosure

There is no assurance that any Fund described in this report will achieve its investment objectives. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund’s shares may therefore be less than what you paid for them. Accordingly, you can lose money 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.

The statistical information that follows may help you understand each Fund’s performance compared to that of a relevant market benchmark.

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

Table of Contents

Shareholder Letter

First Trust Exchange-Traded Fund III

Semi-Annual Letter from the Chairman and CEO

January 31, 2022

Dear Shareholders,

First Trust is pleased to provide you with the semi-annual report for certain series of First Trust Exchange-Traded Fund III (the “Funds”), which contains detailed information about the Funds for the six-month period ended January 31, 2022.

It is times like these that really test the resolve of investors. Since the start of November 2021, we have seen the major U.S. stock indices decline markedly from their all-time highs. Many pundits and experts are calling for additional near-term selling pressure due to robust inflation and the prospects for multiple interest rate hikes from the Federal Reserve (the “Fed”), with anticipation that rate increases could begin as early as March 2022. For the record, Brian Wesbury, Chief Economist at First Trust, has been steadfast in his belief that the Fed is already behind the curve with respect to inflation and interest rates, which means the Fed may have a little chasing to do at some point to deliver on its mandate of price stability. In January 2022, the Consumer Price Index stood at 7.5% on a trailing 12-month basis, the highest it has been since 1982, according to the U.S. Bureau of Labor Statistics (“BLS”). The spike in inflation over the past year is primarily rooted in a massive increase in the U.S. money supply, in my opinion. It was brought to bear to mitigate the economic fallout from the coronavirus (“COVID-19”) pandemic. The disruption of the global supply chain and the overall lack of goods available for consumption are also contributing to the spike in inflation, and both happen to be collateral damage from the pandemic. Remember, the definition of inflation is “too many dollars chasing too few goods.” This is the climate we are in today.

It has been roughly two years since the onset of the COVID-19 pandemic and we are still battling this stubborn virus. There is, however, some good news to report. Despite the recommendation from the Centers for Disease Control and Prevention that masks continue to be worn indoors, as of mid-February 2022, many states had terminated their divisive mask mandates, and more could do so soon. Providing that the number of cases continues to shrink in the U.S., and we do not encounter any other significant variants like Omicron, we could attempt another run at fully reopening the U.S. economy (such an attempt was made in 2021 prior to the onset of the Omicron variant). Reopening the economy could prove to be a positive, and much needed, influence on getting more people back to work. This is especially relevant for those parents staying at home due to a shortage of daycare services or for those with children still e-learning. The U.S. finished 2021 with 10.9 million job openings, well above the 10-year average of 6.0 million, according to the BLS.

Lastly, we believe that politics, both domestic and foreign, could influence the markets in 2022. The most pressing issue currently is the conflict between Russia and Ukraine. The prevailing concern is that a Russian invasion could boost uncertainty and increase volatility in the markets, particularly the energy market. A war could conceivably push the price of oil higher, putting additional strain on inflation. On the domestic front, as it stands, the Biden Administration’s Build Back Better Act does not have the support of enough Democrats in the Senate to pass. It included substantial tax hikes primarily targeting the wealthy to pay for the nearly $2 trillion price tag. At best, the hope is to split it up into smaller bills to see if pieces of it can pass. That leads us to the second domestic political issue: the midterm elections in November 2022. If the Republicans can win back control of the House and the Senate, I would expect gridlock to persist throughout the last two years of President Joe Biden’s term. The good news is that gridlock is a normal byproduct of our system of checks and balances. The markets have experienced it, and investors have navigated it, plenty of times. The bottom line is that we need to reopen the economy and get people back to work. Stay the course!

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

Sincerely,

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)

First Trust California Municipal High Income ETF (FCAL)

The primary investment objective of First Trust California Municipal High Income ETF (the “Fund”) is to seek to provide current income that is exempt from regular federal income taxes and California income taxes, and its secondary objective is long-term capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objectives by investing at least 80% of its net assets (including investment borrowings) in municipal debt securities that pay interest that is exempt from regular federal income taxes and California income taxes (“Municipal Securities”). Municipal Securities will be issued by or on behalf of the State of California or territories or possessions of the U.S. (including but not limited to Puerto Rico, the U.S. Virgin Islands and Guam) and/or the political subdivisions, agencies, authorities and other instrumentalities of such State, territories or possessions. The Fund lists and principally trades its shares on The Nasdaq Stock Market LLC under the ticker symbol “FCAL.”

Performance
			Average Annual Total Returns	Cumulative Total Returns
	6 Months Ended 1/31/22	1 Year Ended 1/31/22	Inception (6/20/17) to 1/31/22	Inception (6/20/17) to 1/31/22
Fund Performance
NAV	-3.05%	-0.55%	3.87%	19.16%
Market Price	-3.16%	-0.50%	3.86%	19.08%
Index Performance
Bloomberg 10 Year California Exempt Index	-3.58%	-3.04%	2.59%	12.55%

(See Notes to Fund Performance Overview on page 7.)

Page 2

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Fund Performance Overview (Unaudited) (Continued)

First Trust California Municipal High Income ETF (FCAL) (Continued)

Sector Allocation	% of Total Investments (including cash)
Special Assessment	14.1%
Insured	12.6
Government Obligation Bond - Unlimited Tax	10.2
Education	8.2
Hospital	5.4
Continuing Care Retirement Communities	5.2
Tobacco	5.1
Industrial Development Bond	4.5
Certificates of Participation	4.5
Dedicated Tax	3.7
Higher Education	2.9
Student Housing	2.6
Water & Sewer	2.5
Airport	2.4
Tax Increment	2.3
Local Housing	2.1
Toll Road	2.1
Housing	1.3
Pre-refunded/Escrowed-to-maturity	1.3
Utility	0.9
Government Obligation Bond - Limited Tax	0.9
Gas	0.8
Other Health	0.5
Cash	3.9
Total	100.0%

Fund Allocation	% of Net Assets
Municipal Bonds	95.2%
Net Other Assets and Liabilities⁽¹⁾	4.8
Total	100.0%

Credit Rating⁽²⁾	% of Total Investments (including cash)
AAA	0.4%
AA	30.6
A	21.0
BBB	12.9
BB	6.1
B	1.0
Not Rated	23.6
A1+ (Short-term)	0.5
Cash	3.9
Total	100.0%

⁽¹⁾	Includes variation margin on futures contracts.

⁽²⁾

The credit quality and ratings information presented above reflect the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including Standard & Poor’s Ratings Group, a division of the McGraw Hill Companies, Inc., Moody’s Investors Service, Inc., Fitch Ratings or a comparably rated NRSRO. For situations in which a security is rated by more than one NRSRO and the ratings are not equivalent, the highest rating is used. Sub-investment grade ratings are those rated BB+/Ba1 or lower. Investment grade ratings are those rated BBB-/Baa3 or higher. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change.

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Fund Performance Overview (Unaudited) (Continued)

First Trust New York Municipal High Income ETF (FMNY)

The First Trust New York Municipal High Income ETF’s (the “Fund”) primary investment objective is to seek to provide current income that is exempt from regular federal income taxes and New York income taxes, and its secondary objective is long-term capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objectives by investing at least 80% of its net assets (including investment borrowings) in municipal debt securities that pay interest that is exempt from regular federal income taxes and New York State and New York City income taxes (collectively, “Municipal Securities”). Municipal Securities will be issued by or on behalf of the State of New York or territories or possessions of the U.S. (including, but not limited to, Puerto Rico, the U.S. Virgin Islands and Guam), and/or the political subdivisions, agencies, authorities and other instrumentalities of such State, territories or possessions. The Fund lists and principally trades its shares on The NYSE Arca, Inc. under the ticker symbol “FMNY.”

Performance
		Cumulative Total Returns
	6 Months Ended 1/31/22	Inception (5/12/21) to 1/31/22
Fund Performance
NAV	-3.83%	-2.00%
Market Price	-3.56%	-1.73%
Index Performance
Bloomberg Municipal New York 12-17 Years Index	-3.61%	-1.95%

(See Notes to Fund Performance Overview on page 7.)

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Table of Contents

Fund Performance Overview (Unaudited) (Continued)

First Trust New York Municipal High Income ETF (FMNY) (Continued)

Sector Allocation	% of Total Investments (including cash)
Education	15.2%
Dedicated Tax	12.5
Mass Transit	10.9
Higher Education	10.7
Insured	9.4
Tobacco	8.1
Hospital	6.0
Government Obligation Bond - Unlimited Tax	5.0
Toll Road	4.8
Water & Sewer	4.8
Utility	3.9
Special Assessment	2.4
Continuing Care Retirement Communities	2.3
Airport	1.3
Cash	2.7
Total	100.0%

Fund Allocation	% of Net Assets
Municipal Bonds	94.1%
Net Other Assets and Liabilities⁽¹⁾	5.9
Total	100.0%

Credit Quality⁽²⁾	% of Total Investments (including cash)
AAA	4.8%
AA	34.3
A	26.5
BBB	11.9
BB	2.6
Not Rated	17.2
Cash	2.7
Total	100.0%

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.

⁽¹⁾	Includes variation margin on futures contracts.

⁽²⁾

Page 6

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Notes to Fund Performance Overview (Unaudited)

Total returns for the periods since inception are calculated from the inception date of each Fund. “Average Annual Total Returns” represent the average annual change in value of an investment over the periods indicated. “Cumulative Total Returns” represent the total change in value of an investment over the periods indicated. The total returns would have been lower if certain fees had not been waived by the Advisor.

Each Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint 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. 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 7

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Portfolio Management

First Trust Exchange-Traded Fund III

Semi-Annual Report

January 31, 2022 (Unaudited)

Advisor

First Trust Advisors L.P. (“First Trust”) serves as the investment advisor to the First Trust California Municipal High Income ETF (“FCAL”) and the First Trust New York Municipal High Income ETF (“FMNY”) (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.

Portfolio Management Team

Tom Futrell, CFA, Senior Vice President, Senior Portfolio Manager

Johnathan N. Wilhelm, Senior Vice President, Senior Portfolio Manager

The First Trust Municipal Securities Team was formed in September of 2013 and is headed by Tom Futrell, CFA, and Johnathan N. Wilhelm who serve as senior portfolio managers of the Funds. Messrs. Futrell and Wilhelm have a combined 50+ years of investment experience and prior to joining First Trust, served as portfolio managers of municipal bonds at Nuveen Investments and Performance Trust Investment Advisors. In addition to the Funds, the team manages/consults for a variety of First Trust investment portfolios and separately managed accounts.

Page 8

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First Trust Exchange-Traded Fund III

Understanding Your Fund Expenses

January 31, 2022 (Unaudited)

As a shareholder of First Trust California Municipal High Income ETF or First Trust New York Municipal High Income ETF (each a “Fund” and collectively, the “Funds”), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended January 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 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 August 1, 2021	Ending Account Value January 31, 2022	Annualized Expense Ratio Based on the Six-Month Period (a)	Expenses Paid During the Six-Month Period (b)
First Trust California Municipal High Income ETF (FCAL)
Actual	$1,000.00	$969.50	0.50%	$2.48
Hypothetical (5% return before expenses)	$1,000.00	$1,022.68	0.50%	$2.55
First Trust New York Municipal High Income ETF (FMNY)
Actual	$1,000.00	$961.70	0.50%	$2.47
Hypothetical (5% return before expenses)	$1,000.00	$1,022.68	0.50%	$2.55

(a)	These expense ratios reflect expense waivers. See Note 3 in the Notes to Financial Statements.
(b)	Expenses are equal to the annualized expense ratios as indicated in the table multiplied by the average account value over the period (August 1, 2021 through January 31, 2022), multiplied by 184/365 (to reflect the six-month period).

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Table of Contents

First Trust California Municipal High Income ETF (FCAL)

Portfolio of Investments

January 31, 2022 (Unaudited)

Principal Value	Description	Stated Coupon	Stated Maturity	Value
MUNICIPAL BONDS – 95.2%
	American Samoa – 0.5%
$500,000	American Samoa AS Econ Dev Auth Gen Rev, Ser A (a)	5.00%	09/01/38	$596,232
	California – 87.7%
350,000	Alameda CA Corridor Transprtn Auth Ref 2nd Subord Lien, Ser B, AGM	4.00%	10/01/37	381,866
150,000	Alameda CA Corridor Transprtn Auth Ref Subord Lien, Ser A	5.00%	10/01/25	169,665
215,000	Antelope Vly E Kern CA Wtr Agy Wtr Rev Ref	5.00%	06/01/35	245,345
525,000	Azusa CA Spl Tax Cmnty Facs Dist No 2005-1 Impt	4.00%	09/01/34	576,137
100,000	Beaumont CA Spl Tax Cmnty Facs Dist No 93-1 Impt Area 8F	4.00%	09/01/33	109,474
175,000	Beaumont CA Spl Tax Cmnty Facs Dist No 93-1 Impt Area 8F	4.00%	09/01/34	191,449
330,000	Beaumont CA Spl Tax Cmnty Facs Dist No 93-1 Impt Area 8F	4.00%	09/01/36	360,381
620,000	Beaumont CA Spl Tax Cmnty Facs Dist No 93-1 Impt Area 8F	4.00%	09/01/40	676,065
1,000,000	CA Cmnty Choice Fing Auth Green Bd Clean Energy Proj Rev, Ser A (Mandatory Put 12/01/27)	4.00%	10/01/52	1,112,773
200,000	CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Ref, Sonoma Cnty Securitization Corp, Ser A	4.00%	06/01/35	233,611
665,000	CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Sr Ref, Ser A	5.00%	06/01/32	825,812
200,000	CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Sr Ref, Ser A	5.00%	06/01/33	248,250
200,000	CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Sr Ref, Ser A	4.00%	06/01/35	231,855
200,000	CA Cnty CA Tobacco Securitization Agy Tobacco Stlmt Sr Ref, Ser A	4.00%	06/01/39	229,703
165,000	CA Hlth Fac Fing Auth Rev St Joseph Hlth Sys, Ser A	5.00%	07/01/29	174,673
434,084	CA Hsg Fin Agy Muni Ctfs, Ser A	4.25%	01/15/35	493,417
360,000	CA Pub Fin Auth Rev Ref Henry Mayo Newhall Hosp, Ser A	4.00%	10/15/27	404,353
360,000	CA Pub Fin Auth Rev Ref Henry Mayo Newhall Hosp, Ser A	4.00%	10/15/28	409,454
290,000	CA Pub Fin Auth Sr Living Rev ENSO Vlg Proj Green Bond, Ser A (a)	5.00%	11/15/36	331,539
250,000	CA Pub Fin Auth Sr Living Rev ENSO Vlg Proj Green Bond, Ser A (a)	5.00%	11/15/56	278,079
750,000	CA Pub Fin Auth Sr Living Rev Green Bond Temps 70 Enso Vlg Proj, Ser B-2 (a)	2.38%	11/15/28	753,162
200,000	CA Sch Fin Auth Sch Fac Rev Alliance Clg Ready Pub Schs Proj, Ser C	4.50%	07/01/26	216,566
255,000	CA Sch Fin Auth Sch Fac Rev Alliance Clg Ready Pub Schs Projs, Ser A (a)	5.00%	07/01/30	281,243
505,000	CA Sch Fin Auth Sch Fac Rev Granada Hills Chrt Oblig Grp (a)	5.00%	07/01/34	566,706
105,000	CA Sch Fin Auth Sch Fac Rev Kipp SoCal Pub Schs, Ser A (a)	5.00%	07/01/26	119,058
105,000	CA Sch Fin Auth Sch Fac Rev Kipp SoCal Pub Schs, Ser A (a)	5.00%	07/01/27	121,704
400,000	CA Sch Fin Auth Sch Fac Rev Kipp SoCal Pub Schs, Ser A (a)	5.00%	07/01/39	471,854
675,000	CA Sch Fin Auth Sch Fac Rev Ref Granada Hills Chrt Oblig Grp, Ser A (a)	4.00%	07/01/48	725,544
200,000	CA Sch Fin Auth Sch Fac Rev Ref Hlth Learning Proj, Ser A (a)	4.00%	07/01/25	215,537
200,000	CA Sch Fin Auth Sch Fac Rev Ref Hlth Learning Proj, Ser A (a)	5.00%	07/01/32	226,792
650,000	CA Sch Fin Auth Sch Fac Rev, Ser A (a)	5.00%	07/01/40	730,872
1,000,000	CA St Ent Dev Auth Lease Rev Riverside Cnty Library Fac Proj	4.00%	11/01/37	1,107,690
100,000	CA St Ent Dev Auth Stdt Hsg Rev M@Clg Proj, Ser A	5.00%	08/01/35	120,732
100,000	CA St Ent Dev Auth Stdt Hsg Rev M@Clg Proj, Ser A	5.00%	08/01/40	119,200
30,000	CA St Hlth Facs Fing Auth Rev El Camino Hosp	5.00%	02/01/33	35,142
220,000	CA St Hlth Facs Fing Auth Rev Ref Sutter Hlth, Ser B	5.00%	11/15/33	256,341
1,000,000	CA St Hlth Facs Fing Auth Rev Ref, Commonspirit Hlth, Ser A	4.00%	04/01/36	1,127,715
250,000	CA St Hlth Facs Fing Auth Rev Sutter Hlth, Ser A	5.00%	11/15/30	298,769
500,000	CA St Infra & Econ Dev Bank Natl Chrt Social Bond	4.00%	11/01/39	562,524

Page 10

See Notes to Financial Statements

Table of Contents

First Trust California Municipal High Income ETF (FCAL)

Portfolio of Investments (Continued)

January 31, 2022 (Unaudited)

Principal Value	Description	Stated Coupon	Stated Maturity	Value
MUNICIPAL BONDS (Continued)
	California (Continued)
$250,000	CA St Muni Fin Auth Chrt Sch Lease Rev Sycamore Acdmy Proj (b)	5.38%	07/01/34	$266,487
250,000	CA St Muni Fin Auth Chrt Sch Lease Rev Vista Chrt Middle Sch Proj (c)	5.38%	07/01/34	269,291
900,000	CA St Muni Fin Auth Chrt Sch Rev John Adams Acdmys Lincoln Proj, Ser A (a)	5.00%	10/01/39	965,428
200,000	CA St Muni Fin Auth Chrt Sch Rev Palmdale Aerospace Acdmy Proj (a)	4.00%	07/01/26	210,235
450,000	CA St Muni Fin Auth Chrt Sch Rev Palmdale Aerospace Acdmy Proj, Ser A (a)	5.00%	07/01/38	514,271
250,000	CA St Muni Fin Auth Chrt Sch Rev, Ser A (a)	5.50%	06/01/38	275,942
605,000	CA St Muni Fin Auth Mobile Home Park Rev Sr Caritas Affordable Hsg Inc Projs, Ser A	5.25%	08/15/49	643,081
295,000	CA St Muni Fin Auth Mobile Home Park Rev Sub Ref Caritas Proj, Ser B	4.00%	08/15/41	302,329
435,000	CA St Muni Fin Auth Mobile Home Park Rev Sub Ref Caritas Proj, Ser B	4.00%	08/15/51	439,703
330,000	CA St Muni Fin Auth Mobile Home Park Rev Sub Ref Caritas Proj, Ser B	4.00%	08/15/56	330,746
155,000	CA St Muni Fin Auth Rev Ref Biola Univ	5.00%	10/01/37	178,434
225,000	CA St Muni Fin Auth Rev Ref CA Lutheran Univ	5.00%	10/01/30	268,020
225,000	CA St Muni Fin Auth Rev Ref CA Lutheran Univ	5.00%	10/01/32	266,767
675,000	CA St Muni Fin Auth Rev Ref CA Lutheran Univ	5.00%	10/01/33	799,550
475,000	CA St Muni Fin Auth Rev Ref Cmnty Med Ctrs, Ser A	5.00%	02/01/36	549,949
200,000	CA St Muni Fin Auth Rev Ref Eisenhower Med Ctr, Ser A	5.00%	07/01/32	233,684
400,000	CA St Muni Fin Auth Rev Ref Eisenhower Med Ctr, Ser A	5.00%	07/01/34	467,826
250,000	CA St Muni Fin Auth Rev Ref Emerson Clg, Ser B	5.00%	01/01/33	288,299
1,000,000	CA St Muni Fin Auth Rev Ref HumanGood CA Oblig Grp	4.00%	10/01/46	1,114,511
700,000	CA St Muni Fin Auth Rev Ref HumanGood Oblig Grp, Ser A	4.00%	10/01/34	760,300
500,000	CA St Muni Fin Auth Rev Ref HumanGood Oblig Grp, Ser A	4.00%	10/01/36	541,647
110,000	CA St Muni Fin Auth Rev Ref Retmnt Hsg Fdtn Oblig Grp, Ser A	5.00%	11/15/26	125,486
435,000	CA St Muni Fin Auth Rev Ref Retmnt Hsg Fdtn Oblig Grp, Ser A	5.00%	11/15/27	503,116
575,000	CA St Muni Fin Auth Rev Ref Southwestern Law Sch	4.00%	11/01/41	638,748
625,000	CA St Muni Fin Auth Sol Wst Disp Rev Var Rep Svcs Inc Proj Remk, Ser B, AMT (Mandatory put 07/15/22)	0.38%	07/01/51	624,610
700,000	CA St Muni Fin Auth Spl Fac Rev United Airls Inc Proj, AMT	4.00%	07/15/29	771,123
500,000	CA St Muni Fin Auth Sr Living Rev Ref Mt San Antonio Gardens Proj	5.00%	11/15/49	563,512
550,000	CA St Muni Fin Auth Stdt Hsg Rev Chf Davis I, LLC W Vlg Stdt Hsg Proj	5.00%	05/15/27	641,071
1,000,000	CA St Muni Fin Auth Stdt Hsg Rev Chf Davis I, LLC W Vlg Stdt Hsg Proj	5.00%	05/15/38	1,172,827
350,000	CA St Muni Fin Auth Stdt Hsg Rev Chf Davis I, LLC W Vlg Stdt Hsg Proj	5.00%	05/15/40	409,289
75,000	CA St Muni Fin Auth Stdt Hsg Rev Chf Davis I, LLC W Vlg Stdt Hsg Proj TCRS, BAM	5.00%	05/15/29	90,478
600,000	CA St Poll Control Fin Auth Sol Wst Disp Rev Ref Wst Mgmt Inc, Ser A1, AMT	3.38%	07/01/25	640,607
150,000	CA St Poll Control Fin Auth Sol Wst Disp Rev Waste Mgmt Inc Proj, Ser C (Mandatory put 06/03/24)	3.25%	12/01/27	157,630
1,000,000	CA St Poll Control Fin Auth Wtr Furnishing Rev, AMT (a)	5.00%	07/01/37	1,024,783
650,000	CA St Pub Wks Brd Lease Rev Dept Crrctns Rehab RJ, Ser E	5.00%	10/01/25	734,717
15,000	CA St Pub Wks Brd Lease Rev Judicial Council CA, Ser B	5.00%	06/01/34	16,721
175,000	CA St Pub Wks Brd Lease Rev Ref, Ser B	5.00%	10/01/26	203,191
165,000	CA St Pub Wks Brd Lease Rev Ref, Ser B	5.00%	05/01/29	202,389

See Notes to Financial Statements

Page 11

Table of Contents

First Trust California Municipal High Income ETF (FCAL)

Portfolio of Investments (Continued)

January 31, 2022 (Unaudited)

Principal Value	Description	Stated Coupon	Stated Maturity	Value
MUNICIPAL BONDS (Continued)
	California (Continued)
$125,000	CA St Pub Wks Brd Lease Rev Ref, Ser F	5.00%	05/01/24	$135,769
100,000	CA St Pub Wks Brd Lease Rev Various Corr Facs, Ser A	5.00%	09/01/27	109,612
75,000	CA St Ref	4.00%	09/01/32	82,426
75,000	CA St Ref	4.00%	08/01/34	82,182
155,000	CA St Ref	4.00%	09/01/35	170,060
75,000	CA St Ref Various Purp	4.00%	09/01/33	82,391
275,000	CA St Ref Various Purp	4.00%	09/01/35	301,719
100,000	CA St Ref Various Purp	5.00%	10/01/35	113,731
565,000	CA St Sch Fin Auth Chrt Sch Rev Arts in Action Chrt Schs, Ser A (a)	5.00%	06/01/30	628,204
335,000	CA St Sch Fin Auth Chrt Sch Rev Arts in Action Chrt Schs, Ser A (a)	5.00%	06/01/40	363,979
600,000	CA St Sch Fin Auth Chrt Sch Rev Fenton Chrt Schs, Ser A (a)	4.00%	07/01/30	652,910
600,000	CA St Sch Fin Auth Chrt Sch Rev Fenton Chrt Schs, Ser A (a)	5.00%	07/01/40	673,880
300,000	CA St Sch Fin Auth Chrt Sch Rev Rocketship Pub Schs, Ser G (b)	5.00%	06/01/37	332,617
100,000	CA St Sch Fin Auth Chrt Sch Rev Summit Pub Schs (a)	5.00%	06/01/25	110,305
210,000	CA St Sch Fin Auth Chrt Sch Rev Summit Pub Schs (a)	5.00%	06/01/31	236,708
500,000	CA St Stwd Cmntys Dev Auth Spl Tax Rev Impt Area No 1	4.00%	09/01/41	549,731
200,000	CA St Stwd Cmntys Dev Auth Stdt Hsg Rev Ref Chf Irvine LLC	5.00%	05/15/30	229,397
280,000	CA St Stwd Cmntys Dev Auth Stdt Hsg Rev Ref Chf Irvine LLC	5.00%	05/15/35	320,153
1,170,000	CA St Stwd Cmntys Dev Auth Stwd Rev Stwd Cmnty Infra Prog, Ser C-1	4.00%	09/02/31	1,251,237
600,000	CA Stwd Cmntys Dev Auth Rev Loma Linda Univ Med Ctr, Ser A (a)	5.00%	12/01/30	680,482
300,000	CA Stwd Cmntys Dev Auth Rev Loma Linda Univ Med Ctr, Ser A (a)	5.00%	12/01/33	353,912
150,000	CA Stwd Cmntys Dev Auth Rev Ref CA Baptist Univ, Ser A (a)	3.00%	11/01/22	152,035
250,000	CA Stwd Cmntys Dev Auth Rev Ref CA Baptist Univ, Ser A (a)	5.00%	11/01/32	289,197
245,000	CA Stwd Cmntys Dev Auth Rev Ref Front Porch Cmntys & Svcs, Ser A	5.00%	04/01/27	286,126
50,000	CA Stwd Cmntys Dev Auth Rev Ref Front Porch Cmntys & Svcs, Ser A	5.00%	04/01/30	58,154
175,000	CA Stwd Cmntys Dev Auth Rev Ref Front Porch Cmntys & Svcs, Ser A	5.00%	04/01/31	202,921
50,000	CA Stwd Cmntys Dev Auth Rev Ref Front Porch Cmntys & Svcs, Ser A	4.00%	04/01/32	55,359
50,000	CA Stwd Cmntys Dev Auth Rev Ref Insd Enloe Med Ctr, CA MTG INS	5.00%	08/15/33	57,071
475,000	California Cnty CA Tobacco Securitization Agy Tobacco Settle Ref Sonoma Cnty Securitization Corp, Ser A	5.00%	06/01/31	598,368
125,000	Camarillo CA Cmnty Dev Commn Successor Agy Tax Allocation Ref Camarillo Corridor Proj, AGM	5.00%	09/01/25	136,787
240,000	Camarillo CA Cmnty Dev Commn Successor Agy Tax Allocation Ref Sub Lien, Ser B, BAM	5.00%	09/01/28	275,753
305,000	Camarillo CA Cmnty Dev Commn Successor Agy Tax Allocation Ref Sub Lien, Ser B, BAM	5.00%	09/01/30	350,428
400,000	Casitas Muni Wtr Dist CA Spl Tax Cmnty Facs Dist No 2013-1, BAM	4.00%	09/01/34	452,662
450,000	Chino CA Cmnty Facs Dist Spl Tax #2003-3 Impt Area #7	5.00%	09/01/31	530,427
425,000	Chino Vly CA Unif Sch Dist, Ser B	5.00%	08/01/36	533,926
250,000	Compton CA Unif Sch Dist Los Angeles Co Schs Fing Prog, Ser A, COPS, BAM	5.00%	06/01/31	289,849
250,000	Compton CA Unif Sch Dist Los Angeles Co Schs Fing Prog, Ser A, COPS, BAM	4.00%	06/01/35	275,344

Page 12

See Notes to Financial Statements

Table of Contents

First Trust California Municipal High Income ETF (FCAL)

Portfolio of Investments (Continued)

January 31, 2022 (Unaudited)

Principal Value	Description	Stated Coupon	Stated Maturity	Value
MUNICIPAL BONDS (Continued)
	California (Continued)
$200,000	Compton CA Unif Sch Dist Los Angeles Co Schs Fing Prog, Ser A, COPS, BAM	4.00%	06/01/36	$220,169
210,000	Cotati-Rohnert Park CA Unif Sch Dist 2016 Election, Ser C, AGM	5.00%	08/01/32	241,800
2,000,000	CSCDA Cmnty Impt Auth CA Essential Hsg Rev the Link Glendale Social Bonds, Ser A-2 (a)	4.00%	07/01/56	1,858,779
175,000	Dana Point CA Cmnty Facs Distspl Tax Ref, Ser A, BAM	4.00%	09/01/33	204,950
180,000	Dana Point CA Cmnty Facs Distspl Tax Ref, Ser A, BAM	4.00%	09/01/34	210,243
200,000	Del Mar CA Union Sch Dist Spl Tax Ref	4.00%	09/01/33	222,715
300,000	Del Mar CA Union Sch Dist Spl Tax Ref	4.00%	09/01/34	333,276
270,000	Diablo CA Wtr Dist Wtr Rev Ref, COPS, BAM	4.00%	01/01/32	300,742
150,000	Dinuba CA Jt Unif Sch Dist, COPS, AGM	4.00%	02/01/35	162,241
755,000	El Dorado CA Irr Dist Rev Ref, Ser C	4.00%	03/01/34	824,017
300,000	Estrn CA Muni Wtr Dist Wtr & Wstwtr Rev Sub Ref, Ser A	5.00%	07/01/31	347,762
350,000	Folsom Ranch CA Fing Auth Spl Tax Rev Cmnty Facs Dist No. 19 Mangini	5.00%	09/01/32	402,608
155,000	Fontana CA Spl Tax Cmnty Facs Dist #80 Bella Strada	5.00%	09/01/29	178,023
525,000	Fontana CA Spl Tax Spl Tax, Summit at Rosena Phase One	4.00%	09/01/41	579,479
240,000	Fontana CA Spl Tax Spl Tax, The Meadows	4.00%	09/01/32	265,858
165,000	Fontana CA Unif Sch Dist Prerefunded, AGM	(d)	02/01/33	127,732
1,000,000	Foothill Estrn Transprtn Corr Agy CA Toll Rd Rev Ref, Sr Lien, Ser A, Exchange 2021	4.00%	01/15/46	1,105,377
310,000	Fountain Vly CA Pub Fing Auth Lease Rev Ref, Ser A	4.00%	11/01/29	339,681
140,000	Fresno CA Jt Pwrs Fing Auth Lease Rev Ref Master Lease Proj, Ser A, AGM	5.00%	04/01/32	161,323
1,000,000	Fresno CA Uni Sch Dist, Ser A08/01/45	4.00%	08/01/45	1,135,115
500,000	Gilroy CA Unif Sch Dist	4.00%	08/01/42	571,575
280,000	Golden St Tobacco Securitization Corp CA Tobacco Stlmt Asset Bkd, Ref, Ser A	3.25%	06/01/32	298,798
100,000	Golden St Tobacco Securitization Corp CA Tobacco Stlmt Enhanced Asset Bkd, Ser A	5.00%	06/01/29	105,556
340,000	Golden St Tobacco Securitization Corp CA Tobacco Stlmt Ref, Ser A-1	5.00%	06/01/26	392,768
750,000	Golden St Tobacco Securitization Corp CA Tobacco Stlmt Ref, Ser A-1	5.00%	06/01/34	908,944
145,000	Golden W CA Schs Fing Auth Ref Beverly Hills Unif Sch Dist, NATL	5.25%	08/01/23	154,680
265,000	Imperial CA Pub Fing Auth Rev Ref, AGM	4.00%	10/15/33	301,726
360,000	Imperial CA Pub Fing Auth Rev Ref, AGM	4.00%	10/15/35	407,581
140,000	Inglewood CA Unif Sch Dist, Ser C, BAM	4.00%	08/01/35	152,965
960,000	Irvine CA Impt Bond Act 1915 Ref	4.00%	09/02/35	1,105,506
1,000,000	Irvine CA Impt Bond Act 1915 Ref	4.00%	09/02/46	1,159,545
150,000	Irvine CA Unif Sch Dist Spl Tax Cmnty Facs Dist #09-1, Ser C	5.00%	09/01/31	174,426
890,000	Jurupa CA Public Fing Auth Spl Tax Rev Ref, Ser A, AGM	4.00%	09/01/34	1,010,511
290,000	Kaweah CA Delta Hlthcare Dist Rev, Ser B	5.00%	06/01/40	320,479
100,000	Kern Cnty CA Wtr Agy Impt Dist #4 Wtr Rev Ref, Ser A, AGM	5.00%	05/01/29	114,945
485,000	King City CA Union Sch Dist Cap Apprec Election 1998-C, CABS, AMBAC	(d)	08/01/29	413,940
250,000	La Verne CA Ref Brethren Hillcrest Homes, COPS	5.00%	05/15/36	255,749
25,000	Lammersville CA Jt Unif Sch Dist Spl Tax	4.00%	09/01/33	27,685
25,000	Lammersville CA Jt Unif Sch Dist Spl Tax	4.00%	09/01/34	27,662
200,000	Lammersville CA Jt Unif Sch Dist Spl Tax	4.00%	09/01/40	219,992
1,055,000	Lancaster CA Fing Auth Rev Measure M&R Street Impts Proj	4.00%	06/01/35	1,211,735
100,000	Long Beach CA Bond Fin Auth Nat Gas Pur Rev, Ser A	5.25%	11/15/23	107,352
650,000	Long Beach CA Bond Fin Auth Nat Gas Pur Rev, Ser A	5.50%	11/15/30	824,911

See Notes to Financial Statements

Page 13

Table of Contents

First Trust California Municipal High Income ETF (FCAL)

Portfolio of Investments (Continued)

January 31, 2022 (Unaudited)

Principal Value	Description	Stated Coupon	Stated Maturity	Value
MUNICIPAL BONDS (Continued)
	California (Continued)
$460,000	Los Angeles CA Dept of Arpts Arpt Rev Ref Sub Los Angeles Intl Arpt, Ser D, AMT	5.00%	05/15/32	$554,615
700,000	Los Angeles CA Dept of Arpts Arpt Rev Sub Los Angeles Intl Arpt, Ser B, AMT	5.00%	05/15/31	792,639
250,000	Los Angeles CA Dept of Arpts Arpt Rev Subord Los Angeles Intl Arpt, Ser F, AMT	5.00%	05/15/32	301,421
10,000	Los Angeles CA Dept of Arpts, Ser E	5.00%	05/15/28	11,175
340,000	Los Angeles CA Muni Impt Corplease Rev Ref Real Property, Ser B	4.00%	11/01/37	375,770
500,000	Los Angeles CA Unif Sch Dist, Ser C	4.00%	07/01/36	575,801
410,000	Los Osos CA Cmnty Svcs Wstwtr Assmnt Dist #1 Ref Reassmnt	3.13%	09/02/32	432,275
100,000	Marina CA Redev Agy Successor Agy Tax Allocation Hsg, Ser B	5.00%	09/01/27	113,408
250,000	Marina CA Redev Agy Successor Agy Tax Allocation Hsg, Ser B	5.00%	09/01/33	281,417
250,000	Marina Coast CA Wtr Dist Enterprise Rev, COPS	4.00%	06/01/35	287,141
310,000	Marina Coast CA Wtr Dist Enterprise Rev, COPS	4.00%	06/01/36	355,734
1,190,000	Marysville CA Jt Unif Sch Dist Green Bond, 2021 Energy Efficiency Proj, COPS, BAM	4.00%	06/01/39	1,332,902
245,000	Menifee CA Union Sch Dist Spl Tax Cmnty Facs Dist #2011-1	5.00%	09/01/34	281,250
500,000	Menifee CA Union Sch Dist Spl Tax Cmnty Facs Dist #2011-1	5.00%	09/01/44	568,099
100,000	Modesto CA Spl Tax Ref Cmnty Facs Dist # 2004-1 Vlg 1 #2	5.00%	09/01/27	108,878
200,000	Morongo Band of Mission Indians CA Rev Ref, Ser B (a)	5.00%	10/01/42	231,174
225,000	Mt San Antonio CA Cmnty Clg Dist Election 2018, Ser A	4.00%	08/01/22	229,010
1,115,000	Natomas CA Unif Sch Dist, AGM	3.00%	08/01/36	1,153,386
250,000	Norco CA Spl Tax Ref Norco Ridge Ranch, BAM	5.00%	09/01/32	294,470
750,000	Oak Vly CA Hosp Dist Hlth Facs Rev Ref, Ser A	4.00%	11/01/36	775,429
405,000	Oakland CA Unif Sch Dist Alameda Cnty Election of 2012, Ser A, AGM	4.00%	08/01/36	455,001
100,000	Ontario CA Cmnty Facs Dist 40 Spl Tax Emeral Park Fac	4.00%	09/01/34	110,705
65,000	Ontario CA Cmnty Facs Dist 40 Spl Tax Emeral Park Fac	4.00%	09/01/35	71,932
275,000	Ontario CA Cmnty Facs Dist 40 Spl Tax Emeral Park Fac	4.00%	09/01/39	303,298
750,000	Oxnard CA Sch Dist Election of 2016, Ser C, AGM	4.00%	08/01/49	835,340
800,000	Pacifica CA Sch Dist Election of 2016	4.00%	08/01/45	905,122
650,000	Palm Desert CA Spl Tax Ref Univ Park	4.00%	09/01/51	675,000
250,000	Palomar Hlth CA Rev Ref	5.00%	11/01/31	285,067
250,000	Pleasant Vly CA Sch Dist Ventura Cnty, Ser B	4.00%	08/01/39	285,477
500,000	Pleasant Vly CA Sch Dist Ventura Cnty, Ser B	4.00%	08/01/40	568,594
750,000	Pleasanton CA Unif Sch Dist	3.00%	08/01/36	785,002
210,000	Rancho Cordova CA Cmnty Facs Dist Spl Tax No 2018-1 Grantline 208	5.00%	09/01/33	240,634
220,000	Rancho Cordova CA Cmnty Facs Dist Spl Tax No 2018-1 Grantline 208	5.00%	09/01/34	252,237
340,000	Rancho Cordova CA Cmnty Facs Dist Spl Tax No 2018-1 Grantline 208	5.00%	09/01/39	388,137
200,000	Rancho Cordova CA Cmnty Facs Dist Spl Tax Ref #2004-1 Sunridge Park Area	5.00%	09/01/25	222,952
500,000	River Islands CA Pub Fing Auth Spl Tax Cmnty Facs Dist #2019-1 Phase 2 Pub Impts	5.00%	09/01/40	565,779
300,000	River Islands CA Pub Fing Auth Spl Tax Ref Cmnty Facs Dist #2003-1	5.38%	09/01/31	311,706
575,000	Riverside CA Unif Sch Dist Election of 2016, Ser B	3.00%	08/01/38	605,844
185,000	Riverside CA Unif Sch Dist Fing Auth Spl Tax Ref, BAM	5.00%	09/01/34	205,353
550,000	Riverside Cnty CA Teeter Plan Oblig Nts, Ser A	0.50%	10/20/22	549,982
1,035,000	Riverside Cnty CA Transprtn Commn Toll Rev Ref, Sr Lien, RCTC 91 Express Lanes, Ser B-1	4.00%	06/01/40	1,189,564

Page 14

See Notes to Financial Statements

Table of Contents

First Trust California Municipal High Income ETF (FCAL)

Portfolio of Investments (Continued)

January 31, 2022 (Unaudited)

Principal Value	Description	Stated Coupon	Stated Maturity	Value
MUNICIPAL BONDS (Continued)
	California (Continued)
$1,495,000	Rocklin CA Unif Sch Dist Cmnty Facs Dist Subord, Ser 2019, BAM	4.00%	09/15/37	$1,691,766
185,000	Roseville CA Spl Tax Fiddyment Ranch Cmnty Fac	5.00%	09/01/32	211,867
160,000	Roseville CA Spl Tax Fiddyment Ranch Cmnty Fac	5.00%	09/01/33	183,188
170,000	Roseville CA Spl Tax Fiddyment Ranch Cmnty Fac	4.00%	09/01/34	185,979
150,000	Roseville CA Spl Tax Fiddyment Ranch Cmnty Fac	4.00%	09/01/35	163,980
225,000	Roseville CA Spl Tax Vlg CFD #1	4.00%	09/01/33	248,687
200,000	Sacramento CA Spl Tax Natomas Meadows Cmnty Facs Dist #2007-01 (a)	5.00%	09/01/32	220,076
500,000	Sacramento CA Transient Occupancy Tax Rev Sub Convention Ctr Complex, Ser C	5.00%	06/01/32	584,644
385,000	San Bruno CA Park Sch Dist, Ser B	4.00%	08/01/34	439,015
200,000	San Bruno CA Park Sch Dist, Ser B	4.00%	08/01/37	227,523
35,000	San Diego Cnty CA Ltd Rev Obligs Ref Sanford Burnham Prebys Med Discovery Institute, Ser A	5.00%	11/01/25	39,720
510,000	San Diego Cnty CA Ltd Rev Obligs Ref Sanford Burnham Prebys Med Discovery Institute, Ser A	5.00%	11/01/28	577,172
125,000	San Diego Cnty CA Spl Tax Harmony Grove Vlg Impt Area No.2, Ser A	4.00%	09/01/32	136,936
85,000	San Diego Cnty CA Spl Tax Harmony Grove Vlg Impt Area No.2, Ser A	4.00%	09/01/33	93,092
100,000	San Diego Cnty CA Spl Tax Harmony Grove Vlg Impt Area No.2, Ser A	4.00%	09/01/34	109,445
500,000	San Francisco CA Bay Area Rapid Transit Dist Sales Tax Rev, Ser A	4.00%	07/01/36	560,224
140,000	San Francisco CA City & Cnty Arpts Commn Intl Arpt Rev Ref, Ser D, AMT	5.00%	05/01/22	141,574
1,000,000	San Francisco CA City & Cnty Arpts Commn Intl Arpt Rev, Ser E, AMT	4.00%	05/01/50	1,077,146
500,000	San Francisco CA City & Cnty Dcnty Dev Spl Tax Dist No 2020-1 Mission Rock Facs & Svcs, Ser A (a)	4.00%	09/01/46	546,442
100,000	San Francisco City & Cnty CA Redev Agy Successor Agy Tax Ref Mission Bay N Redev Proj, Ser A	5.00%	08/01/35	115,178
175,000	San Joaquin Hills CA Transprtn Corridor Agy Toll Road Rev Cap Apprec Ref, Ser A, NATL	(d)	01/15/29	150,861
1,500,000	Santa Ana Unif Sch Dist, 2018 Election, Ser A	4.00%	08/01/48	1,681,979
800,000	Santa Clarita CA Cmnty Facs Dist Vista Canyon #2016-1 (a)	4.00%	09/01/35	873,928
175,000	Simi Vly CA Unif Sch Dist, Ser B	4.00%	08/01/33	198,378
370,000	Simi Vly CA Unif Sch Dist, Ser B	4.00%	08/01/38	417,549
500,000	Simi Vly CA Unif Sch Dist, Ser C	4.00%	08/01/43	571,215
1,625,000	So San Fran CA Pub Facs Fing Auth Lease Rev Police St Proj, Ser A	4.00%	06/01/43	1,840,274
305,000	Tahoe-Truckee CA Unif Sch Dist, COPS, BAM	4.00%	06/01/37	332,534
260,000	Tahoe-Truckee CA Unif Sch Dist, COPS, BAM	4.00%	06/01/39	282,792
150,000	Temecula Vly CA Unif Sch Dist Cmnty Facs Dist #2014-1	5.00%	09/01/32	168,885
400,000	Temecula Vly Unif Sch Dist Fing Auth CA Spl Tax Rev, BAM	5.00%	09/01/34	443,750
500,000	Temescal Vly CA Wtr Dist Spl Tax Terramor Cmnty Facs Dist #4 Impt Area #1	5.00%	09/01/31	562,191
230,000	Tobacco Securitization Auth Sthrn CA Tobacco Stlmt Rev Ref San Diego Co Tobacco Securitization Corp, Ser A, Class 1	5.00%	06/01/30	284,811
1,000,000	Tobacco Securitization Auth Sthrn CA Tobacco Stlmt Rev Ref San Diego Co Tobacco Securitization Corp, Ser A, Class 1	5.00%	06/01/37	1,220,200
1,000,000	Tobacco Securitization Auth Sthrn CA Tobacco Stlmt Rev San Diego Co Asset Securitization Corp, Ser A, Class 1	5.00%	06/01/38	1,217,704
250,000	Tracy CA Cmnty Facs Dist	5.00%	09/01/33	281,417

See Notes to Financial Statements

Page 15

Table of Contents

First Trust California Municipal High Income ETF (FCAL)

Portfolio of Investments (Continued)

January 31, 2022 (Unaudited)

Principal Value	Description	Stated Coupon	Stated Maturity	Value
MUNICIPAL BONDS (Continued)
	California (Continued)
$470,000	Transbay Jt Powers Auth CA Green Bond Sr Tax Alloc Bonds, Ser A	5.00%	10/01/33	$581,068
945,000	Transbay Jt Powers Auth CA Green Bond Sr Tax Alloc Bonds, Ser A	5.00%	10/01/39	1,157,872
500,000	Univ of California CA Revs Ref Ltd Proj, Ser O	5.00%	05/15/48	595,679
100,000	W Contra Costa CA Unif Sch Dist Ref, Ser A	5.00%	08/01/31	112,446
				104,842,490
	Colorado – 0.9%
500,000	Rampart Range CO Met Dist #5	4.00%	12/01/41	502,480
500,000	Willow Bend Met Dist CO Sr, Ser A	5.00%	12/01/39	532,697
				1,035,177
	Florida – 0.8%
500,000	FL Dev Fin Corp Surface Tranprtn Fac Rev Green Bond Brightline Passenger Rail Remk, Ser B, AMT (a)	7.38%	01/01/49	543,278
150,000	Parkland Preserve CDD FL Spl Assmnt Rev, Ser A	4.50%	05/01/24	153,309
245,000	Rhodine Road N CDD FL Spl Assmnt	4.00%	05/01/30	257,921
				954,508
	Georgia – 0.4%
500,000	Fulton Cnty GA Rsdl Care Facs Elderly Auth Retmnt Fac Rev Ref Lenbrook Sq Fdtn Inc	5.00%	07/01/42	529,482
	Guam – 0.8%
100,000	Guam Govt Busn Privilege Tax Rev Ref, Ser D	5.00%	11/15/32	110,999
750,000	Guam Govt Wtrwks Auth Wtr & Wstwtr Sys Rev, Ser A	5.00%	01/01/50	882,422
				993,421
	Illinois – 0.2%
135,000	Chicago IL Ref, Ser C, CABS	(d)	01/01/24	129,189
120,000	IL St, Ser A	4.00%	01/01/25	120,320
				249,509
	Louisiana – 0.8%
750,000	Saint James Parish LA Rev Var Nustar Logistics LP Proj, Ser 2008 (Mandatory put 06/01/30) (a)	6.10%	06/01/38	959,023
	Ohio – 0.7%
750,000	Buckeye OH Tobacco Stlmt Fing Auth Ref Sr, Ser B-2, Class 2	5.00%	06/01/55	824,959
	Puerto Rico – 1.7%
100,000	Puerto Rico Cmwlth Ref Pub Impt, Ser A, AGM	5.00%	07/01/35	100,711
1,295,000	Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured, Ser A-1	4.50%	07/01/34	1,384,506
616,000	Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured, Ser A-1, CABS	(d)	07/01/29	516,495
				2,001,712
	Texas – 0.3%
370,000	Houston TX Arpt Sys Rev Ref United Airls Inc Terminal Impt Proj, Ser B-2, AMT	5.00%	07/15/27	420,465

Page 16

See Notes to Financial Statements

Table of Contents

First Trust California Municipal High Income ETF (FCAL)

Portfolio of Investments (Continued)

January 31, 2022 (Unaudited)

Principal Value	Description	Stated Coupon	Stated Maturity	Value
MUNICIPAL BONDS (Continued)
	Utah – 0.4%
$500,000	Military Installation Dev Auth UT Tax Allocation Rev, Ser A-1	4.00%	06/01/52	$456,242

	Total Investments – 95.2%		113,863,220
	(Cost $111,962,257)
	Net Other Assets and Liabilities – 4.8%		5,727,961
	Net Assets – 100.0%		$119,591,181

Futures Contracts (See Note 2D - Futures Contracts in the Notes to Financial Statements):

Futures Contracts	Position	Number of Contracts	Expiration Date	Notional Value	Unrealized Appreciation (Depreciation)/ Value
U.S. Treasury Long Bonds	Short	15	Mar 2022	$ (2,334,375)	$(5,738)
Ultra 10-Year Treasury Notes	Short	21	Mar 2022	(2,999,391)	(4,360)
				$(5,333,766)	$(10,098)

(a)	This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P. (the “Advisor”). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At January 31, 2022, securities noted as such amounted to $17,783,293 or 14.9% of net assets.
(b)	This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the 1933 Act, and may be resold in transactions exempt from registration, normally to qualified institutional buyers (see Note 2C - Restricted Securities in the Notes to Financial Statements).
(c)	Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by the Advisor.
(d)	Zero coupon bond.

AGM	Assured Guaranty Municipal Corp.
AMBAC	American Municipal Bond Assurance Corp.
AMT	Alternative Minimum Tax
BAM	Build America Mutual
CA MTG INS	California Mortgage Insurance
CABS	Capital Appreciation Bonds
COPS	Certificates of Participation
NATL	National Public Finance Guarantee Corp.

See Notes to Financial Statements

Page 17

Table of Contents

First Trust New York Municipal High Income ETF (FMNY)

Portfolio of Investments

January 31, 2022 (Unaudited)

Principal Value	Description	Stated Coupon	Stated Maturity	Value
MUNICIPAL BONDS – 94.1%
	American Samoa – 2.6%
$250,000	American Samoa AS Econ Dev Auth Gen Rev, Ser A (a)	5.00%	09/01/38	$298,116
	Florida – 2.2%
225,000	FL St Dev Fin Corp Sr Living Rev Ref Glenridge on Palmer Ranch Proj	5.00%	06/01/35	254,808
	New York – 84.6%
350,000	Albany NY Capital Res Corp Natl Chrt Sch Revolving Equitable Sch Revolving Fund Social Bonds, Ser D	4.00%	11/01/46	394,226
350,000	Amherst NY Dev Corp Ref Ubf Fac Stdt Hsg, BAM	4.00%	10/01/42	396,545
400,000	Build NYC Res Corp NY Rev Acad Leadership Chrt Sch Proj	4.00%	06/15/36	439,571
300,000	Build NYC Res Corp NY Rev NY Preparatory Chrt Sch Proj, Ser A	4.00%	06/15/31	324,065
500,000	Build NYC Res Corp NY Rev Richmond Prep Chtr Sch Proj Social Impact Proj, Ser A (a)	5.00%	06/01/41	556,300
255,000	Chemung Cnty NY Ref, AGM	4.00%	12/15/27	288,720
285,000	Hudson Yards Infra Corp NY 2nd Indenture Rev Ref, Ser A	4.00%	02/15/36	313,354
355,000	Long Island NY Pwr Auth Elec Sys Rev Ref, Ser A	5.00%	09/01/37	444,942
315,000	Met Transprtn Auth NY Rev Ref, Ser D	4.00%	11/15/42	336,980
400,000	Monroe Cnty NY Indl Dev Corp Rev Univ of Rochester Proj, Ser A	4.00%	07/01/50	443,497
475,000	New York City NY Muni Wtr Fin Auth Wtr & Swr Sys Rev Ref Wtr & Swr Sys Second General Resolution, Ser BB2	4.00%	06/15/42	540,008
135,000	New York City NY Transitional Fin Auth Rev Subord Future Tax Secured, Ser C-1	4.00%	11/01/40	151,781
345,000	New York City NY Transitional Fin Auth Rev Subord, Ser A-3	4.00%	05/01/43	385,718
250,000	Niagara Cnty NY Tobacco Asset Securitization Corp Tobacco As Ref Asset Bkd Bds	5.00%	05/15/22	252,961
235,000	NY NY Fiscal 2020, Ser B-1	4.00%	10/01/35	265,393
325,000	NY St Dorm Auth Revs Non St Supported Debt Grp 2 Memorial Sloan Kettering Cancer Ctr Rev, Ser 1	3.00%	07/01/34	348,741
300,000	NY St Dorm Auth Revs Non St Supported Debt Ref N Shore Long Island Jewish Oblig Grp, Ser A	5.00%	05/01/36	331,850
250,000	NY St Liberty Dev Corp Liberty Rev Ref, Ser 1WTC	4.00%	02/15/43	277,011
500,000	NY St Thruway Auth Gen Rev Junior Indebtedness Oblig Subord, Ser B	4.00%	01/01/50	545,089
120,000	NY St Transprtn Dev Corp Spl Fac Rev Ref Terminal 4 JFK Intl Arpt Proj, Ser A, AMT	5.00%	12/01/33	144,304
250,000	NY St Urban Dev Corp Rev Ref Grp 3, Ser E	4.00%	03/15/46	277,226
200,000	Onondaga NY Civic Dev Corp Le Moyne Clg Proj	4.00%	07/01/41	221,334
250,000	Port Auth of NY & NJ NY Consolidated Bonds Two Hundred Fourteenth Ser, AMT	5.00%	09/01/30	303,618
275,000	Port Auth of NY & NJ NY Ref Consolidated Bonds Two Hundred Twelfth Ser	4.00%	09/01/37	311,025
500,000	Suffolk NY Tobacco Asset Securitization Corp Tobacco Stlmt Asset Backed Sub Bonds, Ser B-1	4.00%	06/01/50	542,326
190,000	Troy NY Capital Res Corp Rev Rensselaer Polytechnic Institute Proj Ref	4.00%	09/01/35	218,232
280,000	Troy NY Capital Res Corp Rev Rensselaer Polytechnic Institute Proj Ref	4.00%	09/01/36	321,255
100,000	Tsasc Inc NY Ref, Ser A	5.00%	06/01/32	115,612
325,000	Wayne Cnty NY Wtr & Swr Auth Wtr & Swr Sys Rev Green Bond, BAM	4.00%	12/15/41	374,445
				9,866,129

See Notes to Financial Statements

Page 19

Table of Contents

First Trust New York Municipal High Income ETF (FMNY)

Portfolio of Investments (Continued)

January 31, 2022 (Unaudited)

Principal Value	Description	Stated Coupon	Stated Maturity	Value
MUNICIPAL BONDS (Continued)
	Puerto Rico – 2.4%
$153,000	Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured, Ser A-1, CABS	(b)	07/01/29	$128,286
194,000	Puerto Rico Sales Tax Fing Corp Sales Tax Rev Restructured, Ser A-1, CABS	(b)	07/01/31	151,549
				279,835
	Texas – 2.3%
250,000	North Parkway Muni Mgmt Dist #1 Tx Spl Assmnt Rev Major Impts Proj (a)	5.00%	09/15/51	270,620

	Total Investments – 94.1%		10,969,508
	(Cost $11,312,357)
	Net Other Assets and Liabilities – 5.9%		689,047
	Net Assets – 100.0%		$11,658,555

Futures Contracts (See Note 2D - Futures Contracts in the Notes to Financial Statements):

Futures Contracts	Position	Number of Contracts	Expiration Date	Notional Value	Unrealized Appreciation (Depreciation)/ Value
U.S. Treasury Long Bonds	Short	3	Mar 2022	$ (466,875)	$12,140
Ultra 10-Year Treasury Notes	Short	2	Mar 2022	(285,656)	7,745
				$(752,531)	$19,885

(a)

This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P. (the “Advisor”). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At January 31, 2022, securities noted as such amounted to $1,125,036 or 9.6% of net assets.

(b)

Zero coupon bond.

AGM	Assured Guaranty Municipal Corp.
AMT	Alternative Minimum Tax
BAM	Build America Mutual
CABS	Capital Appreciation Bonds

Valuation Inputs

A summary of the inputs used to value the Fund’s investments as of January 31, 2022 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):

	Total Value at 1/31/2022	Level 1 Quoted Prices	Level 2 Significant Observable Inputs	Level 3 Significant Unobservable Inputs
Municipal Bonds*	$ 10,969,508	$ —	$ 10,969,508	$ —
Futures Contracts**	19,885	19,885	—	—
Total	$ 10,989,393	$ 19,885	$ 10,969,508	$—

*	See Portfolio of Investments for state and territory breakout.
**	Includes cumulative appreciation/depreciation on futures contracts as reported in the Futures Contracts table. Only the current day’s variation margin is presented on the Statements of Assets and Liabilities.

Page 20

See Notes to Financial Statements

Table of Contents

First Trust Exchange-Traded Fund III

Statements of Changes in Net Assets

	First Trust California Municipal High Income ETF (FCAL)		First Trust New York Municipal High Income ETF (FMNY)
	Six Months Ended 1/31/2022 (Unaudited)	Year Ended 7/31/2021	Six Months Ended 1/31/2022 (Unaudited)	Period Ended 7/31/2021 (a)
OPERATIONS:
Net investment income (loss)	$ 1,150,724	$ 2,039,398	$ 151,599	$ 46,946
Net realized gain (loss)	(166,347)	418,351	(195,133)	29,919
Net increase from payment by the advisor	—	219	—	—
Net change in unrealized appreciation (depreciation)	(4,651,030)	3,455,246	(527,309)	204,345
Net increase (decrease) in net assets resulting from operations	(3,666,653)	5,913,214	(570,843)	281,210
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations	(1,147,501)	(1,990,252)	(98,250)	(30,000)
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold	19,206,728	21,698,863	—	15,004,560
Cost of shares redeemed	—	(8,129,605)	(2,928,122)	—
Net increase (decrease) in net assets resulting from shareholder transactions	19,206,728	13,569,258	(2,928,122)	15,004,560
Total increase (decrease) in net assets	14,392,574	17,492,220	(3,597,215)	15,255,770
NET ASSETS:
Beginning of period	105,198,607	87,706,387	15,255,770	—
End of period	$ 119,591,181	$ 105,198,607	$ 11,658,555	$ 15,255,770
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period	1,900,002	1,650,002	500,002	—
Shares sold	350,000	400,000	—	500,002
Shares redeemed	—	(150,000)	(100,000)	—
Shares outstanding, end of period	2,250,002	1,900,002	400,002	500,002

(a)	Inception date is May 12, 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 23

Table of Contents

First Trust Exchange-Traded Fund III

Financial Highlights

For a share outstanding throughout each period

First Trust California Municipal High Income ETF (FCAL)

	Six Months Ended 1/31/2022 (Unaudited)	Year Ended July 31,				Period Ended 7/31/2017 (a)
	Six Months Ended 1/31/2022 (Unaudited)	2021	2020	2019	2018	Period Ended 7/31/2017 (a)
Net asset value, beginning of period	$ 55.37	$ 53.16	$ 52.70	$ 50.11	$ 50.14	$ 50.00
Income from investment operations:
Net investment income (loss)	0.53	1.16	1.17	1.49	1.45	0.10
Net realized and unrealized gain (loss)	(2.21)	2.19 (b)	0.51	2.60	(0.04)	0.14
Total from investment operations	(1.68)	3.35	1.68	4.09	1.41	0.24
Distributions paid to shareholders from:
Net investment income	(0.54)	(1.14)	(1.17)	(1.50)	(1.40)	(0.10)
Net realized gain	—	—	—	—	(0.04)	—
Return of capital	—	—	(0.05)	—	—	(0.00) (c)
Total distributions	(0.54)	(1.14)	(1.22)	(1.50)	(1.44)	(0.10)
Net asset value, end of period	$53.15	$55.37	$53.16	$52.70	$50.11	$50.14
Total return (d)	(3.05)%	6.37% (b)	3.23%	8.32%	2.83%	0.50%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000’s)	$ 119,591	$ 105,199	$ 87,706	$ 34,257	$ 17,539	$ 10,029
Ratio of total expenses to average net assets	0.65% (e)	0.65%	0.65%	0.65%	0.65%	0.65% (e)
Ratio of net expenses to average net assets	0.50% (e)	0.50%	0.50%	0.50%	0.50%	0.50% (e)
Ratio of net investment income (loss) to average net assets	1.99% (e)	2.16%	2.28%	3.01%	2.97%	1.74% (e)
Portfolio turnover rate (f)	5%	25%	81%	69%	91%	22%

(a)	Inception date is June 20, 2017, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b)	The Fund received a reimbursement from the advisor in the amount of $219, which represents less than $0.01 per share. Since the advisor reimbursed the Fund, there was no effect on the Fund’s total return.
(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 returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total return would have been lower if certain fees had not been waived by the investment advisor.
(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 24

See Notes to Financial Statements

Table of Contents

First Trust Exchange-Traded Fund III

Financial Highlights (Continued)

For a share outstanding throughout each period

First Trust New York Municipal High Income ETF (FMNY)

	Six Months Ended 1/31/2022 (Unaudited)	Period Ended 7/31/2021 (a)
Net asset value, beginning of period	$ 30.51	$ 30.00
Income from investment operations:
Net investment income (loss)	0.35	0.09
Net realized and unrealized gain (loss)	(1.51)	0.48
Total from investment operations	(1.16)	0.57
Distributions paid to shareholders from:
Net investment income	(0.20)	(0.04)
Net realized gain	—	(0.02)
Total distributions	(0.20)	(0.06)
Net asset value, end of period	$29.15	$30.51
Total return (b)	(3.83)%	1.90%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000’s)	$ 11,659	$ 15,256
Ratio of total expenses to average net assets	0.65% (c)	0.65% (c)
Ratio of net expenses to average net assets	0.50% (c)	0.50% (c)
Ratio of net investment income (loss) to average net assets	1.99% (c)	1.41% (c)
Portfolio turnover rate (d)	43%	16%

(a)	Inception date is May 12, 2021, which is consistent with the commencement of investment operations and is the date the initial creation units were established.
(b)	Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total return would have been lower if certain fees had not been waived by the investment advisor.
(c)	Annualized.
(d)	Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.

See Notes to Financial Statements

Page 25

Table of Contents

Notes to Financial Statements

First Trust Exchange-Traded Fund III

January 31, 2022 (Unaudited)

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 currently consists of seventeen funds that are offering shares. This report covers the following funds, (each a “Fund” and collectively, the “Funds”):

First Trust California Municipal High Income ETF – (The Nasdaq Stock Market LLC ticker “FCAL”)

First Trust New York Municipal High Income ETF – (NYSE Arca, Inc. ticker “FMNY”)

FCAL is a diversified series of the Trust. FMNY is a non-diversified series of the Trust.

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 primary investment objective of each Fund is to seek to provide current income that is exempt from regular federal income taxes and, for FCAL, California income taxes and, for FMNY, New York income taxes. The secondary investment objective of each Fund is long-term capital appreciation. Under normal market conditions, each Fund seeks to achieve its investment objectives by investing at least 80% of its net assets (including investment borrowings) in municipal debt securities that pay interest that is exempt from regular federal income taxes and, for FCAL, California income taxes and, for FMNY, New York State and New York City income taxes. There can be no assurance that a Fund will achieve its investment objectives. 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. Domestic debt 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 last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds’ investment advisor, First Trust Advisors L.P. (“First Trust” or the “Advisor”), in accordance with valuation procedures adopted by the Trust’s Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor’s Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund’s investments are valued as follows:

Municipal securities and other debt securities are fair valued on the basis of fair valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the Trust’s Board of Trustees, which may use the following valuation inputs when available:

1)	benchmark yields;
2)	reported trades;
3)	broker/dealer quotes;
4)	issuer spreads;
5)	benchmark securities;
6)	bids and offers; and
7)	reference data including market research publications.

Page 26

Table of Contents

Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

January 31, 2022 (Unaudited)

Exchange-traded futures contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded futures contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.

Fixed income and other debt securities having a remaining maturity of sixty days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor’s Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer-specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following:

1)	the credit conditions in the relevant market and changes thereto;
2)	the liquidity conditions in the relevant market and changes thereto;
3)	the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates);
4)	issuer-specific conditions (such as significant credit deterioration); and
5)	any other market-based data the Advisor’s Pricing Committee considers relevant. In this regard, the Advisor’s Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost.

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 (the “1933 Act”)) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security’s fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:

1)	the fundamental business data relating to the issuer;
2)	an evaluation of the forces which influence the market in which these securities are purchased and sold;
3)	the type, size and cost of the security;
4)	the financial statements of the issuer;
5)	the credit quality and cash flow of the issuer, based on the Advisor’s or external analysis;
6)	the information as to any transactions in or offers for the security;
7)	the price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies;
8)	the coupon payments;
9)	the quality, value and salability of collateral, if any, securing the security; and
10)	other relevant factors.

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).

Page 27

Table of Contents

Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

January 31, 2022 (Unaudited)

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 January 31, 2022, 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. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method.

C. Restricted Securities

FCAL invests in restricted securities, which are securities that may not be offered for public sale without first being registered under the 1933 Act. Prior to registration, restricted securities may only be resold in transactions exempt from registration under Rule 144A under the 1933 Act, normally to qualified institutional buyers. As of January 31, 2022, FCAL held restricted securities as shown in the following table that the Advisor has deemed illiquid pursuant to procedures adopted by the Trust’s Board of Trustees. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security-specific factors and assumptions, which require subjective judgment. FCAL does not have the right to demand that such securities be registered. These securities are valued according to the valuation procedures as stated in the Portfolio Valuation note (Note 2A) and are not expressed as a discount to the carrying value of a comparable unrestricted security. There are no unrestricted securities with the same maturity dates and yields for these issuers.

Security	Acquisition Date	Principal Value	Current Price	Carrying Cost	Value	% of Net Assets
CA St Muni Fin Auth Chrt Sch Lease Rev Sycamore Acdmy Proj, 5.38%, 07/01/34	06/14/18	$250,000	$106.59	$251,929	$266,487	0.22%
CA St Sch Fin Auth Chrt Sch Rev Rocketship Pub Schs, Ser G, 5.00%, 06/01/37	12/05/17	$300,000	110.87	309,580	332,617	0.28
				$561,509	$599,104	0.50%

D. Futures Contracts

The Funds may purchase or sell (i.e., are long or short) exchange-listed futures contracts to hedge against changes in interest rates (interest rate risk). Futures contracts are agreements between the Funds and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Open futures contracts can also be closed out prior to settlement by entering into an offsetting transaction in a matching futures contract. If the Funds are not able to enter into an offsetting transaction, the Funds will continue to be required to maintain margin deposits on the futures contract. When the contract is closed or expires, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or expired. This gain or loss is included in “Net realized gain (loss) on futures contracts” on the Statements of Operations.

Upon entering into a futures contract, the Funds must deposit funds, called margin, with its custodian in the name of the clearing broker equal to a specified percentage of the current value of the contract. Open futures contracts are marked to market daily with the change in value recognized as a component of “Net change in unrealized appreciation (depreciation) on futures contracts” on the Statements of Operations. This daily fluctuation in the value of the contracts is also known as variation margin and is included in “Variation margin” payable or receivable on the Statements of Assets and Liabilities.

If market conditions change unexpectedly, the Funds may not achieve the anticipated benefits of the futures contract and may realize a loss. The use of futures contracts involves the risk of imperfect correlation in movements in the price of the futures contracts, interest rates and the underlying instruments.

Restricted cash segregated as collateral for futures contracts in the amounts of $104,620 and $15,400 for FCAL and FMNY, respectively, is shown as “Cash segregated as collateral for open futures contracts” on the Statements of Assets and Liabilities.

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Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

January 31, 2022 (Unaudited)

E. Dividends and Distributions to Shareholders

Dividends from net investment income, if any, are declared and paid monthly by each Fund, 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.

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

The tax character of distributions paid by each Fund during the fiscal period ended July 31, 2021, was as follows:

	Distributions paid from Tax-exempt Income	Distributions paid from Ordinary Income	Distributions paid from Capital Gains	Distributions paid from Return of Capital
First Trust California Municipal High Income ETF	$ 1,983,260	$ 6,992	$ —	$ —
First Trust New York Municipal High Income ETF	22,190	7,810	—	—

As of July 31, 2021, 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 California Municipal High Income ETF	$ 6,826	$ (1,800,225)	$ 6,776,717
First Trust New York Municipal High Income ETF	23,335	—	227,875

F. Income Taxes

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

In addition, each Fund intends to invest in municipal securities to allow it to pay shareholders “exempt dividends” as defined in the Code.

The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. For FCAL, taxable years ended 2019, 2020, and 2021 remain open to federal and state audit. For FMNY, the taxable period ended 2021 remains open to federal and state audit. As of January 31, 2022, 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 July 31, 2021, for federal income tax purposes, each applicable Fund had a capital loss carryforward available that is shown in the table below, to the extent provided by regulations, to offset future capital gains.

	Non-Expiring Capital Loss Carryforward
First Trust California Municipal High Income ETF	$ 1,800,225
First Trust New York Municipal High Income ETF	—

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Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

January 31, 2022 (Unaudited)

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 July 31, 2021, the Funds did not incur any net late year ordinary losses.

As of January 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:

	Tax Cost	Gross Unrealized Appreciation	Gross Unrealized (Depreciation)	Net Unrealized Appreciation (Depreciation)
First Trust California Municipal High Income ETF	$ 111,962,257	$ 3,008,853	$ (1,117,988)	$ 1,890,865
First Trust New York Municipal High Income ETF	11,312,357	40,329	(363,293)	(322,964)

G. Expenses

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

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

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

Pursuant to the Investment Management Agreements between the Trust and the Advisor, First Trust manages the investment of the Funds’ assets and is responsible for the Funds’ expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreements, interest, taxes, acquired fund fees and expenses, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Funds have agreed to pay First Trust an annual unitary management fee equal to 0.65% of their average daily net assets. 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 Trust’s Board of Trustees and the Advisor have entered into Fee Waiver Agreements for the Funds pursuant to which the Advisor contractually agreed to waive management fees of 0.15% of each Fund’s average daily net assets until November 30, 2022 and May 11, 2023, for FCAL and FMNY, respectively. The waiver agreements may be terminated by action of the Trust’s Board of Trustees at any time upon 60 days’ written notice by the Trust on behalf of the Funds or by the Advisor only after November 30, 2022 and May 11, 2023, for FCAL and FMNY, respectively. First Trust does not have the right to recover the fees waived. During the six months ended January 31, 2022, the Advisor waived fees of $86,598 and $11,402 for FCAL and FMNY, respectively.

During the fiscal year ended July 31, 2021, FCAL received a payment from the Advisor of $219 in connection with a trade error.

The Trust has multiple service agreements with Brown Brothers Harriman & Co. (“BBH”). Under the service agreements, BBH performs custodial, fund accounting, certain administrative services, and transfer agency services for the Funds. As custodian, BBH is responsible for custody of the Funds’ assets. As fund accountant and administrator, BBH is responsible for maintaining the books and records of the Funds’ securities and cash. As transfer agent, BBH is responsible for maintaining shareholder records for the Funds.

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.

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Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

January 31, 2022 (Unaudited)

4. Purchases and Sales of Securities

For the six months ended January 31, 2022, the cost of purchases and proceeds from sales of investment securities for each Fund, excluding short-term investments and in-kind transactions, were as follows:

	Purchases	Sales
First Trust California Municipal High Income ETF	$ 20,489,696	$ 5,077,459
First Trust New York Municipal High Income ETF	6,029,647	8,886,318

For the six months ended January 31, 2022, the Funds had no in-kind transactions.

5. Derivative Transactions

The following tables present the type of derivatives held by each Fund at January 31, 2022, the primary underlying risk exposure and the location of these instruments as presented on the Statements of Assets and Liabilities.

FCAL

		Asset Derivatives		Liability Derivatives
Derivative Instrument	Risk Exposure	Statements of Assets and Liabilities Location	Value	Statements of Assets and Liabilities Location	Value
Futures contracts	Interest Rate Risk	Unrealized appreciation on futures contracts*	$ —	Unrealized depreciation on futures contracts*	$ 10,098

FMNY

		Asset Derivatives		Liability Derivatives
Derivative Instrument	Risk Exposure	Statements of Assets and Liabilities Location	Value	Statements of Assets and Liabilities Location	Value
Futures contracts	Interest Rate Risk	Unrealized appreciation on futures contracts*	$ 19,885	Unrealized depreciation on futures contracts*	$ —

* Includes cumulative appreciation/depreciation on futures contracts as reported in the Futures Contracts table. Only the current day’s variation margin is presented on the Statements of Assets and Liabilities.

The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized for the six months ended January 31, 2022, on derivative instruments, as well as the primary underlying risk exposure associated with each instrument.

	Interest Rate Risk
Statements of Operations Location	FCAL	FMNY
Net realized gain (loss) on futures contracts	$(53,388)	$(20,839)
Net change in unrealized appreciation (depreciation) on futures contracts	124,121	41,994

During the six months ended January 31, 2022, for FCAL, the notional value of futures contracts opened and closed were $39,030,072 and $37,788,091, respectively.

During the six months ended January 31, 2022, for FMNY, the notional value of futures contracts opened and closed were $2,622,973 and $2,308,136, respectively.

The Funds do not have the right to offset financial assets and liabilities related to futures contracts on the Statements of Assets and Liabilities.

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Notes to Financial Statements (Continued)

First Trust Exchange-Traded Fund III

January 31, 2022 (Unaudited)

6. Creations, Redemptions and Transaction Fees

Each Fund generally issues and redeems its shares in primary market transactions through a creation and redemption mechanism and does not sell or redeem individual shares. Instead, financial entities known as “Authorized Participants” have contractual arrangements with a Fund or one of the Fund’s service providers to purchase and redeem Fund shares directly with the Fund in large blocks of shares known as “Creation Units.” Prior to the start of trading on every business day, a Fund publishes through the National Securities Clearing Corporation (“NSCC”) the “basket” of securities, cash or other assets that it will accept in exchange for a Creation Unit of the Fund’s shares. An Authorized Participant that wishes to effectuate a creation of a Fund’s shares deposits with the Fund the “basket” of securities, cash or other assets identified by the Fund that day, and then receives the Creation Unit of the Fund’s shares in return for those assets. After purchasing a Creation Unit, the Authorized Participant may continue to hold the Fund’s shares or sell them in the secondary market. The redemption process is the reverse of the purchase process: the Authorized Participant redeems a Creation Unit of a Fund’s shares for a basket of securities, cash or other assets. The combination of the creation and redemption process with secondary market trading in a Fund’s shares and underlying securities provides arbitrage opportunities that are designed to help keep the market price of a Fund’s shares at or close to the NAV per share of the Fund.

Each Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket.

Each Fund also imposes fees in connection with the redemption of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price received for each Creation Unit will equal the daily NAV per share of a Fund times the number of shares in a Creation Unit, minus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees, stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the redemption basket. Investors who use the services of a broker or other such intermediary in addition to an Authorized Participant to effect a redemption of a Creation Unit may also be assessed an amount to cover the cost of such services. The redemption fee charged by a Fund will comply with Rule 22c-2 of the 1940 Act which limits redemption fees to no more than 2% of the value of the shares redeemed.

7. Distribution Plan

The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, each 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 Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or to provide investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services.

No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before November 30, 2022 for FCAL and May 11, 2023 for FMNY.

8. Borrowings

The Trust, on behalf of FCAL, along with First Trust Series Fund and First Trust Exchange-Traded Fund IV have a $355 million Credit Agreement with The Bank of Nova Scotia (“Scotia”) as administrative agent for a group of lenders. Prior to October 29, 2021, the commitment amount was $330 million. Scotia charges a commitment fee of 0.25% of the daily amount of the excess of the commitment amount over the outstanding principal balance of the loans and an agency fee. First Trust allocates the commitment fee and agency fee amongst the funds that have access to the credit line. To the extent that the Fund accesses the credit line, there would also be an interest fee charged. The Fund did not have any borrowings outstanding during the six months ended January 31, 2022.

9. Indemnification

The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust’s maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

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Additional Information

First Trust Exchange-Traded Fund III

January 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 each Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on each Fund’s website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

Portfolio Holdings

Each Fund files portfolio holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be publicly available on the SEC’s website at www.sec.gov. Each Fund’s complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for each Fund is available to investors within 60 days after the period to which it relates. Each Fund’s Forms N-PORT and Forms N-CSR are available on the SEC’s website listed above.

Risk Considerations

Risks are inherent in all investing. Certain general risks that may be applicable to a Fund are identified below, but not all of the material risks relevant to each Fund are included in this report and not all of the risks below apply to each Fund. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information and other regulatory filings. Before investing, you should consider each Fund’s investment objective, risks, charges and expenses, and read each Fund’s prospectus and statement of additional information carefully. You can download each Fund’s prospectus at www.ftportfolios.com or contact First Trust Portfolios L.P. at (800) 621-1675 to request a prospectus, which contains this and other information about each Fund.

Concentration Risk. To the extent that a fund is able to invest a significant percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund’s investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund’s corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is more broadly diversified.

Credit Risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer’s ability to make such payments.

Cyber Security Risk. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches.

Defined Outcome Funds Risk. To the extent a fund’s investment strategy is designed to deliver returns tied to the price performance of an underlying ETF, an investor may not realize the returns the fund seeks to achieve if that investor does not hold shares for the entire target outcome period. In the event an investor purchases shares after the first day of the target outcome period or sells shares prior to the end of the target outcome period, the buffer that the fund seeks to provide against a decline in the value of the underlying ETF may not be available, the enhanced returns that the fund seeks to provide (if any) may not be available and the investor may not participate in a gain in the value of the underlying ETF up to the cap for the investor’s investment period. Additionally, the fund will not participate in gains of the underlying ETF above the cap and a shareholder may lose their entire investment. If the fund seeks enhanced returns, there are certain time periods when the value of the fund may fall faster than the value of the underlying ETF, and it is very unlikely that, on any given day during which the underlying ETF share price increases in value, the fund’s share price will increase at the same rate as the enhanced returns sought by the fund, which is designed for an entire target outcome period. Trading flexible exchange options involves risks different from, or possibly greater than, the risks associated with investing directly in securities, such as less liquidity and correlation and valuation risks. A fund may experience substantial downside from specific flexible exchange option positions and certain positions may expire worthless.

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

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Additional Information (Continued)

First Trust Exchange-Traded Fund III

January 31, 2022 (Unaudited)

by certain features of the derivative. These risks are heightened when a fund’s portfolio managers use derivatives to enhance the fund’s return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund.

Equity Securities Risk. To the extent a fund invests in equity securities, the value of the fund’s shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors’ perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market.

ETF Risk. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF’s shares, or decisions by an ETF’s authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF’s shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads.

Fixed Income Securities Risk. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund’s fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund’s fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or “junk” bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities.

Index or Model Constituent Risk. Certain funds may be a constituent of one or more indices or ETF models. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund’s net asset value could be negatively impacted and the fund’s market price may be significantly below its net asset value during certain periods. In addition, index rebalances may potentially result in increased trading activity in a fund’s shares.

Index Provider Risk. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund’s costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders.

Investment Companies Risk. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund’s investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests.

LIBOR Risk. To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate (“LIBOR”) as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR has ceased making LIBOR available as a reference rate over a phase-out period that began December 31, 2021. There is no assurance that any alternative reference rate, including the Secured Overnight Financing Rate (“SOFR”) will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in 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.

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Additional Information (Continued)

First Trust Exchange-Traded Fund III

January 31, 2022 (Unaudited)

Management Risk. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund’s investment portfolio, the fund’s portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective.

Market Risk. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. 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 outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. While the development of vaccines has slowed the spread of the virus and allowed for the resumption of “reasonably” normal business activity in the United States, many countries continue to impose lockdown measures in an attempt to slow the spread. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease.

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.

NOT FDIC INSURED

NOT BANK GUARANTEED

MAY LOSE VALUE

Page 36

	First Trust California Municipal High Income ETF (FCAL)	First Trust New York Municipal High Income ETF (FMNY)
ASSETS:
Investments, at value	$ 113,863,220	$ 10,969,508
Cash	4,510,211	306,789
Cash segregated as collateral for open futures contracts	104,620	15,400
Receivables:
Interest	1,178,853	97,388
Investment securities sold	—	3,203,578
Variation margin	—	375
Total Assets	119,656,904	14,593,038
LIABILITIES:
Payables:
Investment advisory fees	50,910	6,361
Variation margin	14,813	—
Fund shares redeemed	—	2,928,122
Total Liabilities	65,723	2,934,483
NET ASSETS	$119,591,181	$11,658,555
NET ASSETS consist of:
Paid-in capital	$ 119,399,517	$ 12,072,438
Par value	22,500	4,000
Accumulated distributable earnings (loss)	169,164	(417,883)
NET ASSETS	$119,591,181	$11,658,555
NET ASSET VALUE, per share	$53.15	$29.15
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)	2,250,002	400,002
Investments, at cost	$111,962,257	$11,312,357

	First Trust California Municipal High Income ETF (FCAL)	First Trust New York Municipal High Income ETF (FMNY)
INVESTMENT INCOME:
Interest	$ 1,439,385	$ 189,604
Total investment income	1,439,385	189,604
EXPENSES:
Investment advisory fees	375,259	49,407
Total expenses	375,259	49,407
Fees waived by the investment advisor	(86,598)	(11,402)
Net expenses	288,661	38,005
NET INVESTMENT INCOME (LOSS)	1,150,724	151,599
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments	(112,959)	(174,294)
Futures contracts	(53,388)	(20,839)
Net realized gain (loss)	(166,347)	(195,133)
Net change in unrealized appreciation (depreciation) on:
Investments	(4,775,151)	(569,303)
Futures contracts	124,121	41,994
Net change in unrealized appreciation (depreciation)	(4,651,030)	(527,309)
NET REALIZED AND UNREALIZED GAIN (LOSS)	(4,817,377)	(722,442)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$(3,666,653)	$(570,843)

ASSETS TABLE
	Total Value at 1/31/2022	Level 1 Quoted Prices	Level 2 Significant Observable Inputs	Level 3 Significant Unobservable Inputs
Municipal Bonds*	$ 113,863,220	$ —	$ 113,863,220	$ —

LIABILITIES TABLE
	Total Value at 1/31/2022	Level 1 Quoted Prices	Level 2 Significant Observable Inputs	Level 3 Significant Unobservable Inputs
Futures Contracts**	$ (10,098)	$ (10,098)	$ —	$ —