First Trust High Income Long/Short Fund (FSD)

Annual Report

October 31, 2018

Shareholder Letter	1
At a Glance	2
Portfolio Commentary	4
Portfolio of Investments	7
Statement of Assets and Liabilities	18
Statement of Operations	19
Statements of Changes in Net Assets	20
Statement of Cash Flows	21
Financial Highlights	22
Notes to Financial Statements	23
Report of Independent Registered Public Accounting Firm	32
Additional Information	33
Board of Trustees and Officers	39
Privacy Policy	41

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 MacKay Shields LLC (“MacKay” 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 First Trust High Income Long/Short Fund (the “Fund”) to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and/or Sub-Advisor and their 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 the Fund will achieve its investment objectives. 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 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 common 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 First Trust and MacKay 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, this report and other Fund regulatory filings.

First Trust High Income Long/Short Fund (FSD)

Annual Letter from the Chairman and CEO

October 31, 2018

Dear Shareholders,

First Trust is pleased to provide you with the annual report for the First Trust High Income Long/Short Fund (the “Fund”), which contains detailed information about the Fund for the twelve months ended October 31, 2018, including a market overview and a performance analysis. We encourage you to read this report carefully and discuss it with your financial advisor.

As I mentioned in my April 2018 letter, 2017 was a very strong year for U.S. and global markets. Investors were rewarded with rising markets and very little volatility. As 2018 began, investors were hoping for another strong year in the markets. For the entire first quarter, however, increased market volatility was the norm for U.S. and global markets. The markets continued their volatility throughout the second quarter. During April and May, the Dow Jones Industrial Average (“DJIA”) closed out each month slightly down, but ended both June and July slightly up. August was a strong month for stocks, and the DJIA finished August just under its previous high in January of 2018. At the close of the third quarter in September, the markets had moved higher into positive territory. In fact, all three major U.S. indices (the Nasdaq Composite Index, the DJIA and the S& P 500^® Index) hit record levels during the third quarter. In October, markets were again very volatile, surprising analysts and investors alike. Both global and U.S. markets fell on fears of slowing growth, trade wars and higher interest rates. The DJIA was down 5% for October and the MSCI EAFE Index, an index of stocks in 21 developed markets (excluding the U.S. and Canada), was down 9% for the same period.

Based on continued strong job growth and the economic outlook in the U.S., the Federal Reserve (the “Fed”) raised interest rates in March, June and September. At their September meeting, the Fed also indicated the possibility of one more rate hike in 2018 as well as three more rate hikes in 2019.

Trade tensions have had an impact on markets around the world and could continue to do so in the future. However, our economists believe that the long-term impact of U.S. tariffs will be to encourage countries to come back to the table and talk about more equal trade. Despite market volatility, we continue to believe that the combination of low interest rates, low inflation and strong corporate earnings still point to a positive economic environment and further growth, though we understand that past performance can never guarantee future performance.

We continue to believe that you should invest for the long term and be prepared for market movements, which can happen at any time. You can do this by keeping current on your portfolio and by speaking regularly with your investment professional. Markets go up and they also go down, but savvy investors are prepared for either through careful attention to investment goals.

Thank you for giving First Trust the opportunity to be a part of your financial plan. 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.

Page 1

First Trust High Income Long/Short Fund (FSD)

“AT A GLANCE”

As of October 31, 2018 (Unaudited)

(1)	Most recent distribution paid or declared through 10/31/2018. Subject to change in the future.

(2)	Distribution rates are calculated by annualizing the most recent distribution paid or declared through the report date and then dividing by Common Share Price or NAV, as applicable, as of 10/31/2018. Subject to change in the future.

(3)

Total return is based on the combination of reinvested dividend, capital gain, and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results.

Page 2

First Trust High Income Long/Short Fund (FSD)

“AT A GLANCE” (Continued)

As of October 31, 2018 (Unaudited)

Page 3

Portfolio Commentary

First Trust High Income Long/Short Fund (FSD)

Annual Report

October 31, 2018 (Unaudited)

Advisor

First Trust Advisors L.P. (“First Trust” or the “Advisor”) is the investment advisor to the First Trust High Income Long/Short Fund (the “Fund”). First Trust is responsible for the ongoing monitoring of the Fund’s investment portfolio, managing the Fund’s business affairs and providing certain administrative services necessary for the management of the Fund.

Sub-Advisor

MacKay Shields LLC is a registered investment advisor founded in 1938, and is Sub-Advisor to the Fund. The Fund trades under the ticker symbol FSD on the New York Stock Exchange. As of October 31, 2018, MacKay had approximately $111.8 billion in assets under management.

Portfolio Management Team

Dan Roberts, PhD – Executive Managing Director, Head of Global Fixed Income Division and Chief Investment Officer

Louis N. Cohen, CFA – Senior Managing Director, Global Fixed Income Division

Joseph Cantwell – Managing Director, Global Fixed Income Division

Matthew Jacob – Managing Director, Global Fixed Income Division

Shu-Yang Tan, CFA – Managing Director, Global Fixed Income Division

Market Recap

This report covers the Fund for the 12-month period ending October 31, 2018.

Reflecting on the last quarter of 2017, U.S. stocks and corporate bonds closed the year benefitting from investors’ optimism about the Republican tax plan, an increase in oil prices, and an overall positive economic backdrop.

The Federal Open Market Committee (“FOMC”) raised its target Fed Funds interest rate as expected in December and announced the doubling of its balance sheet reduction program starting in January 2018. Tapering initially began in October 2017 with the reduction of U.S. Treasury holdings by $6 billion per month and agency mortgage-backed securities by $4 billion per month. Early 2018 also marked a shift in the Federal Reserve (the “Fed”) leadership with Jerome Powell succeeding previous chairperson, Janet Yellen. In 2018, the Fed raised its target Fed Funds interest rate three times by a total of 75 basis points (“bps”) to between 2.00 – 2.25%. At the FOMC’s September 2018 meeting, the committee removed language in its statement that referenced accommodative policy, but cited strong labor conditions, sustained economic expansion, and stable inflation measures near the Fed’s 2% target as reasons for supporting further gradual rate hikes. The next scheduled meeting is set for December 2018.

Trump’s imposed tariffs on $50 billion of Chinese imports earlier in the year was not well-received by global markets nor China, which retaliated with a variety of potential trade sanctions against U.S. exports primarily produced in states that supported Trump in the election. Trade war rhetoric has intensified with 10% tariffs on an additional $200 billion of Chinese exports, with a threat to further impose tariffs on practically all remaining Chinese imports. Meanwhile, negotiations among the U.S., Mexico and Canadian governments have produced the United States-Mexico-Canada Agreement (“USMCA”), a new trade agreement among the three North American countries, which will replace the North American Free Trade Agreement (“NAFTA”) if passed by all three governments.

Greater attention by investors is being paid to the mid-term elections¹. We believe recent attacks by President Trump against the Fed can be construed as political rhetoric ahead of the elections rather than dogma. The consensus view is that the Democratic party will win the House of Representatives but not secure the Senate. In such a scenario, we believe gridlock will increase and any additional tax reform will likely fail. Credit spreads should remain firm in this scenario.

Indicators continue to signal that the U.S. economy is in good health. Gross domestic product (“GDP”) growth increased to 3.5% in the third quarter of 2018, according to estimates released by the Bureau of Economic Analysis in late October, from 2.3% at the end of 2017. The jobs picture continues to improve; the unemployment rate declined from 4.1% to 3.7% year to date through October. The U.S. dollar strengthened against most currencies, in particular the Euro and the British Sterling.

U.S. interest rates rose and the yield curve flattened over the last year. The 2-year Treasury rose 128 bps to 2.87% while the benchmark 10-year rate rose 79 bps to 3.16% (source: Bloomberg).

Commodity prices pushed higher led by strength in crude oil. Over the last year, oil prices gained over 30%.

In the recent months, the European Central Bank (“ECB”) announced that it would remain committed to ending its bond purchases by year-end although the ECB was more reticent towards raising the target interest rate. The ECB’s divergent policies from the Fed appear to be leading to less synchronized global growth than previously experienced.

1	The elections are now behind us and the results were as expected.

Page 4

Portfolio Commentary (Continued)

First Trust High Income Long/Short Fund (FSD)

Annual Report

October 31, 2018 (Unaudited)

Emerging markets debt sold off during the year resulting from idiosyncratic risks emanating from Argentina, Turkey and Brazil. Emerging markets are also vulnerable to a stronger U.S. dollar given that many tend to borrow in USD.

Economic growth in China is slowing as government spending slows and policy makers look to crackdown on shadow banking and other speculative forms of debt financing. Although real GDP growth is still a healthy 6.5%, it is at its lowest level in years. Meanwhile, trade wars between China and the U.S. could exacerbate the decline.

Performance Analysis

The U.S. high yield market returned 0.86% for the 12-month period ended October 31, 2018 (as measured by the ICE BofAML US High Yield Index), outperforming several other fixed income asset classes. U.S. high-yield (“HY”) bond market spreads widened overall by 30 bps from 351 to 381 bps over Treasuries over the year. The lowest quality segment of the market rallied for the last year, driven by a search for yield; CCC-rated bonds gained 4.56% and U.S. HY distressed issues returned 3.31%, whereas higher quality BB’s declined by 0.82% and single-B rated bonds returned 1.66%.

In our opinion, the rally in the lower quality part of the market has been driven by investors seeking returns in industries and credits that are subject to high levels of business and technological disruption such as telecom (wirelines and satellites), energy, hospitals and retail. Healthcare, transportation, and energy were the top performing sectors for the year, while other sectors that continue to face headwinds, banking and automotive specifically, underperformed. The worst performing sector for the period was automotive as investors believe that the production cycle has already passed its peak and growth in new production is expected to slow. Additionally, bonds issued by American Tire Distributors, Inc., an automotive tire distributor, lost approximately 75% of their value as Bridgestone Corporation decided to exit a supply agreement with the company. The banking sector experienced weakness during the period; bonds issued by foreign banks were under pressure in part due to political developments in Europe.

The Fund underperformed its benchmark, the ICE BofAML US High Yield Constrained Index (the “benchmark”), for the 12-month period ended October 31, 2018, with a return of -10.24% on a share price basis and -0.82% on a net asset value (“NAV”) basis, compared with the benchmark, which returned 0.86% for the period. The Fund’s underperformance is primarily attributed to the underweight to the lower quality segment of the market as well as those sectors experiencing high levels of disruption, which outperformed during the period; this includes the Fund’s underweight positioning within energy, a telecommunications subsector, and a healthcare subsector. Note that these are the same underweights that generally benefitted the Fund in 2017. Additionally, the Fund’s overweight to high quality issuers, such as services, and basic industry subsectors, detracted from results as higher quality bonds underperformed. Alternatively, avoiding uncompensated risks in the automotive (American Tire Distributors, Inc.) and the banking (foreign banks) sectors benefitted the portfolio. Positioning in pharmaceuticals with an overweight in Bausch Health Companies, Inc. was also a positive contributor for the year. As we previously shared, given that high yield spreads are near their tightest for this current economic cycle, we have reduced credit and idiosyncratic risks in the Fund as spread compensation, in many cases, is inadequate. Although the credit fundamentals of the non-investment grade market are broadly sound, we are concerned that low return on capital, an uptick in leverage, and rapid technological changes have led to an increase in idiosyncratic risk.

We maintained a short position in U.S. Treasury bonds within the Fund, expressed in the belly of the curve, and used the short to reduce the portfolio’s exposure to interest rate risk, while at the same time purchasing additional high yield securities to lever up the portfolio. The Fund benefited from its additional long exposure to high yield bonds, offset slightly by the borrowing costs involved, as the high yield market experienced a positive return during the period. U.S. Treasury yields increased during the year; as a result, the short U.S. Treasury position added to performance.

Finally, as you may be aware, on June 25, 2018, another closed-end fund, the First Trust Strategic High Income Fund II (“FHY”), merged into the Fund. The merger was completed successfully, with no material repositioning required within the Fund.

Outlook

Although U.S. economic growth slowed in the most recent quarter, output continues to be very healthy relative to most other markets, in our opinion. The Fed appears committed to normalizing policy rates with some wind in its sails. We continue to monitor risks in the system by way of elevated leverage in both the public and private markets. Since the Great Recession, we have observed a re-leveraging process unfold among high quality issuers while consumers generally de-levered². A sustained period of ultra-low interest rates contributed to significant growth in debt capital. More recently, loose fiscal policy has provided additional fuel to an environment already flush with liquidity. Consequently, we believe compensation to investors is very limited, and thus the margin for error at this stage in the cycle is quite low.

As investors, we believe corporate fundamentals and central bank policies should be the dominant drivers of market sentiment over the near-term. While we do not foresee a recession on the immediate horizon, we are mindful of the aforementioned risk factors at play.

2	Based on the Federal Reserve’s U.S. consumer financial obligation ratio, a measure of the household debt payments relative to total disposable income.

Page 5

Portfolio Commentary (Continued)

First Trust High Income Long/Short Fund (FSD)

Annual Report

October 31, 2018 (Unaudited)

Importantly, we continue to reaffirm our less aggressive targeted risk profile across portfolio styles. We believe downside protection will continue to be paramount in the current environment.

Page 6

This material contains the opinions of the Global Fixed Income team of MacKay Shields LLC but not necessarily those of MacKay Shields LLC. The opinions expressed herein are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and opinions contained herein should not be considered as investment advice or a recommendation of any security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of MacKay Shields LLC. ©2018, MacKay Shields LLC.

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments

October 31, 2018

Principal Value		Description		Stated Coupon		Stated Maturity		Value
CORPORATE BONDS AND NOTES – 92.7%
		Automotive – 2.6%
$287,000		American Axle & Manufacturing, Inc.		6.63%		10/15/22		$291,664
4,025,000		Dana, Inc. (a)		5.50%		12/15/24		3,898,212
2,080,000		Gates Global LLC/Gates Global Co. (b)		6.00%		07/15/22		2,074,800
1,175,000		Goodyear Tire & Rubber (The) Co.		5.13%		11/15/23		1,155,613
1,275,000		Goodyear Tire & Rubber (The) Co.		5.00%		05/31/26		1,165,031
2,125,000		Goodyear Tire & Rubber (The) Co. (a)		4.88%		03/15/27		1,901,875
2,599,000		Navistar International Corp. (b)		6.63%		11/01/25		2,663,975
1,970,000		Tenneco, Inc. (a)		5.00%		07/15/26		1,644,950
								14,796,120
		Banking – 1.4%
1,165,000		Ally Financial, Inc.		8.00%		11/01/31		1,406,738
612,000		Ally Financial, Inc. (a)		8.00%		11/01/31		737,460
6,000,000		Ally Financial, Inc. (a)		5.13%		09/30/24		6,112,500
								8,256,698
		Basic Industry – 10.1%
3,750,000		AK Steel Corp.		7.63%		10/01/21		3,764,062
1,000,000		AK Steel Corp. (a)		7.50%		07/15/23		1,020,000
2,100,000		AK Steel Corp.		6.38%		10/15/25		1,879,500
2,425,000		Beazer Homes USA, Inc. (a)		8.75%		03/15/22		2,449,250
800,000		Cleveland-Cliffs, Inc. (a)		4.88%		04/01/21		796,000
1,800,000		Cleveland-Cliffs, Inc. (a)		5.75%		03/01/25		1,707,750
4,111,000		Core & Main L.P. (b)		6.13%		08/15/25		3,874,617
1,000,000		Freeport-McMoRan, Inc. (a)		3.55%		03/01/22		948,750
1,680,000		Freeport-McMoRan, Inc.		3.88%		03/15/23		1,558,200
960,000		Freeport-McMoRan, Inc. (a)		4.55%		11/14/24		892,800
2,445,000		JELD-WEN, Inc. (a) (b)		4.88%		12/15/27		2,133,263
2,979,000		KB Home		7.50%		09/15/22		3,157,740
1,600,000		Koppers, Inc. (a) (b)		6.00%		02/15/25		1,540,480
500,000		Lennar Corp.		5.88%		11/15/24		504,375
1,500,000		LGI Homes, Inc. (b)		6.88%		07/15/26		1,432,500
3,180,000		Meritage Homes Corp.		6.00%		06/01/25		3,108,450
1,000,000		Novelis Corp. (a) (b)		6.25%		08/15/24		992,500
2,862,000		Novelis Corp. (b)		5.88%		09/30/26		2,704,590
2,045,000		Olin Corp.		5.13%		09/15/27		1,914,631
2,050,000		Pisces Midco, Inc. (a) (b)		8.00%		04/15/26		1,998,750
3,260,000		PQ Corp. (a) (b)		6.75%		11/15/22		3,370,025
565,000		PQ Corp. (a) (b)		5.75%		12/15/25		545,931
3,710,000		PulteGroup, Inc. (a)		7.88%		06/15/32		3,932,600
2,025,000		Shea Homes L.P./Shea Homes Funding Corp. (a) (b)		6.13%		04/01/25		1,883,250
4,250,000		Standard Industries, Inc. (a) (b)		5.00%		02/15/27		3,888,750
3,050,000		Toll Brothers Finance Corp.		4.88%		11/15/25		2,889,875
3,765,000		TRI Pointe Group, Inc./TRI Pointe Homes, Inc. (a)		5.88%		06/15/24		3,529,688
								58,418,327
		Capital Goods – 7.5%
3,045,000		Ball Corp.		4.00%		11/15/23		2,961,262
2,675,000		Berry Global, Inc. (a) (b)		4.50%		02/15/26		2,507,813
4,100,000		BWAY Holding Co. (a) (b)		5.50%		04/15/24		3,946,250
3,500,000		Crown Americas LLC/Crown Americas Capital Corp. IV (a)		4.50%		01/15/23		3,438,750
1,500,000		JB Poindexter & Co., Inc. (b)		7.13%		04/15/26		1,552,500
2,590,000		KLX, Inc. (b)		5.88%		12/01/22		2,674,175
2,080,000		Mueller Water Products, Inc. (b)		5.50%		06/15/26		2,064,400
2,840,000		Owens-Brockway Glass Container, Inc. (a) (b)		5.00%		01/15/22		2,815,150

See Notes to Financial Statements

Page 7

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments (Continued)

October 31, 2018

Principal Value		Description		Stated Coupon		Stated Maturity		Value
CORPORATE BONDS AND NOTES (Continued)
		Capital Goods (Continued)
$5,700,000		Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer LU (a) (b)		5.13%		07/15/23		$5,578,875
3,725,000		Sealed Air Corp. (b)		5.50%		09/15/25		3,687,750
5,445,000		Terex Corp. (a) (b)		5.63%		02/01/25		5,186,362
2,660,000		Trident Merger Sub, Inc. (a) (b)		6.63%		11/01/25		2,493,750
2,925,000		Triumph Group, Inc. (a)		4.88%		04/01/21		2,769,683
1,750,000		Triumph Group, Inc. (a)		7.75%		08/15/25		1,649,375
								43,326,095
		Consumer Goods – 7.2%
3,905,000		B&G Foods, Inc. (a)		5.25%		04/01/25		3,734,156
3,245,000		Cott Holdings, Inc. (b)		5.50%		04/01/25		3,098,975
4,920,000		First Quality Finance Co., Inc. (a) (b)		5.00%		07/01/25		4,538,700
4,840,000		Kronos Acquisition Holdings, Inc. (a) (b)		9.00%		08/15/23		4,247,100
2,915,000		Lamb Weston Holdings, Inc. (b)		4.63%		11/01/24		2,866,086
3,965,000		Performance Food Group, Inc. (b)		5.50%		06/01/24		3,826,225
2,000,000		Pilgrim’s Pride Corp. (b)		5.75%		03/15/25		1,875,000
1,765,000		Post Holdings, Inc. (b)		5.50%		03/01/25		1,714,256
3,610,000		Post Holdings, Inc. (b)		5.00%		08/15/26		3,343,763
3,900,000		Prestige Brands, Inc. (b)		6.38%		03/01/24		3,870,750
3,910,000		Spectrum Brands, Inc.		5.75%		07/15/25		3,822,025
1,500,000		TreeHouse Foods, Inc. (b)		6.00%		02/15/24		1,501,875
3,240,000		US Foods, Inc. (b)		5.88%		06/15/24		3,223,800
								41,662,711
		Energy – 10.0%
1,675,000		AmeriGas Partners L.P./AmeriGas Finance Corp.		5.50%		05/20/25		1,574,500
5,100,000		AmeriGas Partners L.P./AmeriGas Finance Corp.		5.88%		08/20/26		4,845,000
1,875,000		Andeavor Logistics L.P./Tesoro Logistics Finance Corp. (a)		5.25%		01/15/25		1,914,844
1,600,000		Antero Midstream Partners LP/Antero Midstream Finance Corp.		5.38%		09/15/24		1,568,000
2,475,000		Blue Racer Midstream LLC/Blue Racer Finance Corp. (a) (b)		6.13%		11/15/22		2,536,875
3,526,000		California Resources Corp. (b)		8.00%		12/15/22		3,146,955
2,060,000		Carrizo Oil & Gas, Inc. (a)		6.25%		04/15/23		2,034,250
4,370,000		Crestwood Midstream Partners L.P./Crestwood Midstream Finance Corp. (a)		6.25%		04/01/23		4,473,787
3,129,000		Denbury Resources, Inc. (a) (b)		9.25%		03/31/22		3,273,716
2,100,000		Genesis Energy LP/Genesis Energy Finance Corp.		6.50%		10/01/25		1,947,750
1,955,000		Hilcorp Energy I L.P./Hilcorp Finance Co. (b)		5.00%		12/01/24		1,852,363
2,100,000		Holly Energy Partners L.P./Holly Energy Finance Corp. (b)		6.00%		08/01/24		2,115,750
2,650,000		Matador Resources Co. (b)		5.88%		09/15/26		2,597,000
1,500,000		Oasis Petroleum, Inc. (b)		6.25%		05/01/26		1,475,625
3,155,000		QEP Resources, Inc.		5.63%		03/01/26		2,981,475
875,000		Range Resources Corp. (a)		5.75%		06/01/21		891,406
2,245,000		Sanchez Energy Corp.		6.13%		01/15/23		841,875
3,020,000		SM Energy Co. (a)		5.63%		06/01/25		2,921,850
2,790,000		Southwestern Energy Co.		4.10%		03/15/22		2,762,100
2,310,000		Southwestern Energy Co.		7.50%		04/01/26		2,361,975
2,000,000		Targa Pipeline Partners L.P./Targa Pipeline Finance Corp.		5.88%		08/01/23		1,965,000
4,000,000		Targa Resources Partners L.P./Targa Resources Partners Finance Corp.		5.00%		01/15/28		3,805,000
1,380,000		Whiting Petroleum Corp.		5.75%		03/15/21		1,393,800
2,560,000		Whiting Petroleum Corp.		6.63%		01/15/26		2,563,200
								57,844,096
		Financial Services – 2.4%
2,000,000		Icahn Enterprises L.P./Icahn Enterprises Finance Corp.		6.00%		08/01/20		2,020,000

Page 8

See Notes to Financial Statements

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments (Continued)

October 31, 2018

Principal Value		Description		Stated Coupon		Stated Maturity		Value
CORPORATE BONDS AND NOTES (Continued)
		Financial Services (Continued)
$2,000,000		Icahn Enterprises L.P./Icahn Enterprises Finance Corp.		5.88%		02/01/22		$2,007,700
3,385,000		MSCI, Inc. (a) (b)		5.75%		08/15/25		3,495,013
1,395,000		Springleaf Finance Corp.		6.00%		06/01/20		1,429,875
4,555,000		Springleaf Finance Corp. (a)		7.75%		10/01/21		4,828,300
								13,780,888
		Healthcare – 6.3%
3,825,000		Catalent Pharma Solutions, Inc. (b)		4.88%		01/15/26		3,605,062
1,370,000		CHS/Community Health Systems, Inc.		5.13%		08/01/21		1,304,925
153,000		CHS/Community Health Systems, Inc. (b)		8.13%		06/30/24		121,635
3,905,000		Hologic, Inc. (b)		4.38%		10/15/25		3,680,462
731,000		IQVIA, Inc. (a) (b)		4.88%		05/15/23		726,892
3,000,000		IQVIA, Inc. (b)		5.00%		10/15/26		2,902,500
3,665,000		MPH Acquisition Holdings LLC (b)		7.13%		06/01/24		3,732,143
2,000,000		Service Corp International		5.38%		05/15/24		2,030,000
4,750,000		Service Corp International (a)		7.50%		04/01/27		5,242,812
2,670,000		Syneos Health, Inc./inVentiv Health, Inc./inVentiv Health Clinical, Inc. (a) (b)		7.50%		10/01/24		2,823,525
2,750,000		Teleflex, Inc.		4.63%		11/15/27		2,574,688
2,450,000		Tenet Healthcare Corp.		8.13%		04/01/22		2,560,250
2,300,000		Verscend Escrow Corp. (a) (b)		9.75%		08/15/26		2,314,375
3,245,000		West Street Merger Sub, Inc. (b)		6.38%		09/01/25		3,058,413
								36,677,682
		Leisure – 7.2%
5,450,000		Boyd Gaming Corp. (a)		6.38%		04/01/26		5,422,750
2,980,000		Churchill Downs, Inc. (b)		4.75%		01/15/28		2,726,700
1,200,000		Eldorado Resorts, Inc.		7.00%		08/01/23		1,263,000
3,500,000		Eldorado Resorts, Inc.		6.00%		04/01/25		3,473,750
4,385,000		ESH Hospitality, Inc. (a) (b)		5.25%		05/01/25		4,160,269
3,980,000		GLP Capital L.P./GLP Financing II, Inc.		5.38%		04/15/26		3,965,075
4,600,000		Hilton Domestic Operating Co., Inc. (a) (b)		5.13%		05/01/26		4,508,000
3,120,000		Live Nation Entertainment, Inc. (b)		4.88%		11/01/24		2,995,200
3,900,000		MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer, Inc.		5.63%		05/01/24		3,919,500
4,825,000		MGM Resorts International (a)		6.75%		10/01/20		5,039,230
4,160,000		Scientific Games International, Inc. (a)		10.00%		12/01/22		4,362,800
								41,836,274
		Media – 5.5%
2,250,000		CCO Holdings LLC/CCO Holdings Capital Corp.		5.75%		01/15/24		2,278,125
2,200,000		CCO Holdings LLC/CCO Holdings Capital Corp. (b)		5.88%		05/01/27		2,167,000
2,000,000		Clear Channel Worldwide Holdings, Inc., Series B (a)		7.63%		03/15/20		2,005,000
2,841,000		Clear Channel Worldwide Holdings, Inc., Series B		6.50%		11/15/22		2,898,388
3,500,000		CSC Holdings LLC (a)		5.25%		06/01/24		3,381,875
1,250,000		CSC Holdings LLC (b)		6.63%		10/15/25		1,312,500
725,000		CSC Holdings LLC (b)		10.88%		10/15/25		838,281
2,325,000		CSC Holdings LLC (a) (b)		5.50%		04/15/27		2,237,813
1,000,000		Dish DBS Corp. (a)		5.13%		05/01/20		1,006,250
5,830,000		Dish DBS Corp. (a)		6.75%		06/01/21		5,902,875
2,300,000		Lamar Media Corp.		5.38%		01/15/24		2,314,375
2,115,000		Lamar Media Corp.		5.75%		02/01/26		2,133,506
3,150,000		Sirius XM Radio, Inc. (b)		5.38%		07/15/26		3,087,000
								31,562,988

See Notes to Financial Statements

Page 9

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments (Continued)

October 31, 2018

Principal Value		Description		Stated Coupon		Stated Maturity		Value
CORPORATE BONDS AND NOTES (Continued)
		Real Estate – 0.2%
$1,000,000		Hospitality Properties Trust		4.95%		02/15/27		$968,847
		Retail – 2.5%
5,445,000		Hanesbrands, Inc. (a) (b)		4.63%		05/15/24		5,240,812
1,320,000		KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC (b)		5.00%		06/01/24		1,305,150
3,300,000		KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC (b)		5.25%		06/01/26		3,250,500
800,000		L Brands, Inc. (a)		7.60%		07/15/37		640,000
2,975,000		Murphy Oil USA, Inc.		6.00%		08/15/23		3,049,375
1,375,000		New Albertsons, Inc.		7.75%		06/15/26		1,213,438
								14,699,275
		Services – 9.4%
4,000,000		Advanced Disposal Services, Inc. (a) (b)		5.63%		11/15/24		3,910,000
1,625,000		Aramark Services, Inc.		4.75%		06/01/26		1,551,875
4,175,000		Aramark Services, Inc. (b)		5.00%		02/01/28		3,971,469
325,000		Ashtead Capital, Inc. (b)		5.63%		10/01/24		334,344
2,900,000		BlueLine Rental Finance Corp./BlueLine Rental LLC (b)		9.25%		03/15/24		3,030,500
1,045,000		Frontdoor, Inc. (b)		6.75%		08/15/26		1,068,513
500,000		GEO (The) Group, Inc.		5.88%		10/15/24		466,150
2,740,000		H&E Equipment Services, Inc.		5.63%		09/01/25		2,616,700
3,587,000		Herc Rentals, Inc. (b)		7.50%		06/01/22		3,748,415
1,276,000		Herc Rentals, Inc. (b)		7.75%		06/01/24		1,352,560
4,199,000		Iron Mountain, Inc. (b)		4.88%		09/15/27		3,758,105
1,845,000		Iron Mountain, Inc. (b)		5.25%		03/15/28		1,665,112
4,615,000		KAR Auction Services, Inc. (a) (b)		5.13%		06/01/25		4,349,637
3,805,000		ServiceMaster (The) Co. LLC (a) (b)		5.13%		11/15/24		3,671,825
3,650,000		Tempo Acquisition LLC/Tempo Acquisition Finance Corp. (b)		6.75%		06/01/25		3,484,655
2,500,000		United Rentals North America, Inc.		5.75%		11/15/24		2,515,625
1,400,000		United Rentals North America, Inc.		5.50%		07/15/25		1,369,375
2,900,000		United Rentals North America, Inc. (a)		5.88%		09/15/26		2,852,875
450,000		United Rentals North America, Inc.		5.50%		05/15/27		428,063
1,705,000		United Rentals North America, Inc.		4.88%		01/15/28		1,540,382
3,650,000		Waste Pro USA, Inc. (b)		5.50%		02/15/26		3,467,500
2,975,000		Wrangler Buyer Corp. (b)		6.00%		10/01/25		3,198,125
								54,351,805
		Technology & Electronics – 5.4%
3,195,000		CDK Global, Inc. (a)		4.88%		06/01/27		3,007,294
590,000		CDW LLC/CDW Finance Corp. (a)		5.50%		12/01/24		598,850
145,000		CDW LLC/CDW Finance Corp.		5.00%		09/01/25		141,919
3,700,000		CommScope Technologies LLC (b)		5.00%		03/15/27		3,312,129
2,800,000		CommScope, Inc. (a) (b)		5.00%		06/15/21		2,801,400
3,996,000		Dell International LLC/EMC Corp. (a) (b)		8.35%		07/15/46		4,657,283
4,030,000		First Data Corp. (a) (b)		7.00%		12/01/23		4,181,629
2,038,000		First Data Corp. (a) (b)		5.00%		01/15/24		2,020,167
3,105,000		Match Group, Inc. (a)		6.38%		06/01/24		3,236,962
4,365,000		NCR Corp.		6.38%		12/15/23		4,365,000
3,019,000		PTC, Inc.		6.00%		05/15/24		3,094,475
								31,417,108
		Telecommunications – 11.3%
2,960,000		CenturyLink, Inc., Series P (a)		7.60%		09/15/39		2,560,400
3,300,000		CenturyLink, Inc., Series U		7.65%		03/15/42		2,854,500
4,545,000		CyrusOne L.P./CyrusOne Finance Corp.		5.38%		03/15/27		4,522,275

Page 10

See Notes to Financial Statements

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments (Continued)

October 31, 2018

Principal Value		Description		Stated Coupon		Stated Maturity		Value
CORPORATE BONDS AND NOTES (Continued)
		Telecommunications (Continued)
$5,525,000		Equinix, Inc. (a)		5.88%		01/15/26		$5,635,500
1,675,000		Equinix, Inc. (a)		5.38%		05/15/27		1,662,438
1,130,000		Frontier Communications Corp. (a)		10.50%		09/15/22		946,375
4,380,000		Frontier Communications Corp. (a) (b)		8.50%		04/01/26		4,084,350
2,956,000		Hughes Satellite Systems Corp. (a)		5.25%		08/01/26		2,819,285
300,000		Level 3 Financing, Inc.		6.13%		01/15/21		301,500
3,070,000		Level 3 Financing, Inc.		5.38%		01/15/24		3,046,975
3,025,000		Level 3 Financing, Inc.		5.38%		05/01/25		2,960,719
2,900,000		Level 3 Financing, Inc.		5.25%		03/15/26		2,791,250
2,850,000		Qualitytech L.P./QTS Finance Corp. (b)		4.75%		11/15/25		2,671,875
1,250,000		SBA Communications Corp.		4.88%		07/15/22		1,242,188
1,700,000		SBA Communications Corp. (a)		4.88%		09/01/24		1,646,875
425,000		Sprint Capital Corp.		6.88%		11/15/28		419,156
6,045,000		Sprint Capital Corp.		8.75%		03/15/32		6,619,275
570,000		Sprint Communications, Inc. (a)		9.25%		04/15/22		645,525
3,685,000		Sprint Corp.		7.63%		03/01/26		3,841,612
3,295,000		T-Mobile USA, Inc.		6.00%		03/01/23		3,386,733
2,925,000		T-Mobile USA, Inc.		6.00%		04/15/24		3,005,437
3,500,000		Zayo Group LLC/Zayo Capital, Inc. (a)		6.00%		04/01/23		3,587,500
4,200,000		Zayo Group LLC/Zayo Capital, Inc. (a) (b)		5.75%		01/15/27		4,127,340
								65,379,083
		Transportation – 2.2%
771,800		Continental Airlines 2005-ERJ1 Pass Through Trust		9.80%		04/01/21		816,179
2,000,000		United Continental Holdings, Inc. (a)		6.00%		12/01/20		2,082,500
4,822,427		US Airways 2000-3C Pass Through Trust		8.39%		03/01/22		5,123,829
4,331,000		XPO Logistics, Inc. (a) (b)		6.50%		06/15/22		4,455,516
								12,478,024
		Utility – 1.5%
5,120,000		Calpine Corp. (a)		5.75%		01/15/25		4,594,176
2,000,000		Clearway Energy Operating LLC		5.38%		08/15/24		1,988,750
2,300,000		Pattern Energy Group, Inc. (b)		5.88%		02/01/24		2,288,500
								8,871,426
		Total Corporate Bonds and Notes						536,327,447
		(Cost $550,731,617)
Principal Value (Local Currency)		Description		Stated Coupon		Stated Maturity		Value (US Dollars)
FOREIGN CORPORATE BONDS AND NOTES – 25.8%
		Automotive – 0.5%
2,565,000		LKQ European Holdings B.V. (EUR) (b)		3.63%		04/01/26		2,869,483
		Banking – 0.4%
2,400,000		Royal Bank of Scotland Group PLC (USD)		5.13%		05/28/24		2,368,131
		Basic Industry – 5.2%
2,700,000		Alcoa Nederland Holding B.V. (USD) (b)		7.00%		09/30/26		2,862,000
3,792,000		ArcelorMittal (USD) (a)		7.00%		10/15/39		4,208,203
1,700,000		Cemex SAB de CV (USD) (b)		7.75%		04/16/26		1,797,750
3,340,000		FMG Resources (August 2006) Pty Ltd. (USD) (b)		5.13%		05/15/24		3,185,525
2,725,000		Intertape Polymer Group, Inc. (USD) (b)		7.00%		10/15/26		2,731,812
1,900,000		James Hardie International Finance DAC (USD) (a) (b)		5.00%		01/15/28		1,731,375
250,000		Kinross Gold Corp. (USD)		5.95%		03/15/24		256,875

See Notes to Financial Statements

Page 11

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments (Continued)

October 31, 2018

Principal Value (Local Currency)		Description		Stated Coupon		Stated Maturity		Value (US Dollars)
FOREIGN CORPORATE BONDS AND NOTES (Continued)
		Basic Industry (Continued)
775,000		Kinross Gold Corp. (USD)		4.50%		07/15/27		$695,563
1,490,000		MMC Norilsk Nickel OJSC via MMC Finance DAC (USD) (b)		6.63%		10/14/22		1,560,318
1,625,000		SPCM S.A. (USD) (b)		4.88%		09/15/25		1,507,188
2,200,000		Stora Enso OYJ (USD) (b)		7.25%		04/15/36		2,618,000
2,505,000		Teck Resources Ltd. (USD)		6.00%		08/15/40		2,461,162
1,795,000		Teck Resources Ltd. (USD)		6.25%		07/15/41		1,799,488
2,975,000		Trinseo Materials Operating SCA/Trinseo Materials Finance, Inc. (USD) (b)		5.38%		09/01/25		2,764,667
								30,179,926
		Capital Goods – 2.7%
5,100,000		Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc. (USD) (a) (b)		7.25%		05/15/24		5,144,625
535,000		Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc. (USD) (b)		6.00%		02/15/25		502,900
890,000		Bombardier, Inc. (USD) (b)		6.00%		10/15/22		877,762
5,888,000		Bombardier, Inc. (USD) (a) (b)		6.13%		01/15/23		5,843,840
3,980,000		Titan Acquisition Ltd./Titan Co-Borrower LLC (USD) (b)		7.75%		04/15/26		3,323,300
								15,692,427
		Consumer Goods – 0.9%
2,600,000		JBS Investments II GmbH (USD) (b)		7.00%		01/15/26		2,570,100
2,925,000		Minerva Luxembourg S.A. (USD) (b)		6.50%		09/20/26		2,712,938
								5,283,038
		Energy – 3.2%
950,000		Gazprom OAO Via Gaz Capital S.A. (USD) (b)		8.63%		04/28/34		1,165,010
1,800,000		LBC Tank Terminals Holding Netherlands BV (USD) (b)		6.88%		05/15/23		1,777,500
4,590,000		Petrobras Global Finance B.V. (USD)		7.38%		01/17/27		4,766,026
588,000		Petrobras Global Finance B.V. (USD)		6.88%		01/20/40		560,070
1,060,000		Petrobras Global Finance B.V. (USD)		7.25%		03/17/44		1,026,213
800,000		Puma International Financing S.A. (USD) (b)		5.13%		10/06/24		674,078
4,500,000		Transocean, Inc. (USD) (b)		7.25%		11/01/25		4,387,500
3,350,000		Weatherford International Ltd. (USD)		4.50%		04/15/22		2,512,500
1,793,000		Weatherford International Ltd. (USD)		8.25%		06/15/23		1,376,127
406,000		Weatherford International Ltd. (USD)		6.50%		08/01/36		272,020
								18,517,044
		Healthcare – 3.4%
1,105,000		Bausch Health Cos, Inc. (USD) (b)		7.50%		07/15/21		1,124,338
2,785,000		Bausch Health Cos, Inc. (USD) (b)		6.50%		03/15/22		2,889,437
4,000,000		Bausch Health Cos, Inc. (USD) (b)		5.50%		03/01/23		3,805,000
5,319,000		Bausch Health Cos, Inc. (USD) (a) (b)		5.88%		05/15/23		5,092,942
3,724,000		Bausch Health Cos, Inc. (USD) (a) (b)		6.13%		04/15/25		3,434,273
1,320,000		Bausch Health Cos, Inc. (USD) (b)		9.00%		12/15/25		1,381,050
2,275,000		Endo Dac./Endo Finance LLC/Endo Finco, Inc. (USD) (a) (b)		6.00%		02/01/25		1,916,688
								19,643,728
		Insurance – 0.8%
1,800,000		Aviva PLC (GBP) (c)		6.13%		11/14/36		2,523,640
2,220,000		Oil Insurance Ltd., 3 Mo. LIBOR + 2.98% (USD) (a) (b) (d)		5.38%		(e)		2,164,500
								4,688,140

Page 12

See Notes to Financial Statements

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments (Continued)

October 31, 2018

Principal Value (Local Currency)		Description		Stated Coupon		Stated Maturity		Value (US Dollars)
FOREIGN CORPORATE BONDS AND NOTES (Continued)
		Leisure – 1.7%
3,205,000		Royal Caribbean Cruises Ltd. (USD) (a)		7.50%		10/15/27		$3,757,555
1,305,000		Sands China, LTD. (USD) (b)		4.60%		08/08/23		1,290,329
1,695,000		Sands China, LTD. (USD) (b)		5.13%		08/08/25		1,664,350
2,960,000		Stars Group Holdings B.V./Stars Group U.S. Co-Borrower LLC (USD) (b)		7.00%		07/15/26		3,011,800
								9,724,034
		Media – 2.3%
3,815,000		Altice France S.A./France (USD) (b)		6.25%		05/15/24		3,671,937
1,200,000		Altice Luxembourg S.A. (USD) (a) (b)		7.75%		05/15/22		1,122,000
3,695,000		UPCB Finance IV Ltd. (USD) (b)		5.38%		01/15/25		3,604,473
1,000,000		Virgin Media Finance PLC (USD) (b)		6.00%		10/15/24		981,550
2,800,000		Virgin Media Finance PLC (GBP)		6.38%		10/15/24		3,704,224
								13,084,184
		Retail – 0.4%
2,720,000		1011778 BC ULC/New Red Finance, Inc. (USD) (b)		4.25%		05/15/24		2,563,600
		Services – 1.9%
700,000		Darling Global Finance BV (EUR) (b)		3.63%		05/15/26		807,693
3,540,000		GFL Environmental, Inc. (USD) (b)		5.63%		05/01/22		3,380,700
630,000		GFL Environmental, Inc. (USD) (a) (b)		5.38%		03/01/23		579,600
3,940,000		Ritchie Bros. Auctioneers, Inc. (USD) (a) (b)		5.38%		01/15/25		3,900,600
1,985,000		Travelport Corporate Finance PLC (USD) (b)		6.00%		03/15/26		1,994,925
								10,663,518
		Technology & Electronics – 1.0%
2,500,000		NXP B.V./NXP Funding LLC (USD) (a) (b)		4.63%		06/01/23		2,484,375
3,060,000		Sensata Technologies UK Financing Co., PLC (USD) (a) (b)		6.25%		02/15/26		3,128,850
								5,613,225
		Telecommunications – 1.4%
2,225,000		DKT Finance ApS (USD) (b)		9.38%		06/17/23		2,344,594
3,540,000		Telecom Italia Capital S.A. (USD) (a)		7.72%		06/04/38		3,601,950
2,300,000		VEON Holdings B.V. (USD) (b)		4.95%		06/16/24		2,182,861
								8,129,405
		Total Foreign Corporate Bonds and Notes						149,019,883
		(Cost $151,098,690)
Par Amount (Local Currency)		Description		Stated Rate		Stated Maturity		Value (US Dollars)
CAPITAL PREFERRED SECURITIES – 6.0%
		Automotive – 0.8%
4,935,000		General Motors Financial Co., Inc., Series A (USD) (a) (c)		5.75%		(e)		4,456,206
		Banking – 3.1%
2,940,000		Bank of America Corp., Series DD (USD) (c)		6.30%		(e)		3,105,375
4,475,000		Citigroup, Inc., Series M (USD) (c)		6.30%		(e)		4,453,744
2,775,000		Dresdner Funding Trust I (USD) (a) (b)		8.15%		06/30/31		3,455,030
5,370,000		Goldman Sachs Group (The), Inc., Series P (USD) (c)		5.00%		(e)		4,953,825
900,000		HBOS Capital Funding L.P. (GBP) (c)		6.46%		(e)		1,155,102

See Notes to Financial Statements

Page 13

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments (Continued)

October 31, 2018

Par Amount (Local Currency)		Description		Stated Rate		Stated Maturity		Value (US Dollars)
CAPITAL PREFERRED SECURITIES (Continued)
		Banking (Continued)
795,000		RBS Capital Trust II (USD) (c)		6.43%		(e)		$953,006
								18,076,082
		Capital Goods – 0.5%
3,210,000		Textron Financial Corp., 3 Mo. LIBOR + 1.74% (USD) (b) (d)		4.05%		02/15/42		2,752,575
		Insurance – 1.6%
6,950,000		Hartford Financial Services Group (The), Inc., 3 Mo. LIBOR + 2.13% (USD) (a) (b) (d)		4.44%		02/12/47		6,411,375
3,500,000		Lincoln National Corp., 3 Mo. LIBOR + 2.36% (USD) (a) (d)		4.67%		05/17/66		3,211,250
								9,622,625
		Total Capital Preferred Securities						34,907,488
		(Cost $35,572,954)
Principal Value		Description		Rate (f)		Stated Maturity (g)		Value
SENIOR FLOATING-RATE LOAN INTERESTS – 1.5%
		Consumer Goods – 0.3%
$2,100,000		United Natural Foods, Inc., 1 Mo. LIBOR + 4.25%, 0.00% Floor		6.55%		10/22/25		1,966,125
		Energy – 0.2%
990,188		Crestwood Holdings LLC, Term Loan B, 1 Mo. LIBOR + 7.50%, 0.00% Floor		9.79%		03/06/23		985,653
		Healthcare – 1.0%
5,997,883		Ortho-Clinical Term Loan B3, 1 Mo. LIBOR + 3.25%, 0.00% Floor		5.54%		06/30/25		5,975,391
		Total Senior Floating-Rate Loan Interests						8,927,169
		(Cost $8,985,234)
Principal Value		Description		Stated Coupon		Stated Maturity		Value
MORTGAGE-BACKED SECURITIES – 0.8%
		Collateralized Mortgage Obligations – 0.2%
		Washington Mutual Alternative Mortgage Pass-Through Certificates
23,993		Series 2007-5, Class A11, 1 Mo. LIBOR x -6 + 39.48% (h)		25.79%		06/25/37		37,640
		Wells Fargo Mortgage Backed Securities
990,617		Series 2006-AR7 Trust, Class 2A4 (i)		4.32%		05/25/36		1,017,022
								1,054,662
		Commercial Mortgage-Backed Securities – 0.6%
		Securitized Asset Backed Receivables LLC Trust
7,674,533		Series 2006-FR4, Class A2A, 1 Mo. LIBOR + 0.08% (d)		2.30%		08/25/36		3,330,731
		Total Mortgage-Backed Securities						4,385,393
		(Cost $6,050,890)
ASSET-BACKED SECURITIES – 0.1%
		Keycorp Student Loan Trust,
437,412		Series 2000-A, Class A2, 3 Mo. LIBOR + 0.32% (d)		2.65%		05/25/29		436,143
		(Cost $413,366)
STRUCTURED NOTES – 0.0%
5,750,000		Preferred Term Securities XXV, Ltd. (j) (k) (l)		(m)		06/22/37		0

Page 14

See Notes to Financial Statements

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments (Continued)

October 31, 2018

Principal Value		Description		Stated Coupon		Stated Maturity		Value
STRUCTURED NOTES (Continued)
$2,500,000		Preferred Term Securities XXVI, Ltd. (j) (k) (l)		(m)		09/22/37		$0
		Total Structured Notes						0
		(Cost $0)

    

Shares		Description		Value
COMMON STOCKS – 0.1%
		Energy – 0.0%
7		Thunderbird Resources Equity, Inc. (k) (l) (n) (o)		108,110
		Utility – 0.1%
13,918		Vistra Energy Corp. (o)		314,965
		Total Common Stocks		423,075
		(Cost $997,888)
RIGHTS – 0.0%
		Utility – 0.0%
13,918		Vistra Energy Corp. (n) (o)		11,246
22,783		Vistra Energy Corp. Claim (k) (l) (n) (o)		0
		Total Rights		11,246
		(Cost $23,512)
PREFERRED SECURITIES – 0.0%
4,000,000		Soloso CDO, Ltd. (j) (k) (l) (m)		0
		(Cost $0)

    

		Total Investments – 127.0%						734,437,844
		(Cost $753,874,151) (p)
Principal Value		Description		Stated Coupon		Stated Maturity		Value
U.S. GOVERNMENT BONDS SOLD SHORT - (21.8)%
(101,950,000)		United States Treasury Note		1.38%		09/30/23		(94,455,126)
(32,000,000)		United States Treasury Note		2.88%		05/31/25		(31,640,625)
		Total U.S. Government Bonds Sold Short						(126,095,751)
		(Proceeds $130,967,755)
CORPORATE BONDS SOLD SHORT – (1.6)%
		Energy – (0.8)%
(2,400,000)		Noble Energy, Inc.		4.15%		12/15/21		(2,418,879)
(2,100,000)		Noble Energy, Inc.		3.90%		11/15/24		(2,043,836)
								(4,462,715)
		Media – (0.8)%
(5,145,000)		Netflix, Inc.		4.38%		11/15/26		(4,752,694)
		Total Corporate Bonds Sold Short						(9,215,409)
		(Proceeds $9,150,271)
		Total Investments Sold Short – (23.4)%						(135,311,160)
		(Proceeds $140,118,026)

    

	Outstanding Loan – (6.3)%		(36,664,548)
	Net Other Assets and Liabilities – 2.7%		15,898,039
	Net Assets – 100.0%		$578,360,175

    

See Notes to Financial Statements

Page 15

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments (Continued)

October 31, 2018

Forward Foreign Currency Contracts
Settlement Date		Counterparty		Amount Purchased			Amount Sold			Purchase Value as of 10/31/2018		Sale Value as of 10/31/2018		Unrealized Appreciation/ (Depreciation)
11/01/18		JPM		USD	3,890,187		EUR	3,306,000		$ 3,890,187		$ 3,744,819		$ 145,368
02/01/19		JPM		USD	3,775,945		EUR	3,294,000		3,775,945		3,763,694		12,251
11/01/18		JPM		USD	7,878,103		GBP	5,963,000		7,878,103		7,622,246		255,857
02/01/19		JPM		USD	7,674,118		GBP	5,994,000		7,674,118		7,699,993		(25,875)
Net Unrealized Appreciation (Depreciation)														$387,601

    

Counterparty Abbreviations
JPM	JPMorgan Chase

See Note 2F – Forward Foreign Currency Contracts in the Notes to Financial Statements.

(a)	This security or a portion of this security is segregated as collateral for investments sold short.
(b)	This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be liquid by MacKay Shields LLC, the Fund’s sub-advisor (the “Sub-Advisor”). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At October 31, 2018, securities noted as such amounted to $374,364,580 of total investments or 64.7% of net assets.
(c)	Fixed-to-floating or fixed-to-variable rate security. The interest rate shown reflects the fixed rate in effect at October 31, 2018. At a predetermined date, the fixed rate will change to a floating rate or a variable rate.
(d)	Floating or variable rate security.
(e)	Perpetual maturity.
(f)	Senior Floating-Rate Loan Interests (“Senior Loans”) in which the Fund invests pay interest at rates which are periodically predetermined by reference to a base lending rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the LIBOR, (ii) the prime rate offered by one or more United States banks or (iii) the certificate of deposit rate. Certain Senior Loans are subject to a LIBOR floor that establishes a minimum LIBOR rate.
(g)	Senior Loans generally are subject to mandatory and/or optional prepayment. As a result, the actual remaining maturity of Senior Loans may be substantially less than the stated maturities shown.
(h)	Inverse floating rate security.
(i)	Collateral Strip Rate security. Interest is based on the weighted net interest rate of the investment’s underlying collateral. The interest rate resets periodically.
(j)	This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the 1933 Act, and may be resold in transactions exempt from registration, normally to qualified institutional buyers (see Note 2D - Restricted Securities in the Notes to Financial Statements).
(k)	This security is fair valued by the Advisor’s Pricing Committee in accordance with procedures adopted by the Fund’s Board of Trustees, and in accordance with the provisions of the Investment Company Act of 1940, as amended. At October 31, 2018, securities noted as such are valued at $108,110 or 0.0% of net assets.
(l)	This security’s value was determined using significant unobservable inputs (see Note 2A – Portfolio Valuation in the Notes to Financial Statements).
(m)	Zero coupon security.
(n)	Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be illiquid by the Fund’s Sub-Advisor.
(o)	Non-income producing security.
(p)	Aggregate cost for federal income tax purposes was $624,507,773. As of October 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $16,298,156 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $41,291,644. The net unrealized depreciation was $24,993,488. The amounts presented are inclusive of investments sold short and derivative contracts.

    

CDO	Collateralized Debt Obligation
EUR	Euro
GBP	British Pound Sterling
LIBOR	London Interbank Offered Rate
USD	United States Dollar

Page 16

See Notes to Financial Statements

First Trust High Income Long/Short Fund (FSD)

Portfolio of Investments (Continued)

October 31, 2018

Valuation Inputs

A summary of the inputs used to value the Fund’s investments as of October 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):

ASSETS TABLE
	Total Value at 10/31/2018	Level 1 Quoted Prices	Level 2 Significant Observable Inputs	Level 3 Significant Unobservable Inputs
Corporate Bonds and Notes*	$ 536,327,447	$ —	$ 536,327,447	$ —
Foreign Corporate Bonds and Notes*	149,019,883	—	149,019,883	—
Capital Preferred Securities*	34,907,488	—	34,907,488	—
Senior Floating-Rate Loan Interests*	8,927,169	—	8,927,169	—
Mortgage-Backed Securities	4,385,393	—	4,385,393	—
Asset-Backed Securities	436,143	—	436,143	—
Structured Notes	—**	—	—	—**
Common Stocks:
Energy	108,110	—	—	108,110
Utility	314,965	314,965	—	—
Rights*	11,246	—	11,246	—**
Preferred Securities	—**	—	—	—**
Total Investments	734,437,844	314,965	734,014,769	108,110
Forward Foreign Currency Contracts	413,476	—	413,476	—
Total	$ 734,851,320	$ 314,965	$ 734,428,245	$ 108,110
LIABILITIES TABLE
	Total Value at 10/31/2018	Level 1 Quoted Prices	Level 2 Significant Observable Inputs	Level 3 Significant Unobservable Inputs
U.S. Government Bonds Sold Short	$ (126,095,751)	$ —	$ (126,095,751)	$ —
Corporate Bonds Sold Short*	(9,215,409)	—	(9,215,409)	—
Forward Foreign Currency Contracts	(25,875)	—	(25,875)	—
Total	$ (135,337,035)	$—	$ (135,337,035)	$—

    

*	See Portfolio of Investments for industry breakout.
**	Investment is valued at $0.

All transfers in and out of the Levels during the period are assumed to occur on the last day of the period at their current value. During the period ended October 31, 2018, the Fund acquired Level 3 common stocks valued at $108,110 and Level 3 structured notes, rights and preferred securities valued at $0. The acquisition of the Level 3 securities is due to the merger of the First Trust Strategic High Income Fund II (“FHY”), a closed-end fund managed by First Trust Advisors L.P., with and into the Fund (see Note 4 – Merger in the Notes to Financial Statements).

Level 3 Structured Notes, Preferred Securities and Rights are fair valued by the Advisor’s Pricing Committee. These values are based on unobservable and non-quantitative inputs.

See Notes to Financial Statements

Page 17

First Trust High Income Long/Short Fund (FSD)

Statement of Assets and Liabilities

October 31, 2018

ASSETS:
Investments, at value (Cost $753,874,151)	$ 734,437,844
Cash	2,577,351
Foreign currency (Cost $177,742)	172,895
Unrealized appreciation on forward foreign currency contracts	413,476
Receivables:
Interest	11,350,992
Investment securities sold	6,033,702
Margin interest rebate	81,251
Prepaid expenses	5,250
Total Assets	755,072,761
LIABILITIES:
Borrowings	36,664,548
Investments sold short, at value (proceeds $140,118,026)	135,311,160
Unrealized depreciation on forward foreign currency contracts	25,875
Payables:
Investment securities purchased	3,182,977
Interest expense on investments sold short	689,938
Investment advisory fees	498,027
Margin interest expense	167,008
Audit and tax fees	60,001
Shareholder reporting fees	44,450
Administrative fees	38,696
Custodian fees	21,641
Transfer agent fees	2,874
Legal fees	2,339
Trustees’ fees and expenses	1,327
Financial reporting fees	771
Other liabilities	954
Total Liabilities	176,712,586
NET ASSETS	$578,360,175
NET ASSETS consist of:
Paid-in capital	$ 681,215,432
Par value	349,030
Accumulated distributable earnings (loss)	(103,204,287)
NET ASSETS	$578,360,175
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)	$16.57
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized)	34,903,005

Page 18

See Notes to Financial Statements

First Trust High Income Long/Short Fund (FSD)

Statement of Operations

For the Year Ended October 31, 2018

INVESTMENT INCOME:
Interest		$ 40,235,211
Margin interest rebate		1,787,802
Other		300,852
Total investment income		42,323,865
EXPENSES:
Investment advisory fees		5,505,392
Margin interest expense		3,464,034
Interest expense on investments sold short		2,431,447
Administrative fees		301,333
Shareholder reporting fees		115,366
Custodian fees		74,359
Audit and tax fees		55,130
Listing expense		32,889
Legal fees		28,369
Transfer agent fees		26,521
Trustees’ fees and expenses		16,642
Financial reporting fees		9,250
Other		46,971
Total expenses		12,107,703
NET INVESTMENT INCOME (LOSS)		30,216,162
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments		6,088,765
Forward foreign currency contracts		254,220
Foreign currency transactions		89,465
Investments sold short		261,376
Net realized gain (loss)		6,693,826
Net change in unrealized appreciation (depreciation) on:
Investments		(52,502,767)
Forward foreign currency contracts		355,976
Foreign currency translation		(8,276)
Investments sold short		4,283,423
Net change in unrealized appreciation (depreciation)		(47,871,644)
NET REALIZED AND UNREALIZED GAIN (LOSS)		(41,177,818)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS		$(10,961,656)

See Notes to Financial Statements

Page 19

First Trust High Income Long/Short Fund (FSD)

Statements of Changes in Net Assets

	Year Ended 10/31/2018		Year Ended 10/31/2017
OPERATIONS:
Net investment income (loss)	$ 30,216,162		$ 34,918,617
Net realized gain (loss)	6,693,826		7,455,441
Net change in unrealized appreciation (depreciation)	(47,871,644)		21,272,286
Net increase (decrease) in net assets resulting from operations	(10,961,656)		63,646,344
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment operations	(30,907,135)
Net investment income			(36,417,879)
Return of capital	(11,822,468)		(11,394,759)
Total distributions to shareholders	(42,729,603)		(47,812,638)
CAPITAL TRANSACTIONS:
Proceeds from Common Shares acquired through merger	96,061,971		—
Purchase of Common Shares pursuant to a tender offer *	—		(93,689,849)
Repurchase of Common Shares **	(10,057,633)		(205,540)
Net increase (decrease) in net assets resulting from capital transactions	86,004,338		(93,895,389)
Total increase (decrease) in net assets	32,313,079		(78,061,683)
NET ASSETS:
Beginning of period	546,047,096		624,108,779
End of period	$ 578,360,175		$ 546,047,096
Accumulated net investment income (loss) at end of period			$539,374
CAPITAL TRANSACTIONS were as follows:
Common Shares at beginning of period	29,947,157		35,245,603
Common shares acquired through merger	5,637,721		—
Common Shares purchased pursuant to a tender offer *	—		(5,284,792)
Common Shares repurchased **	(681,873)		(13,654)
Common Shares at end of period	34,903,005		29,947,157

    

*

On June 14, 2017, the Fund commenced a tender offer for up to 15% of its outstanding common shares for cash at a price per share equal to 98% of the net asset value per share determined on the expiration date. The Fund’s tender offer expired at 5:00 p.m. New York City time on Thursday, July 13, 2017. Because the Fund’s tender offer was oversubscribed, the Fund repurchased 5,284,792 (15%) of its outstanding common shares on a pro-rata basis based on the number of shares properly tendered.

**

On September 15, 2015, the Fund commenced a share repurchase program. The program originally expired on March 15, 2016, but the Board of Trustees of the Fund has subsequently authorized the continuation of the Fund’s share repurchase program until March 15, 2019. For the year ended October 31, 2018, the fund repurchased 681,873 of its shares at a weighted-average discount of 13.03% from net asset value per share. For the year ended October 31, 2017, the Fund repurchased 13,654 of its shares at a weighted-average discount of 13.69% from net asset value per share. The Fund expects to continue to repurchase its outstanding shares until the earlier of (i) the repurchase of an additional 296,725 common shares (for an aggregate of 1,802,808), or (ii) March 15, 2019.

Page 20

See Notes to Financial Statements

First Trust High Income Long/Short Fund (FSD)

Statement of Cash Flows

For the Year Ended October 31, 2018

Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$(10,961,656)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities:
Purchases of investments	(224,360,011)
Borrowed investments sold short	47,696,828
Sales, maturities and paydown of investments	208,566,575
Borrowed investments purchased	(15,290,452)
Net amortization/accretion of premiums/discounts on investments	136,530
Net realized gain/loss on investments	(6,088,765)
Net realized gain/loss on investments sold short	(261,376)
Net change in unrealized appreciation/depreciation on investments	52,502,767
Net change in unrealized appreciation/depreciation on forward foreign currency contracts	(355,976)
Net change in unrealized appreciation/depreciation on investments sold short	(4,283,423)
Changes in assets and liabilities:
Increase in interest receivable	(1,878,209)
Increase in margin interest rebate receivable	(81,251)
Decrease in miscellaneous receivable	16,998
Decrease in prepaid expenses	7,027
Increase in interest payable on investments sold short	387,133
Decrease in due to broker	(133,785)
Increase in investment advisory fees payable	35,046
Increase in audit and tax fees payable	2,801
Decrease in legal fees payable	(1,155)
Increase in shareholder reporting fees payable	5,905
Increase in administrative fees payable	228
Increase in custodian fees payable	2,917
Decrease in transfer agent fees payable	(1,093)
Decrease in Trustees’ fees and expenses payable	(39)
Increase in margin interest expense payable	167,008
Decrease in other liabilities payable	(563)
Cash provided by operating activities		$45,830,009
Cash flows from financing activities:
Repurchase of Common Shares	(10,057,633)
Distributions to Common Shareholders from investment operations	(30,907,135)
Distributions to Common Shareholders from return of capital	(11,822,468)
Cash received in merger (a)	944,259
Net proceeds from borrowing	8,418,837
Cash used in financing activities		(43,424,140)
Increase in cash and foreign currency (b)		2,405,869
Cash and foreign currency at beginning of period		344,377
Cash and foreign currency at end of period		$2,750,246
Supplemental disclosure of cash flow information:
Cash paid during the period for interest and fees		$5,341,340
Non-cash purchase of investments acquired through the merger (a)		$95,117,712

    

(a)	See Note 4 - Merger in the Notes to Financial Statements.
(b)	Includes net change in unrealized appreciation (depreciation) on foreign currency of $(8,276).

See Notes to Financial Statements

Page 21

First Trust High Income Long/Short Fund (FSD)

Financial Highlights

For a Common Share outstanding throughout each period

	Year Ended October 31,
	2018		2017		2016		2015		2014
Net asset value, beginning of period	$ 18.23		$ 17.71		$ 17.28		$ 19.47		$ 19.63
Income from investment operations:
Net investment income (loss)	0.96		1.04		1.00		1.11		1.31
Net realized and unrealized gain (loss)	(1.32)		0.83		0.44		(2.05)		(0.15)
Total from investment operations	(0.36)		1.87		1.44		(0.94)		1.16
Distributions paid to shareholders from:
Net investment income	(0.98)		(1.07)		(1.06)		(1.26)		(1.32)
Return of capital	(0.37)		(0.34)		—		—		—
Total distributions paid to Common Shareholders	(1.35)		(1.41)		(1.06)		(1.26)		(1.32)
Common Share repurchases	0.05		0.00 (a)		0.05		0.01		—
Tender offer purchases	—		0.06		—		—		—
Net asset value, end of period	$16.57		$18.23		$17.71		$17.28		$19.47
Market value, end of period	$13.91		$16.91		$15.52		$14.96		$17.19
Total return based on net asset value (b)	(0.82)%		11.98%		10.24%		(3.89)%		6.86%
Total return based on market value (b)	(10.24)%		18.52%		11.58%		(5.76)%		5.12%
Ratios to average net assets/supplemental data:
Net assets, end of period (in 000’s)	$ 578,360		$ 546,047		$ 624,109		$ 620,309		$ 701,955
Ratio of total expenses to average net assets	2.20%		1.86%		1.54%		1.66%		1.75%
Ratio of total expenses to average net assets excluding interest expense	1.13%		1.19%		1.16%		1.21%		1.26%
Ratio of net investment income (loss) to average net assets	5.48%		5.76%		5.92%		6.05%		6.59%
Portfolio turnover rate	29%		39%		36%		26%		28%

    

(a)

Amount is less than $0.01.

(b)

Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan, and changes in net asset value per share for net asset value returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results.

Page 22

See Notes to Financial Statements

Notes to Financial Statements

First Trust High Income Long/Short Fund (FSD)

October 31, 2018

1. Organization

First Trust High Income Long/Short Fund (the “Fund”) is a diversified, closed-end management investment company organized as a Massachusetts business trust on June 18, 2010, and is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund trades under the ticker symbol FSD on the New York Stock Exchange (“NYSE”).

The Fund’s primary investment objective is to provide current income. The Fund’s secondary objective is capital appreciation. The Fund seeks to achieve its investment objectives by investing, under normal market conditions, a majority of its assets in a diversified portfolio of U.S. and foreign (including emerging markets) high-yield corporate fixed-income securities of varying maturities that are rated below-investment grade at the time of purchase. For purposes of this strategy, “corporate fixed-income securities” include corporate bonds, debentures, notes, commercial paper and other similar types of corporate debt instruments, including instruments issued by corporations with direct or indirect government ownership, as well as asset-backed securities, preferred shares, senior floating-rate loan participations, commitments and assignments (“Senior Loans”)⁽¹⁾, payment-in-kind securities, zero-coupon bonds, bank certificates of deposit, fixed time deposits, bankers’ acceptances and derivative instruments that provide the same or similar economic impact as a physical investment in the above securities. Below-investment grade fixed-income securities are commonly referred to as “high-yield” or “junk” bonds and are considered speculative with respect to the issuer’s capacity to pay interest and repay principal. As part of its investment strategy, the Fund intends to maintain both long and short positions in securities under normal market conditions. The Fund will take long positions in securities that MacKay Shields LLC (“MacKay” or the “Sub-Advisor”) believes offer the potential for attractive returns and that it considers in the aggregate to have the potential to outperform the Fund’s benchmark, the ICE BofAML US High Yield Constrained Index (the “Index”). The Fund will take short positions in securities that the Sub-Advisor believes in the aggregate will underperform the Index. The Fund’s long positions, either directly or through derivatives, may total up to 130% of the Fund’s Managed Assets. The Fund’s short positions, either directly or through derivatives, may total up to 30% of the Fund’s Managed Assets. “Managed Assets” means the average daily gross asset value of the Fund (which includes the principal amount of any borrowings), minus the sum of the Fund’s liabilities. There can be no assurance that the Fund will achieve its investment objectives. 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 (“FASB”) Accounting Standards Codification (“ASC”) 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 net asset value (“NAV”) of the Common Shares of the Fund is determined daily as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund’s NAV per Common Share is calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses, dividends declared but unpaid and any borrowings of the Fund), by the total number of Common Shares outstanding.

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

Corporate bonds, notes, capital preferred securities, U.S. government securities, mortgage-backed securities, asset-backed securities and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the Fund’s Board of Trustees, which may use the following valuation inputs when available:

1)	benchmark yields;

(1)	The terms “security” and “securities” used throughout the Notes to Financial Statements include Senior Loans.

Page 23

Notes to Financial Statements (Continued)

First Trust High Income Long/Short Fund (FSD)

October 31, 2018

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

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

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

The Senior Loans held in the Fund are not listed on any securities exchange or board of trade. Senior Loans are typically bought and sold by institutional investors in individually negotiated private transactions that function in many respects like an over-the-counter secondary market, although typically no formal market-makers exist. This market, while having grown substantially since its inception, generally has fewer trades and less liquidity than the secondary market for other types of securities. Some Senior Loans have few or no trades, or trade infrequently, and information regarding a specific Senior Loan may not be widely available or may be incomplete. Accordingly, determinations of the market value of Senior Loans may be based on infrequent and dated information. Because there is less reliable, objective data available, elements of judgment may play a greater role in valuation of Senior Loans than for other types of securities. Typically, Senior Loans are fair valued using information provided by a third-party pricing service. The third-party pricing service primarily uses over-the-counter pricing from dealer runs and broker quotes from indicative sheets to value the Senior Loans.

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

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

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

Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Fund’s Board of Trustees or its delegate, the Advisor’s Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended (the “1933 Act”)) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of 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 fundamental business data relating to the borrower/issuer;

Page 24

Notes to Financial Statements (Continued)

First Trust High Income Long/Short Fund (FSD)

October 31, 2018

2)	an evaluation of the forces which influence the market in which these securities are purchased and sold;
3)	the type, size and cost of the security;
4)	the financial statements of the borrower/issuer;
5)	the credit quality and cash flow of the borrower/issuer, based on the Sub-Advisor’s or external analysis;
6)	the information as to any transactions in or offers for the security;
7)	the price and extent of public trading in similar securities (or equity securities) of the issuer/borrower, or comparable companies;
8)	the coupon payments;
9)	the quality, value and salability of collateral, if any, securing the security;
10)	the business prospects of the borrower/issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the borrower’s/issuer’s management;
11)	the prospects for the borrower’s/issuer’s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry;
12)	the borrower’s/issuer’s competitive position within the industry;
13)	the borrower’s/issuer’s ability to access additional liquidity through public and/or private markets; and
14)	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, 2018, is included with the Fund’s Portfolio of Investments.

B. Securities Transactions and Investment Income

Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded daily on the accrual basis. Amortization of premiums and accretion of discounts are recorded using the effective interest method.

Securities purchased or sold on a when-issued, delayed-delivery or forward purchase commitment basis may have extended settlement periods. The value of the security so purchased is subject to market fluctuations during this period. The Fund maintains liquid assets with a current value at least equal to the amount of its when-issued, delayed-delivery or forward purchase commitments until payment is made. At October 31, 2018, the Fund had no when-issued, delayed-delivery or forward purchase commitments.

C. Unfunded Loan Commitments

The Fund may enter into certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrower’s discretion. The Fund had no unfunded delayed draw term loan commitments as of October 31, 2018.

Page 25

Notes to Financial Statements (Continued)

First Trust High Income Long/Short Fund (FSD)

October 31, 2018

D. Restricted Securities

The Fund invests in restricted securities, which are securities that may not be offered for public sale without first being registered under the 1933 Act. Prior to registration, restricted securities may only be resold in transactions exempt from registration under Rule 144A under the 1933 Act, normally to qualified institutional buyers. As of October 31, 2018, the Fund held restricted securities as shown in the following table that the Sub-Advisor has deemed illiquid pursuant to procedures adopted by the Fund’s Board of Trustees. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security-specific factors and assumptions, which require subjective judgment. The Fund does not have the right to demand that such securities be registered. These securities are valued according to the valuation procedures as stated in the Portfolio Valuation note (Note 2A) and are not expressed as a discount to the carrying value of a comparable unrestricted security. There are no unrestricted securities with the same maturity dates and yields for these issuers.

Security	Acquisition Date	Principal Value/Shares	Current Price	Carrying Cost		Value		% of Net Assets
Preferred Term Securities XXV, Ltd., 06/22/37	03/27/07	$5,750,000	$0.00	$0		$0		0.00%
Preferred Term Securities XXVI, Ltd., 09/22/37	06/06/07	$2,500,000	0.00	0		0		0.00
Soloso CDO, Ltd.	04/24/06	$4,000,000	0.00	0		0		0.00
				$0		$0		0.00%

E. Collateralized Debt Obligations

A collateralized debt obligation (“CDO”) is an asset-backed security whose underlying collateral is typically a portfolio of bonds or bank loans. Where the underlying collateral is a portfolio of bonds, a CDO is referred to as a collateralized bond obligation (“CBO”). Where the underlying collateral is a portfolio of bank loans, a CDO is referred to as a collateralized loan obligation (“CLO”). Investors in CDOs bear the credit risk of the underlying collateral. Multiple tranches of securities are issued by the CDO, offering investors various maturity and credit risk characteristics. Tranches are categorized as senior, mezzanine, and subordinated/equity, according to their degree of risk. If there are defaults or the CDO’s collateral otherwise underperforms, scheduled payments to senior tranches take precedence over those of mezzanine tranches, and scheduled payments to mezzanine tranches take precedence over those to subordinated/equity tranches. CDOs, similar to other asset-backed securities, are subject to prepayment risk.

F. Forward Foreign Currency Contracts

The Fund is subject to foreign currency risk in the normal course of pursuing its investment objectives. Forward foreign currency contracts are agreements between two parties (“Counterparties”) to exchange one currency for another at a future date and at a specified price. The Fund uses forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund’s foreign currency exposure. These contracts are valued daily, and the Fund’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included in “Unrealized appreciation on forward foreign currency contracts” and “Unrealized depreciation on forward foreign currency contracts” on the Statement of Assets and Liabilities. The change in unrealized appreciation (depreciation) is included in “Net change in unrealized appreciation (depreciation) on forward foreign currency contracts” on the Statement of Operations. When the forward contract is closed, a Fund records a realized gain or loss equal to the difference between the proceeds from (or the cost of) the closing transaction and the Fund’s basis in the contract. This realized gain or loss is included in “Net realized gain (loss) on forward foreign currency contracts” on the Statement of Operations. Risks arise from the possible inability of Counterparties to meet the terms of their contracts and from movement in currency, securities values and interest rates. Due to the risks, the Fund could incur losses in excess of the net unrealized value shown on the Forward Foreign Currency Contracts table in the Portfolio of Investments. In the event of default by the Counterparty, the Fund will provide notice to the Counterparty of the Fund’s intent to convert the currency held by the Fund into the currency that the Counterparty agreed to exchange with the Fund. If a Counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances.

G. Foreign Currency

The books and records of the Fund are maintained in U.S. dollars. Foreign currencies, investments and other assets and liabilities are translated into U.S. dollars at the exchange rates prevailing at the end of the period. Purchases and sales of investments and items of income and expense are translated on the respective dates of such transactions. Unrealized gains and losses on assets and liabilities, other than investments in securities, which result from changes in foreign currency exchange rates have been included in “Net change in unrealized appreciation (depreciation) on foreign currency translation” on the Statement of Operations. Unrealized gains and losses

Page 26

Notes to Financial Statements (Continued)

First Trust High Income Long/Short Fund (FSD)

October 31, 2018

on investments in securities which result from changes in foreign exchange rates are included with fluctuations arising from changes in market price and are shown in “Net change in unrealized appreciation (depreciation) on investments” on the Statement of Operations. Net realized foreign currency gains and losses include the effect of changes in exchange rates between trade date and settlement date on investment security transactions, foreign currency transactions and interest and dividends received and are shown in “Net realized gain (loss) on foreign currency transactions” on the Statement of Operations. The portion of foreign currency gains and losses related to fluctuation in exchange rates between the initial purchase settlement date and subsequent sale trade date is included in “Net realized gain (loss) on investments” on the Statement of Operations.

H. 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 purchasing or borrowing securities on margin. At October 31, 2018, the Fund had $36,664,548 in borrowings, which approximates fair value, associated with investments sold short as shown in “Borrowings” on the Statement of Assets and Liabilities. The borrowings are categorized as Level 2 within the fair value hierarchy. At October 31, 2018, the Fund had $135,311,160 of investments sold short as shown in “Investments sold short, at value” on the Statement of Assets and Liabilities. The Fund is charged interest on debt margin balances at a rate equal to the Overnight Bank Funding Rate plus 75 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 Overnight Bank Funding Rate less 35 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 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. At October 31, 2018, the Fund had a debit margin balance of $172,196,257 with an interest rate of 2.94%. For the fiscal year ended October 31, 2018, the Fund had margin interest rebate of $1,787,802 and margin interest expense of $3,464,034, as shown on the Statement of Operations. For the fiscal year ended October 31, 2018, the average margin balance and interest rate were $140,136,373 and 2.41%, respectively.

I. Dividends and Distributions to Shareholders

Level dividend distributions are declared and paid monthly to Common Shareholders after the payment of interest and/or dividends in connection with leverage. The level dividend rate may be modified by the Board of Trustees from time to time. If, for any monthly distribution, net investment company taxable income, if any (which term includes net short-term capital gain), is less than the amount of the distribution, the difference will generally be a tax-free return of capital distributed from the Fund’s assets. Distributions of any net long-term capital gains earned by the Fund are distributed at least annually. Distributions will automatically be reinvested into additional Common Shares pursuant to the Fund’s Dividend Reinvestment Plan unless cash distributions are elected by the shareholder.

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 point in the future. Permanent differences incurred during the fiscal year ended October 31, 2018, resulting in book and tax accounting differences, have been reclassified at year end to reflect an increase in accumulated net investment income (loss) of $212,557, a decrease in accumulated net realized gain (loss) of $38,436,836 and an increase to paid-in capital of $38,224,279. Accumulated distributable earnings (loss) consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments, and unrealized appreciation (depreciation) on investments. Net assets were not affected by this reclassification.

The tax character of distributions paid by the Fund during the fiscal years ended October 31, 2018 and 2017, was as follows:

Page 27

Notes to Financial Statements (Continued)

First Trust High Income Long/Short Fund (FSD)

October 31, 2018

Distributions paid from:	2018	2017
Ordinary income	$30,907,135	$36,417,879
Capital gains	—	—
Return of capital	11,822,468	11,394,759

As of October 31, 2018, the components of distributable earnings and net assets on a tax basis were as follows:

Undistributed ordinary income	$—
Undistributed capital gains	—
Total undistributed earnings	—
Accumulated capital and other losses	(78,210,059)
Net unrealized appreciation (depreciation)	(23,659,593)
Total accumulated earnings (losses)	(101,869,652)
Other	—
Paid-in capital	680,229,827
Total net assets	$578,360,175

J. Income and Other 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.

Under the Regulated Investment Company Modernization Act of 2010 (the “Act”), net capital losses arising in taxable years after December 22, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for up to eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. At October 31, 2018, the Fund had no pre-enactment net capital losses for federal income tax purposes. At October 31, 2018, the Fund had post-enactment net capital losses for federal income tax purposes of $78,210,059 to be carried forward indefinitely.

Of these losses, $27,151,412 is subject to loss limitation resulting from reorganization activity. This limitation generally reduces the utilization of these losses to a maximum of $2,219,032 per year.

During the taxable year ended October 31, 2018, the Fund utilized capital loss carryforwards of $6,815,218.

The Fund is subject to certain limitations under the 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.

Certain losses realized during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended October 31, 2018, the Fund did not incur any net ordinary losses.

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 2015, 2016, 2017, and 2018 remain open to federal and state audit. As of October 31, 2018, 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.

K. Expenses

The Fund will pay all expenses directly related to its operations.

L. New Accounting Pronouncements

On March 30, 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-08 “Premium Amortization on Purchased Callable Debt Securities,” which amends the amortization period for certain purchased callable debt securities held at a premium by shortening such period to the earliest call date. The new guidance requires an entity to amortize the premium on a callable debt security within its scope to the earliest call date, unless the guidance for considering estimated prepayments is applied. If the call option is not exercised

Page 28

Notes to Financial Statements (Continued)

First Trust High Income Long/Short Fund (FSD)

October 31, 2018

at the earliest call date, the yield is reset to the effective yield using the payment terms of the security. If the security has more than one call date and the premium was amortized to a call price greater than the next call price, any excess of the amortized cost basis over the amount repayable at the next call date will be amortized to that date. If there are no other call dates, any excess of the amortized cost basis over the par amount will be amortized to maturity. Discounts on purchased callable debt securities will continue to be amortized to the security’s maturity date. ASU 2017-08 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Earlier adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the ASU in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. Management is still assessing the impact of the adoption of ASU 2017-08 on the financial statements but does not expect it to have a material impact.

On August 28, 2018, the FASB issued ASU 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement,” which amends the fair value measurement disclosure requirements of ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified disclosure requirements of ASC 820. In addition, the amendments clarify that materiality is an appropriate consideration of entities when evaluating disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Fund has early adopted ASU 2018-13 for these financial statements, which did not result in a material impact.

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 ongoing monitoring of the Fund’s investment portfolio, managing the Fund’s business affairs and providing certain administrative services necessary for the management of the Fund. For these investment management services, First Trust is entitled to a monthly fee calculated at an annual rate of 1.00% of the Fund’s Managed Assets. First Trust also provides fund reporting services to the Fund for a flat annual fee in the amount of $9,250.

MacKay serves as the Fund’s sub-advisor and manages the Fund’s portfolio subject to First Trust’s supervision. The Sub-Advisor receives a portfolio management fee at an annual rate of 0.50% of Managed Assets that is paid by First Trust from its investment advisory fee.

BNY Mellon Investment Servicing (US) Inc. (“BNYM IS”) serves as the Fund’s transfer agent in accordance with certain fee arrangements. As transfer agent, BNYM IS is responsible for maintaining shareholder records for the Fund. The Bank of New York Mellon (“BNYM”) serves as the Fund’s administrator, fund accountant, and custodian in accordance with certain fee arrangements. As administrator and fund accountant, BNYM is responsible for providing certain administrative and accounting services to the Fund, including maintaining the Fund’s books of account, records of the Fund’s securities transactions, and certain other books and records. As custodian, BNYM is responsible for custody of the Fund’s assets. BNYM IS and BNYM are subsidiaries of The Bank of New York Mellon Corporation, a financial holding company.

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

Additionally, the Lead Independent Trustee and the Chairmen 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 Chairmen rotate every three years. The officers and “Interested” Trustee receive no compensation from the Fund for acting in such capacities.

4. Merger

On March 5, 2018, the Board of Trustees of FSD approved a merger of FSD with the First Trust Strategic High Income Fund II (“FHY”). The merger was completed on June 25, 2018. FSD was the surviving fund.

Under the terms of the merger, which was tax-free, FHY merged with and into FSD and the shareholders of FHY received shares of FSD. As a result of the merger, the assets of FHY were transferred to, and the liabilities of FHY were assumed by, FSD. The cost of the investments received from FHY was carried forward to FSD for U.S. GAAP and tax purposes. The merger was subject to certain conditions, including that the merger was approved on June 11, 2018, by the shareholders of FHY, and that the shareholders of FSD

Page 29

Notes to Financial Statements (Continued)

First Trust High Income Long/Short Fund (FSD)

October 31, 2018

approved the issuance of additional FSD shares in connection with the merger. When the merger occurred, the transactions were based on the relative NAVs of FHY and FSD.

The following table summarizes the asset transfers and conversion ratios for the merger.

Acquired Fund

Shares Redeemed

Net Assets on June 22, 2018

Unrealized Appreciation (Depreciation)

Accumulated Net Realized Gains/Loss

Share Conversion Ratio

Acquiring (Surviving) Fund

Shares Issued

Net Assets on June 22, 2018*

FHY

6,970,226

$96,061,971

$(1,334,635)

$(62,574,506)

0.808829

FSD

5,637,721

$510,274,849

* Amount reflects net assets of FSD prior to the merger.

The following table summarizes the operations of FHY (the Acquired Fund) for the period November 1, 2017 to June 22, 2018, and the operations of FSD, the Acquiring (Surviving) Fund, for the fiscal year ended October 31, 2018, as presented in the Statements of Operations and the combined Acquired and Acquiring (Surviving) Funds’ pro-forma results of operations for the year ended October 31, 2018 assuming the acquisition had been completed on November 1, 2017.

Because the combined investment portfolios have been managed as a single integrated portfolio since the merger was completed, it is not practicable to separate the amounts of revenue and earnings of FHY that have been included in FSD’s Statement of Operations since June 22, 2018.

	Net Investment Income		Net Realized and Unrealized Gain (Loss) on Investments		Net Increase (Decrease) from Operations
Acquired Fund for the Period November 1, 2017 to June 22, 2018 FHY	$3,202,127		$(5,145,740)		$(1,943,613)
Acquiring Fund for the Fiscal Year Ended October 31, 2018 FSD	30,216,162		(41,177,818)		(10,961,656)
Combined Total	$33,418,289		$(46,323,558)		$(12,905,269)

The merger concluded subsequent to the close of business on June 22, 2018.

5. Purchases and Sales of Securities

The cost of purchases and proceeds from sales of investments, excluding short-term investments and investments sold short, for the year ended October 31, 2018, were $221,564,967 and $206,825,076, respectively. The cost of purchases to cover short sales and the proceeds of short sales were $15,290,452 and $47,696,828, respectively.

6. Derivative Transactions

The following table presents the types of derivatives held by the Fund at October 31, 2018, 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
Forward foreign currency contracts		Currency Risk		Unrealized appreciation on forward foreign currency contracts		$ 413,476		Unrealized depreciation on forward foreign currency contracts		$ 25,875

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, 2018, on derivative instruments, as well as the primary underlying risk exposure associated with each instrument.

Statement of Operations Location
Currency Risk Exposure
Net realized gain (loss) on forward foreign currency contracts	$254,220
Net change in unrealized appreciation (depreciation) on forward foreign currency contracts	355,976

Page 30

Notes to Financial Statements (Continued)

First Trust High Income Long/Short Fund (FSD)

October 31, 2018

During the fiscal year ended October 31, 2018, the notional values of forward foreign currency contracts opened and closed were $188,169,476 and $226,626,883, respectively.

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

7. Indemnification

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

8. Tender Offer

During the fiscal year ended October 31, 2017, the Fund conducted a tender offer for up to 15% of its outstanding common shares for cash at a price per share equal to 98% of the net asset value per share determined on the expiration date. The Fund’s tender offer expired at 5:00 p.m. New York City time on Thursday, July 13, 2017.

Because the Fund’s tender offer was oversubscribed, the Fund repurchased 15% of its outstanding common shares on a pro-rata basis based on the number of shares properly tendered (Pro-Ration Factor). The final results of the tender offer are provided in the table below.

Number of Shares Tendered		Number of Tendered Shares to be Purchased		Pro-Ration Factor		Purchase Price (98% of NAV on Expiration Date)		Number of Outstanding Shares after Tender Offer
12,762,491		5,284,792		41.42%		$ 17.7282		29,947,157

9. Distribution Policy

As previously reported, the Fund’s Board of Trustees approved the commencement, effective with the monthly distribution declared in February 2017 and continuing for all distributions declared during the following eleven months, of a distribution policy that provided for the declaration of monthly distributions to common shareholders of the Fund at an annual minimum fixed rate of 8.5% based on the Fund’s average monthly NAV per share for the 12 months from February 2017 through January 2018. Under the distribution policy, monthly distributions may have been sourced from income, paid-in capital, and/or capital gains, if any. The policy expired in January 2018.

10. 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 were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed.

Page 31

(2)Effective on April 17, 2018, First Trust India NIFTY 50 Equal Weight ETF’s underlying index was changed from the NASDAQ AlphaDEX® Taiwan Index to the NIFTY 50 Equal Weight Index.

To the Shareholders and the Board of Trustees of First Trust High Income Long/Short Fund:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of First Trust High Income Long/Short Fund (the “Fund”), as of October 31, 2018, the related statements of operations and cash flows 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, 2018, and the results of its operations and its cash flows 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, 2018, by correspondence with the custodian, agent banks and brokers; when replies were not received from agent banks and brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Chicago, Illinois

December 20, 2018

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

Page 32

Additional Information

First Trust High Income Long/Short Fund (FSD)

October 31, 2018 (Unaudited)

Dividend Reinvestment Plan

If your Common Shares are registered directly with the Fund or if you hold your Common Shares with a brokerage firm that participates in the Fund’s Dividend Reinvestment Plan (the “Plan”), unless you elect, by written notice to the Fund, to receive cash distributions, all dividends, including any capital gain distributions, on your Common Shares will be automatically reinvested by BNY Mellon Investment Servicing (US) Inc. (the “Plan Agent”), in additional Common Shares under the Plan. If you elect to receive cash distributions, you will receive all distributions in cash paid by check mailed directly to you by the Plan Agent, as the dividend paying agent.

If you decide to participate in the Plan, the number of Common Shares you will receive will be determined as follows:

(1)

If Common Shares are trading at or above net asset value (“NAV”) at the time of valuation, the Fund will issue new shares at a price equal to the greater of (i) NAV per Common Share on that date or (ii) 95% of the market price on that date.

(2)

If Common Shares are trading below NAV at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market within 30 days of the valuation date except where temporary curtailment or suspension of purchases is necessary to comply with federal securities laws. Interest will not be paid on any uninvested cash payments.