UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number 811-22442

 

First Trust High Income Long/Short Fund
(Exact name of registrant as specified in charter)

 

120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)


W. Scott Jardine, Esq.

First Trust Portfolios L.P.

120 East Liberty Drive, Suite 400

Wheaton, IL 60187
(Name and address of agent for service)

 

Registrant's telephone number, including area code: 630-765-8000

 

Date of fiscal year end: October 31

 

Date of reporting period: January 31, 2019

 

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

 

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 
 

Item 1. Schedule of Investments.

The Schedule of Investments is attached herewith.

 

First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments
January 31, 2019 (Unaudited)
Principal
Value 		  Description   Stated
Coupon 		  Stated
Maturity 		  Value
CORPORATE BONDS AND NOTES – 90.5%
    Automotive – 2.1%            
$1,525,000  
Dana, Inc.
  5.50%   12/15/24   $1,502,125
2,080,000  
Gates Global LLC/Gates Global Co. (a)
  6.00%   07/15/22   2,098,824
1,175,000  
Goodyear Tire & Rubber (The) Co.
  5.13%   11/15/23   1,176,469
1,275,000  
Goodyear Tire & Rubber (The) Co.
  5.00%   05/31/26   1,175,869
2,125,000  
Goodyear Tire & Rubber (The) Co. (b)
  4.88%   03/15/27   1,912,500
2,599,000  
Navistar International Corp. (a)
  6.63%   11/01/25   2,611,995
1,970,000  
Tenneco, Inc.
  5.00%   07/15/26   1,683,759
        12,161,541
    Banking – 1.5%            
1,165,000  
Ally Financial, Inc.
  8.00%   11/01/31   1,403,825
612,000  
Ally Financial, Inc. (b)
  8.00%   11/01/31   737,460
6,000,000  
Ally Financial, Inc. (b)
  5.13%   09/30/24   6,232,500
        8,373,785
    Basic Industry – 9.8%            
3,750,000  
AK Steel Corp.
  7.63%   10/01/21   3,637,500
1,000,000  
AK Steel Corp. (b)
  7.50%   07/15/23   1,022,500
2,100,000  
AK Steel Corp.
  6.38%   10/15/25   1,716,750
1,945,000  
Beazer Homes USA, Inc. (b)
  8.75%   03/15/22   2,038,360
1,800,000  
Cleveland-Cliffs, Inc. (b)
  5.75%   03/01/25   1,746,000
4,111,000  
Core & Main L.P. (a)
  6.13%   08/15/25   3,936,282
1,000,000  
Freeport-McMoRan, Inc. (b)
  3.55%   03/01/22   970,000
1,680,000  
Freeport-McMoRan, Inc.
  3.88%   03/15/23   1,610,700
3,560,000  
Freeport-McMoRan, Inc. (b)
  4.55%   11/14/24   3,426,500
2,445,000  
JELD-WEN, Inc. (a) (b)
  4.88%   12/15/27   2,169,938
2,979,000  
KB Home
  7.50%   09/15/22   3,176,359
1,600,000  
Koppers, Inc. (a)
  6.00%   02/15/25   1,432,000
500,000  
Lennar Corp.
  5.88%   11/15/24   513,750
1,500,000  
LGI Homes, Inc. (a)
  6.88%   07/15/26   1,451,250
3,180,000  
Meritage Homes Corp.
  6.00%   06/01/25   3,164,100
2,050,000  
NCI Building Systems, Inc. (a) (b)
  8.00%   04/15/26   1,947,500
1,000,000  
Novelis Corp. (a) (b)
  6.25%   08/15/24   1,008,750
2,862,000  
Novelis Corp. (a)
  5.88%   09/30/26   2,768,985
2,045,000  
Olin Corp. (b)
  5.13%   09/15/27   2,004,100
3,260,000  
PQ Corp. (a) (b)
  6.75%   11/15/22   3,424,630
565,000  
PQ Corp. (a) (b)
  5.75%   12/15/25   542,400
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   3,984,375
3,050,000  
Toll Brothers Finance Corp.
  4.88%   11/15/25   2,977,563
3,765,000  
TRI Pointe Group, Inc./TRI Pointe Homes, Inc. (b)
  5.88%   06/15/24   3,642,637
        56,196,179
    Capital Goods – 7.5%            
3,045,000  
Ball Corp.
  4.00%   11/15/23   3,059,920
2,675,000  
Berry Global, Inc. (a) (b)
  4.50%   02/15/26   2,527,875
4,100,000  
BWAY Holding Co. (a) (b)
  5.50%   04/15/24   4,020,583
3,500,000  
Crown Americas LLC/Crown Americas Capital Corp. IV (b)
  4.50%   01/15/23   3,526,250
1,445,000  
JB Poindexter & Co., Inc. (a)
  7.13%   04/15/26   1,408,875
2,080,000  
Mueller Water Products, Inc. (a)
  5.50%   06/15/26   2,095,600
2,840,000  
Owens-Brockway Glass Container, Inc. (a)
  5.00%   01/15/22   2,879,050
5,700,000  
Reynolds Group Issuer, Inc./Reynolds Group Issuer LLC/Reynolds Group Issuer LU (a) (b)
  5.13%   07/15/23   5,717,670
3,725,000  
Sealed Air Corp. (a)
  5.50%   09/15/25   3,818,125
5,445,000  
Terex Corp. (a)
  5.63%   02/01/25   5,274,844
2,760,000  
TransDigm, Inc. (a)
  6.25%   03/15/26   2,808,300
See Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments (Continued)
January 31, 2019 (Unaudited)
Principal
Value 		  Description   Stated
Coupon 		  Stated
Maturity 		  Value
CORPORATE BONDS AND NOTES (Continued)
    Capital Goods (Continued)            
$2,660,000  
Trident Merger Sub, Inc. (a) (b)
  6.63%   11/01/25   $2,487,100
2,925,000  
Triumph Group, Inc. (b)
  4.88%   04/01/21   2,720,250
850,000  
Triumph Group, Inc.
  7.75%   08/15/25   726,750
        43,071,192
    Consumer Goods – 7.3%            
3,905,000  
B&G Foods, Inc.
  5.25%   04/01/25   3,843,496
3,245,000  
Cott Holdings, Inc. (a)
  5.50%   04/01/25   3,224,719
4,920,000  
First Quality Finance Co., Inc. (a) (b)
  5.00%   07/01/25   4,760,100
3,840,000  
Kronos Acquisition Holdings, Inc. (a)
  9.00%   08/15/23   3,264,000
2,915,000  
Lamb Weston Holdings, Inc. (a) (b)
  4.63%   11/01/24   2,907,712
3,965,000  
Performance Food Group, Inc. (a)
  5.50%   06/01/24   3,920,394
2,000,000  
Pilgrim’s Pride Corp. (a)
  5.75%   03/15/25   1,970,000
1,765,000  
Post Holdings, Inc. (a) (b)
  5.50%   03/01/25   1,753,969
3,610,000  
Post Holdings, Inc. (a)
  5.00%   08/15/26   3,430,222
3,900,000  
Prestige Brands, Inc. (a) (b)
  6.38%   03/01/24   3,900,000
3,910,000  
Spectrum Brands, Inc.
  5.75%   07/15/25   3,872,073
1,500,000  
TreeHouse Foods, Inc. (a)
  6.00%   02/15/24   1,546,725
3,240,000  
US Foods, Inc. (a)
  5.88%   06/15/24   3,308,170
        41,701,580
    Energy – 9.3%            
1,675,000  
AmeriGas Partners L.P./AmeriGas Finance Corp.
  5.50%   05/20/25   1,649,875
5,100,000  
AmeriGas Partners L.P./AmeriGas Finance Corp.
  5.88%   08/20/26   5,050,530
1,875,000  
Andeavor Logistics L.P./Tesoro Logistics Finance Corp. (b)
  5.25%   01/15/25   1,898,313
1,600,000  
Antero Midstream Partners LP/Antero Midstream Finance Corp.
  5.38%   09/15/24   1,576,000
2,475,000  
Blue Racer Midstream LLC/Blue Racer Finance Corp. (a) (b)
  6.13%   11/15/22   2,512,125
3,526,000  
California Resources Corp. (a)
  8.00%   12/15/22   2,853,874
2,060,000  
Carrizo Oil & Gas, Inc.
  6.25%   04/15/23   2,044,550
3,500,000  
Chesapeake Energy Corp.
  7.00%   10/01/24   3,434,375
4,370,000  
Crestwood Midstream Partners L.P./Crestwood Midstream Finance Corp. (b)
  6.25%   04/01/23   4,430,087
3,129,000  
Denbury Resources, Inc. (a) (b)
  9.25%   03/31/22   3,089,887
2,100,000  
Genesis Energy LP/Genesis Energy Finance Corp.
  6.50%   10/01/25   1,995,000
1,985,000  
Hilcorp Energy I L.P./Hilcorp Finance Co. (a)
  5.00%   12/01/24   1,895,675
2,650,000  
Matador Resources Co.
  5.88%   09/15/26   2,653,313
1,500,000  
Oasis Petroleum, Inc. (a)
  6.25%   05/01/26   1,426,875
3,155,000  
QEP Resources, Inc.
  5.63%   03/01/26   3,044,575
875,000  
Range Resources Corp. (b)
  5.75%   06/01/21   883,750
1,770,000  
SM Energy Co.
  5.63%   06/01/25   1,699,200
2,310,000  
Southwestern Energy Co.
  7.50%   04/01/26   2,385,075
2,000,000  
Targa Pipeline Partners L.P./Targa Pipeline Finance Corp. (b)
  5.88%   08/01/23   1,972,500
3,300,000  
Targa Resources Partners L.P./Targa Resources Partners Finance Corp.
  5.00%   01/15/28   3,108,187
1,380,000  
Whiting Petroleum Corp.
  5.75%   03/15/21   1,386,900
2,560,000  
Whiting Petroleum Corp.
  6.63%   01/15/26   2,521,600
        53,512,266
    Financial Services – 2.4%            
2,000,000  
Icahn Enterprises L.P./Icahn Enterprises Finance Corp.
  6.00%   08/01/20   2,020,000
2,000,000  
Icahn Enterprises L.P./Icahn Enterprises Finance Corp.
  5.88%   02/01/22   2,022,720
3,385,000  
MSCI, Inc. (a) (b)
  5.75%   08/15/25   3,528,862
1,395,000  
Springleaf Finance Corp.
  6.00%   06/01/20   1,422,900
4,555,000  
Springleaf Finance Corp. (b)
  7.75%   10/01/21   4,811,219
        13,805,701
See Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments (Continued)
January 31, 2019 (Unaudited)
Principal
Value 		  Description   Stated
Coupon 		  Stated
Maturity 		  Value
CORPORATE BONDS AND NOTES (Continued)
    Healthcare – 6.5%            
$3,825,000  
Catalent Pharma Solutions, Inc. (a) (b)
  4.88%   01/15/26   $3,729,375
1,370,000  
CHS/Community Health Systems, Inc.
  5.13%   08/01/21   1,323,763
153,000  
CHS/Community Health Systems, Inc. (a)
  8.13%   06/30/24   122,018
3,905,000  
Hologic, Inc. (a)
  4.38%   10/15/25   3,854,704
731,000  
IQVIA, Inc. (a) (b)
  4.88%   05/15/23   745,620
3,000,000  
IQVIA, Inc. (a)
  5.00%   10/15/26   3,015,000
3,665,000  
MPH Acquisition Holdings LLC (a)
  7.13%   06/01/24   3,648,507
2,000,000  
Service Corp International
  5.38%   05/15/24   2,047,500
4,750,000  
Service Corp International (b)
  7.50%   04/01/27   5,201,250
2,670,000  
Syneos Health, Inc./inVentiv Health, Inc./inVentiv Health Clinical, Inc. (a) (b)
  7.50%   10/01/24   2,826,862
2,750,000  
Teleflex, Inc.
  4.63%   11/15/27   2,691,562
2,450,000  
Tenet Healthcare Corp.
  8.13%   04/01/22   2,572,500
2,300,000  
Verscend Escrow Corp. (a) (b)
  9.75%   08/15/26   2,324,265
3,245,000  
West Street Merger Sub, Inc. (a)
  6.38%   09/01/25   2,952,950
        37,055,876
    Leisure – 7.5%            
5,450,000  
Boyd Gaming Corp. (b)
  6.38%   04/01/26   5,579,437
2,980,000  
Churchill Downs, Inc. (a)
  4.75%   01/15/28   2,871,975
1,200,000  
Eldorado Resorts, Inc.
  7.00%   08/01/23   1,257,000
3,500,000  
Eldorado Resorts, Inc.
  6.00%   04/01/25   3,537,625
4,385,000  
ESH Hospitality, Inc. (a)
  5.25%   05/01/25   4,345,974
3,980,000  
GLP Capital L.P./GLP Financing II, Inc.
  5.38%   04/15/26   4,074,843
4,600,000  
Hilton Domestic Operating Co., Inc. (a) (b)
  5.13%   05/01/26   4,646,000
3,120,000  
Live Nation Entertainment, Inc. (a)
  4.88%   11/01/24   3,081,000
3,900,000  
MGM Growth Properties Operating Partnership LP/MGP Finance Co-Issuer, Inc.
  5.63%   05/01/24   4,021,875
4,825,000  
MGM Resorts International (b)
  6.75%   10/01/20   5,048,446
4,160,000  
Scientific Games International, Inc.
  10.00%   12/01/22   4,388,800
        42,852,975
    Media – 5.6%            
2,250,000  
CCO Holdings LLC/CCO Holdings Capital Corp.
  5.75%   01/15/24   2,300,625
2,200,000  
CCO Holdings LLC/CCO Holdings Capital Corp. (a) (b)
  5.88%   05/01/27   2,211,660
2,000,000  
Clear Channel Worldwide Holdings, Inc., Series B (b)
  7.63%   03/15/20   2,005,000
2,841,000  
Clear Channel Worldwide Holdings, Inc., Series B
  6.50%   11/15/22   2,919,127
3,500,000  
CSC Holdings LLC (b)
  5.25%   06/01/24   3,368,750
1,250,000  
CSC Holdings LLC (a)
  6.63%   10/15/25   1,310,938
725,000  
CSC Holdings LLC (a)
  10.88%   10/15/25   837,513
2,325,000  
CSC Holdings LLC (a) (b)
  5.50%   04/15/27   2,278,454
1,000,000  
Dish DBS Corp. (b)
  5.13%   05/01/20   1,005,000
5,830,000  
Dish DBS Corp.
  6.75%   06/01/21   5,952,488
2,300,000  
Lamar Media Corp.
  5.38%   01/15/24   2,354,625
2,115,000  
Lamar Media Corp.
  5.75%   02/01/26   2,198,225
3,150,000  
Sirius XM Radio, Inc. (a)
  5.38%   07/15/26   3,134,250
        31,876,655
    Real Estate – 0.6%            
1,000,000  
Hospitality Properties Trust
  4.95%   02/15/27   969,675
3,000,000  
Realogy Group LLC/Realogy Co-Issuer Corp. (a) (b)
  4.88%   06/01/23   2,722,500
        3,692,175
    Retail – 2.8%            
1,700,000  
Avantor, Inc. (a)
  9.00%   10/01/25   1,755,250
5,445,000  
Hanesbrands, Inc. (a) (b)
  4.63%   05/15/24   5,370,131
See Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments (Continued)
January 31, 2019 (Unaudited)
Principal
Value 		  Description   Stated
Coupon 		  Stated
Maturity 		  Value
CORPORATE BONDS AND NOTES (Continued)
    Retail (Continued)            
$1,320,000  
KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC (a)
  5.00%   06/01/24   $1,326,600
3,300,000  
KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC (a)
  5.25%   06/01/26   3,349,500
2,975,000  
Murphy Oil USA, Inc.
  6.00%   08/15/23   3,030,781
1,375,000  
New Albertsons, Inc.
  7.75%   06/15/26   1,258,125
        16,090,387
    Services – 7.6%            
4,000,000  
Advanced Disposal Services, Inc. (a) (b)
  5.63%   11/15/24   4,030,000
1,625,000  
Aramark Services, Inc.
  4.75%   06/01/26   1,600,625
4,175,000  
Aramark Services, Inc. (a) (b)
  5.00%   02/01/28   4,086,281
1,045,000  
Frontdoor, Inc. (a)
  6.75%   08/15/26   1,039,775
2,740,000  
H&E Equipment Services, Inc.
  5.63%   09/01/25   2,688,625
3,587,000  
Herc Rentals, Inc. (a)
  7.50%   06/01/22   3,770,834
1,276,000  
Herc Rentals, Inc. (a) (b)
  7.75%   06/01/24   1,365,320
4,199,000  
Iron Mountain, Inc. (a)
  4.88%   09/15/27   3,891,948
1,845,000  
Iron Mountain, Inc. (a) (b)
  5.25%   03/15/28   1,725,075
4,615,000  
KAR Auction Services, Inc. (a)
  5.13%   06/01/25   4,469,997
3,805,000  
ServiceMaster (The) Co. LLC (a) (b)
  5.13%   11/15/24   3,728,900
3,650,000  
Tempo Acquisition LLC/Tempo Acquisition Finance Corp. (a)
  6.75%   06/01/25   3,622,625
2,500,000  
United Rentals North America, Inc. (b)
  5.75%   11/15/24   2,571,875
1,400,000  
United Rentals North America, Inc. (b)
  5.50%   07/15/25   1,421,000
3,650,000  
Waste Pro USA, Inc. (a)
  5.50%   02/15/26   3,558,750
        43,571,630
    Technology & Electronics – 6.0%            
3,195,000  
CDK Global, Inc. (b)
  4.88%   06/01/27   3,115,125
590,000  
CDW LLC/CDW Finance Corp. (b)
  5.50%   12/01/24   613,305
145,000  
CDW LLC/CDW Finance Corp.
  5.00%   09/01/25   144,456
3,700,000  
CommScope Technologies LLC (a)
  5.00%   03/15/27   3,163,130
2,800,000  
CommScope, Inc. (a) (b)
  5.00%   06/15/21   2,793,000
3,996,000  
Dell International LLC/EMC Corp. (a) (b)
  8.35%   07/15/46   4,721,360
6,838,000  
First Data Corp. (a)
  5.00%   01/15/24   7,013,224
3,105,000  
Match Group, Inc.
  6.38%   06/01/24   3,256,369
4,365,000  
NCR Corp.
  6.38%   12/15/23   4,386,825
3,019,000  
PTC, Inc.
  6.00%   05/15/24   3,135,986
725,000  
Xerox Corp.
  2.80%   05/15/20   712,313
725,000  
Xerox Corp.
  4.50%   05/15/21   729,531
350,000  
Xerox Corp.
  3.63%   03/15/23   335,125
        34,119,749
    Telecommunications – 10.6%            
2,960,000  
CenturyLink, Inc., Series P (b)
  7.60%   09/15/39   2,442,000
3,300,000  
CenturyLink, Inc., Series U
  7.65%   03/15/42   2,752,365
4,545,000  
CyrusOne L.P./CyrusOne Finance Corp.
  5.38%   03/15/27   4,567,725
5,525,000  
Equinix, Inc. (b)
  5.88%   01/15/26   5,720,032
1,675,000  
Equinix, Inc. (b)
  5.38%   05/15/27   1,683,375
1,130,000  
Frontier Communications Corp.
  10.50%   09/15/22   815,013
4,380,000  
Frontier Communications Corp. (a) (b)
  8.50%   04/01/26   3,984,705
2,956,000  
Hughes Satellite Systems Corp. (b)
  5.25%   08/01/26   2,841,455
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   3,062,325
3,025,000  
Level 3 Financing, Inc.
  5.38%   05/01/25   2,994,750
2,900,000  
Level 3 Financing, Inc.
  5.25%   03/15/26   2,821,120
2,850,000  
Qualitytech L.P./QTS Finance Corp. (a)
  4.75%   11/15/25   2,679,000
See Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments (Continued)
January 31, 2019 (Unaudited)
Principal
Value 		  Description   Stated
Coupon 		  Stated
Maturity 		  Value
CORPORATE BONDS AND NOTES (Continued)
    Telecommunications (Continued)            
$1,250,000  
SBA Communications Corp.
  4.88%   07/15/22   $1,269,125
1,700,000  
SBA Communications Corp.
  4.88%   09/01/24   1,708,500
425,000  
Sprint Capital Corp.
  6.88%   11/15/28   422,875
6,045,000  
Sprint Capital Corp.
  8.75%   03/15/32   6,649,500
570,000  
Sprint Communications, Inc. (b)
  9.25%   04/15/22   662,625
3,685,000  
Sprint Corp.
  7.63%   03/01/26   3,837,006
3,295,000  
T-Mobile USA, Inc.
  6.00%   03/01/23   3,385,612
2,925,000  
T-Mobile USA, Inc.
  6.00%   04/15/24   3,005,438
1,400,000  
Zayo Group LLC/Zayo Capital, Inc.
  6.00%   04/01/23   1,414,000
1,490,000  
Zayo Group LLC/Zayo Capital, Inc. (a)
  5.75%   01/15/27   1,443,348
        60,463,394
    Transportation – 1.8%            
669,549  
Continental Airlines 2005-ERJ1 Pass Through Trust
  9.80%   04/01/21   703,026
4,822,427  
US Airways 2000-3C Pass Through Trust
  8.39%   03/01/22   5,088,625
4,331,000  
XPO Logistics, Inc. (a) (b)
  6.50%   06/15/22   4,439,275
        10,230,926
    Utility – 1.6%            
5,120,000  
Calpine Corp. (b)
  5.75%   01/15/25   4,838,400
2,000,000  
Clearway Energy Operating LLC
  5.38%   08/15/24   1,865,000
2,300,000  
Pattern Energy Group, Inc. (a)
  5.88%   02/01/24   2,259,750
        8,963,150
   
Total Corporate Bonds and Notes
  517,739,161
    (Cost $525,929,432)            
Principal
Value
(Local
Currency) 		  Description   Stated
Coupon 		  Stated
Maturity 		  Value
(US Dollars)
FOREIGN CORPORATE BONDS AND NOTES – 24.4%
    Automotive – 0.5%            
2,565,000  
LKQ European Holdings B.V. (EUR) (a)
  3.63%   04/01/26   2,896,110
    Banking – 0.4%            
2,400,000  
Royal Bank of Scotland Group PLC (USD)
  5.13%   05/28/24   2,413,212
    Basic Industry – 4.1%            
2,700,000  
Alcoa Nederland Holding B.V. (USD) (a)
  7.00%   09/30/26   2,862,000
1,700,000  
Cemex SAB de CV (USD) (a) (b)
  7.75%   04/16/26   1,840,250
1,525,000  
FMG Resources (August 2006) Pty Ltd. (USD) (a)
  5.13%   05/15/24   1,511,656
2,725,000  
Intertape Polymer Group, Inc. (USD) (a)
  7.00%   10/15/26   2,731,812
1,900,000  
James Hardie International Finance DAC (USD) (a) (b)
  5.00%   01/15/28   1,719,500
1,490,000  
MMC Norilsk Nickel OJSC via MMC Finance DAC (USD) (a)
  6.63%   10/14/22   1,586,480
1,625,000  
SPCM S.A. (USD) (a)
  4.88%   09/15/25   1,531,563
2,200,000  
Stora Enso OYJ (USD) (a)
  7.25%   04/15/36   2,541,000
2,505,000  
Teck Resources Ltd. (USD)
  6.00%   08/15/40   2,523,788
1,795,000  
Teck Resources Ltd. (USD) (b)
  6.25%   07/15/41   1,880,263
2,975,000  
Trinseo Materials Operating SCA/Trinseo Materials Finance, Inc. (USD) (a)
  5.38%   09/01/25   2,708,142
        23,436,454
    Capital Goods – 3.0%            
5,100,000  
Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc. (USD) (a) (b)
  7.25%   05/15/24   5,291,250
See Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments (Continued)
January 31, 2019 (Unaudited)
Principal
Value
(Local
Currency) 		  Description   Stated
Coupon 		  Stated
Maturity 		  Value
(US Dollars)
FOREIGN CORPORATE BONDS AND NOTES (Continued)
    Capital Goods (Continued)            
535,000  
Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc. (USD) (a)
  6.00%   02/15/25   $521,625
55,000  
Bombardier, Inc. (USD) (a)
  7.75%   03/15/20   56,856
890,000  
Bombardier, Inc. (USD) (a) (b)
  6.00%   10/15/22   862,188
6,853,000  
Bombardier, Inc. (USD) (a)
  6.13%   01/15/23   6,638,501
3,980,000  
Titan Acquisition Ltd./Titan Co-Borrower LLC (USD) (a) (b)
  7.75%   04/15/26   3,492,450
        16,862,870
    Consumer Goods – 1.0%            
2,600,000  
JBS Investments II GmbH (USD) (a)
  7.00%   01/15/26   2,645,500
2,925,000  
Minerva Luxembourg S.A. (USD) (a)
  6.50%   09/20/26   2,811,656
        5,457,156
    Energy – 2.8%            
950,000  
Gazprom OAO Via Gaz Capital S.A. (USD) (a)
  8.63%   04/28/34   1,203,785
1,800,000  
LBC Tank Terminals Holding Netherlands BV (USD) (a)
  6.88%   05/15/23   1,687,500
4,590,000  
Petrobras Global Finance B.V. (USD)
  7.38%   01/17/27   4,988,641
1,060,000  
Petrobras Global Finance B.V. (USD)
  7.25%   03/17/44   1,119,360
800,000  
Puma International Financing S.A. (USD) (a)
  5.13%   10/06/24   704,480
4,500,000  
Transocean, Inc. (USD) (a) (b)
  7.25%   11/01/25   4,275,000
2,900,000  
Weatherford International Ltd. (USD)
  4.50%   04/15/22   1,856,000
406,000  
Weatherford International Ltd. (USD)
  6.50%   08/01/36   233,450
        16,068,216
    Healthcare – 3.4%            
970,000  
Bausch Health Cos., Inc. (USD) (a)
  5.63%   12/01/21   971,819
2,785,000  
Bausch Health Cos., Inc. (USD) (a) (b)
  6.50%   03/15/22   2,885,956
4,000,000  
Bausch Health Cos., Inc. (USD) (a)
  5.50%   03/01/23   3,895,000
5,319,000  
Bausch Health Cos., Inc. (USD) (a) (b)
  5.88%   05/15/23   5,225,917
3,724,000  
Bausch Health Cos., Inc. (USD) (a) (b)
  6.13%   04/15/25   3,528,490
1,320,000  
Bausch Health Cos., Inc. (USD) (a)
  9.00%   12/15/25   1,412,400
2,275,000  
Endo Dac./Endo Finance LLC/Endo Finco, Inc. (USD) (a) (b)
  6.00%   02/01/25   1,768,813
        19,688,395
    Insurance – 0.4%            
2,220,000  
Oil Insurance Ltd., 3 Mo. LIBOR + 2.98% (USD) (a) (b) (c)
  5.79%   (d)   2,095,625
    Leisure – 1.7%            
3,205,000  
Royal Caribbean Cruises Ltd. (USD) (b)
  7.50%   10/15/27   3,760,990
1,305,000  
Sands China, Ltd. (USD)
  4.60%   08/08/23   1,313,351
1,695,000  
Sands China, Ltd. (USD)
  5.13%   08/08/25   1,706,169
2,960,000  
Stars Group Holdings B.V./Stars Group U.S. Co-Borrower LLC (USD) (a)
  7.00%   07/15/26   3,012,688
        9,793,198
    Media – 2.1%            
3,815,000  
Altice France S.A./France (USD) (a) (b)
  6.25%   05/15/24   3,754,151
1,200,000  
Altice Luxembourg S.A. (USD) (a) (b)
  7.75%   05/15/22   1,168,500
3,695,000  
UPCB Finance IV Ltd. (USD) (a)
  5.38%   01/15/25   3,565,675
1,000,000  
Virgin Media Finance PLC (USD) (a)
  6.00%   10/15/24   1,016,550
2,000,000  
Virgin Media Finance PLC (GBP)
  6.38%   10/15/24   2,692,312
        12,197,188
See Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments (Continued)
January 31, 2019 (Unaudited)
Principal
Value
(Local
Currency) 		  Description   Stated
Coupon 		  Stated
Maturity 		  Value
(US Dollars)
FOREIGN CORPORATE BONDS AND NOTES (Continued)
    Retail – 0.5%            
2,720,000  
1011778 BC ULC/New Red Finance, Inc. (USD) (a)
  4.25%   05/15/24   $2,638,400
    Services – 2.1%            
700,000  
Darling Global Finance BV (EUR) (a)
  3.63%   05/15/26   825,952
3,540,000  
GFL Environmental, Inc. (USD) (a)
  5.63%   05/01/22   3,419,419
630,000  
GFL Environmental, Inc. (USD) (a) (b)
  5.38%   03/01/23   592,200
4,125,000  
Ritchie Bros. Auctioneers, Inc. (USD) (a) (b)
  5.38%   01/15/25   4,166,250
2,820,000  
Travelport Corporate Finance PLC (USD) (a)
  6.00%   03/15/26   2,923,973
        11,927,794
    Technology & Electronics – 1.0%            
2,500,000  
NXP B.V./NXP Funding LLC (USD) (a) (b)
  4.63%   06/01/23   2,553,125
3,060,000  
Sensata Technologies UK Financing Co., PLC (USD) (a) (b)
  6.25%   02/15/26   3,186,225
        5,739,350
    Telecommunications – 1.4%            
2,225,000  
DKT Finance ApS (USD) (a) (b)
  9.38%   06/17/23   2,352,938
3,540,000  
Telecom Italia Capital S.A. (USD) (b)
  7.72%   06/04/38   3,541,062
2,300,000  
VEON Holdings B.V. (USD) (a)
  4.95%   06/16/24   2,254,759
        8,148,759
   
Total Foreign Corporate Bonds and Notes
  139,362,727
    (Cost $139,326,022)            
Par
Amount
(Local Currency) 		  Description   Stated
Rate 		  Stated
Maturity 		  Value
(US Dollars)
CAPITAL PREFERRED SECURITIES – 5.4%
    Banking – 3.0%            
2,940,000  
Bank of America Corp., Series DD (USD) (e)
  6.30%   (d)   3,168,497
4,475,000  
Citigroup, Inc., Series M (USD) (e)
  6.30%   (d)   4,537,538
2,775,000  
Dresdner Funding Trust I (USD) (a) (b)
  8.15%   06/30/31   3,370,535
5,370,000  
Goldman Sachs Group (The), Inc., Series P (USD) (e)
  5.00%   (d)   4,955,033
795,000  
RBS Capital Trust II (USD) (e)
  6.43%   (d)   950,025
        16,981,628
    Capital Goods – 0.4%            
3,210,000  
Textron Financial Corp., 3 Mo. LIBOR + 1.74% (USD) (a) (c)
  4.35%   02/15/42   2,381,916
    Financial Services – 0.7%            
4,935,000  
General Motors Financial Co., Inc., Series A (USD) (e)
  5.75%   (d)   4,239,042
    Insurance – 1.3%            
5,400,000  
Hartford Financial Services Group (The), Inc., 3 Mo. LIBOR + 2.13% (USD) (a) (c)
  4.74%   02/12/47   4,624,965
3,500,000  
Lincoln National Corp., 3 Mo. LIBOR + 2.36% (USD) (b) (c)
  5.00%   05/17/66   3,032,662
        7,657,627
   
Total Capital Preferred Securities
  31,260,213
    (Cost $32,755,170)            
See Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments (Continued)
January 31, 2019 (Unaudited)
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
  6.75%   10/22/25   $1,796,550
    Energy – 0.2%            
986,928  
Crestwood Holdings LLC, Term Loan B, 1 Mo. LIBOR + 7.50%, 0.00% Floor
  10.02%   03/06/23   938,401
    Healthcare – 1.0%            
5,967,591  
Ortho-Clinical Diagnostics S.A., Term Loan B3, 1 Mo. LIBOR + 3.25%, 0.00% Floor
  5.76%   06/30/25   5,766,185
   
Total Senior Floating-Rate Loan Interests
  8,501,136
    (Cost $8,955,994)            
Principal
Value 		  Description   Stated
Coupon 		  Stated
Maturity 		  Value
MORTGAGE-BACKED SECURITIES – 0.7%
    Collateralized Mortgage Obligations – 0.2%            
    Washington Mutual Alternative Mortgage Pass-Through Certificates             
23,625  
Series 2007-5, Class A11, 1 Mo. LIBOR x -6 + 39.48% (h)
  24.42%   06/25/37   40,005
    Wells Fargo Mortgage Backed Securities             
907,474  
Series 2006-AR7 Trust, Class 2A4 (i)
  4.34%   05/25/36   931,212
        971,217
    Commercial Mortgage-Backed Securities – 0.5%            
    Securitized Asset Backed Receivables LLC Trust             
7,581,215  
Series 2006-FR4, Class A2A, 1 Mo. LIBOR + 0.08% (c)
  2.59%   08/25/36   3,112,554
   
Total Mortgage-Backed Securities
  4,083,771
    (Cost $5,964,142)            
ASSET-BACKED SECURITIES – 0.1%
    Keycorp Student Loan Trust,             
389,363  
Series 2000-A, Class A2, 3 Mo. LIBOR + 0.32% (c)
  2.63%   05/25/29   388,334
    (Cost $368,784)            
STRUCTURED NOTES – 0.0%
5,750,000  
Preferred Term Securities XXV, Ltd. (j) (k) (l)
  (m)   06/22/37   0
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)
  349,481
   
Total Common Stocks
  457,591
    (Cost $997,887)    
RIGHTS – 0.0%
    Utility – 0.0%    
13,918  
Vistra Energy Corp. (n) (o)
  10,230
22,783  
Vistra Energy Corp. Claim (k) (l) (n) (o)
  0
   
Total Rights
  10,230
    (Cost $22,977)    
See Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments (Continued)
January 31, 2019 (Unaudited)
Shares   Description   Value
PREFERRED SECURITIES – 0.0%
4,000,000  
Soloso CDO, Ltd. (j) (k) (l) (m)
  $0
    (Cost $0)    
    
   
Total Investments – 122.7%
  701,803,163
    (Cost $714,320,408) (p)            
Principal
Value 		  Description   Stated
Coupon 		  Stated
Maturity 		  Value
U.S. GOVERNMENT BONDS SOLD SHORT - (22.7)%
$(101,950,000)  
United States Treasury Note
  1.38%   09/30/23   (97,163,173)
(32,000,000)  
United States Treasury Note
  2.88%   05/31/25   (32,685,000)
   
Total U.S. Government Bonds Sold Short
  (129,848,173)
    (Proceeds $130,967,755)            
CORPORATE BONDS SOLD SHORT – (1.5)%
    Energy – (0.4)%            
(2,100,000)  
Noble Energy, Inc.
  3.90%   11/15/24   (2,063,534)
    Healthcare – (0.2)%            
(1,500,000)  
DaVita, Inc.
  5.00%   05/01/25   (1,449,375)
    Media – (0.9)%            
(5,145,000)  
Netflix, Inc.
  4.38%   11/15/26   (4,884,535)
   
Total Corporate Bonds Sold Short
  (8,397,444)
    (Proceeds $8,264,181)            
FOREIGN CORPORATE BONDS SOLD SHORT – (0.2)%
    Healthcare – (0.2)%            
(1,500,000)  
Mylan NV (USD)
  3.95%   06/15/26   (1,421,446)
    (Proceeds $1,391,956)            
   
Total Investments Sold Short – (24.4)%
  (139,667,063)
    (Proceeds $140,623,892)            
    
 
Outstanding Loan – (1.9)%
  (10,864,708)
 
Net Other Assets and Liabilities – 3.6%
  20,598,280
 
Net Assets – 100.0%
  $571,869,672
    
Forward Foreign Currency Contracts
Settlement
Date 		  Counterparty   Amount
Purchased 		  Amount
Sold 		  Purchase
Value as of
1/31/2019 		  Sale
Value as of
1/31/2019 		  Unrealized
Appreciation/
(Depreciation)
02/01/19   JPM   USD 3,775,945   EUR 3,294,000   $ 3,775,945   $ 3,770,620   $   5,325
05/02/19   JPM   USD 3,829,760   EUR 3,327,000    3,829,760    3,838,675     (8,915)
02/01/19   JPM   USD 2,639,576   GBP 2,074,000    2,639,576    2,720,389    (80,813)
05/02/19   JPM   USD 2,738,253   GBP 2,075,000    2,738,253    2,734,658      3,595
Net Unrealized Appreciation (Depreciation)
  $(80,808)
    
Counterparty Abbreviations
JPM JPMorgan Chase
See Note 2F – Forward Foreign Currency Contracts in the Notes to Portfolio of Investments.
(a) 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 January 31, 2019, securities noted as such amounted to $363,550,398 of total investments or 63.6% of net assets.
(b) This security or a portion of this security is segregated as collateral for investments sold short.
See Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments (Continued)
January 31, 2019 (Unaudited)
(c) Floating or variable rate security.
(d) Perpetual maturity.
(e) Fixed-to-floating or fixed-to-variable rate security. The interest rate shown reflects the fixed rate in effect at January 31, 2019. At a predetermined date, the fixed rate will change to a floating rate or a variable rate.
(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 2C - Restricted Securities in the Notes to Portfolio of Investments).
(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 January 31, 2019, 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 Portfolio of Investments).
(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 financial reporting purposes approximates the aggregate cost for federal income tax purposes. As of January 31, 2019, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $12,613,702 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $24,254,926. The net unrealized depreciation was $11,641,224. 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
See Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
Portfolio of Investments (Continued)
January 31, 2019 (Unaudited)
Valuation Inputs
A summary of the inputs used to value the Fund’s investments as of January 31, 2019 is as follows (see Note 2A - Portfolio Valuation in the Notes to Portfolio of Investments):
ASSETS TABLE
  Total
Value at
1/31/2019 		Level 1
Quoted
Prices 		Level 2
Significant
Observable
Inputs 		Level 3
Significant
Unobservable
Inputs
Corporate Bonds and Notes*
$ 517,739,161 $ — $ 517,739,161 $ —
Foreign Corporate Bonds and Notes*
 139,362,727  —  139,362,727  —
Capital Preferred Securities*
 31,260,213  —  31,260,213  —
Senior Floating-Rate Loan Interests*
 8,501,136  —  8,501,136  —
Mortgage-Backed Securities
 4,083,771  —  4,083,771  —
Asset-Backed Securities
 388,334  —  388,334  —
Structured Notes
—**  —  — —**
Common Stocks:        
Energy
 108,110  —  —  108,110
Utility
 349,481  349,481  —  —
Rights*
 10,230  —  10,230 —**
Preferred Securities
—**  —  — —**
Total Investments
 701,803,163  349,481  701,345,572  108,110
Forward Foreign Currency Contracts
 8,920  —  8,920  —
Total
$ 701,812,083 $ 349,481 $ 701,354,492 $ 108,110

 

LIABILITIES TABLE

  Total
Value at
1/31/2019 		Level 1
Quoted
Prices 		Level 2
Significant
Observable
Inputs 		Level 3
Significant
Unobservable
Inputs
U.S. Government Bonds Sold Short
$ (129,848,173) $ — $ (129,848,173) $ —
Corporate Bonds Sold Short*
 (8,397,444)  —  (8,397,444)  —
Foreign Corporate Bonds Sold Short*
 (1,421,446)  —  (1,421,446)  —
Forward Foreign Currency Contracts
 (89,728)  —  (89,728)  —
Total
$ (139,756,791) $— $ (139,756,791) $—
    
* See Portfolio of Investments for industry breakout.
** Investment is valued at $0.
Level 3 Common Stocks, 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 Portfolio of Investments
Notes to Portfolio of Investments
First Trust High Income Long/Short Fund (FSD)
January 31, 2019 (Unaudited)
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 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 is considered an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, “Financial Services-Investment Companies.”
2. Valuation and Investment Practices
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;
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.
Senior Floating-Rate Loan interests (“Senior Loans”)(1) 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
(1) The terms “security” and “securities” used throughout the Notes to Portfolio of Investments include Senior Loans.
Notes to Portfolio of Investments (Continued)
First Trust High Income Long/Short Fund (FSD)
January 31, 2019 (Unaudited)
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;
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 MacKay Shields LLC’s (the “Sub-Advisor”) 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 borrower/issuer, 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.
Notes to Portfolio of Investments (Continued)
First Trust High Income Long/Short Fund (FSD)
January 31, 2019 (Unaudited)
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 January 31, 2019, 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.
C. 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 January 31, 2019, 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%
D. 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
Notes to Portfolio of Investments (Continued)
First Trust High Income Long/Short Fund (FSD)
January 31, 2019 (Unaudited)
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.
E. 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 loan commitments as of January 31, 2019.
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 on the Forward Foreign Currency Contracts table in the Portfolio of Investments. 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.
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 January 31, 2019, the Fund had $10,864,708 in borrowings associated with investments sold short and $139,667,063 of investments sold short as shown on the Portfolio of Investments.
3. Derivative Transactions
For the fiscal year-to-date period (November 1, 2018 through January 31, 2019), the notional values of forward foreign currency contracts opened and closed were $23,205,110 and $23,747,386, respectively.

 

Item 2. Controls and Procedures.

 

(a)The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

(b)There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3. Exhibits.

 

Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.

 
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant)

First Trust High Income Long/Short Fund

    

 

By (Signature and Title)* /s/ James M. Dykas    
  James M. Dykas, President and Chief Executive Officer
(principal executive officer)		    

Date:March 26, 2019

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)* /s/ James M. Dykas    
  James M. Dykas, President and Chief Executive Officer
(principal executive officer)		    
Date:March 26, 2019

 

By (Signature and Title)* /s/ Donald P. Swade    
  Donald P. Swade, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer)		    
Date:March 26, 2019

* Print the name and title of each signing officer under his or her signature.