Caution Regarding Forward-Looking Statements

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

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

Performance and Risk Disclosure

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

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

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

How to Read This Report

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

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

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

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Shareholder Letter

First Trust Exchange-Traded Fund III

Annual Letter from the Chairman and CEO

July 31, 2022

Dear Shareholders,

First Trust is pleased to provide you with the annual report for the Managed Volatility Funds of First Trust Exchange-Traded Fund III (the “Funds”), which contains detailed information about the Funds for the 12-month period ended July 31, 2022.

When it comes to investing one’s capital, it is natural to want to find some analyst, economist, or other pundit who claims to know exactly where the securities markets are headed at any given time. You can find them if you search hard enough, but watch your step. Relying on someone else’s crystal ball predictions, even if they have been fortunate enough to have made a celebrated market call or two in the past, is a fool’s errand, in my opinion. It is tough to reproduce such success. I am, as I have been for my entire career in the financial services industry, an advocate for individual investors seeking out professional assistance to help them meet their goals. If anything, the endless amounts of information flowing through the financial media via the internet and cable channels these days is likely making things more confusing for the average investor looking to get ahead. While some individuals may be adept at sifting through the noise to find those timely nuggets of information that can potentially move the markets, most are not, and one’s financial future is too important to gamble on meme stocks and black swans, in my opinion.

Having said all that, for those investors who do want to steer their own ship, there are now a plethora of packaged products available to meet almost any need or strategy, such as mutual funds, unit investment trusts and exchange-traded funds. With respect to equities, investors can choose from portfolios featuring style investing (growth and value), sectors, subsectors (i.e., Semiconductors are a subsector of the Technology sector), long/short strategies, dividend strategies and many more. There are products out there for both bullish and bearish investors. Again, for those individuals that are not savvy when it comes to investing, know that financial representatives have more of these, and other tools, at their disposal than ever before.

The markets have moved up and down in dramatic fashion in 2022. The stock market, as measured by the S&P 500^® Index, declined in price by 20.80% from the close on March 23, 2022 through June 16, 2022, only to reverse course and rise by 17.41% from the close on June 16, 2022 through August 16, 2022, according to data from Bloomberg. So much for the adage “the trend is your friend.” The action in the bond market has been just as frantic. In the U.S. Treasury market, the yield on the 10-Year Treasury Note (“T-Note”) rose 114 basis points (“bps”) from the close on March 31, 2022 through June 14, 2022, only to reverse course and drop by 90 bps from the close on June 14, 2022 through August 1, 2022, according to data from Bloomberg. Suffice it to say that yield swings of this magnitude are not all that common. What is driving these divergent trading patterns? Robust inflation. The Consumer Price Index stood at 8.5% year-over-year in July 2022. A level not seen since the early 1980s. In the hopes of reducing it, the Federal Reserve (the “Fed”) is in the process of hiking interest rates and, in September, is expected to reduce the size of its balance sheet to the tune of $95 billion per month. The concern in the markets is whether or not the Fed’s tightening of monetary policy will push the U.S. economy into a serious recession. Some economists and others in the financial media believe the U.S. is already in a recession. We expect this battle (fight inflation at the expense of economic growth) to continue to play out over the coming months. Keep an eye on the 10-Year T-Note. If the yield rises moving forward, expect the stock and bond markets to struggle and vice versa. If you have not already, I encourage you to forge an investment plan and stay the course!

Thank you for giving First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Funds 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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Fund Performance Overview (Unaudited)

First Trust Horizon Managed Volatility Domestic ETF (HUSV)

The investment objective of First Trust Horizon Managed Volatility Domestic ETF (the “Fund”) is to provide capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in common stocks of domestic companies listed and traded on U.S. national securities exchanges that Horizon Investments, LLC (“Horizon” or the “Sub-Advisor”) believes exhibit low future expected volatility. The goal of this strategy is to capture upside price movements in rising markets and reduce downside risk when markets decline. To implement this strategy, the Sub-Advisor employs volatility forecasting models to forecast future expected volatility. The strategy is largely quantitative and rules-based, but also includes multiple parameters over which the Sub-Advisor may exercise discretion (including, but not limited to, the number of holdings and the weightings of particular holdings) in connection with its active management of the Fund. Shares of the Fund are listed and trade on the NYSE Arca, Inc. under the ticker symbol “HUSV.” The first day of secondary market trading in shares of the Fund was August 25, 2016.

Performance
		Average Annual Total Returns		Cumulative Total Returns
	1 Year Ended 7/31/22	5 Years Ended 7/31/22	Inception (8/24/16) to 7/31/22	5 Years Ended 7/31/22	Inception (8/24/16) to 7/31/22
Fund Performance
NAV	1.82%	10.11%	10.46%	61.88%	80.51%
Market Price	1.82%	10.09%	10.46%	61.73%	80.51%
Index Performance
S&P 500^® Index	-4.64%	12.83%	13.46%	82.85%	111.56%

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

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Fund Performance Overview (Unaudited) (Continued)

First Trust Horizon Managed Volatility Domestic ETF (HUSV) (Continued)

Sector Allocation	% of Total Investments
Consumer Staples	16.4%
Information Technology	15.1
Utilities	15.1
Health Care	13.9
Industrials	12.4
Financials	11.7
Real Estate	5.4
Consumer Discretionary	4.8
Materials	2.8
Communication Services	1.4
Energy	1.0
Total	100.0%

Top Ten Holdings	% of Total Investments
Jack Henry & Associates, Inc.	2.9%
Automatic Data Processing, Inc.	2.9
McDonald’s Corp.	2.7
PepsiCo, Inc.	2.5
Teledyne Technologies, Inc.	2.5
Hershey (The) Co.	2.5
International Business Machines Corp.	2.5
Coca-Cola (The) Co.	2.5
Johnson & Johnson	2.5
Paychex, Inc.	2.4
Total	25.9%

Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance.

Frequency Distribution of Discounts and Premiums

Information showing the number of days the market price of the Fund’s shares was greater (at a premium) and less (at a discount) than the Fund’s net asset value for the most recently completed year, and the most recently completed calendar quarters since that year (or life of the Fund, if shorter), is available at https://www.ftportfolios.com/Retail/etf/home.aspx.

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Fund Performance Overview (Unaudited) (Continued)

First Trust Horizon Managed Volatility Developed International ETF (HDMV)

The investment objective of First Trust Horizon Managed Volatility Developed International ETF (the “Fund”) is to provide capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in common stocks and depositary receipts of developed market companies listed and traded on non-U.S. exchanges that Horizon Investments, LLC (“Horizon” or the “Sub-Advisor”) believes exhibit low future expected volatility. The term “developed market companies” means those companies (i) whose securities are traded principally on a stock exchange in a developed market country, (ii) with a primary business office in a developed market country, or (iii) that have at least 50% of their assets in, or derive at least 50% of their revenues or profits from, a developed market country. The Sub-Advisor considers Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States to be developed market countries. However, this list may change in response to market and geopolitical events. Under normal market conditions, the Fund will invest in at least three countries and at least 40% of its net assets in countries other than the United States. Shares of the Fund are listed and trade on the NYSE Arca, Inc. under the ticker symbol “HDMV.” The first day of secondary market trading in shares of the Fund was August 25, 2016.

Performance
		Average Annual Total Returns		Cumulative Total Returns
	1 Year Ended 7/31/22	5 Years Ended 7/31/22	Inception (8/24/16) to 7/31/22	5 Years Ended 7/31/22	Inception (8/24/16) to 7/31/22
Fund Performance
NAV	-8.50%	0.01%	2.04%	0.03%	12.71%
Market Price	-8.67%	-0.08%	2.02%	-0.39%	12.60%
Index Performance
MSCI EAFE Index	-14.32%	2.61%	4.80%	13.78%	32.10%

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

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Table of Contents

Fund Performance Overview (Unaudited) (Continued)

First Trust Horizon Managed Volatility Developed International ETF (HDMV) (Continued)

Sector Allocation	% of Total Investments
Financials	17.3%
Real Estate	15.1
Industrials	14.6
Communication Services	13.2
Consumer Staples	12.6
Utilities	11.9
Health Care	5.8
Consumer Discretionary	4.9
Information Technology	2.9
Materials	1.4
Energy	0.3
Total	100.0%

Top Ten Holdings	% of Total Investments
Ascendas Real Estate Investment Trust	2.2%
Singapore Technologies Engineering Ltd.	2.0
UOL Group Ltd.	2.0
MTR Corp., Ltd.	2.0
McDonald’s Holdings Co., Japan Ltd.	1.9
Power Assets Holdings Ltd.	1.9
Swisscom AG	1.8
CLP Holdings, Ltd.	1.8
Link REIT	1.7
Singapore Exchange Ltd.	1.7
Total	19.0%

Frequency Distribution of Discounts and Premiums

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Table of Contents

Fund Performance Overview (Unaudited) (Continued)

First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)

The investment objective of First Trust Horizon Managed Volatility Small/Mid ETF (the “Fund”) is to seek to provide investors with capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in small- and/or mid-capitalization common stocks listed and traded on U.S. national securities exchanges that Horizon Investments, LLC (“Horizon” or the “Sub-Advisor”) believes exhibit low future expected volatility. The goal of this strategy is to capture upside price movements in rising markets and reduce downside risk when markets decline. To implement this strategy, the Sub-Advisor employs volatility forecasting models to forecast future expected volatility. The strategy is largely quantitative and rules-based, but also includes multiple parameters over which the Sub-Advisor may exercise discretion (including, but not limited to, the number of holdings and the weightings of particular holdings) in connection with its active management of the Fund. Shares of the Fund are listed and trade on the NYSE Arca, Inc. under the ticker symbol “HSMV.” The first day of secondary market trading in shares of the Fund was April 7, 2020.

Performance
		Average Annual Total Returns	Cumulative Total Returns
	1 Year Ended 7/31/22	Inception (4/6/20) to 7/31/22	Inception (4/6/20) to 7/31/22
Fund Performance
NAV	-2.11%	20.93%	55.33%
Market Price	-2.11%	20.91%	55.28%
Index Performance
S&P 1000^® Index	-5.86%	29.66%	82.58%

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

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Table of Contents

Fund Performance Overview (Unaudited) (Continued)

First Trust Horizon Managed Volatility Small/Mid ETF (HSMV) (Continued)

Sector Allocation	% of Total Investments
Industrials	21.6%
Financials	18.6
Real Estate	16.7
Utilities	9.6
Information Technology	8.2
Health Care	6.3
Consumer Discretionary	6.2
Consumer Staples	5.9
Materials	5.6
Communication Services	1.3
Total	100.0%

Top Ten Holdings	% of Total Investments
Hubbell, Inc.	0.7%
Encore Capital Group, Inc.	0.7
UniFirst Corp.	0.7
Sonoco Products Co.	0.7
California Water Service Group	0.7
Essential Utilities, Inc.	0.7
Medical Properties Trust, Inc.	0.7
American States Water Co.	0.6
RPM International, Inc.	0.6
Woodward, Inc.	0.6
Total	6.7%

Frequency Distribution of Discounts and Premiums

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Table of Contents

Notes to Fund Performance Overview (Unaudited)

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

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

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

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Table of Contents

Portfolio Commentary

First Trust Exchange-Traded Fund III

Annual Report

July 31, 2022 (Unaudited)

Advisor

First Trust Advisors L.P. (“First Trust” or the “Advisor”) serves as the investment advisor to the First Trust Horizon Managed Volatility Domestic ETF (“HUSV”), the First Trust Horizon Managed Volatility Developed International ETF (“HDMV”), and the First Trust Horizon Managed Volatility Small/Mid ETF (“HSMV”) (each a “Fund” and collectively, the “Funds”). First Trust is responsible for the ongoing monitoring of each Fund’s investment portfolio, managing each Fund’s business affairs and providing certain administrative services necessary for the management of each Fund.

Sub-Advisor

Horizon Investments, LLC (“Horizon” or the “Sub-Advisor”) serves as the investment sub-advisor to the Funds.

Portfolio Management Team

The following persons serve as portfolio managers of the Funds:

Michael Dickson, PhD, Head of Research and Product Development and Portfolio Manager of Horizon

Scott Ladner, Chief Investment Officer and Portfolio Manager of Horizon

Steven Clark, PhD, Portfolio Manager of Horizon

The portfolio managers are primarily and jointly responsible for the day-to-day management of the Funds. Each portfolio manager has served as part of the portfolio management team of the Funds since each Fund’s inception.

Commentary

First Trust Horizon Managed Volatility Domestic ETF (“HUSV” or the “Fund”)

Market Recap

For the 12-month period ended July 31, 2022, the S&P 500^® Index fell 4.64%. During the period, low volatility as a factor led the S&P 500^® Index, as the S&P 500^® Low Volatility Index returned 4.50%.

During the same period, the S&P 500^® Index experienced a moderate decline as macroeconomic and geopolitical risks weighed on sentiment and, to some extent, on corporate earnings and profitability. Labor market imbalances, unresolved supply chain stressors, and the prosecution of Russia’s war in Ukraine all coalesced to first persist and then increase inflationary dynamics. Despite the maintenance of accommodative fiscal and monetary policy at the onset of the 12-month period ended July 31, 2022, these inflationary dynamics proved the transitory characterization inaccurate, at least in the short term.

In November 2021, the Federal Reserve (“Fed”) announced that it was dropping the “transitory” characterization of inflation, signaling that it would soon pivot in a more hawkish direction by increasing short term interest rates and adjusting quantitative easing to tighten financial conditions, and hopefully, curb inflation. It took the financial markets some time to process the implications of the Fed’s hawkish pivot, with equities broadly rallying into calendar year end and surging to all-time highs in the first week of January 2022.

Shortly after reaching all-time highs, the S&P 500^® Index rapidly sold off as market participants began repricing risk assets in accordance with this new, much more hawkish, Fed stance. From the start of the calendar year through April 2022, the U.S. 2-Year yield increased by nearly 200 basis points (“bps”) as the markets digested the expected interest rate hikes that began in March 2022. In just a few weeks, the S&P 500^® Index found itself nearly 10% off all-time high levels, bottoming nearly 24% off highs by mid-June 2022. These surging short term interest rate expectations necessitated a rerating of valuation multiples.

As measured by the price to earnings ratio, most of the sell-off in both January 2022 and through the market bottom was driven by multiple compression. From peak to trough over this same period, twelve-month blended forward price to earnings fell by roughly 6 points, or 27%. Although macroeconomic conditions deteriorated, the U.S. consumer remained resilient, supporting corporate revenues and earnings. This broad market pullback that hit companies with lower quality fundamentals the hardest, also provided a boost to the more defensive posture of lower volatility stocks, contributing to their strong relative return over the period.

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Table of Contents

Portfolio Commentary (Continued)

First Trust Exchange-Traded Fund III

Annual Report

July 31, 2022 (Unaudited)

and rules-based, but also includes multiple parameters over which Horizon may exercise discretion (including, but not limited to, the number of holdings and the weightings of particular holdings) in connection with its active management of the Fund.

Performance Analysis

On a net asset value (“NAV”) basis for the 12-month period ended July 31, 2022, the Fund provided a total return of 1.82%, including the reinvestment of dividends. The S&P 500^® Index returned -4.64% and the S&P 500^® Low Volatility Index returned 4.50% over this same time period.

Stocks selected within the Utilities, Consumer Staples, and Industrials sectors contributed the most to the Fund’s return, whereas stocks selected within Information Technology, Communication Services, and Materials sectors detracted the most from the Fund’s return.

Single stock positions in Jack Henry & Associates Inc., The Hershey Co., and Automatic Data Processing, Inc. contributed the most to the Fund’s return for the same period. Single stock positions in VeriSign, Inc., Cisco Systems, Inc, and Cognizant Technology Solutions detracted the most from the Fund’s return for the same period.

During the 12-month period ended July 31, 2022, the Fund realized lower volatility than the S&P 500^® Index and had volatility in line with the S&P 500^® Low Volatility Index. As a part of the Fund’s portfolio allocation process, Horizon overweights or underweights common stocks of domestic companies based on future expected volatility. An overweight allocation indicates that Horizon expects those stocks to be relatively low risk, while an underweight allocation indicates that Horizon expects those stocks to be relatively high risk. Due to the long-term defensive tilt of the strategy, it is expected that the Fund will underperform in strong positive markets and outperform in strong negative markets. For the same period, this was the case and these tilts contributed largely to the relative performance for the period.

Market and Fund Outlook

At the end of the 12-month period ended July 31, 2022, Horizon believes that overall corporate and economic fundamental conditions have deteriorated and that risks to financial markets and the global economy skew towards the downside. Additionally, as the Fed has clearly indicated their policy path is sensitive to each new economic data point, we believe this set up supports periods of elevated volatility. Despite this, we do believe that there are some paths for either rapid or moderately paced normalization in economic conditions, most all of which are dependent on inflation rolling over.

During time periods of persistent volatility, Horizon believes it is important to continue to be responsive to current market conditions when picking stocks to create a portfolio of expected lower volatility stocks. The Fund continues to use a quantitative and rules-based investment process to mitigate volatility through enhanced security selection of targeted exposure to stocks that Horizon estimates will have forecasted future low volatility. Horizon also continues to use active management approach when managing the Fund that provides the flexibility to limit sector concentration and business risk, without being limited to static rebalance requirements.

First Trust Horizon Managed Volatility Developed International ETF (“HDMV” or the “Fund”)

Market Recap

For the 12-month period ended July 31, 2022, the MSCI EAFE Index fell 14.32%. During the same period, low volatility outperformed the broad MSCI EAFE Index as the MSCI EAFE Minimum Volatility Index fell 13.06%.

During the period, the MSCI EAFE Index experienced a moderate decline as macroeconomic and geopolitical risks weighed on sentiment and, to some extent, on corporate earnings and profitability. Labor market imbalances, unresolved supply chain stressors, and the prosecution of Russia’s war in Ukraine all coalesced to first persist and then increase inflationary dynamics. Despite the maintenance of accommodative fiscal and monetary policy at the onset of the fiscal year, these inflationary dynamics proved the transitory characterization inaccurate, at least in the short term.

In November 2021, the Fed announced that it was dropping the “transitory” characterization of inflation, signaling that it would soon pivot in a more hawkish direction by increasing short term interest rates and adjusting quantitative easing to tighten financial conditions, and hopefully, curb inflation. It took the financial markets some time to process the implications of the Fed’s hawkish pivot, with global equities broadly rallying into calendar year-end and nearing all-time highs in the first week of January 2022.

Shortly after nearing all-time highs, the MSCI EAFE Index rapidly sold off as market participants began repricing risk assets in accordance with this new, much more hawkish, stance by central banks. To highlight this we reference the Fed as the U.S. Central Bank

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Table of Contents

Portfolio Commentary (Continued)

First Trust Exchange-Traded Fund III

Annual Report

July 31, 2022 (Unaudited)

policy is relevant internationally due to the U.S. Dollar’s preeminent position in global financial markets. From the start of the calendar year through April 2022, the U.S. 2-Year yield increased by nearly 200 bps as the markets digested the expected interest rate hikes that began in March 2022. As Russia’s war in Ukraine exacerbated risks in international markets, by mid-March 2022, the MSCI EAFE Index found itself nearly 16% off all-time high levels, bottoming nearly 24% off highs by mid-June 2022. These surging short term interest rate expectations necessitated a rerating of valuation multiples.

As measured by the price to earnings ratio, most of the sell-off in both January 2022 and through the market bottom was driven by multiple compression. From peak to trough over this same period, twelve-month blended forward price to earnings for the MSCI EAFE Index fell by roughly 4 points, or 28%. As macroeconomic conditions deteriorated Internationally more acutely than the U.S. due to the risks of Russia’s war in Ukraine, this setup provided a boost to the more defensive posture of lower volatility stocks, contributing to their strong relative return over the period.

The investment objective of the Fund is to provide capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in common stocks and depositary receipts of developed market companies listed and traded on non-U.S. exchanges that Horizon believes exhibit low future expected volatility. The goal of this strategy is to capture upside price movements in rising markets and reduce downside risk when markets decline. To implement this strategy, in selecting securities for the Fund from a portfolio of eligible securities, Horizon employs volatility forecasting models to forecast future expected volatility. The strategy is largely quantitative and rules-based, but also includes multiple parameters over which Horizon may exercise discretion (including, but not limited to, the number of holdings and the weightings of particular holdings) in connection with its active management of the Fund.

Performance Analysis

On a NAV basis for the 12-month period ended July 31, 2022, the Fund provided a total return of -8.50%, including the reinvestment of dividends. During the same period, low volatility outperformed the broad MSCI EAFE Index of -14.32% as the MSCI EAFE Minimum Volatility Index fell 13.06%. The Fund substantially outperformed both the MSCI EAFE and MSCI EAFE Minimum Volatility Indices.

For countries with an average allocation greater than 1%, stocks selected within United Kingdom, Australia, and Switzerland detracted the least from the Fund’s return, whereas stocks selected within Germany, Sweden, and the Netherlands detracted the most from the Fund’s return during the same period.

Single stock positions in Hongkong Land Holdings Ltd., AusNet Services Ltd., and United Overseas Bank Ltd. contributed the most to the Fund’s return for the same period. Single stock positions in Hong Kong & China Gas Co., Ltd., McDonald’s Holdings Co., Japan Ltd., and CLP Holdings, Ltd. detracted the most from the Fund’s return for the same period.

During the same period, the Fund realized lower volatility than the MSCI EAFE Index. As a part of the Fund’s portfolio allocation process, Horizon overweights or underweights common stocks and depositary receipts of large and mid-cap securities across developed markets based on future expected volatility. An overweight allocation indicates that Horizon expects those stocks to be relatively low risk, while an underweight allocation indicates that Horizon expects those stocks to be relatively high risk. Due to the long-term defensive tilt of the strategy, it is expected that the Fund will underperform in strong positive markets and outperform in strong negative markets. For the 12-month period ended July 31, 2022, this was the case and these tilts contributed largely to the relative performance for the period.

Market and Fund Outlook

At the end of the 12-month period ended July 31, 2022, Horizon believes that overall corporate and economic fundamental conditions have deteriorated and that risks to financial markets and the global economy skew towards the downside. Additionally, we believe there are several unresolved factors that support periods of elevated volatility internationally. These include the uncertain path of global central banks, Russia’s war in Ukraine, and China’s policies related to COVID-19. Despite this, we do believe that there are some paths for either rapid or moderately paced normalization in economic conditions, most of which are dependent on inflation rolling over and the resolution of these risk factors.

During time periods of persistent volatility, Horizon believes it is important to continue to be more responsive to current market conditions when picking stocks to create a portfolio of expected lower volatility stocks when exposed to these risk factors. The Fund continues to use a quantitative and rules-based investment process to mitigate volatility through enhanced security selection of targeted exposure to stocks that Horizon estimates will have forecasted future low volatility. Horizon also continues to use active management

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Table of Contents

Portfolio Commentary (Continued)

First Trust Exchange-Traded Fund III

Annual Report

July 31, 2022 (Unaudited)

approach when managing the Fund that provides the flexibility to limit sector and country concentration and business risk, without being limited to static rebalance requirements.

First Trust Horizon Managed Volatility Small/Mid ETF (“HSMV” or the “Fund”)

Market Recap

For the 12-month period ended July 31, 2022, the S&P 1000^® Index fell 5.86%. During the same period, low volatility as a factor led the S&P 1000^® Total Return Index, as the S&P 400^® Low Volatility Index gained 2.19%.

During the same period, the S&P 1000^® Index experienced a moderate decline as macroeconomic and geopolitical risks weighed on sentiment and, to some extent, on corporate earnings and profitability. Labor market imbalances, unresolved supply chain stressors, and the prosecution of Russia’s war in Ukraine all coalesced to first persist and then increase inflationary dynamics. Despite the maintenance of accommodative fiscal and monetary policy at the onset of the fiscal year, these inflationary dynamics proved the transitory characterization inaccurate, at least in the short term.

In November 2021, the Fed announced that it was dropping the “transitory” characterization of inflation, signaling that it would soon pivot in a more hawkish direction by increasing short term interest rates and adjusting quantitative easing to tighten financial conditions, and hopefully, curb inflation. It took the financial markets some time to process the implications of the Fed’s hawkish pivot, with equities broadly rallying into calendar year-end and nearing all-time highs in the first week of January 2022.

Shortly after nearing all-time highs, the S&P 1000^® Index rapidly sold off as market participants began repricing risk assets in accordance with this new, much more hawkish, Fed stance. From the start of the calendar year through April 2022, the U.S. 2-Year yield increased by nearly 200 bps as the markets digested the expected interest rate hikes that began in March 2022. In just a few weeks, the S&P 1000^® Index found itself nearly 10% off all-time high levels, bottoming nearly 24% off highs by mid-June 2022. These surging short term interest rate expectations necessitated a rerating of valuation multiples.

As measured by the price to earnings ratio, most of the sell-off in both January 2022 and through the market bottom was driven by multiple compression. From peak to trough over this same period, twelve-month blended forward price to earnings of the S&P 1000^® Index fell by roughly 6 points, or 36%. Although macroeconomic conditions deteriorated, the U.S. consumer remained resilient, supporting corporate revenues and earnings. This broad market pullback that hit companies with lower quality fundamentals the hardest, also provided a boost to the more defensive posture of lower volatility stocks, contributing to their strong relative return over the period.

The investment objective of the Fund is to provide capital appreciation. Under normal market conditions, the Fund seeks to achieve its investment objective by investing at least 80% of its net assets (including investment borrowings) in small- and/or mid-capitalization common stocks of domestic companies listed and traded on U.S. national securities exchanges that Horizon believes exhibit low future expected volatility. The goal of this strategy is to capture upside price movements in rising markets and reduce downside risk when markets decline. To implement this strategy, Horizon employs volatility forecasting models to forecast future expected volatility. The strategy is largely quantitative and rules-based, but also includes multiple parameters over which Horizon may exercise discretion (including, but not limited to, the number of holdings and the weightings of particular holdings) in connection with its active management of the Fund.

Performance Analysis

On a NAV basis for the 12-month period ended July 31, 2022, the Fund provided a total return of -2.11%, including the reinvestment of dividends. The S&P 1000^® Index fell 5.86%. During the same period, low volatility as a factor led the S&P 1000^® Index, as the S&P 400^® Low Volatility Index gained 2.19%.

Stocks selected within the Consumer Staples, Financials, and Utilities sectors contributed the most to the Fund’s return, while stocks selected within the Health Care, Industrials, and Information Technology sectors detracted the most from the Fund’s return for the same period.

Single stock positions in Murphy USA, Inc., H&R Block, Inc., and Carlisle Cos., Inc. contributed the most to the Fund’s return for the same period. Single stock positions in Masimo Corp., Helen of Troy, Ltd., and Stericycle, Inc. detracted the most from the Fund’s return since inception.

Since the Fund’s inception on April 6, 2020, the Fund realized lower volatility than the S&P 1000^® Index and higher volatility than the S&P 400^® Low Volatility Index. As a part of the Fund’s portfolio allocation process, Horizon overweights or underweights common

Page 13

Table of Contents

Portfolio Commentary (Continued)

First Trust Exchange-Traded Fund III

Annual Report

July 31, 2022 (Unaudited)

stocks of small and mid-cap domestic companies based on future expected volatility. An overweight allocation indicates that Horizon expects those stocks to be relatively low risk, while an underweight allocation indicates that Horizon expects those stocks to be relatively high risk. Due to the long-term defensive tilt of the strategy, it is expected that the Fund will underperform in strong positive markets and outperform in strong negative markets. For the fiscal year this was the case and these tilts contributed largely to the relative performance for the period.

Market and Fund Outlook

Page 14

Table of Contents

First Trust Exchange-Traded Fund III

Understanding Your Fund Expenses

July 31, 2022 (Unaudited)

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

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

Actual Expenses

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

Hypothetical Example for Comparison Purposes

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

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

	Beginning Account Value February 1, 2022	Ending Account Value July 31, 2022	Annualized Expense Ratio Based on the Six-Month Period	Expenses Paid During the Six-Month Period (a)
First Trust Horizon Managed Volatility Domestic ETF (HUSV)
Actual	$1,000.00	$981.90	0.70%	$3.44
Hypothetical (5% return before expenses)	$1,000.00	$1,021.32	0.70%	$3.51
First Trust Horizon Managed Volatility Developed International ETF (HDMV)
Actual	$1,000.00	$934.60	0.80%	$3.84
Hypothetical (5% return before expenses)	$1,000.00	$1,020.83	0.80%	$4.01
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)
Actual	$1,000.00	$987.90	0.80%	$3.94
Hypothetical (5% return before expenses)	$1,000.00	$1,020.83	0.80%	$4.01

(a)	Expenses are equal to the annualized expense ratios as indicated in the table multiplied by the average account value over the period (February 1, 2022 through July 31, 2022), multiplied by 181/365 (to reflect the six-month period).

Page 15

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First Trust Horizon Managed Volatility Domestic ETF (HUSV)

Portfolio of Investments

July 31, 2022

Shares	Description	Value
COMMON STOCKS – 94.4%
	Aerospace & Defense – 4.1%
9,192	General Dynamics Corp.	$2,083,551
2,326	Lockheed Martin Corp.	962,522
11,459	Raytheon Technologies Corp.	1,068,093
		4,114,166
	Beverages – 5.0%
38,236	Coca-Cola (The) Co.	2,453,604
14,464	PepsiCo, Inc.	2,530,622
		4,984,226
	Biotechnology – 5.1%
7,180	AbbVie, Inc.	1,030,402
7,073	Amgen, Inc.	1,750,355
37,832	Gilead Sciences, Inc.	2,260,462
		5,041,219
	Capital Markets – 2.1%
1,832	FactSet Research Systems, Inc.	787,174
7,066	Nasdaq, Inc.	1,278,239
		2,065,413
	Chemicals – 1.0%
3,932	Air Products and Chemicals, Inc.	976,040
	Commercial Services & Supplies – 1.9%
13,958	Republic Services, Inc.	1,935,416
	Communications Equipment – 1.9%
41,298	Cisco Systems, Inc.	1,873,690
	Containers & Packaging – 1.8%
21,878	International Paper Co.	935,722
6,216	Packaging Corp. of America	874,032
		1,809,754
	Distributors – 0.8%
5,279	Genuine Parts Co.	807,001
	Diversified Financial Services – 2.1%
7,042	Berkshire Hathaway, Inc., Class B (a)	2,116,825
	Diversified Telecommunication Services – 1.4%
30,202	Verizon Communications, Inc.	1,395,030
	Electric Utilities – 7.5%
9,664	American Electric Power Co., Inc.	952,484
13,491	Duke Energy Corp.	1,483,066
4,789	Edison International	324,550
12,610	Evergy, Inc.	860,759
3,560	Eversource Energy	314,063
11,806	Exelon Corp.	548,861

Shares	Description	Value

	Electric Utilities (Continued)
15,152	FirstEnergy Corp.	$622,747
24,875	PPL Corp.	723,365
9,442	Southern (The) Co.	725,995
12,261	Xcel Energy, Inc.	897,260
		7,453,150
	Electrical Equipment – 2.0%
7,736	AMETEK, Inc.	955,396
11,964	Emerson Electric Co.	1,077,598
		2,032,994
	Electronic Equipment, Instruments & Components – 2.5%
6,375	Teledyne Technologies, Inc. (a)	2,495,175
	Food & Staples Retailing – 2.0%
15,023	Walmart, Inc.	1,983,787
	Food Products – 6.0%
26,778	General Mills, Inc.	2,002,726
10,930	Hershey (The) Co.	2,491,603
23,494	Mondelez International, Inc., Class A	1,504,556
		5,998,885
	Gas Utilities – 0.5%
3,678	Atmos Energy Corp.	446,472
	Health Care Equipment & Supplies – 1.9%
14,862	Baxter International, Inc.	871,805
4,166	Becton Dickinson and Co.	1,017,795
		1,889,600
	Health Care Providers & Services – 2.3%
8,800	AmerisourceBergen Corp.	1,284,184
1,762	UnitedHealth Group, Inc.	955,603
		2,239,787
	Hotels, Restaurants & Leisure – 4.0%
10,005	McDonald’s Corp.	2,635,017
10,758	Yum! Brands, Inc.	1,318,285
		3,953,302
	Household Products – 1.7%
12,078	Procter & Gamble (The) Co.	1,677,755
	Industrial Conglomerates – 1.9%
6,733	3M Co.	964,435
4,871	Honeywell International, Inc.	937,473
		1,901,908

Page 16

See Notes to Financial Statements

Table of Contents

First Trust Horizon Managed Volatility Domestic ETF (HUSV)

Portfolio of Investments (Continued)

July 31, 2022

Shares	Description	Value
COMMON STOCKS (Continued)
	Insurance – 7.5%
13,617	Aflac, Inc.	$780,254
9,032	Assurant, Inc.	1,587,645
5,328	Chubb Ltd.	1,005,074
13,479	Loews Corp.	785,152
7,809	Marsh & McLennan Cos., Inc.	1,280,363
6,284	Travelers (The) Cos., Inc.	997,271
17,088	W.R. Berkley Corp.	1,068,513
		7,504,272
	IT Services – 10.7%
11,792	Automatic Data Processing, Inc.	2,843,287
18,859	International Business Machines Corp.	2,466,569
14,008	Jack Henry & Associates, Inc.	2,910,442
18,969	Paychex, Inc.	2,433,343
		10,653,641
	Machinery – 1.4%
6,888	Illinois Tool Works, Inc.	1,431,051
	Multi-Utilities – 7.1%
7,237	Ameren Corp.	673,910
15,231	CenterPoint Energy, Inc.	482,670
13,041	CMS Energy Corp.	896,308
10,015	Consolidated Edison, Inc.	994,189
3,157	Dominion Energy, Inc.	258,811
12,886	DTE Energy Co.	1,679,046
18,111	NiSource, Inc.	550,574
11,012	Public Service Enterprise Group, Inc.	723,158
7,912	WEC Energy Group, Inc.	821,345
		7,080,011
	Oil, Gas & Consumable Fuels – 1.0%
29,721	Williams (The) Cos., Inc.	1,013,189
	Pharmaceuticals – 4.6%
29,439	Bristol-Myers Squibb Co.	2,172,010
14,000	Johnson & Johnson	2,443,280
		4,615,290
	Road & Rail – 1.0%
4,142	Union Pacific Corp.	941,477
	Tobacco – 1.6%
37,316	Altria Group, Inc.	1,636,680
	Total Common Stocks	94,067,206
	(Cost $89,957,523)
REAL ESTATE INVESTMENT TRUSTS – 5.3%
	Equity Real Estate Investment Trusts – 5.3%
5,458	AvalonBay Communities, Inc.	1,167,684
13,948	Equity Residential	1,093,384
32,348	Healthpeak Properties, Inc.	893,775

Shares	Description	Value

	Equity Real Estate Investment Trusts (Continued)
29,437	Realty Income Corp.	$2,178,044
	Total Real Estate Investment Trusts	5,332,887
	(Cost $5,310,989)
	Total Investments – 99.7%	99,400,093
	(Cost $95,268,512)
	Net Other Assets and Liabilities – 0.3%	264,488
	Net Assets – 100.0%	$99,664,581

(a)	Non-income producing security.

Valuation Inputs

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

	Total Value at 7/31/2022	Level 1 Quoted Prices	Level 2 Significant Observable Inputs	Level 3 Significant Unobservable Inputs
Common Stocks*	$ 94,067,206	$ 94,067,206	$ —	$ —
Real Estate Investment Trusts*	5,332,887	5,332,887	—	—
Total Investments	$ 99,400,093	$ 99,400,093	$—	$—

*	See Portfolio of Investments for industry breakout.

See Notes to Financial Statements

Page 17

Table of Contents

First Trust Horizon Managed Volatility Developed International ETF (HDMV)

Portfolio of Investments

July 31, 2022

Shares	Description	Value
COMMON STOCKS (a) – 91.2%
	Australia – 6.2%
4,057	ASX Ltd. (b)	$252,162
77,874	Aurizon Holdings Ltd. (b)	220,407
16,874	Australia & New Zealand Banking Group Ltd. (b)	272,705
26,447	Brambles Ltd. (b)	212,864
23,823	Coles Group Ltd. (b)	313,757
108,660	Medibank Pvt Ltd. (b)	261,277
7,100	National Australia Bank Ltd. (b)	153,335
15,968	Suncorp Group Ltd. (b)	126,104
131,487	Telstra Corp., Ltd. (b)	359,355
6,363	Wesfarmers Ltd. (b)	208,487
15,071	Westpac Banking Corp. (b)	228,222
8,318	Woolworths Group Ltd. (b)	218,839
		2,827,514
	Belgium – 1.0%
4,687	Etablissements Franz Colruyt N.V. (b)	129,591
1,927	Groupe Bruxelles Lambert S.A. (b)	170,569
2,039	UCB S.A. (b)	159,325
		459,485
	Bermuda – 0.6%
44,255	CK Infrastructure Holdings Ltd. (b)	277,513
	Cayman Islands – 1.2%
34,400	CK Asset Holdings Ltd. (b)	243,543
43,558	CK Hutchison Holdings Ltd. (b)	288,932
		532,475
	Denmark – 0.7%
2,333	Novozymes A.S., Class B (b)	149,033
6,704	Tryg A.S. (b)	152,860
		301,893
	France – 5.4%
1,763	Air Liquide S.A. (b)	242,382
7,625	Bouygues S.A. (b)	230,502
7,030	Bureau Veritas S.A. (b)	193,892
12,368	Getlink SE (b)	247,537
4,590	La Francaise des Jeux SAEM (b) (c) (d)	163,946
1,391	Legrand S.A. (b)	113,879
55,813	Orange S.A. (b)	570,322
664	Pernod Ricard S.A. (b)	130,439
1,820	Sanofi (b)	180,860
1,481	SEB S.A. (b)	124,686
985	Thales S.A. (b)	122,494
18,390	Vivendi SE (b)	174,582
		2,495,521
	Germany – 4.2%
2,161	Bayer AG (b)	126,052

Shares	Description	Value

	Germany (Continued)
2,223	Beiersdorf AG (b)	$229,246
1,166	Deutsche Boerse AG (b)	203,543
12,400	Deutsche Telekom AG (b)	235,587
21,156	E.ON SE (b)	190,174
2,535	Fresenius Medical Care AG & Co., KGaA (b)	93,981
2,910	Henkel AG & Co., KGaA (b)	183,490
1,625	LEG Immobilien SE (b)	147,624
1,440	SAP SE (b)	134,313
1,926	Symrise AG (b)	224,736
61,205	Telefonica Deutschland Holding AG (b)	162,722
		1,931,468
	Hong Kong – 8.7%
94,827	CLP Holdings, Ltd. (b)	804,092
19,859	Hang Seng Bank Ltd. (b)	320,338
174,504	Hong Kong & China Gas Co., Ltd. (b)	184,299
168,917	MTR Corp., Ltd. (b)	894,501
68,800	New World Development Co., Ltd. (b)	230,060
132,370	Power Assets Holdings Ltd. (b)	866,725
176,000	Sino Land Co., Ltd. (b)	261,508
34,800	Sun Hung Kai Properties Ltd. (b)	415,413
		3,976,936
	Ireland – 0.6%
2,497	Kerry Group PLC, Class A (b)	263,561
	Israel – 0.5%
1,783	Check Point Software Technologies Ltd. (e)	222,162
	Italy – 1.9%
7,107	Assicurazioni Generali S.p.A. (b)	106,247
20,463	Infrastrutture Wireless Italiane S.p.A. (b) (c) (d)	215,033
70,612	Snam S.p.A. (b)	354,299
25,983	Terna-Rete Elettrica Nazionale S.p.A. (b)	198,921
		874,500
	Japan – 25.8%
4,700	Aeon Co., Ltd. (b)	94,785
4,500	Ajinomoto Co., Inc. (b)	118,422
5,400	Canon, Inc. (b)	127,752
19,600	Chubu Electric Power Co., Inc. (b)	209,081
4,900	Dai Nippon Printing Co., Ltd. (b)	108,130
4,100	Daiwa House Industry Co., Ltd. (b)	101,303
27,300	Daiwa Securities Group, Inc. (b)	126,023
32,400	ENEOS Holdings, Inc. (b)	125,336

Page 18

See Notes to Financial Statements

Table of Contents

First Trust Horizon Managed Volatility Developed International ETF (HDMV)

Portfolio of Investments (Continued)

July 31, 2022

Shares	Description	Value
COMMON STOCKS (a) (Continued)
	Japan (Continued)
4,800	Hankyu Hanshin Holdings, Inc. (b)	$139,232
4,200	Hoshizaki Corp. (b)	125,294
3,800	ITOCHU Corp. (b)	110,617
21,400	Japan Post Bank Co., Ltd. (b)	171,193
39,900	Japan Post Holdings Co., Ltd. (b)	287,273
7,900	Japan Post Insurance Co., Ltd. (b)	127,726
19,900	Japan Tobacco, Inc. (b)	357,317
14,700	Kansai Electric Power (The) Co., Inc. (b)	149,039
4,800	Kao Corp. (b)	208,773
11,100	KDDI Corp. (b)	355,892
13,000	Kirin Holdings Co., Ltd. (b)	213,829
1,700	Kyocera Corp. (b)	94,501
8,300	Lion Corp. (b)	95,561
23,400	McDonald’s Holdings Co., Japan Ltd. (b)	878,330
6,900	Medipal Holdings Corp. (b)	104,103
4,800	MEIJI Holdings Co., Ltd. (b)	250,608
6,700	Mitsubishi Corp. (b)	199,119
11,100	Mitsubishi Electric Corp. (b)	117,152
11,400	Mitsubishi Estate Co., Ltd. (b)	169,308
25,900	Mitsubishi HC Capital, Inc. (b)	125,509
21,400	Mitsubishi UFJ Financial Group, Inc. (b)	120,578
22,700	Mizuho Financial Group, Inc. (b)	270,729
6,200	MS&AD Insurance Group Holdings, Inc. (b)	201,074
1,600	Nippon Shinyaku Co., Ltd. (b)	99,027
14,800	Nippon Telegraph & Telephone Corp. (b)	422,767
24,300	Nisshin Seifun Group, Inc. (b)	299,120
2,200	Nissin Foods Holdings Co., Ltd. (b)	159,337
31,000	Nomura Holdings, Inc. (b)	118,281
15,600	Obayashi Corp. (b)	114,729
5,300	Ono Pharmaceutical Co., Ltd. (b)	149,030
10,400	Osaka Gas Co., Ltd. (b)	186,972
4,500	Otsuka Holdings Co., Ltd. (b)	160,753
34,500	Resona Holdings, Inc. (b)	134,076
7,100	SCSK Corp. (b)	125,033
5,100	Secom Co., Ltd. (b)	340,630
14,600	Sekisui House Ltd. (b)	258,586
21,600	Shizuoka Bank (The), Ltd. (b)	130,711
55,800	Softbank Corp. (b)	645,174
3,200	Sohgo Security Services Co., Ltd. (b)	89,677
3,900	Sompo Holdings, Inc. (b)	174,062
10,000	Sumitomo Corp. (b)	140,600
4,100	Sumitomo Mitsui Financial Group, Inc. (b)	128,626
4,300	Sumitomo Mitsui Trust Holdings, Inc. (b)	141,252

Shares	Description	Value

	Japan (Continued)
3,700	Suntory Beverage & Food Ltd. (b)	$145,993
4,500	Taisei Corp. (b)	143,581
13,600	Takeda Pharmaceutical Co., Ltd. (b)	399,027
6,600	Tobu Railway Co., Ltd. (b)	156,716
2,100	Tokio Marine Holdings, Inc. (b)	122,934
7,500	Tokyo Gas Co., Ltd. (b)	147,307
3,400	Toyo Suisan Kaisha Ltd. (b)	144,459
2,300	Trend Micro, Inc. (b)	133,663
14,800	USS Co., Ltd. (b)	290,413
2,300	Yakult Honsha Co., Ltd. (b)	140,069
5,700	Yamato Holdings Co., Ltd. (b)	99,744
		11,825,938
	Netherlands – 2.6%
2,470	Euronext N.V. (b) (c) (d)	201,252
8,202	Koninklijke Ahold Delhaize N.V. (b)	225,873
124,080	Koninklijke KPN N.V. (b)	409,339
3,437	QIAGEN N.V. (b) (e)	172,252
1,744	Wolters Kluwer N.V. (b)	189,402
		1,198,118
	New Zealand – 0.6%
84,940	Spark New Zealand Ltd. (b)	273,131
	Norway – 1.0%
30,031	Orkla ASA (b)	259,236
17,405	Telenor ASA (b)	211,369
		470,605
	Singapore – 12.2%
46,300	City Developments Ltd. (b)	260,125
14,400	DBS Group Holdings Ltd. (b)	328,584
495,900	Genting Singapore Ltd. (b)	289,624
61,600	Keppel Corp., Ltd. (b)	307,765
42,700	Oversea-Chinese Banking Corp., Ltd. (b)	361,870
105,000	Singapore Exchange Ltd. (b)	752,702
317,000	Singapore Technologies Engineering Ltd. (b)	924,297
261,400	Singapore Telecommunications Ltd. (b)	494,327
17,900	United Overseas Bank Ltd. (b)	357,129
169,800	UOL Group Ltd. (b)	917,409
26,000	Venture Corp., Ltd. (b)	331,246
81,600	Wilmar International Ltd. (b)	237,775
		5,562,853
	Spain – 2.2%
18,809	Enagas S.A. (b)	371,265
7,794	Endesa S.A. (b)	142,860
16,015	Red Electrica Corp. S.A. (b)	314,861
38,252	Telefonica S.A. (b)	170,745
		999,731

See Notes to Financial Statements

Page 19

Table of Contents

First Trust Horizon Managed Volatility Developed International ETF (HDMV)

Portfolio of Investments (Continued)

July 31, 2022

Shares	Description	Value
COMMON STOCKS (a) (Continued)
	Sweden – 1.4%
14,671	Svenska Handelsbanken AB, Class A (b)	$131,920
15,170	Swedish Match AB (b)	158,807
15,699	Tele2 AB, Class B (b)	179,340
51,913	Telia Co., AB (b)	191,785
		661,852
	Switzerland – 8.2%
2,018	Baloise Holding AG (b)	321,526
3,889	Nestle S.A. (b)	476,509
7,887	Novartis AG (b)	677,727
877	Roche Holding AG (b)	291,168
488	Swiss Life Holding AG (b)	258,511
5,545	Swiss Prime Site AG (b)	504,948
1,531	Swisscom AG (b)	827,716
883	Zurich Insurance Group AG (b)	385,455
		3,743,560
	United Kingdom – 6.2%
6,013	Bunzl PLC (b)	225,672
1,937	Intertek Group PLC (b)	103,523
32,688	National Grid PLC (b)	450,101
15,112	Phoenix Group Holdings PLC (b)	119,062
3,325	Reckitt Benckiser Group PLC (b)	269,707
10,759	RELX PLC (b)	318,568
17,437	Sage Group (The) PLC (b)	150,274
8,225	Severn Trent PLC (b)	295,704
7,719	Smiths Group PLC (b)	145,675
128,238	Tesco PLC (b)	411,277
19,950	United Utilities Group PLC (b)	265,066
65,226	Vodafone Group PLC (b)	96,121
		2,850,750
	Total Common Stocks	41,749,566
	(Cost $43,926,839)
REAL ESTATE INVESTMENT TRUSTS (a) – 7.9%
	Australia – 0.5%
18,911	Dexus (b)	127,082
36,877	GPT (The) Group (b)	118,641
		245,723
	France – 0.5%
2,157	Gecina S.A. (b)	221,159
	Hong Kong – 1.7%
91,266	Link REIT (b)	764,291
	Singapore – 5.2%
462,000	Ascendas Real Estate Investment Trust (b)	994,436
281,000	CapitaLand Integrated Commercial Trust (b)	443,902
11,055	CDL Hospitality Trusts (b)	10,583
256,400	Mapletree Commercial Trust (b)	353,184

Shares	Description	Value

	Singapore (Continued)
442,243	Mapletree Logistics Trust (b)	$564,432
		2,366,537
	Total Real Estate Investment Trusts	3,597,710
	(Cost $3,845,642)
RIGHTS (a) – 0.0%
	Australia – 0.0%
1,124	Australia & New Zealand Banking Group Ltd., expiring 8/8/22 (e)	3,126
	(Cost $0)
	Total Investments – 99.1%	45,350,402
	(Cost $47,772,481)
	Net Other Assets and Liabilities – 0.9%	406,501
	Net Assets – 100.0%	$45,756,903

(a)	Portfolio securities are categorized based upon their country of incorporation. For a breakdown of the portfolio securities by sector, please see the Fund Performance Overview.
(b)	This security is fair valued by the Advisor’s Pricing Committee in accordance with procedures adopted by the Trust’s Board of Trustees and in accordance with provisions of the Investment Company Act of 1940, as amended. At July 31, 2022, securities noted as such are valued at $45,125,114 or 98.6% of net assets. Certain of these securities are fair valued using a factor provided by a third-party pricing service due to the change in value between the foreign markets’ close and the New York Stock Exchange close exceeding a certain threshold. On days when this threshold is not exceeded, these securities are typically valued at the last sale price on the exchange on which they are principally traded.
(c)	This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the Securities Act of 1933, as amended (the “1933 Act”).
(d)	This security is exempt from registration upon resale under Rule 144A of the 1933 Act and may be resold in transactions exempt from registration, normally to qualified institutional buyers. This security is not restricted on the foreign exchange where it trades freely without any additional registration. As such, it does not require the additional disclosure required of restricted securities.
(e)	Non-income producing security.

Page 20

See Notes to Financial Statements

Table of Contents

First Trust Horizon Managed Volatility Developed International ETF (HDMV)

Portfolio of Investments (Continued)

July 31, 2022

Currency Exposure Diversification	% of Total Investments
Japanese Yen	26.1%
Euro	18.6
Singapore Dollar	17.5
Hong Kong Dollar	12.2
Swiss Franc	8.2
Australian Dollar	6.8
British Pound Sterling	6.3
Swedish Krona	1.5
Norwegian Krone	1.0
Danish Krone	0.7
New Zealand Dollar	0.6
United States Dollar	0.5
Total	100.0%

Valuation Inputs

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

	Total Value at 7/31/2022	Level 1 Quoted Prices	Level 2 Significant Observable Inputs	Level 3 Significant Unobservable Inputs
Common Stocks:
Israel	$ 222,162	$ 222,162	$ —	$ —
Other Country Categories*	41,527,404	—	41,527,404	—
Real Estate Investment Trusts*	3,597,710	—	3,597,710	—
Rights*	3,126	3,126	—	—
Total Investments	$ 45,350,402	$ 225,288	$ 45,125,114	$—

*	See Portfolio of Investments for country breakout.

See Notes to Financial Statements

Page 21

Table of Contents

First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)

Portfolio of Investments

July 31, 2022

Shares	Description	Value
COMMON STOCKS – 81.4%
	Aerospace & Defense – 0.6%
981	Woodward, Inc.	$102,711
	Air Freight & Logistics – 0.4%
896	Atlas Air Worldwide Holdings, Inc. (a)	67,836
	Auto Components – 0.5%
3,064	Gentex Corp.	86,466
	Banks – 7.7%
2,577	Associated Banc-Corp.	51,798
897	BancFirst Corp.	96,329
1,163	Bank of Hawaii Corp.	93,168
1,068	Bank OZK	42,827
1,324	Commerce Bancshares, Inc.	92,005
1,378	Community Bank System, Inc.	92,781
397	Cullen/Frost Bankers, Inc.	51,769
3,481	CVB Financial Corp.	92,838
1,822	Eagle Bancorp, Inc.	89,333
6,041	Fulton Financial Corp.	100,824
6,861	Northwest Bancshares, Inc.	98,661
5,842	Old National Bancorp	101,709
1,256	Prosperity Bancshares, Inc.	93,057
3,524	Valley National Bancorp	41,195
2,829	Washington Federal, Inc.	96,554
		1,234,848
	Biotechnology – 0.4%
281	United Therapeutics Corp. (a)	64,931
	Building Products – 1.1%
275	Carlisle Cos., Inc.	81,428
378	Lennox International, Inc.	90,542
		171,970
	Capital Markets – 1.6%
262	Affiliated Managers Group, Inc.	33,112
325	Evercore, Inc., Class A	32,490
1,304	Janus Henderson Group PLC	33,604
1,158	Jefferies Financial Group, Inc.	37,716
1,622	SEI Investments Co.	89,794
544	Stifel Financial Corp.	32,537
		259,253
	Chemicals – 2.4%
900	Ashland Global Holdings, Inc.	90,423
735	Balchem Corp.	99,783
1,140	RPM International, Inc.	103,056
1,160	Sensient Technologies Corp.	99,737
		392,999
	Commercial Services & Supplies – 3.2%
1,411	ABM Industries, Inc.	63,269
910	Clean Harbors, Inc. (a)	88,807
738	MSA Safety, Inc.	94,715
2,068	Stericycle, Inc. (a)	96,927

Shares	Description	Value

	Commercial Services & Supplies (Continued)
467	Tetra Tech, Inc.	$71,577
547	UniFirst Corp.	107,152
		522,447
	Communications Equipment – 1.0%
1,217	Ciena Corp. (a)	62,797
6,706	Viavi Solutions, Inc. (a)	99,249
		162,046
	Construction & Engineering – 1.8%
1,338	AECOM	96,336
861	EMCOR Group, Inc.	100,195
3,251	MDU Resources Group, Inc.	92,881
		289,412
	Construction Materials – 0.4%
454	Eagle Materials, Inc.	57,408
	Consumer Finance – 1.5%
1,488	Encore Capital Group, Inc. (a)	107,776
2,390	PRA Group, Inc. (a)	95,217
1,971	SLM Corp.	30,748
		233,741
	Containers & Packaging – 1.8%
880	AptarGroup, Inc.	94,829
2,130	Silgan Holdings, Inc.	94,785
1,640	Sonoco Products Co.	104,123
		293,737
	Diversified Consumer Services – 1.6%
988	Grand Canyon Education, Inc. (a)	94,917
1,419	H&R Block, Inc.	56,703
1,313	Service Corp. International	97,766
		249,386
	Electric Utilities – 3.0%
1,493	ALLETE, Inc.	92,671
2,220	Hawaiian Electric Industries, Inc.	93,906
874	IDACORP, Inc.	97,643
2,415	OGE Energy Corp.	99,208
1,907	PNM Resources, Inc.	92,051
		475,479
	Electrical Equipment – 1.8%
493	Hubbell, Inc.	107,977
2,701	nVent Electric PLC	95,372
607	Regal Rexnord Corp.	81,520
		284,869

Page 22

See Notes to Financial Statements

Table of Contents

First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)

Portfolio of Investments (Continued)

July 31, 2022

Shares	Description	Value
COMMON STOCKS (Continued)
	Electronic Equipment, Instruments & Components – 3.8%
755	Arrow Electronics, Inc. (a)	$96,768
1,528	Avnet, Inc.	73,145
972	Cognex Corp.	49,553
975	Insight Enterprises, Inc. (a)	91,075
886	Jabil, Inc.	52,575
4,936	Knowles Corp. (a)	97,486
270	Littelfuse, Inc.	75,295
740	TD SYNNEX Corp.	74,311
		610,208
	Entertainment – 0.6%
1,398	World Wrestling Entertainment, Inc., Class A	96,895
	Food & Staples Retailing – 1.2%
467	Casey’s General Stores, Inc.	94,637
1,172	Grocery Outlet Holding Corp. (a)	50,068
1,625	Sprouts Farmers Market, Inc. (a)	44,915
		189,620
	Food Products – 4.3%
1,723	Cal-Maine Foods, Inc.	88,063
3,424	Flowers Foods, Inc.	97,276
1,842	Hain Celestial Group (The), Inc. (a)	41,906
4,316	Hostess Brands, Inc. (a)	97,628
993	Ingredion, Inc.	90,343
643	J&J Snack Foods Corp.	87,133
680	Lancaster Colony Corp.	90,018
1,109	Post Holdings, Inc. (a)	96,416
		688,783
	Gas Utilities – 2.9%
1,138	National Fuel Gas Co.	82,323
2,026	New Jersey Resources Corp.	93,581
1,294	Northwest Natural Holding Co.	69,449
1,091	ONE Gas, Inc.	92,670
1,191	Spire, Inc.	89,611
797	UGI Corp.	34,398
		462,032
	Health Care Equipment & Supplies – 2.1%
521	CONMED Corp.	50,865
973	Enovis Corp. (a)	58,107
1,889	Envista Holdings Corp. (a)	76,788
1,049	Globus Medical, Inc., Class A (a)	61,566
1,568	Integra LifeSciences Holdings Corp. (a)	86,303
		333,629

Shares	Description	Value

	Health Care Providers & Services – 2.2%
825	Acadia Healthcare Co., Inc. (a)	$68,401
190	Chemed Corp.	91,407
1,584	Encompass Health Corp.	80,182
792	Enhabit, Inc. (a)	13,868
3,026	Patterson Cos., Inc.	93,987
		347,845
	Health Care Technology – 0.4%
3,828	Allscripts Healthcare Solutions, Inc. (a)	60,559
	Hotels, Restaurants & Leisure – 2.0%

Shareholder Letter	2
Fund Performance Overview
First Trust Horizon Managed Volatility Domestic ETF (HUSV)	3
First Trust Horizon Managed Volatility Developed International ETF (HDMV)	5
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)	7
Notes to Fund Performance Overview	9
Portfolio Commentary	10
Understanding Your Fund Expenses	15
Portfolio of Investments
First Trust Horizon Managed Volatility Domestic ETF (HUSV)	16
First Trust Horizon Managed Volatility Developed International ETF (HDMV)	18
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV)	22
Statements of Assets and Liabilities	26
Statements of Operations	27
Statements of Changes in Net Assets	28
Financial Highlights	30
Notes to Financial Statements	33
Report of Independent Registered Public Accounting Firm	40
Additional Information	41
Board of Trustees and Officers	48
Privacy Policy	50