Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Annual Report

October 31, 2022

Shareholder Letter	1
Fund Performance Overview	2
Portfolio Commentary	5
Understanding Your Fund Expenses	7
Portfolio of Investments	8
Statement of Assets and Liabilities	21
Statement of Operations	22
Statements of Changes in Net Assets	23
Financial Highlights	24
Notes to Financial Statements	25
Report of Independent Registered Public Accounting Firm	32
Additional Information	33
Board of Trustees and Officers	40
Privacy Policy	42

Caution Regarding Forward-Looking Statements

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

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

Performance and Risk Disclosure

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

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

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

How to Read This Report

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

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

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

Table of Contents

Shareholder Letter

First Trust Long/Short Equity ETF (FTLS)

Annual Letter from the Chairman and CEO

October 31, 2022

Dear Shareholders,

First Trust is pleased to provide you with the annual report for the First Trust Long/Short Equity ETF (the “Fund”), which contains detailed information about the Fund for the twelve months ended October 31, 2022.

As I’m writing this letter in mid-November, it strikes me that things appear to be a little more chaotic in the current climate than normal. One of the things that may have contributed to the chaotic nature of the news flow of late was the November mid-term election. For the most part, except for a few seats in Congress, the election is behind us. We learned there would be no “red wave” (Republicans gaining a strong majority in Congress) but likely gridlock ahead. Gridlock has been good for stock market investors in the past few decades, particularly when there’s been a Democratic president and the Republicans have control of at least one house of Congress, according to Brian Wesbury, Chief Economist at First Trust.

The Federal Reserve (the “Fed”) has kept its promise to aggressively hike interest rates to combat robust inflation. As of November 13, 2022, the Fed has increased the Federal Funds target rate (upper bound) six times, from 0.25% to 4.00%. The Fed’s actions have some investors and pundits looking for evidence linking the interest rate hikes to a downturn in the economy. In short, the hope is that a pullback in economic activity might deter the Fed from executing further interest rate hikes. Fed Chairman Jerome Powell, however, recently said that the terminal rate (the ultimate rate the Fed is targeting) will likely need to be higher than previously estimated in order to curb stubbornly high inflation. The Consumer Price Index (“CPI”) is a commonly used measure of inflation. The CPI stood at 7.7% on a trailing 12-month basis as of October 31, 2022, according to the U.S. Bureau of Labor Statistics. That is down from its recent high of 9.1% in June 2022. Prior to this year, the last time the CPI was higher than 7.0% was over 40 years ago. While monetary policy is an ongoing process subject to change, the Fed does appear to be steadfast in its mission to bring the rate of inflation back to its preferred level of 2.0%, and that will take some time, in my opinion. Stay tuned!

Equity and fixed income markets have contended with numerous headwinds this year, such as the war between Russia and Ukraine. Since setting its all-time high of 4,796.56 on January 3, 2022, the S&P 500^® Index has been in a bear market (a price decline of 20% or more from the most recent high) for the better part of 310 days. Suffice it to say, we are all looking forward to the end of this bear market. With respect to corrections and bear markets, the silver lining is that the S&P 500^®Index has never failed to fully recover the losses sustained in any previous downturn. Where might we see demand for stocks moving forward? One such source could be stock buybacks. As of the last week of October 2022, U.S. companies had announced stock buybacks totaling $1 trillion so far this year, according to Birinyi Associates. The fixed income market has not been immune to selling pressure either. Year-to-date through November 10, 2022, yields on the 10-Year Treasury Note increased by 258 basis points. As you may be aware, bond yields and bond prices are inversely related, particularly with respect to investment-grade bonds. As yields rise, prices fall and vice versa. As noted above, the Fed has more work to do, so bond investors should not be surprised to see interest rates and bond yields trend at least a bit higher in the months ahead.

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

Sincerely,

James A. Bowen

Chairman of the Board of Trustees

Chief Executive Officer of First Trust Advisors L.P.

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Table of Contents

Fund Performance Overview (Unaudited)

First Trust Long/Short Equity ETF (FTLS)

The First Trust Long/Short Equity ETF’s (the “Fund”) investment objective is to seek to provide investors with long-term total return. Under normal conditions, the Fund will expose at least 80% of its net assets (including investment borrowings) to U.S. exchange-listed equity securities and/or U.S. exchange-traded funds (“ETFs”) that provide exposure to U.S. exchange-listed equity securities. The Fund pursues its investment objective by establishing long and short positions in a portfolio of U.S. exchange-listed equity securities and ETFs. The Fund’s portfolio may include U.S. exchange-listed equity securities of non-U.S. issuers, including the securities of non-U.S. issuers traded on U.S. exchanges in the form of depositary receipts.

The Fund’s portfolio is composed of both long and short positions in equity securities and ETFs. As opposed to taking long positions in which an investor seeks to profit from increases in the price of a security, short selling is a technique that will be used by the Fund to try and profit from the falling price of a security. Short selling involves selling a security that has been borrowed from a third party with the intention of buying an identical security back at a later date to return to that third party.

Having both long and short positions in an equity security portfolio is a common way to create returns that are independent of market moves. One advantage of a long and short portfolio is that the long and short positions may offset one another in a manner that results in a lower net exposure to the direction of the market. In addition, cash balances arising from the use of short selling typically will be held in money market instruments.

Performance
		Average Annual Total Returns		Cumulative Total Returns
	1 Year Ended 10/31/22	5 Years Ended 10/31/22	Inception (9/8/14) to 10/31/22	5 Years Ended 10/31/22	Inception (9/8/14) to 10/31/22
Fund Performance
NAV	-2.74%	5.76%	6.79%	32.33%	70.80%
Market Price	-2.76%	5.77%	6.80%	32.35%	70.86%
Index Performance
S&P 500^® Index	-14.61%	10.44%	10.51%	64.31%	125.69%

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

The Fund’s per share net asset value (“NAV”) is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return (“Market Price”) is determined by using the midpoint of the national best bid and offer price (“NBBO”) as of the time that the Fund’s NAV is calculated. Under SEC rules, the NBBO consists of the highest displayed buy and lowest sell prices among the various exchanges trading the Fund at the time the Fund’s NAV is calculated. 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 the Fund did not trade in the secondary market until after its inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in the Fund at NAV and Market Price, respectively.

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

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Table of Contents

Fund Performance Overview (Unaudited) (Continued)

First Trust Long/Short Equity ETF (FTLS)

Portfolio Sector Allocation	% of Total Investments – Long Positions
Information Technology	23.2%
Health Care	17.9
Financials	13.4
Industrials	10.5
Energy	10.2
Consumer Discretionary	8.2
Consumer Staples	7.5
Materials	4.3
Communication Services	4.0
Real Estate	0.6
Utilities	0.2
Total	100.0%

Portfolio Sector Allocation	% of Total Investments Sold Short
Information Technology	20.6%
Industrials	15.8
Materials	12.7
Financials	11.3
Consumer Staples	10.0
Health Care	9.9
Communication Services	6.4
Energy	6.2
Consumer Discretionary	6.1
Real Estate	1.0
Total	100.0%

Top Ten Investments – Long Positions	% of Net Assets
Apple, Inc.	4.4%
Microsoft Corp.	2.3
AstraZeneca PLC, ADR	1.7
Taiwan Semiconductor Manufacturing Co., Ltd., ADR	1.6
Gilead Sciences, Inc.	1.5
Hershey (The) Co.	1.4
Walgreens Boots Alliance, Inc.	1.3
CVS Health Corp.	1.3
Amazon.com, Inc.	1.2
UnitedHealth Group, Inc.	1.2
Total	17.9%

Top Ten Investments Sold Short	% of Net Assets
PepsiCo., Inc.	-0.7%
Northrop Grumman Corp.	-0.7
Raytheon Technologies Corp.	-0.6
Oracle Corp.	-0.6
Verizon Communications, Inc.	-0.5
Baker Hughes Co.	-0.5
Intel Corp.	-0.5
PNC Financial Services Group (The), Inc.	-0.5
Estee Lauder (The) Cos., Inc., Class A	-0.4
Bank of America Corp.	-0.4
Total	-5.4%

Fund Allocation	% of Net Assets
Common Stocks	84.1%
Exchange-Traded Funds	4.9
Master Limited Partnerships	1.2
Real Estate Investment Trusts	0.5
Common Stocks Sold Short	(22.3)
Real Estate Investment Trusts Sold Short	(0.2)
Net Other Assets and Liabilities *	31.8
Total	100.0%

*	Includes variation margin on futures contracts.

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Portfolio Commentary

First Trust Long/Short Equity ETF (FTLS)

Annual Report

October 31, 2022 (Unaudited)

Investment Advisor

First Trust Advisors L.P. (“First Trust”) is the investment advisor to First Trust Long/Short Equity ETF (the “Fund” or “FTLS”). In this capacity, First Trust is responsible for the selection and ongoing monitoring of the investments in the Fund’s portfolio and certain other services necessary for the management of the portfolio.

Portfolio Management Team

John Gambla – CFA, FRM, PRM, Senior Portfolio Manager of First Trust, FTA- Alternatives Investment Team

Rob A. Guttschow – CFA, Senior Portfolio Manager of First Trust, FTA- Alternatives Investment Team

Commentary

The Fund is an actively managed exchange-traded fund (“ETF”). The Fund’s investment objective is to seek to provide investors with long-term total return. The Fund pursues its investment objective by establishing long and short positions in a portfolio of U.S. exchange-listed securities and ETFs. Under normal conditions, the Fund will expose at least 80% of its net assets (including investment borrowings) to U.S. exchange-listed equity securities and/or U.S. ETFs that provide exposure to U.S. exchange-listed securities.

Overall Market Recap

U.S. economic growth was mixed during the 12-month period ended October 31, 2022. The first quarter of the period was strong, with 2021 third quarter annualized gross domestic product (“GDP”) growth of 7.0%. As 2022 began, growth turned negative for the first half of 2022 with GDP declining by an average -1.1% annualized for the semi-annual period. Third quarter annualized growth rebounded to a 2.6% annual rate. Despite two quarters of negative growth, the economy does not appear to be in a recession as the unemployment rate is very low at 3.7%, down from 4.6% one year ago. Job growth has been positive every month of the 12-month period ended October 31, 2022, with the total number of new jobs (BLS Non-Farm Payrolls) created in the period being 5.3 million.

Good news on the jobs front is being partially offset by bad news on the inflation and earnings front. After years of declining and/or low inflation, as measured by the Consumer Price Index (“CPI”), inflation surged from the pandemic lows of 0.1% year-over-year (“YOY”) in May of 2020. After jumping to 6.2% YOY at this time last year, the CPI maintained its upward trend, reaching a cycle high of 9.1% YOY in June of 2022. Subsequently, with a decline in energy prices, the CPI has fallen back to “only” 7.7% as of the October 2022 reading. Inflation is pernicious as it erodes the purchase power of the dollar and employee earnings, resulting in a decline in real living standards. As a measure of its impact, employment earnings growth looks attractive for 2022, with average hourly earnings up 4.7% for the 12-month period ended October 31, 2022. However, after accounting for inflation, U.S. real average weekly earnings declined by 3.7% during the same period, meaning that on average, U.S. workers took a big pay cut in 2022.

The U.S. Federal Reserve (the “Fed”), to quell inflation, has begun to aggressively hike interest rates. The Fed raised its benchmark short term interest rate by 0.25% in March 2022, 0.50% in May 2022, and then by 0.75% in June, July, and September of 2022. Expectations are for another 0.75% increase in November 2022. With the increasing Fed benchmark rate, interest rates for the U.S. consumer have also risen. One common and very impactful rate, the 30-year mortgage rate as measured by Freddie Mac, increased from 3.14% one year ago to 7.08% as of September 27, 2022. Higher short-term interest rates have increased the attractiveness of the U.S. Dollar, with the U.S. Dollar Index rising by 18.49% during the 12-month period ended October 31, 2022.

The U.S. equity market, as represented by the S&P 500^® Index, sold off during the same period, down 14.61%. Higher inflation, higher interest rates, and a strong dollar are all potential drags on future earnings. Riskier, smaller capitalization stocks, as represented by the Russell 2000^® Index, performed poorly during the same period, declining by 18.54%. With rising interest rates, bond investments also were hard hit during the same period with the broad-based Bloomberg Aggregate Index down 15.68% for the same period.

Fund Performance

The Fund returned -2.76% on a market price basis and -2.74% on a net asset value basis for the 12-month period ended October 31, 2022. The Fund’s benchmark, the S&P 500^® Index (the “Benchmark”) returned -14.61% during the same period.

During the same period, the net positions within the portfolio (long holdings minus short holdings) decreased from 63.2% at the beginning of the period to 54.57% at the end of the period. The decrease was the result of a 6.91% decrease in the long positions and a 5.17% increase in the size of the short positions.

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Portfolio Commentary (Continued)

First Trust Long/Short Equity ETF (FTLS)

Annual Report

October 31, 2022 (Unaudited)

The Fund’s long positions, as stand-alone investments, outperformed the Benchmark with stock selection being particularly effective in the Consumer Discretionary, Financial, and Communication Services sectors. Offsetting some of that outperformance was the Fund’s poor stock selection in the Information Technology, Industrials, and Health Care sectors. The Fund also benefitted from overweights in the Energy and Materials sectors and underweights in the Communication Services and Consumer Discretionary sectors. The only sector allocation during the period which was a negative contributor to the relative performance of the long equity portfolio was an underweight to the Utilities sector.

During the 12-month period ended October 31, 2022, the short portfolio added significantly to total returns as the short equity selections fell in value during the period. On a relative basis, the shorts fell in value by more than the Benchmark, boosting relative returns in addition to absolute returns. The Fund’s usage of short positions in futures contracts were particularly beneficial as the equities fell in value during the period by more than the Benchmark. Within the individually selected short stock positions, the short selections in the Information Technology, Health Care, and Consumer Discretionary sectors were particularly beneficial as the shorted stocks declined by more the Benchmark. Offsetting some of the beneficial stock selection was the allocation impact within the Consumer Discretionary, Energy, and Utilities sectors, all of which hurt relative performance of the short portfolio.

Overall, the Fund significantly outperformed the unmanaged, unhedged Benchmark during the same period.

Market and Fund Outlook

Today, we believe the Fund is well positioned to achieve its primary objective of seeking to provide investors with long term total return. As of October 31, 2022, the Fund is invested in a broad array of U.S. equity securities with a net market exposure of approximately 54.6% versus its unmanaged Benchmark’s exposure of 100%. In our opinion, the Fund’s combination of a broadly diversified portfolio, which includes long high-quality stocks and short low-quality stocks, as measured by an earnings quality model, positions the Fund well to continue to achieve its investment objective of seeking to provide investors with long term total return.

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First Trust Long/Short Equity ETF (FTLS)

Understanding Your Fund Expenses

October 31, 2022 (Unaudited)

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

The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended October 31, 2022.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

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

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

	Beginning Account Value May 1, 2022	Ending Account Value October 31, 2022	Annualized Expense Ratio Based on the Six-Month Period (a)	Expenses Paid During the Six-Month Period (a)(b)
First Trust Long/Short Equity ETF (FTLS)
Actual	$1,000.00	$979.10	1.36%	$6.78
Hypothetical (5% return before expenses)	$1,000.00	$1,018.35	1.36%	$6.92

(a)	Annualized expense ratio and expenses paid during the six-month period do not include fees and expenses of the underlying funds in which the Fund invests.
(b)	Expenses are equal to the annualized expense ratios as indicated in the table multiplied by the average account value over the period (May 1, 2022 through October 31, 2022), multiplied by 184/365 (to reflect the six-month period).

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First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments

October 31, 2022

Shares/ Units	Description	Value
COMMON STOCKS – 84.1%
	Aerospace & Defense – 0.5%
4,518	TransDigm Group, Inc. (a)	$2,601,284
	Air Freight & Logistics – 0.2%
67,493	ZTO Express Cayman, Inc., ADR	1,139,957
	Airlines – 0.6%
47,136	Alaska Air Group, Inc. (b)	2,095,667
16,707	Ryanair Holdings PLC, ADR (b)	1,150,945
		3,246,612
	Auto Components – 0.3%
30,579	Magna International, Inc.	1,704,168
	Automobiles – 1.5%
151,285	Stellantis N.V.	2,045,373
21,796	Tesla, Inc. (b)	4,959,462
19,226	Winnebago Industries, Inc.	1,147,600
		8,152,435
	Banks – 2.7%
117,891	Citigroup, Inc.	5,406,481
41,994	HSBC Holdings PLC, ADR	1,088,064
23,512	JPMorgan Chase & Co. (a)	2,959,691
110,629	US Bancorp.	4,696,201
		14,150,437
	Beverages – 0.5%
12,696	Celsius Holdings, Inc. (b)	1,156,352
32,706	Coca-Cola European Partners PLC	1,538,817
		2,695,169
	Biotechnology – 3.0%
21,718	AbbVie, Inc.	3,179,515
5,661	Amgen, Inc.	1,530,451
99,230	Gilead Sciences, Inc.	7,785,586
49,425	Horizon Therapeutics PLC (b)	3,080,166
		15,575,718
	Building Products – 0.7%
13,283	Advanced Drainage Systems, Inc.	1,539,234
28,228	Owens Corning	2,416,599
		3,955,833
	Capital Markets – 0.8%
16,890	CME Group, Inc.	2,927,037
21,781	Tradeweb Markets, Inc., Class A	1,199,697
		4,126,734
	Chemicals – 2.2%
42,505	CF Industries Holdings, Inc. (a)	4,516,581
22,968	Mosaic (The) Co.	1,234,530
47,184	Sociedad Quimica y Minera de Chile SA, ADR	4,420,197
11,852	Westlake Corp.	1,145,496
		11,316,804
	Commercial Services & Supplies – 2.2%
13,060	Cintas Corp.	5,583,803

Page 8

See Notes to Financial Statements

Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Shares/ Units	Description	Value
COMMON STOCKS (Continued)
	Commercial Services & Supplies (Continued)
8,500	Republic Services, Inc.	$1,127,270
45,162	Rollins, Inc.	1,900,417
24,114	Waste Connections, Inc.	3,180,878
		11,792,368
	Construction Materials – 0.2%
9,631	Eagle Materials, Inc.	1,177,968
	Consumer Finance – 0.2%
10,872	Capital One Financial Corp.	1,152,649
	Containers & Packaging – 0.3%
28,244	Sealed Air Corp.	1,344,979
	Diversified Consumer Services – 0.4%
52,668	H&R Block, Inc.	2,167,288
	Diversified Financial Services – 0.8%
13,953	Berkshire Hathaway, Inc., Class B (b)	4,117,391
	Diversified Telecommunication Services – 0.1%
7,526	Iridium Communications, Inc. (b)	387,815
66,573	Sitios Latinoamerica S.A.B. de C.V. (b)	19,723
		407,538
	Electric Utilities – 0.2%
11,136	Duke Energy Corp.	1,037,652
	Electrical Equipment – 1.5%
7,489	Hubbell, Inc.	1,778,488
23,937	Rockwell Automation, Inc.	6,111,116
		7,889,604
	Electronic Equipment, Instruments & Components – 0.7%
29,363	TE Connectivity Ltd.	3,589,039
	Food & Staples Retailing – 1.6%
45,343	Sprouts Farmers Market, Inc. (b)	1,337,619
190,820	Walgreens Boots Alliance, Inc. (a)	6,964,930
		8,302,549
	Food Products – 3.0%
75,383	Campbell Soup Co.	3,988,515
119,313	Conagra Brands, Inc.	4,378,787
30,087	Hershey (The) Co. (a)	7,183,873
		15,551,175
	Health Care Equipment & Supplies – 0.4%
30,107	Lantheus Holdings, Inc. (b)	2,227,617
	Health Care Providers & Services – 6.0%
20,952	AMN Healthcare Services, Inc. (b)	2,629,476
76,043	Centene Corp. (b)	6,473,541
72,510	CVS Health Corp.	6,866,697
25,299	Henry Schein, Inc. (b)	1,731,969
10,950	Molina Healthcare, Inc. (a) (b)	3,929,517
24,218	Quest Diagnostics, Inc.	3,478,916

See Notes to Financial Statements

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Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Shares/ Units	Description	Value
COMMON STOCKS (Continued)
	Health Care Providers & Services (Continued)
11,706	UnitedHealth Group, Inc.	$6,498,586
		31,608,702
	Health Care Technology – 0.4%
14,090	Veeva Systems, Inc., Class A (b)	2,366,275
	Hotels, Restaurants & Leisure – 1.9%
2,697	Booking Holdings, Inc. (b)	5,041,987
39,039	Restaurant Brands International, Inc.	2,318,136
26,846	Texas Roadhouse, Inc.	2,656,412
		10,016,535
	Household Durables – 0.2%
37,632	KB Home	1,084,554
	Household Products – 0.5%
19,917	Procter & Gamble (The) Co.	2,682,222
	Insurance – 2.7%
27,185	Chubb Ltd.	5,841,785
11,005	RenaissanceRe Holdings Ltd.	1,702,253
43,818	W.R. Berkley Corp.	3,259,183
15,447	Willis Towers Watson PLC	3,370,690
		14,173,911
	Interactive Media & Services – 1.8%
45,570	Alphabet, Inc., Class A (a) (b)	4,306,820
42,080	Alphabet, Inc., Class C (a) (b)	3,983,293
118,918	Kanzhun Ltd., ADR (b)	1,299,774
		9,589,887
	Internet & Direct Marketing Retail – 1.7%
63,583	Amazon.com, Inc. (a) (b)	6,513,443
58,673	JD.com, Inc., ADR	2,187,916
		8,701,359
	IT Services – 3.1%
17,480	Accenture PLC, Class A	4,962,572
62,166	Cognizant Technology Solutions Corp., Class A	3,869,834
76,609	Shopify, Inc., Class A (b)	2,622,326
22,364	Visa, Inc., Class A (a)	4,632,926
		16,087,658
	Life Sciences Tools & Services – 0.8%
10,697	ICON PLC (b)	2,116,294
8,570	Medpace Holdings, Inc. (b)	1,902,369
		4,018,663
	Machinery – 3.3%
6,333	Caterpillar, Inc.	1,370,841
57,778	Fortive Corp.	3,692,014
10,414	IDEX Corp.	2,315,136
49,549	Ingersoll Rand, Inc.	2,502,225
19,570	Parker-Hannifin Corp.	5,687,433
8,253	Snap-on, Inc.	1,832,579
		17,400,228

Page 10

See Notes to Financial Statements

Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Shares/ Units	Description	Value
COMMON STOCKS (Continued)
	Media – 0.4%
66,402	Fox Corp., Class A	$1,917,026
	Metals & Mining – 1.2%
19,851	Franco-Nevada Corp.	2,453,187
8,740	Nucor Corp.	1,148,261
89,139	Wheaton Precious Metals Corp.	2,913,954
		6,515,402
	Oil, Gas & Consumable Fuels – 8.1%
108,102	Antero Midstream Corp.	1,151,286
31,165	Antero Resources Corp. (b)	1,142,509
66,026	Canadian Natural Resources Ltd.	3,957,598
70,470	Cenovus Energy, Inc.	1,423,494
7,754	Cheniere Energy, Inc.	1,367,883
13,110	Chesapeake Energy Corp.	1,340,760
7,976	Chevron Corp.	1,442,858
19,757	Civitas Resources, Inc.	1,381,212
36,078	ConocoPhillips	4,549,075
43,016	Coterra Energy, Inc.	1,339,088
58,455	Exxon Mobil Corp.	6,477,399
66,831	Kinder Morgan, Inc.	1,210,978
55,235	Magnolia Oil & Gas Corp., Class A	1,418,435
12,885	Marathon Petroleum Corp.	1,463,994
21,893	Matador Resources, Co.	1,454,790
40,681	Occidental Petroleum Corp.	2,953,441
19,742	ONEOK, Inc.	1,171,095
36,758	PBF Energy, Inc., Class A	1,626,541
111,471	Petroleo Brasileiro S.A., ADR	1,429,058
5,490	Pioneer Natural Resources Co.	1,407,691
11,842	Valero Energy Corp.	1,486,763
36,320	Williams (The) Cos., Inc.	1,188,754
		42,384,702
	Pharmaceuticals – 5.6%
149,214	AstraZeneca PLC, ADR (a)	8,775,275
297,675	Bausch Health Cos., Inc. (b)	1,934,888
22,077	Johnson & Johnson (a)	3,840,736
36,111	Merck & Co, Inc.	3,654,433
67,195	Novartis AG, ADR	5,451,530
45,159	Novo Nordisk A/S	4,915,106
100,692	SIGA Technologies, Inc.	925,359
		29,497,327
	Semiconductors & Semiconductor Equipment – 4.9%
34,715	Analog Devices, Inc.	4,951,053
8,121	ASML Holding N.V.	3,836,523
6,232	Broadcom, Inc.	2,929,788
43,706	Microchip Technology, Inc.	2,698,408
19,481	NVIDIA Corp.	2,629,351
139,161	Taiwan Semiconductor Manufacturing Co., Ltd., ADR (a)	8,565,360
		25,610,483
	Software – 8.0%
17,960	Adobe, Inc. (a) (b)	5,720,260
18,266	Autodesk, Inc. (b)	3,914,404

See Notes to Financial Statements

Page 11

Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Shares/ Units	Description	Value
COMMON STOCKS (Continued)
	Software (Continued)
15,514	Cadence Design Systems, Inc. (b)	$2,348,664
10,493	CyberArk Software Ltd. (b)	1,646,457
99,468	Gen Digital, Inc., Class A	2,241,014
10,703	Intuit, Inc.	4,575,533
53,043	Microsoft Corp. (a)	12,312,872
6,109	Nice Ltd., ADR (b)	1,160,038
9,114	Qualys, Inc. (b)	1,299,292
19,933	Salesforce, Inc. (b)	3,240,906
11,493	Synopsys, Inc. (b)	3,362,277
		41,821,717
	Specialty Retail – 1.2%
923	AutoZone, Inc. (b)	2,337,848
13,120	Home Depot (The), Inc.	3,885,226
		6,223,074
	Technology Hardware, Storage & Peripherals – 4.4%
151,940	Apple, Inc. (a)	23,298,480
	Textiles, Apparel & Luxury Goods – 0.2%
16,571	Crocs, Inc. (b)	1,172,398
	Tobacco – 1.3%
106,031	Altria Group, Inc. (a)	4,906,054
43,234	British American Tobacco PLC, ADR	1,712,931
		6,618,985
	Trading Companies & Distributors – 0.4%
17,794	Ferguson PLC	1,944,172
	Wireless Telecommunication Services – 1.4%
69,480	America Movil SAB de CV, ADR, Class L	1,306,919
24,521	T-Mobile US, Inc. (b)	3,716,403
188,625	Vodafone Group PLC, ADR	2,227,661
		7,250,983
	Total Common Stocks	441,407,711
	(Cost $457,605,190)
EXCHANGE-TRADED FUNDS – 4.9%
	Capital Markets – 4.9%
33,907	iShares Rusell 1000 Value ETF	5,077,234
36,183	iShares S&P 500 Value ETF	5,186,110
79,138	Schwab U.S. Large-Cap Value ETF	5,137,639
135,110	SPDR Portfolio S&P 500 Value ETF	5,190,926
52,575	Vanguard Mega Cap Value ETF	5,299,034
	Total Exchange-Traded Funds	25,890,943
	(Cost $25,858,618)
MASTER LIMITED PARTNERSHIPS – 1.2%
	Oil, Gas & Consumable Fuels – 1.2%
84,472	Enterprise Products Partners, L.P.	2,132,918
13,985	Hess Midstream, L.P., Class A (c)	404,726
31,075	Magellan Midstream Partners, L.P.	1,676,496

Page 12

See Notes to Financial Statements

Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Shares/ Units	Description	Value
MASTER LIMITED PARTNERSHIPS (Continued)
	Oil, Gas & Consumable Fuels (Continued)
56,313	MPLX, L.P.	$1,888,738
	Total Master Limited Partnerships	6,102,878
	(Cost $6,147,726)
REAL ESTATE INVESTMENT TRUSTS – 0.5%
	Equity Real Estate Investment Trusts – 0.5%
10,320	Crown Castle, Inc.	1,375,243
42,013	Weyerhaeuser Co.	1,299,462
	Total Real Estate Investment Trusts	2,674,705
	(Cost $3,382,644)

	Total Investments – 90.7%		476,076,237
	(Cost $492,994,178)

Shares	Description	Value
COMMON STOCKS SOLD SHORT – (22.3)%
	Aerospace & Defense – (1.7)%
(7,780)	Boeing (The) Co. (b)	(1,108,728)
(4,211)	BWX Technologies, Inc.	(239,943)
(1,574)	Curtiss-Wright Corp.	(264,164)
(4,242)	Kratos Defense & Security Solutions, Inc. (b)	(47,001)
(4,089)	Mercury Systems, Inc. (b)	(197,908)
(6,238)	Northrop Grumman Corp.	(3,424,724)
(35,872)	Raytheon Technologies Corp.	(3,401,383)
(26,387)	Rocket Lab USA, Inc. (b)	(134,310)
(2,731)	Woodward, Inc.	(250,433)
		(9,068,594)
	Air Freight & Logistics – (0.0)%
(3,522)	GXO Logistics, Inc. (b)	(128,694)
	Auto Components – (0.0)%
(12,613)	Solid Power, Inc. (b)	(70,759)
	Automobiles – (0.1)%
(16,812)	Rivian Automotive, Inc., Class A (b)	(587,916)
	Banks – (0.9)%
(59,117)	Bank of America Corp.	(2,130,577)
(15,161)	PNC Financial Services Group (The), Inc.	(2,453,504)
		(4,584,081)
	Beverages – (0.7)%
(19,018)	PepsiCo, Inc.	(3,453,288)
(6,567)	Primo Water Corp.	(95,813)
		(3,549,101)
	Biotechnology – (0.1)%
(8,036)	Natera, Inc. (b)	(377,370)
	Capital Markets – (0.7)%
(1,758)	B. Riley Financial, Inc.	(71,515)
(31,774)	Bank of New York Mellon (The) Corp.	(1,338,003)
(6,647)	Franklin Resources, Inc.	(155,872)
(29,386)	Invesco, Ltd.	(450,194)

See Notes to Financial Statements

Page 13

Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Shares	Description	Value
COMMON STOCKS SOLD SHORT (Continued)
	Capital Markets (Continued)
(10,725)	Janus Henderson Group PLC	$(244,208)
(4,856)	Lazard Ltd., Class A	(183,120)
(7,102)	Northern Trust Corp.	(599,054)
(9,682)	State Street Corp.	(716,468)
		(3,758,434)
	Chemicals – (1.8)%
(8,157)	Air Products & Chemicals, Inc.	(2,042,513)
(3,560)	Ashland Global Holdings, Inc.	(373,515)
(18,199)	Axalta Coating Systems Ltd. (b)	(424,401)
(31,336)	Corteva, Inc.	(2,047,494)
(24,173)	DuPont de Nemours, Inc.	(1,382,696)
(8,472)	Ecolab, Inc.	(1,330,697)
(3,427)	International Flavors & Fragrances, Inc.	(334,510)
(10,240)	Origin Materials, Inc. (b)	(58,163)
(10,135)	PPG Industries, Inc.	(1,157,214)
(4,776)	Scotts Miracle-Gro (The) Co.	(219,266)
		(9,370,469)
	Commercial Services & Supplies – (0.1)%
(12,320)	ACV Auctions, Inc., Class A (b)	(112,359)
(7,738)	KAR Auction Services, Inc. (b)	(112,433)
(1,004)	MSA Safety, Inc.	(134,777)
(2,892)	Stericycle, Inc. (b)	(128,925)
		(488,494)
	Communications Equipment – (0.3)%
(21,228)	Infinera Corp. (b)	(119,089)
(31,453)	Juniper Networks, Inc.	(962,462)
(84,569)	Nokia Oyj, ADR	(372,104)
(2,971)	Viasat, Inc. (b)	(121,692)
		(1,575,347)
	Construction & Engineering – (0.1)%
(3,008)	Granite Construction, Inc.	(101,460)
(9,921)	MDU Resources Group, Inc.	(282,550)
		(384,010)
	Construction Materials – (0.2)%
(3,396)	Martin Marietta Materials, Inc.	(1,140,988)
	Consumer Finance – (0.0)%
(4,592)	Green Dot Corp., Class A (b)	(87,386)
	Containers & Packaging – (0.4)%
(2,161)	AptarGroup, Inc.	(214,263)
(15,748)	Ardagh Metal Packaging S.A.	(69,921)
(25,019)	International Paper Co.	(840,888)
(4,823)	Packaging Corp. of America	(579,773)
(3,960)	Silgan Holdings, Inc.	(187,546)
		(1,892,391)
	Diversified Consumer Services – (0.0)%
(10,666)	Coursera, Inc. (b)	(137,485)
	Diversified Financial Services – (0.1)%
(9,084)	Voya Financial, Inc.	(620,982)

Page 14

See Notes to Financial Statements

Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Shares	Description	Value
COMMON STOCKS SOLD SHORT (Continued)
	Diversified Telecommunication Services – (0.8)%
(23,285)	AT&T, Inc.	$(424,486)
(10,832)	BCE, Inc.	(488,523)
(11,475)	Frontier Communications Parent, Inc. (b)	(268,745)
(7,233)	KT Corp., ADR	(91,931)
(74,574)	Verizon Communications, Inc.	(2,786,830)
		(4,060,515)
	Electrical Equipment – (0.1)%
(30,064)	Ballard Power Systems, Inc. (b)	(170,463)
(13,902)	Bloom Energy Corp., Class A (b)	(260,106)
(8,822)	Enovix Corp. (b)	(166,471)
(5,808)	FREYR Battery SA (b)	(77,305)
		(674,345)
	Electronic Equipment, Instruments & Components – (0.1)%
(6,421)	Knowles Corp. (b)	(88,289)
(6,056)	National Instruments Corp.	(231,218)
(1,962)	PAR Technology Corp. (b)	(56,466)
		(375,973)
	Energy Equipment & Services – (0.8)%
(99,932)	Baker Hughes Co.	(2,764,119)
(1,727)	Nabors Industries Ltd. (b)	(300,550)
(25,754)	Schlumberger Ltd.	(1,339,980)
		(4,404,649)
	Food & Staples Retailing – (0.7)%
(24,413)	Walmart, Inc.	(3,474,702)
	Food Products – (0.4)%
(7,141)	Freshpet, Inc. (b)	(420,962)
(2,677)	Ingredion, Inc.	(238,574)
(21,965)	Mondelez International, Inc., Class A	(1,350,408)
(3,323)	Post Holdings, Inc. (b)	(300,466)
		(2,310,410)
	Health Care Equipment & Supplies – (1.1)%
(26,742)	Baxter International, Inc.	(1,453,428)
(54,266)	Boston Scientific Corp. (b)	(2,339,407)
(1,603)	Cooper (The) Cos., Inc.	(438,244)
(1,116)	Establishment Labs Holdings, Inc. (b)	(62,931)
(3,893)	Integra LifeSciences Holdings Corp. (b)	(195,623)
(1,344)	Stryker Corp.	(308,099)
(9,573)	Zimmer Biomet Holdings, Inc.	(1,085,100)
		(5,882,832)
	Health Care Providers & Services – (0.6)%
(18,482)	agilon health, Inc. (b)	(366,868)
(1,957)	DaVita, Inc. (b)	(142,881)
(3,515)	HCA Healthcare, Inc.	(764,407)
(3,319)	Oak Street Health, Inc. (b)	(67,143)
(2,737)	R1 RCM, Inc. (b)	(48,335)
(10,188)	Signify Health, Inc., Class A (b)	(297,795)
(13,119)	Tenet Healthcare Corp. (b)	(581,959)
(6,972)	Universal Health Services, Inc., Class B	(807,846)
		(3,077,234)

See Notes to Financial Statements

Page 15

Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Shares	Description	Value
COMMON STOCKS SOLD SHORT (Continued)
	Health Care Technology – (0.0)%
(4,540)	Schrodinger, Inc. (b)	$(108,824)
	Hotels, Restaurants & Leisure – (0.4)%
(52,504)	Las Vegas Sands Corp. (b)	(1,995,677)
	Household Durables – (0.1)%
(27,589)	Newell Brands, Inc.	(381,004)
	Household Products – (0.0)%
(3,257)	Reynolds Consumer Products, Inc.	(99,469)
	Industrial Conglomerates – (0.5)%
(5,743)	3M Co.	(722,412)
(27,078)	General Electric Co.	(2,106,939)
		(2,829,351)
	Insurance – (0.8)%
(19,026)	Aflac, Inc.	(1,238,783)
(5,740)	MetLife, Inc.	(420,225)
(11,121)	Principal Financial Group, Inc.	(980,094)
(14,806)	Prudential Financial, Inc.	(1,557,443)
		(4,196,545)
	Interactive Media & Services – (0.1)%
(10,146)	Match Group, Inc. (b)	(438,307)
	Internet & Direct Marketing Retail – (0.3)%
(81,605)	Farfetch Ltd., Class A (b)	(692,010)
(20,215)	Wayfair, Inc., Class A (b)	(766,553)
		(1,458,563)
	IT Services – (1.4)%
(14,234)	Affirm Holdings, Inc. (b)	(285,676)
(1,630)	CSG Systems International, Inc.	(105,412)
(17,691)	DXC Technology Co. (b)	(508,616)
(2,926)	Euronet Worldwide, Inc. (b)	(245,813)
(24,919)	Fidelity National Information Services, Inc.	(2,068,028)
(25,005)	International Business Machines Corp.	(3,457,942)
(21,277)	Kyndryl Holdings, Inc. (b)	(205,749)
(28,961)	Western Union (The) Co.	(391,263)
		(7,268,499)
	Life Sciences Tools & Services – (0.4)%
(46,734)	Avantor, Inc. (b)	(942,625)
(4,303)	IQVIA Holdings, Inc. (b)	(902,210)
(11,519)	NeoGenomics, Inc. (b)	(87,602)
(34,921)	Pacific Biosciences of California, Inc. (b)	(294,733)
		(2,227,170)
	Machinery – (0.4)%
(10,725)	3D Systems Corp. (b)	(94,702)
(7,019)	Flowserve Corp.	(201,305)
(5,621)	Gates Industrial Corp, PLC (b)	(62,674)
(4,605)	Oshkosh Corp.	(405,240)
(16,571)	Stanley Black & Decker, Inc.	(1,300,658)
		(2,064,579)

Page 16

See Notes to Financial Statements

Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Shares	Description	Value
COMMON STOCKS SOLD SHORT (Continued)
	Marine – (0.0)%
(3,137)	Kirby Corp. (b)	$(218,806)
	Media – (0.6)%
(46,158)	Comcast Corp., Class A	(1,465,055)
(37,163)	DISH Network Corp., Class A (b)	(554,100)
(12,417)	Omnicom Group, Inc.	(903,337)
		(2,922,492)
	Metals & Mining – (0.5)%
(2,606)	ATI, Inc. (b)	(77,555)
(20,181)	Eldorado Gold Corp. (b)	(112,812)
(57,018)	Freeport-McMoRan, Inc.	(1,806,900)
(14,032)	Southern Copper Corp.	(659,083)
		(2,656,350)
	Oil, Gas & Consumable Fuels – (0.6)%
(10,816)	Archaea Energy, Inc. (b)	(279,161)
(2,704)	Cameco Corp.	(64,139)
(3,409)	Enviva Inc.	(203,994)
(1,883)	EOG Resources, Inc.	(257,067)
(24,221)	EQT Corp.	(1,013,407)
(9,990)	Euronav NV	(178,122)
(9,558)	Golar LNG Ltd. (b)	(265,903)
(15,699)	TC Energy Corp.	(689,500)
		(2,951,293)
	Personal Products – (0.4)%
(14,428)	Beauty Health (The) Co. (b)	(164,912)
(10,962)	Estee Lauder (The) Cos., Inc., Class A	(2,197,771)
		(2,362,683)
	Professional Services – (0.4)%
(28,849)	Alight, Inc., Class A (b)	(239,158)
(3,541)	Equifax, Inc.	(600,341)
(4,422)	Jacobs Solutions, Inc.	(509,503)
(11,176)	TransUnion	(662,402)
		(2,011,404)
	Real Estate Management & Development – (0.0)%
(13,239)	DigitalBridge Group, Inc.	(169,459)
	Road & Rail – (0.1)%
(14,721)	Hertz Global Holdings, Inc. (b)	(270,867)
(860)	Norfolk Southern Corp.	(196,140)
		(467,007)
	Semiconductors & Semiconductor Equipment – (1.2)%
(10,264)	First Solar, Inc. (b)	(1,494,130)
(9,759)	indie Semiconductor, Inc., Class A (b)	(76,315)
(94,279)	Intel Corp.	(2,680,352)
(13,796)	Teradyne, Inc.	(1,122,305)
(10,926)	Wolfspeed, Inc. (b)	(860,423)
		(6,233,525)
	Software – (1.7)%
(59,589)	BlackBerry Ltd. (b)	(277,685)
(4,458)	Cerence, Inc. (b)	(76,678)

See Notes to Financial Statements

Page 17

Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Shares	Description	Value
COMMON STOCKS SOLD SHORT (Continued)
	Software (Continued)
(11,052)	Ceridian HCM Holding, Inc. (b)	$(731,532)
(19,442)	Confluent, Inc.. Class A (b)	(522,601)
(4,202)	Freshworks, Inc., Class A (b)	(57,105)
(11,251)	Gitlab, Inc., Class A (b)	(545,223)
(3,564)	Informatica, Inc., Class A (b)	(68,999)
(37,912)	Matterport, Inc. (b)	(132,313)
(17,712)	NCR Corp. (b)	(376,557)
(21,651)	Nutanix, Inc., Series A (b)	(593,237)
(39,569)	Oracle Corp.	(3,089,152)
(3,036)	Paycor HCM, Inc. (b)	(92,507)
(6,202)	Pegasystems, Inc.	(230,776)
(15,924)	Qualtrics International, Inc., Class A (b)	(190,610)
(10,220)	Samsara, Inc., Class A (b)	(125,808)
(5,962)	SAP SE, ADR	(572,710)
(27,158)	SentinelOne, Inc., Class A (b)	(620,289)
(1,918)	Tyler Technologies, Inc. (b)	(620,147)
		(8,923,929)
	Specialty Retail – (0.2)%
(2,456)	Burlington Stores, Inc. (b)	(351,110)
(69,748)	Gap (The), Inc.	(786,060)
		(1,137,170)
	Textiles, Apparel & Luxury Goods – (0.3)%
(3,352)	Columbia Sportswear Co.	(249,724)
(10,228)	Skechers U.S.A., Inc., Class A (b)	(352,150)
(28,558)	VF Corp.	(806,763)
		(1,408,637)
	Tobacco – (0.0)%
(1,301)	Universal Corp.	(65,844)
	Trading Companies & Distributors – (0.1)%
(4,549)	Air Lease Corp.	(160,534)
(1,360)	GATX Corp.	(142,406)
		(302,940)
	Wireless Telecommunication Services – (0.0)%
(8,279)	Telephone & Data Systems, Inc.	(140,743)
	Total Common Stocks Sold Short	(117,123,431)
	(Proceeds $128,565,177)
REAL ESTATE INVESTMENT TRUSTS SOLD SHORT – (0.2)%
	Equity Real Estate Investment Trusts – (0.2)%
(12,148)	Douglas Emmett, Inc.	(213,683)
(20,412)	Hudson Pacific Properties, Inc.	(225,348)
(8,398)	JBG SMITH Properties	(165,273)
(15,949)	Vornado Realty Trust	(376,237)
		(980,541)

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Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Portfolio of Investments (Continued)

October 31, 2022

Valuation Inputs

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

ASSETS TABLE
	Total Value at 10/31/2022	Level 1 Quoted Prices	Level 2 Significant Observable Inputs	Level 3 Significant Unobservable Inputs
Common Stocks*	$441,407,711	$441,407,711	$—	$—
Exchange-Traded Funds*	25,890,943	25,890,943	—	—
Master Limited Partnerships*	6,102,878	6,102,878	—	—
Real Estate Investment Trusts*	2,674,705	2,674,705	—	—
Total Investments	476,076,237	476,076,237	—	—
Futures Contracts**	3,102,771	3,102,771	—	—
Total	$ 479,179,008	$ 479,179,008	$—	$—

LIABILITIES TABLE
	Total Value at 10/31/2022	Level 1 Quoted Prices	Level 2 Significant Observable Inputs	Level 3 Significant Unobservable Inputs
Common Stocks Sold Short*	$ (117,123,431)	$ (117,123,431)	$—	$—
Real Estate Investment Trusts Sold Short*	(1,069,777)	(1,069,777)	—	—
Total Investments	(118,193,208)	(118,193,208)	—	—
Futures Contracts**	(879,567)	(879,567)	—	—
Total	$ (119,072,775)	$ (119,072,775)	$—	$—

*	See Portfolio of Investments for industry 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 Statement of Assets and Liabilities.

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Table of Contents

First Trust Long/Short Equity ETF (FTLS)

Financial Highlights

For a share outstanding throughout each period

	Year Ended October 31,
	2022	2021	2020	2019	2018
Net asset value, beginning of period	$ 50.26	$ 41.86	$ 41.67	$ 38.47	$ 37.78
Income from investment operations:
Net investment income (loss)	0.19	(0.10)	0.05	0.39	0.26
Net realized and unrealized gain (loss)	(1.56)	8.63	0.25	3.23	0.67
Total from investment operations	(1.37)	8.53	0.30	3.62	0.93
Distributions paid to shareholders from:
Net investment income	(0.07)	(0.13)	(0.11)	(0.42)	(0.24)
Net asset value, end of period	$48.82	$50.26	$41.86	$41.67	$38.47
Total return (a)	(2.74)%	20.41%	0.74%	9.49%	2.45%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000’s)	$ 524,765	$ 429,755	$ 301,375	$ 245,867	$ 155,803
Ratio of total expenses to average net assets (b)	1.41%	1.36%	1.55%	1.60%	1.59%
Ratio of total expenses to average net assets excluding dividend expense and margin interest expense (b)	0.95%	0.95%	0.95%	0.95%	0.95%
Ratio of net investment income (loss) to average net assets	0.40%	(0.28)%	0.09%	1.03%	0.71%
Portfolio turnover rate (c)	223%	250%	250%	210%	249%

(a)	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.
(b)	The Fund indirectly bears its proportionate share of fees and expenses incurred by the underlying funds in which the Fund invests. This ratio does not include these indirect fees and expenses.
(c)	Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions.

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Table of Contents

Notes to Financial Statements

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022

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 (“SEC”) 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 First Trust Long/Short Equity ETF (the “Fund”), a diversified series of the Trust, which trades under the ticker “FTLS” on the NYSE Arca, Inc. Unlike conventional mutual funds, the Fund issues and redeems shares on a continuous basis, at net asset value (“NAV”), only in large blocks of shares known as “Creation Units.”

The investment objective of the Fund is to seek to provide investors with long-term total return. Under normal conditions, the Fund will expose at least 80% of its net assets (including investment borrowings) to U.S. exchange-listed equity securities and/or U.S. exchange-traded funds (“ETFs”) that provide exposure to U.S. exchange-traded equity securities. The Fund pursues its investment objective by establishing long and short positions in a portfolio of U.S. exchange-listed equity securities and ETFs. The Fund’s portfolio may include U.S. exchange-listed equity securities of non-U.S. issuers, including the securities of non-U.S. issuers traded on U.S. exchanges in the form of depositary receipts. There can be no assurance that the Fund will achieve its investment objective. The Fund may not be appropriate for all investors.

2. Significant Accounting Policies

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

A. Portfolio Valuation

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

The Fund’s investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent readily available market quotations such as last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Fund’s investment advisor, First Trust Advisors L.P. (“First Trust” or the “Advisor”), in accordance with valuation procedures approved by the Trust’s Board of Trustees, and in accordance with provisions of the 1940 Act and rules thereunder. Investments valued by the Advisor’s Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. The Fund’s investments are valued as follows:

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

Securities traded in an over-the-counter market are valued at the mean of their most recent bid and asked price, if available, and otherwise at their last trade price.

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 valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price.

Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Advisor’s Pricing Committee at fair value. These securities generally include, but are not limited to, restricted securities (securities which may

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Notes to Financial Statements (Continued)

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022

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

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

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

•	Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
•	Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following:

o	Quoted prices for similar investments in active markets.
o	Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly.
o	Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates).
o	Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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

The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund’s investments as of October 31, 2022, is included with the Fund’s Portfolio of Investments.

In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. The rule permits fund boards to designate a fund’s investment adviser to perform fair value determinations, subject to board oversight and certain other conditions. The rule also defines when market quotations are “readily available” for purposes of the 1940 Act and requires a fund to fair value a portfolio investment when a market quotation is not readily available. The SEC also adopted new Rule 31a-4 under the 1940 Act, which sets forth recordkeeping requirements associated with fair value determinations. The compliance date for Rule 2a-5 and Rule 31a-4 was September 8, 2022.

Effective September 8, 2022 and pursuant to the requirements of Rule 2a-5, the Trust’s Board of Trustees designated the Advisor as its valuation designee to perform fair value determinations and approved new Advisor Valuation Procedures for the Trust.

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Notes to Financial Statements (Continued)

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022

B. Securities Transactions and Investment Income

Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded daily on the accrual basis.

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

Distributions received from the Fund’s investments in MLPs generally are comprised of return of capital and investment income. The Fund records estimated return of capital and investment income based on historical information available from each MLP. These estimates may subsequently be revised based on information received from the MLPs after their tax reporting periods are concluded.

C. Futures Contracts

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

Upon entering into a futures contract, the Fund must deposit funds, called margin, with its custodian in the name of the clearing broker equal to a specified percentage of the current value of the contract. Open futures 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 Statement 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 Statement of Assets and Liabilities.

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

Restricted cash segregated as collateral for futures contracts in the amount of $4,573,500 is shown as “Cash held at broker as collateral for open futures contracts” on the Statement of Assets and Liabilities.

D. Short Sales

Short sales are utilized for investment and risk management purposes and are transactions in which securities or other instruments (such as options, forwards, futures or other derivative contracts) are sold by the Fund, but are not currently owned in the Fund’s portfolio. When the Fund engages in a short sale, the Fund must borrow the security sold short and deliver the security to the counterparty. Short selling allows the Fund to profit from a decline in a market price to the extent such decline exceeds the transaction costs and the costs of borrowing the securities. The Fund will pay a fee or premium to borrow the securities sold short and is obligated to repay the lenders of the securities. Any dividends or interest that accrues on the securities during the period of the loan are due to the lenders. A gain, limited to the price at which the security was sold short, or a loss, unlimited in size, will be recognized upon the termination of the short sale; which is affected by the Fund purchasing the security sold short and delivering the security to the lender. Any such gain or loss may be offset, completely or in part, by the change in the value of the long portion of the Fund’s portfolio. The Fund is subject to the risk that it may be unable to reacquire a security to terminate a short position except at a price substantially in excess of the last quoted price. Also, there is the risk that the counterparty to a short sale may fail to honor its contractual terms, causing a loss to the Fund.

The Fund has established an account with Pershing, LLC for the purpose of borrowing securities that the Fund intends to sell short. The Fund is charged interest on debit margin balances at a rate equal to the Overnight Bank Funding Rate (“OBFR”) plus 40 basis points and earns interest on credit margin balances at a rate equal to the OBFR less 30 basis points. With regard to securities held short, the Fund is credited a rebate equal to the market value of its short positions at a rate equal to the OBFR less 25 basis points. This rebate rate applies to easy to borrow securities. Securities that are hard to borrow may earn a rebate that is less than the foregoing or

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Notes to Financial Statements (Continued)

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022

may be subject to a premium charge on a security by security basis. The different rebate rate is determined at the time of a short sale request. For the fiscal year ended October 31, 2022, the Fund had margin interest income of $183,684 and margin interest expense of $165,971, as shown on the Statement of Operations. Restricted cash in the amount of $120,079,280, as shown on the Statement of Assets and Liabilities, is associated with collateral at the broker as of October 31, 2022.

E. Dividends and Distributions to Shareholders

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

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

The tax character of distributions paid by the Fund during the fiscal years ended October 31, 2022 and 2021, was as follows:

Distributions paid from:	2022	2021
Ordinary income	$701,300	$895,180
Capital gains	—	—
Return of capital	—	—

As of October 31, 2022, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$588,816
Accumulated capital and other gain (loss)	(60,966,459)
Net unrealized appreciation (depreciation)	(7,025,942)

F. Income Taxes

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

The Fund is subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ended 2019, 2020, 2021, and 2022 remain open to federal and state audit. As of October 31, 2022, management has evaluated the application of these standards to the Fund and has determined that no provision for income tax is required in the Fund’s financial statements for uncertain tax positions.

The Fund intends to utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains. The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At October 31, 2022, for federal income tax purposes, the Fund had $60,966,459 of non-expiring capital loss carryforwards available, to the extent provided by regulations, to offset future capital gains.

In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statement of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Fund

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Notes to Financial Statements (Continued)

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022

and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended October 31, 2022, the adjustments for the Fund were as follows:

Accumulated Net Investment Income (Loss)		Accumulated Net Realized Gain (Loss) on Investments		Paid-in Capital
$(519,748)		$(3,480,328)		$4,000,076

As of October 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)
$367,132,175		$36,682,822		$(43,708,764)		$(7,025,942)

G. Expenses

Expenses, other than the investment advisory fee, dividend and interest expenses on investments sold short and other excluded expenses, are paid by the Advisor (See Note 3).

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

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

Pursuant to the Investment Management Agreement, First Trust manages the investment of the Fund’s assets and is responsible for the Fund’s expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services, but excluding fee payments under the Investment Management Agreement, interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, acquired fund fees and expenses, dividend expenses on investments sold short, and extraordinary expenses. The Fund has agreed to pay First Trust an annual unitary management fee equal to 0.95% of its average daily net assets. In addition, the Fund incurs acquired fund fees and expenses. The total of the unitary management fee and acquired fund fees and expenses represents the Fund’s total annual operating expenses. First Trust also provides fund reporting services to the Fund for a flat annual fee in the amount of $9,250, which is covered under the annual unitary management fee.

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 Fund. As custodian, BBH is responsible for custody of the Fund’s assets. As fund accountant and administrator, BBH is responsible for maintaining the books and records of the Fund’s securities and cash. As transfer agent, BBH is responsible for maintaining shareholder records for the Fund.

Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a target outcome fund or an index fund.

Additionally, the Lead Independent Trustee and the Chairs of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairs rotate every three years. The officers and “Interested” Trustee receive no compensation from the Trust for acting in such capacities.

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Notes to Financial Statements (Continued)

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022

4. Purchases and Sales of Securities

For the fiscal year ended October 31, 2022, the cost of purchases and proceeds from sales of investments, excluding short term investments, investments sold short and in-kind transactions, were $839,891,175 and $826,019,507, respectively. The cost of purchases to cover short sales and the proceeds from short sales were $426,781,411 and $442,826,078, respectively.

For the fiscal year ended October 31, 2022, the cost of in-kind purchases and proceeds from in-kind sales were $167,132,994 and $67,822,293, respectively. The cost of in-kind purchases to cover short sales and the proceeds from in-kind short sales were $0 and $9,273, respectively.

5. Derivative Transactions

The following table presents the type of derivatives held by the Fund at October 31, 2022, the primary underlying risk exposure and the location of these instruments as presented on the Statement of Assets and Liabilities.

		Asset Derivatives		Liability Derivatives
Derivative Instrument	Risk Exposure	Statement of Assets and Liabilities Location	Value	Statement of Assets and Liabilities Location	Value
Futures contracts	Equity Risk	Unrealized appreciation on futures contracts*	$ 3,102,771	Unrealized depreciation on futures contracts*	$ 879,567

*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 Statement 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 fiscal year ended October 31, 2022, on derivative instruments, as well as the primary underlying risk exposure associated with each instrument.

Statement of Operations Location
Equity Risk Exposure
Net realized gain (loss) on futures contracts	$6,018,732
Net change in unrealized appreciation (depreciation) on futures contracts	2,005,339

During the fiscal year ended October 31, 2022, the notional value of futures contracts opened and closed were $278,515,800 and $211,049,461, respectively.

The Fund does not have the right to offset financial assets and liabilities related to futures contracts on the Statement of Assets and Liabilities.

6. Creations, Redemptions and Transaction Fees

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

The Fund imposes fees in connection with the purchase of Creation Units. These fees may vary based upon various fact-based circumstances, including, but not limited to, the composition of the securities included in the Creation Unit or the countries in which the transactions are settled. The price for each Creation Unit will equal the daily NAV per share of the Fund times the number of shares in a Creation Unit, plus the fees described above and, if applicable, any operational processing and brokerage costs, transfer fees,

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Notes to Financial Statements (Continued)

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022

stamp taxes and part or all of the spread between the expected bid and offer side of the market related to the securities comprising the creation basket.

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

7. Distribution Plan

The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to pay an amount up to 0.25% of its average daily net assets each year to reimburse First Trust Portfolios L.P. (“FTP”), the distributor of the Fund, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or 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 Fund, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before February 28, 2024.

8. Indemnification

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

9. Subsequent Events

Management has evaluated the impact of all subsequent events to the Fund through the date the financial statements were issued, and has determined that there was the following subsequent event:

At a meeting on October 24, 2022, the Board of Trustees approved a breakpoint pricing arrangement for each of the series of the Trust, including the Fund. Pursuant to this arrangement, which is effective as of November 1, 2022, the management fee the Fund pays to First Trust, as investment manager, will be discounted as the Fund’s net assets reach certain predefined levels.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Trustees of First Trust Exchange-Traded Fund III:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of First Trust Long/Short Equity ETF (the “Fund”), a series of the First Trust Exchange-Traded Fund III, including the portfolio of investments, as of October 31, 2022, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2022, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2022, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Chicago, Illinois

December 22, 2022

We have served as the auditor of one or more First Trust investment companies since 2001.

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Additional Information

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022 (Unaudited)

Proxy Voting Policies and Procedures

A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund’s website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.

Portfolio Holdings

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

Federal Tax Information

For the taxable year ended October 31, 2022, the following percentage of income dividends paid by the Fund qualifies for the dividends received deduction available to corporations and is hereby designated as qualified dividend income:

Dividends Received Deduction		Qualified Dividend Income
100.00%		100.00%

A portion of the ordinary dividends (including short-term capital gains) that the Fund paid to shareholders during the taxable year ended October 31, 2022, may be eligible for the Qualified Business Income (QBI) Deduction under the Internal Revenue Code of 1986, as amended, section 199A for the aggregate dividends the Fund received from the underlying Real Estate Investment Trusts (REITs) it invests in.

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

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October 31, 2022 (Unaudited)

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 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.

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October 31, 2022 (Unaudited)

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.

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

Market Risk. Market risk is the risk that a particular security, or shares of a fund in general, may fall in value. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public health issues, recessions, or other events could have a significant negative impact on a fund and its investments. Such events may affect certain geographic regions, countries, sectors and industries more significantly than others. In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain fund investments as well as fund performance. The COVID-19 global pandemic and the ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty in global financial markets. While the U.S. has resumed “reasonably” normal business activity, many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease. These events also adversely affect the prices and liquidity of a fund’s portfolio securities or other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact on the value of a fund’s shares and result in increased market volatility. During any such events, a fund’s shares may trade at increased premiums or discounts to their net asset value and the bid/ask spread on a fund’s shares may widen.

Non-U.S. Securities Risk. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; capital controls; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; the imposition of sanctions by foreign governments; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries.

Operational Risk. Each fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing and communication errors, errors of a fund’s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. Each fund relies on third-parties for a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect a fund’s ability to meet its investment objective. Although the funds and the funds’ investment advisor seek to reduce these operational risks through controls and procedures, there is no way to completely protect against such risks.

Passive Investment Risk. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets.

Preferred Securities Risk. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company’s capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally, holders of preferred securities have no voting rights

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First Trust Long/Short Equity ETF (FTLS)

October 31, 2022 (Unaudited)

with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances, an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities, including common stock.

Valuation Risk. The valuation of certain securities may carry more risk than that of common stock. Uncertainties in the conditions of the financial markets, unreliable reference data, lack of transparency and inconsistency of valuation models and processes may lead to inaccurate asset pricing. A fund may hold investments in sizes smaller than institutionally sized round lot positions (sometimes referred to as odd lots). However, third-party pricing services generally provide evaluations on the basis of institutionally-sized round lots. If a fund sells certain of its investments in an odd lot transaction, the sale price may be less than the value at which such securities have been held by the fund. Odd lots often trade at lower prices than institutional round lots. There is no assurance that the fund will be able to sell a portfolio security at the price established by the pricing service, which could result in a loss to the fund.

Advisory Agreement

Board Considerations Regarding Approval of Continuation of Investment Management Agreement

The Board of Trustees of First Trust Exchange-Traded Fund III (the “Trust”), including the Independent Trustees, unanimously approved the continuation of the Investment Management Agreement (the “Agreement”) with First Trust Advisors L.P. (the “Advisor”) on behalf of the First Trust Long/Short Equity ETF (the “Fund”). The Board approved the continuation of the Agreement for a one-year period ending June 30, 2023 at a meeting held on June 12–13, 2022. The Board determined that the continuation of the Agreement is in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment.

To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (the “1940 Act”), as well as under the general principles of state law, in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. At meetings held on April 18, 2022 and June 12–13, 2022, the Board, including the Independent Trustees, reviewed materials provided by the Advisor responding to requests for information from counsel to the Independent Trustees, submitted on behalf of the Independent Trustees, that, among other things, outlined: the services provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the unitary fee rate payable by the Fund as compared to fees charged to a peer group of funds (the “Expense Group”) and a broad peer universe of funds (the “Expense Universe”), each assembled by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent source, and as compared to fees charged to other clients of the Advisor, including other exchange-traded funds (“ETFs”) managed by the Advisor; the expense ratio of the Fund as compared to expense ratios of the funds in the Fund’s Expense Group and Expense Universe; performance information for the Fund, including comparisons of the Fund’s performance to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the “Performance Universe”), each assembled by Broadridge; the nature of expenses incurred in providing services to the Fund and the potential for the Advisor to realize economies of scale, if any; profitability and other financial data for the Advisor; any indirect benefits to the Advisor and its affiliate, First Trust Portfolios L.P. (“FTP”); and information on the Advisor’s compliance program. The Board reviewed initial materials with the Advisor at the meeting held on April 18, 2022, prior to which the Independent Trustees and their counsel met separately to discuss the information provided by the Advisor. Following the April meeting, counsel to the Independent Trustees, on behalf of the Independent Trustees, requested certain clarifications and supplements to the materials provided, and the information provided in response to those requests was considered at an executive session of the Independent Trustees and their counsel held prior to the June 12–13, 2022 meeting, as well as at the June meeting. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor continues to be a reasonable business arrangement from the Fund’s perspective. The Board determined that, given the totality of the information provided with respect to the Agreement, the Board had received sufficient information to renew the Agreement. The Board considered that shareholders chose to invest or remain invested in the Fund knowing that the Advisor manages the Fund and knowing the Fund’s unitary fee.

In reviewing the Agreement, the Board considered the nature, extent and quality of the services provided by the Advisor under the Agreement. The Board considered that the Advisor is responsible for the overall management and administration of the Trust and the Fund and reviewed all of the services provided by the Advisor to the Fund, as well as the background and experience of the persons responsible for such services. The Board noted that the Fund is an actively-managed ETF and noted that the Advisor’s Alternatives Investment Team is responsible for the day-to-day management of the Fund’s investments. The Board considered the background and experience of the members of the Alternatives Investment Team and noted the Board’s prior meetings with members of the Team. The Board considered the Advisor’s statement that it applies the same oversight model internally with its Alternatives Investment Team as it uses for overseeing external sub-advisors, including portfolio risk monitoring and performance review. In reviewing the services

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First Trust Long/Short Equity ETF (FTLS)

October 31, 2022 (Unaudited)

provided, the Board noted the compliance program that had been developed by the Advisor and considered that it includes a robust program for monitoring the Advisor’s and the Fund’s compliance with the 1940 Act, as well as the Fund’s compliance with its investment objective, policies and restrictions. The Board also considered a report from the Advisor with respect to its risk management functions related to the operation of the Fund. Finally, as part of the Board’s consideration of the Advisor’s services, the Advisor, in its written materials and at the April 18, 2022 meeting, described to the Board the scope of its ongoing investment in additional personnel and infrastructure to maintain and improve the quality of services provided to the Fund and the other funds in the First Trust Fund Complex. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Trust and the Fund by the Advisor under the Agreement have been and are expected to remain satisfactory and that the Advisor has managed the Fund consistent with its investment objective, policies and restrictions.

The Board considered the unitary fee rate payable by the Fund under the Agreement for the services provided. The Board considered that as part of the unitary fee the Advisor is responsible for the Fund’s expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees, if any, but excluding the fee payment under the Agreement and interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses, if any. The Board received and reviewed information showing the fee rates and expense ratios of the peer funds in the Expense Group, as well as advisory and unitary fee rates charged by the Advisor to other fund (including ETFs) and non-fund clients, as applicable. Because the Fund pays a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was below the median total (net) expense ratio of the peer funds in the Expense Group. With respect to the Expense Group, the Board, at the April 18, 2022 meeting, discussed with Broadridge its methodology for assembling peer groups and discussed with the Advisor limitations in creating peer groups for actively-managed ETFs, including that the Expense Group contained both actively-managed ETFs and open-end mutual funds, and different business models that may affect the pricing of services among ETF sponsors. The Board took these limitations and differences into account in considering the peer data. With respect to fees charged to other non-ETF clients, the Board considered differences between the Fund and other non-ETF clients that limited their comparability. In considering the unitary fee rate overall, the Board also considered the Advisor’s statement that it seeks to meet investor needs through innovative and value-added investment solutions and the Advisor’s demonstrated long-term commitment to the Fund and the other funds in the First Trust Fund Complex.

The Board considered performance information for the Fund. The Board noted the process it has established for monitoring the Fund’s performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting from the Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund’s performance. The Board received and reviewed information comparing the Fund’s performance for periods ended December 31, 2021 to the performance of the funds in the Performance Universe and to that of a benchmark index. Based on the information provided, the Board noted that the Fund outperformed the Performance Universe median and underperformed the benchmark index for the one-, three- and five-year periods ended December 31, 2021.

On the basis of all the information provided on the unitary fee and performance of the Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for the Fund continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor to the Fund under the Agreement.

The Board considered information and discussed with the Advisor whether there were any economies of scale in connection with providing advisory services to the Fund and noted the Advisor’s statement that it believes that its expenses relating to providing advisory services to the Fund will likely increase during the next twelve months as the Advisor continues to build infrastructure and add new staff. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board considered the revenues and allocated costs (including the allocation methodology) of the Advisor in serving as investment advisor to the Fund for the twelve months ended December 31, 2021 and the estimated profitability level for the Fund calculated by the Advisor based on such data, as well as complex-wide and product-line profitability data, for the same period. The Board noted the inherent limitations in the profitability analysis and concluded that, based on the information provided, the Advisor’s profitability level for the Fund was not unreasonable. In addition, the Board considered indirect benefits described by the Advisor that may be realized from its relationship with the Fund. The Board considered that the Advisor had identified as an indirect benefit to the Advisor and FTP their exposure to investors and brokers who, absent their exposure to the Fund, may have had no dealings with the Advisor or FTP, and noted that the Advisor does not utilize soft dollars in connection with the Fund. The Board also considered the Advisor’s compensation for fund reporting services provided to the Fund pursuant to a separate Fund Reporting Services Agreement, which is paid from the unitary fee. The Board concluded that the character and amount of potential indirect benefits to the Advisor were not unreasonable.

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First Trust Long/Short Equity ETF (FTLS)

October 31, 2022 (Unaudited)

Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement continue to be fair and reasonable and that the continuation of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board’s analysis.

Board Considerations Regarding Approval of Amendment to the Investment Management Agreement

The Board of Trustees of First Trust Exchange-Traded Fund III (the “Trust”), including the Independent Trustees, unanimously approved the amendment (the “Amendment”) of the Investment Management Agreement (the “Agreement”) with First Trust Advisors L.P. (the “Advisor”) on behalf of the First Trust Long/Short Equity ETF (the “Fund”).

The Board approved the Amendment at a meeting held on October 24, 2022. As part of the review process, the Board reviewed information and had preliminary discussions with the Advisor regarding the proposed Amendment at meetings held on April 18, 2022, June 12–13, 2022 and September 18–19, 2022. Following those preliminary discussions, the Board requested and received information from the Advisor regarding the proposed Amendment, and that information was considered at an executive session of the Independent Trustees and their counsel held prior to the October 24, 2022 meeting, as well as at the October meeting.

In reviewing the Amendment, the Board considered that the purpose of the Amendment is to modify the unitary fee rate for the Fund under the Agreement by introducing a breakpoint schedule pursuant to which the unitary fee rate paid by the Fund to the Advisor will be reduced as assets of the Fund meet certain thresholds. The Board noted the Advisor’s representations that the quality and quantity of the services provided to the Fund by the Advisor under the Agreement will not be reduced or modified as a result of the Amendment, and that the obligations of the Advisor under the Agreement will remain the same in all respects.

The Board noted that it, including the Independent Trustees, last approved the continuation of the Agreement for a one-year period ending June 30, 2023 at a meeting held on June 12–13, 2022. The Board noted that in connection with such approval it had determined, based upon the information provided, that the terms of the Agreement were fair and reasonable and that the continuation of the Agreement was in the best interests of the Fund in light of the nature, extent and quality of the services provided and such other matters as the Board considered to be relevant in the exercise of its business judgment.

Based on all of the information considered, the Board, including the Independent Trustees, unanimously determined that the terms of the Amendment are fair and reasonable and that the Amendment is in the best interests of the Fund.

Remuneration

First Trust Advisors L.P. (“First Trust”) is authorised and regulated by the U.S. Securities and Exchange Commission and is entitled to market shares of certain funds it manages, including First Trust Long/Short Equity ETF (the “Fund”), in certain member states in the European Economic Area in accordance with the cooperation arrangements in Article 42 of the Alternative Investment Fund Managers Directive (the “Directive”). First Trust is required under the Directive to make disclosures in respect of remuneration. The following disclosures are made in line with First Trust’s interpretation of currently available regulatory guidance on remuneration disclosures.

During the year ended December 31, 2021, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Fund is $196,587. This figure is comprised of $7,565 paid (or to be paid) in fixed compensation and $189,022 paid (or to be paid) in variable compensation. There were a total of 24 beneficiaries of the remuneration described above. Those amounts include $100,954 paid (or to be paid) to senior management of First Trust Advisors L.P. and $95,633 paid (or to be paid) to other employees whose professional activities have a material impact on the risk profiles of First Trust Advisors L.P. or the Fund (collectively, “Code Staff”).

Code Staff included in the aggregated figures disclosed above are rewarded in line with First Trust’s remuneration policy (the “Remuneration Policy”) which is determined and implemented by First Trust’s senior management. The Remuneration Policy reflects First Trust’s ethos of good governance and encapsulates the following principal objectives:

i. to provide a clear link between remuneration and performance of First Trust and to avoid rewarding for failure;

ii. to promote sound and effective risk management consistent with the risk profiles of the funds managed by First Trust; and

iii. to remunerate staff in line with the business strategy, objectives, values and interests of First Trust and the funds managed by First Trust in a manner that avoids conflicts of interest.

First Trust assesses various risk factors which it is exposed to when considering and implementing remuneration for Code Staff and considers whether any potential award to such person(s) would give rise to a conflict of interest. First Trust does not reward failure, or consider the taking of risk or failure to take risk in its remuneration of Code Staff.

Page 38

Table of Contents

Board of Trustees and Officers

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022 (Unaudited)

The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187.

The Trust’s statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891.

Name, Year of Birth and Position with the Trust	Term of Office and Year First Elected or Appointed	Principal Occupations During Past 5 Years	Number of Portfolios in the First Trust Fund Complex Overseen by Trustee	Other Trusteeships or Directorships Held by Trustee During Past 5 Years
INDEPENDENT TRUSTEES
Richard E. Erickson, Trustee (1951)	• Indefinite Term • Since Inception	Physician, Edward-Elmhurst Medical Group; Physician and Officer, Wheaton Orthopedics (1990 to 2021)	223	None
Thomas R. Kadlec, Trustee (1957)	• Indefinite Term • Since Inception	Retired; President, ADM Investor Services, Inc. (Futures Commission Merchant) (2010 to July 2022)	223	Director, National Futures Association and ADMIS Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association
Denise M. Keefe, Trustee (1964)	• Indefinite Term • Since 2021	Executive Vice President, Advocate Aurora Health and President, Advocate Aurora Continuing Health Division (Integrated Healthcare System)	223	Director and Board Chair of Advocate Home Health Services, Advocate Home Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director and Board Chair of RML Long Term Acute Care Hospitals; and Director of Senior Helpers (since 2021)
Robert F. Keith, Trustee (1956)	• Indefinite Term • Since Inception	President, Hibs Enterprises (Financial and Management Consulting)	223	Formerly, Director of Trust Company of Illinois
Niel B. Nielson, Trustee (1954)	• Indefinite Term • Since Inception	Senior Advisor (2018 to Present), Managing Director and Chief Operating Officer (2015 to 2018), Pelita Harapan Educational Foundation (Educational Products and Services)	223	None
INTERESTED TRUSTEE
James A. Bowen⁽¹⁾, Trustee and Chairman of the Board (1955)	• Indefinite Term • Since Inception	Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor)	223	None

⁽¹⁾	Mr. Bowen is deemed an “interested person” of the Trust due to his position as CEO of First Trust Advisors L.P., investment advisor of the Trust.

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Table of Contents

Board of Trustees and Officers (Continued)

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022 (Unaudited)

Name and Year of Birth	Position and Offices with Trust	Term of Office and Length of Service	Principal Occupations During Past 5 Years
OFFICERS⁽²⁾
James M. Dykas (1966)	President and Chief Executive Officer	• Indefinite Term • Since 2016	Managing Director and Chief Financial Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor)
Donald P. Swade (1972)	Treasurer, Chief Financial Officer and Chief Accounting Officer	• Indefinite Term • Since 2016	Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P.
W. Scott Jardine (1960)	Secretary and Chief Legal Officer	• Indefinite Term • Since Inception	General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC
Daniel J. Lindquist (1970)	Vice President	• Indefinite Term • Since Inception	Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P.
Kristi A. Maher (1966)	Chief Compliance Officer and Assistant Secretary	• Indefinite Term • Since Inception	Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.

Roger F. Testin (1966)	Vice President	• Indefinite Term • Since Inception	Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P.
Stan Ueland (1970)	Vice President	• Indefinite Term • Since Inception	Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P.

⁽²⁾	The term “officer” means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function.

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Table of Contents

First Trust Long/Short Equity ETF (FTLS)

October 31, 2022 (Unaudited)

First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information.

Sources of Information

We collect nonpublic personal information about you from the following sources:

•	Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms;
•	Information about your transactions with us, our affiliates or others;
•	Information we receive from your inquiries by mail, e-mail or telephone; and
•	Information we collect on our website through the use of “cookies.” For example, we may identify the pages on our website that your browser requests or visits.

Information Collected

The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information.

Disclosure of Information

We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons:

•

In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers.

•

We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud).

In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust.

Use of Website Analytics

We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust’s website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust’s website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis.

Confidentiality and Security

With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information.

Policy Updates and Inquiries

As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors).

March 2022

Page 42

Shares	Description	Value
REAL ESTATE INVESTMENT TRUSTS SOLD SHORT (Continued)
	Mortgage Real Estate Investment Trusts – (0.0)%
(7,925)	Apollo Commercial Real Estate Finance, Inc.	$(89,236)
	Total Real Estate Investment Trusts Sold Short	(1,069,777)
	(Proceeds $1,377,239)
	Total Investments Sold Short – (22.5)%	(118,193,208)
	(Proceeds $129,942,416)
	Net Other Assets and Liabilities – 31.8%	166,881,773
	Net Assets – 100.0%	$524,764,802

Futures Contracts	Position	Number of Contracts	Expiration Date	Notional Value	Unrealized Appreciation (Depreciation)/ Value
NASDAQ 100 E-mini Futures	Short	163	Dec 2022	$ (37,318,035)	$3,102,771
Russell 2000 E-mini Futures	Short	387	Dec 2022	(35,855,550)	(879,567)
				$(73,173,585)	$2,223,204

ASSETS:
Investments, at value (Cost $492,994,178)	$ 476,076,237
Cash	41,574,516
Cash held at broker as collateral for open futures contracts	4,573,500
Restricted Cash	120,079,280
Receivables:
Fund shares sold	2,440,345
Variation margin	428,495
Dividends	293,109
Margin interest rebate	115,137
Miscellaneous	8,931
Dividend reclaims	7,353
Total Assets	645,596,903
LIABILITIES:
Investments sold short, at value (proceeds $129,942,416)	118,193,208
Payables:
Investment securities purchased	2,214,598
Investment advisory fees	404,800
Dividends on investments sold short	19,495
Total Liabilities	120,832,101
NET ASSETS	$524,764,802
NET ASSETS consist of:
Paid-in capital	$ 592,060,887
Par value	107,500
Accumulated distributable earnings (loss)	(67,403,585)
NET ASSETS	$524,764,802
NET ASSET VALUE, per share	$48.82
Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)	10,750,002

INVESTMENT INCOME:
Dividends		$ 7,513,003
Margin interest rebate		951,716
Margin interest income		183,684
Interest		128,804
Foreign withholding tax		(81,721)
Other		11
Total investment income		8,695,497
EXPENSES:
Investment advisory fees		4,557,183
Dividend expense on investments sold short		2,034,162
Margin interest expense		165,971
Total expenses		6,757,316
NET INVESTMENT INCOME (LOSS)		1,938,181
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments		(9,130,945)
In-kind redemptions		5,221,770
Futures contracts		6,018,732
Investments sold short		17,346,840
Net realized gain (loss)		19,456,397
Net change in unrealized appreciation (depreciation) on:
Investments		(54,054,025)
Futures contracts		2,005,339
Investments sold short		15,588,771
Net change in unrealized appreciation (depreciation)		(36,459,915)
NET REALIZED AND UNREALIZED GAIN (LOSS)		(17,003,518)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		$(15,065,337)

	Year Ended 10/31/2022	Year Ended 10/31/2021
OPERATIONS:
Net investment income (loss)	$ 1,938,181	$ (1,003,242)
Net realized gain (loss)	19,456,397	40,742,569
Net change in unrealized appreciation (depreciation)	(36,459,915)	19,551,117
Net increase (decrease) in net assets resulting from operations	(15,065,337)	59,290,444
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations	(701,300)	(895,180)
SHAREHOLDER TRANSACTIONS:
Proceeds from shares sold	184,437,643	547,568,213
Cost of shares redeemed	(73,660,960)	(477,583,820)
Net increase (decrease) in net assets resulting from shareholder transactions	110,776,683	69,984,393
Total increase (decrease) in net assets	95,010,046	128,379,657
NET ASSETS:
Beginning of period	429,754,756	301,375,099
End of period	$524,764,802	$429,754,756
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period	8,550,002	7,200,002
Shares sold	3,700,000	12,000,000
Shares redeemed	(1,500,000)	(10,650,000)
Shares outstanding, end of period	10,750,002	8,550,002

(a)	This security or a portion of this security is segregated as collateral for investments sold short.
(b)	Non-income producing security.
(c)	This security is taxed as a “C” corporation for federal income tax purposes.