UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-22442
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First Trust High Income Long/Short Fund
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(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
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(Name and address of agent for service)
registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: October 31
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Date of reporting period: April 30, 2017
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
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 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. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
FIRST TRUST
HIGH INCOME LONG/SHORT FUND (FSD)
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SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
APRIL 30, 2017
FIRST TRUST
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TABLE OF CONTENTS
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First Trust High Income Long/Short Fund (FSD)
Semi-Annual Report
April 30, 2017
Shareholder Letter.......................................................... 1
At a Glance................................................................. 2
Portfolio Commentary........................................................ 3
Portfolio of Investments.................................................... 5
Statement of Assets and Liabilities......................................... 16
Statement of Operations..................................................... 17
Statements of Changes in Net Assets......................................... 18
Statement of Cash Flows..................................................... 19
Financial Highlights........................................................ 20
Notes to Financial Statements............................................... 21
Additional Information...................................................... 28
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
http://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 webpage at http://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
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.
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SHAREHOLDER LETTER
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First Trust High Income Long/Short Fund (FSD)
Semi-Annual Letter from the Chairman and CEO
April 30, 2017
Dear Shareholders:
Thank you for your investment in First Trust High Income Long/Short Fund (the
"Fund").
The year 2016 was a historic year all over the world. Many will remember some of
the events that occurred during the year: from the Brexit vote in the UK to
leave the European Union, to the results of the U.S. Presidential Election which
seemed unlikely at the beginning of 2016, to the first World Series Championship
for the Chicago Cubs in 108 years!
First Trust Advisors L.P. ("First Trust") is pleased to provide you with this
semi-annual report which contains detailed information about your investment.
Additionally, First Trust has compiled the Fund's financial statements for you
to review. We encourage you to read this report and discuss it with your
financial advisor.
On November 8, 2016, Donald J. Trump was elected to become the 45th president in
our country's history. As I write this, he has just hit his 100th day in office,
always a historic marker for pundits, politicians, and voters. While no one has
a crystal ball and the ability to predict how the Trump administration will
shape the United States (and the world), there is no doubt that his populist
message resonated for many Americans. His message of improving lives for the
"average" American, while reducing the size and scope of the federal government,
also won him millions of votes. Many of his supporters believe that with his
background in business, Trump will make policy changes that will continue to
grow the economy and spur stock markets even higher. Many analysts predicted the
Dow Jones Industrial Average would hit a new benchmark, 20,000, in the first
days of the New Year. It took until January 25, 2017, but the Dow finally traded
over 20,000 on that day. On March 1, 2017, the Dow went past 21,000, a new
record. As with all change and a new administration, only time will tell where
our economy and the markets will go.
As of December 31, 2016, the S&P 500(R) Index (the "Index") was up 11.96% for
the year, on a total return basis, as measured by Bloomberg. As of April 30,
2017, the Index was up 7.16% (calendar year-to-date). The current bull market
(measuring from March 9, 2009 through April 28, 2017) is the second longest in
history, but lags the longest bull market by 4.17 years, according to Bespoke
Investment Group. We remain bullish on the economy, but continue to have a
long-term perspective. We believe investors should think long-term as well,
since no one can predict volatility and the inevitable ups and downs that occur
in the market.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will continue our relentless focus
on bringing the types of investments that we believe could help you reach your
financial goals.
Sincerely,
/s/ James A. Bowen
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"
April 30, 2017 (Unaudited)
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FUND STATISTICS
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Symbol on NYSE FSD
Common Share Price $17.30
Common Share Net Asset Value ("NAV") $18.14
Premium (Discount) to NAV (4.63)%
Net Assets Applicable to Common Shares $638,974,560
Current Monthly Distribution per Common Share (1) $0.1240
Current Annualized Distribution per Common Share $1.4880
Current Distribution Rate on Common Share Price (2) 8.60%
Current Distribution Rate on NAV (2) 8.20%
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COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
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Common Share Price NAV
4/16 14.90 17.02
14.55 16.78
14.54 16.83
14.62 16.84
5/16 14.82 16.96
14.78 16.89
14.90 17.04
14.77 16.90
6/16 14.66 16.93
14.73 17.02
14.98 17.23
15.14 17.48
15.27 17.53
7/16 15.31 17.45
15.33 17.47
15.50 17.62
15.74 17.69
8/16 15.80 17.74
15.76 17.69
15.45 17.68
15.45 17.51
15.47 17.71
9/16 15.59 17.79
15.45 17.78
15.39 17.78
15.61 17.89
10/16 15.53 17.78
15.12 17.45
15.02 17.45
15.47 17.37
11/16 15.59 17.48
15.44 17.42
15.89 17.71
15.98 17.69
15.92 17.78
12/16 16.08 17.71
16.42 17.92
16.46 17.97
16.41 17.94
1/17 16.60 18.06
16.64 18.03
16.55 18.05
16.85 18.08
2/17 16.90 18.20
16.95 18.16
16.53 17.86
16.60 17.88
16.47 17.82
3/17 16.66 18.03
16.75 17.97
16.90 17.93
16.92 17.99
4/17 17.30 18.14
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PERFORMANCE
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Average Annual Total Return
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6 Months Ended 1 Year Ended 5 Years Ended Inception (9/27/10)
4/30/2017 4/30/2017 4/30/2017 to 4/30/2017
FUND PERFORMANCE (3)
NAV 6.63% 14.58% 7.79% 7.31%
Market Value 16.04% 24.82% 6.98% 5.80%
INDEX PERFORMANCE
BofA Merrill Lynch US High Yield Constrained Index 5.49% 13.65% 6.87% 7.41%
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% OF LONG-TERM
INDUSTRY CLASSIFICATION INVESTMENTS (4)
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Basic Industry 13.9%
Telecommunications 9.1
Energy 9.1
Healthcare 8.1
Capital Goods 7.8
Media 6.6
Technology & Electronics 6.4
Leisure 5.1
Services 5.1
Banking 4.6
Financial Services 4.5
Automotive 4.5
Consumer Goods 4.4
Insurance 3.4
Transportation 2.7
Retail 2.7
Utility 0.8
Commercial Mortgage-Backed Securities 0.8
Collateralized Mortgage Obligations 0.3
Asset-Backed Securities 0.1
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Total 100.0%
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% OF TOTAL
COUNTRY EXPOSURE INVESTMENTS (4)
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United States 84.4%
Luxembourg 4.0
Canada 2.8
Ireland 1.4
Netherlands 1.3
United Kingdom 1.1
Bermuda 0.8
France 0.7
Liberia 0.6
Finland 0.6
Cayman Islands 0.6
Australia 0.6
Jersey 0.5
Mexico 0.3
Multinational 0.3
Brazil 0.0*
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Total 100.0%
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% OF LONG-TERM
ASSET CLASSIFICATION INVESTMENTS (4)
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Corporate Bonds and Notes 76.7%
Foreign Corporate Bonds and Notes 14.3
Capital Preferred Securities 6.8
Mortgage-Backed Securities 1.1
Senior Floating-Rate Loan Interests 1.0
Asset-Backed Securities 0.1
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Total 100.0%
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% OF LONG
FIXED-INCOME
CREDIT QUALITY (5) INVESTMENTS (4)
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BBB- and above 11.9%
BB 53.5
B 27.9
CCC+ and below 6.2
NR 0.5
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Total 100.0%
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* Amount is less than 0.1%.
(1) Most recent distribution paid or declared through 4/30/2017. Subject to
change in the future. The distribution was increased subsequent to
4/30/2017. See Note 8 - Subsequent Events in the Notes to Financial
Statements.
(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 4/30/2017. 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 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
less than one year. Past performance is not indicative of future results.
(4) Percentages are based on the long positions only. Short positions are
excluded.
(5) The credit quality and ratings information presented above reflect the
ratings assigned by one or more nationally recognized statistical rating
organizations (NRSROs), including Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies, Inc., Moody's Investors Service,
Inc., Fitch Ratings, or a comparably rated NRSRO. For situations in which
a security is rated by more than one NRSRO and the ratings are not
equivalent, the highest ratings are used. Sub-investment grade ratings are
those rated BB+/Ba1 or lower. Investment grade ratings are those rated
BBB-/Baa3 or higher. The credit ratings shown relate to the
creditworthiness of the issuers of the underlying securities in the Fund,
and not to the Fund or its shares. Credit ratings are subject to change.
NR - Not Rated
Page 2
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PORTFOLIO COMMENTARY
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FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
SEMI-ANNUAL REPORT
APRIL 30, 2017 (UNAUDITED)
PLAN FOR TENDER OFFER AND DISTRIBUTION POLICY
The Fund announced on January 20, 2017, that the Fund's Board of Trustees
approved the commencement (subject to certain conditions), no later than the
week of June 15, 2017, of a cash tender offer for up to 15% of the Fund's then
outstanding common shares of beneficial interest at a price per share equal to
98% of the Fund's net asset value ("NAV") per share. The cash tender offer
commenced on June 14, 2017. Please see Note 7 - Plan for Tender Offer and
Distribution Policy in the Notes to Financial Statements.
The Fund's Board of Trustees has also 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 provides 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 over the prior 12 months. Under the
distribution policy, monthly distributions may be sourced from income, paid-in
capital, and/or capital gains, if any.
ADVISOR
First Trust Advisors L.P. ("First Trust") was established in 1991 and is located
in Wheaton, Illinois. First Trust is a registered investment advisor which
offers customized portfolio management using its structured, quantitative
approach to security selection. As of April 30, 2017, First Trust managed or
supervised $105.533 billion in assets.
SUB-ADVISOR
MacKay Shields LLC is a registered investment adviser founded in 1938, and is
Sub-Advisor to First Trust High Income Long/Short Fund (the "Fund"). The Fund
trades under the ticker symbol FSD on the New York Stock Exchange. As of April
30, 2017, MacKay had approximately $94.9 billion in assets under management.
MACKAY SHIELDS LLC 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
MICHAEL KIMBLE, CFA - SENIOR MANAGING DIRECTOR, GLOBAL FIXED INCOME DIVISION
MARKET RECAP
The U.S. presidential election marked a watershed moment as the Republican Party
swept control of both the executive and legislative branches of government in
November of 2016. Initially, market participants ignited a "growth acceleration
trade" following the Trump victory, and U.S. Treasury yields rose appreciably.
Risky assets rallied significantly through the period; however, the outsized
gains associated with the high-yield bonds of energy and commodities companies
waned in the first four months of 2017. The Organization of the Petroleum
Exporting Countries ("OPEC") had agreed to cut oil production late in 2016
resulting in a continued rally in oil prices, and the cartel appeared poised to
renew the cuts in May of 2017 -- although compliance by OPEC members has been
uneven. Nevertheless, oil prices were weak in the first quarter of 2017 as U.S.
production increased and inventories rose. The Federal Open Market Committee
("FOMC") raised the Federal Reserve ("Fed") funds target rate in December 2016
and March 2017 as was widely expected, and the Committee signaled that three
more rate hikes are possible in 2017.
After a strong January and February, "risk markets" reassessed the so-called
"Trump Reflation Trade" following the failure of the administration to garner
enough Republican support in the House of Representatives to repeal and replace
Obamacare. This was a key tenet of President Trump's campaign along with tax
cuts, deregulation, and infrastructure spending. Initially, capital markets
assigned a high probability to the implementation of stimulative policies by the
new administration; however, the timing and likelihood of such policy stimulus
are now open to debate.
Furthermore, a number of U.S. economists have cited the difference between
quantifiable data and survey-based indicators. For instance, small business
optimism is near its 43-year high, while consumer sentiment has reached levels
last seen in 2000. However, hard data stats, such as retail sales and capital
spending are more muted. By the end of the period covered by this report,
inflation data edged upward in a number of major markets. U.S. inflation, as
measured by the core PCE (personal consumption expenditure) Price Index (less
food and energy), rose by 1.8% according to the U.S. Department of Commerce, and
headline Eurozone inflation rose by 1.9%, according to Eurostat. First quarter
2017 U.S. GDP surprised on the downside at a meager 0.7%, and the unemployment
rate for the quarter was 4.5%.
Page 3
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PORTFOLIO COMMENTARY (CONTINUED)
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FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
SEMI-ANNUAL REPORT
APRIL 30, 2017 (UNAUDITED)
PERFORMANCE ANALYSIS
For the six-month period ended April 30, 2017, U.S. high yield securities ("HY")
returned 5.49%, according to the BofA Merrill Lynch US High Yield Constrained
Index ("benchmark").(1) With the exception of the slight pullbacks in November
and March, the asset class delivered strong positive returns for each of the
other months during the period. We believe buyers were focused on the perceived
increased growth implications of the Trump administration for most of the
period. The stimulative impact of anticipated lower taxes, regulatory reform,
and big infrastructure spending were likely the primary drivers of increased
risk-taking in HY and the equity markets, in our view. Retail HY mutual funds
experienced mixed flows during the period; according to JP Morgan, there were
large inflows into the asset class in December, however, this was offset by the
large outflows in November and March. JP Morgan also reported that U.S. HY bond
issuance totaled approximately $154 billion during the period and refinancing
represented a large portion of the use of proceeds. Par-weighted HY defaults
ended April at 1.39%, down from 3.57% at the beginning of 2017 and the lowest
since March 2014, also noted by JP Morgan. We expect this trend to continue.
FSD posted strong results for the six-month period ended April 30, 2017,
outperforming its benchmark, with a total return(2) of 16.04% on a share price
basis and 6.63% on a net asset value ("NAV") basis, compared to the benchmark's
return of 5.49% (as we also noted above). Within the Fund, security selection
within the insurance and telecommunications sectors, as well as an underweight
to the retail sector, benefited performance. Alternatively, security selection
within the transportation and services sectors as well as an underweight
positioning within the energy sector, detracted from performance. With regard to
the energy sector, we believe that the lag in HY energy bond performance
calendar year-to-date is telling. The tightening of the sector from around 1,400
basis points before the rally began in 2016 to levels in line with the rest of
the HY market today leaves scant room for negative developments in the sector
going forward, in our view. Moreover, we believe it is likely that new supply
and high inventories in the U.S. will keep oil prices range bound barring a
geo-political event. Consequently, we remain underweight in the sector.
During the period, we maintained short positions in U.S. Treasury bonds, which
were used to reduce the portfolio's exposure to interest rate risk, while at the
same time using the proceeds from the short sales to purchase additional
high-yield securities to increase the size of 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 rallied in the period. Given
the rise in U.S. Treasury rates during the period, the short U.S. Treasury
positions also benefited performance.
OUTLOOK
We believe there will be continued upward pressure on short-term U.S. interest
rates in 2017 as the Fed tightens monetary conditions and the new administration
embarks on looser fiscal policies. The fundamental economic backdrop in the U.S.
has been durable, in our opinion; consumption is being supported by a healthy
consumer enjoying wage gains from a tighter labor market, and an increase in
wealth from a burgeoning housing market. President Trump's fiscal platform calls
for an increase in spending, especially on infrastructure, and lower taxes for
households and businesses. While tax cuts should be stimulative for the U.S.
economy in the short-to-medium term, some of the other proposals may not have
the same impact, in our view. In particular, protectionist trade policies would
likely curtail global growth and incite trade wars.
We do believe credit spreads could tighten modestly given our tempered outlook
for corporate earnings and high levels of idiosyncratic risk. Valuations
generally remain fair across the credit sectors but greater vigilance is
required as we navigate the late stages of the current economic cycle.
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(1) The BofA Merrill Lynch US High Yield Constrained Index tracks the
performance of U.S. dollar denominated below investment grade corporate
debt publicly issued in the U.S. domestic market but caps issuer exposure
at 2%. Indexes are unmanaged and an investor cannot invest directly in an
index.
(2) Total return is based on the combination of reinvested dividends, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan and changes in NAV 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
less than one year. Past performance is not indicative of future results.
Page 4
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
--------------- -------------------------------------------------------------- -------- -------- --------------
CORPORATE BONDS AND NOTES - 94.3%
AUTOMOTIVE - 5.1%
$ 4,725,000 Dana, Inc. (a)................................................ 5.50% 12/15/24 $ 4,831,312
220,000 Ford Motor Co................................................. 8.90% 01/15/32 299,089
2,000,000 Ford Motor Co. (a)............................................ 7.75% 06/15/43 2,516,426
1,620,000 Ford Motor Co................................................. 9.98% 02/15/47 2,524,649
5,135,000 Gates Global LLC/Gates Global Co. (b)......................... 6.00% 07/15/22 5,186,350
4,396,000 Goodyear Tire & Rubber (The) Co. (a).......................... 7.00% 05/15/22 4,557,817
1,500,000 Goodyear Tire & Rubber (The) Co............................... 5.00% 05/31/26 1,543,125
4,757,000 Navistar International Corp. (a).............................. 8.25% 11/01/21 4,840,247
2,320,000 Tenneco, Inc.................................................. 5.00% 07/15/26 2,328,398
3,705,000 ZF North America Capital, Inc. (b)............................ 4.75% 04/29/25 3,867,353
--------------
32,494,766
--------------
Banking - 1.5%
612,000 Ally Financial, Inc. (a)...................................... 8.00% 11/01/31 731,340
7,355,000 Ally Financial, Inc. (a)...................................... 8.00% 11/01/31 8,789,225
--------------
9,520,565
--------------
BASIC INDUSTRY - 11.5%
650,000 AK Steel Corp. (a)............................................ 7.63% 10/01/21 681,688
4,500,000 AK Steel Corp................................................. 8.38% 04/01/22 4,677,187
925,000 AK Steel Corp. (a)............................................ 7.50% 07/15/23 1,011,719
5,604,000 Aleris International, Inc..................................... 7.88% 11/01/20 5,575,980
2,875,000 Beazer Homes USA, Inc......................................... 8.75% 03/15/22 3,205,625
5,500,000 CalAtlantic Group, Inc. (a)................................... 8.38% 05/15/18 5,843,750
500,000 CalAtlantic Group, Inc........................................ 5.88% 11/15/24 539,375
1,580,000 Cliffs Natural Resources, Inc................................. 4.88% 04/01/21 1,516,800
200,000 Freeport-McMoRan, Inc......................................... 4.00% 11/14/21 197,250
2,010,000 Freeport-McMoRan, Inc......................................... 3.55% 03/01/22 1,899,450
3,680,000 Freeport-McMoRan, Inc......................................... 3.88% 03/15/23 3,431,600
960,000 Freeport-McMoRan, Inc......................................... 4.55% 11/14/24 906,720
1,873,000 K Hovnanian Enterprises, Inc. (a) (b)......................... 7.00% 01/15/19 1,662,288
2,800,000 K Hovnanian Enterprises, Inc. (b)............................. 7.25% 10/15/20 2,730,000
3,479,000 KB Home (a)................................................... 7.50% 09/15/22 3,950,839
1,305,000 Koppers, Inc. (a) (b)......................................... 6.00% 02/15/25 1,370,250
3,730,000 Meritage Homes Corp........................................... 6.00% 06/01/25 3,992,965
1,840,000 Momentive Performance Escrow Claim (c) (d) (e) (f)............ N/A N/A 2
1,840,000 Momentive Performance Materials, Inc. (a) (c)................. 4.69% 04/24/22 1,692,800
1,815,000 Novelis Corp. (b)............................................. 6.25% 08/15/24 1,914,825
2,862,000 Novelis Corp. (b)............................................. 5.88% 09/30/26 2,947,860
2,420,000 Olin Corp..................................................... 5.13% 09/15/27 2,525,875
2,060,000 PQ Corp. (b).................................................. 6.75% 11/15/22 2,240,229
1,780,000 PulteGroup, Inc. (a).......................................... 7.63% 10/15/17 1,828,950
4,570,000 PulteGroup, Inc............................................... 7.88% 06/15/32 5,221,225
2,375,000 Shea Homes L.P./Shea Homes Funding Corp. (b).................. 6.13% 04/01/25 2,410,625
5,000,000 Standard Industries, Inc. (b)................................. 5.00% 02/15/27 5,062,500
4,465,000 TRI Pointe Group, Inc./TRI Pointe Homes, Inc.................. 5.88% 06/15/24 4,721,737
--------------
73,760,114
--------------
See Notes to Financial Statements Page 5
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
--------------- -------------------------------------------------------------- -------- -------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
Capital Goods - 6.8%
$ 3,595,000 Ball Corp..................................................... 4.00% 11/15/23 $ 3,662,406
4,785,000 BWAY Holding Co. (b).......................................... 5.50% 04/15/24 4,850,794
4,000,000 Crown Americas LLC/Crown Americas Capital Corp. IV (a)........ 4.50% 01/15/23 4,140,000
5,445,000 KLX, Inc. (a) (b)............................................. 5.88% 12/01/22 5,744,475
1,575,000 Orbital ATK, Inc.............................................. 5.50% 10/01/23 1,641,938
3,315,000 Owens-Brockway Glass Container, Inc. (a) (b).................. 5.00% 01/15/22 3,455,888
6,700,000 Reynolds Group Issuer, Inc./Reynolds Group Issuer
LLC/Reynolds Group Issuer LU (a) (b)....................... 5.13% 07/15/23 6,993,125
4,375,000 Sealed Air Corp. (b).......................................... 5.50% 09/15/25 4,692,187
3,970,000 Terex Corp. (b)............................................... 5.63% 02/01/25 4,064,287
4,500,000 Triumph Group, Inc............................................ 4.88% 04/01/21 4,432,500
--------------
43,677,600
--------------
Consumer Goods - 4.8%
3,995,000 B&G Foods, Inc................................................ 5.25% 04/01/25 4,099,989
3,795,000 Cott Holdings, Inc. (b)....................................... 5.50% 04/01/25 3,870,900
4,265,000 Kronos Acquisition Holdings, Inc. (b)......................... 9.00% 08/15/23 4,334,306
2,240,000 Lamb Weston Holdings, Inc. (a) (b)............................ 4.63% 11/01/24 2,318,400
2,325,000 Pilgrim's Pride Corp. (b)..................................... 5.75% 03/15/25 2,429,625
2,665,000 Post Holdings, Inc. (b)....................................... 5.50% 03/01/25 2,798,250
3,610,000 Post Holdings, Inc. (b)....................................... 5.00% 08/15/26 3,600,975
4,585,000 Spectrum Brands, Inc. (a)..................................... 5.75% 07/15/25 4,937,632
2,400,000 US Foods, Inc. (b)............................................ 5.88% 06/15/24 2,520,000
--------------
30,910,077
--------------
Energy - 8.8%
6,000,000 AmeriGas Partners L.P./AmeriGas Finance Corp. (a)............. 5.88% 08/20/26 6,120,000
2,426,000 California Resources Corp. (a) (b)............................ 8.00% 12/15/22 1,864,988
2,410,000 Carrizo Oil & Gas, Inc........................................ 6.25% 04/15/23 2,440,125
5,470,000 CITGO Petroleum Corp. (a) (b)................................. 6.25% 08/15/22 5,606,750
4,475,000 Continental Resources, Inc.................................... 5.00% 09/15/22 4,530,937
3,170,000 Crestwood Midstream Partners L.P./Crestwood
Midstream Finance Corp. (a)................................ 6.25% 04/01/23 3,324,537
6,700,000 Denbury Resources, Inc. (a)................................... 5.50% 05/01/22 5,025,000
2,305,000 Hilcorp Energy I L.P./Hilcorp Finance Co. (b)................. 5.00% 12/01/24 2,172,462
3,535,000 PHI, Inc. (a)................................................. 5.25% 03/15/19 3,322,900
2,340,000 Sanchez Energy Corp........................................... 6.13% 01/15/23 2,164,477
545,000 SM Energy Co. (a)............................................. 5.00% 01/15/24 516,388
2,020,000 SM Energy Co.................................................. 5.63% 06/01/25 1,939,200
2,910,000 Suburban Propane Partners L.P./Suburban
Energy Finance Corp........................................ 5.75% 03/01/25 2,902,725
2,280,000 Suburban Propane Partners L.P./Suburban
Energy Finance Corp........................................ 5.88% 03/01/27 2,285,700
1,900,000 Sunoco L.P./Sunoco Finance Corp. (a).......................... 5.50% 08/01/20 1,966,500
1,560,000 Sunoco L.P./Sunoco Finance Corp............................... 6.38% 04/01/23 1,669,200
2,200,000 Tesoro Logistics L.P./Tesoro Logistics Finance Corp........... 5.25% 01/15/25 2,343,000
1,770,000 Ultra Resources, Inc. (b)..................................... 7.13% 04/15/25 1,755,628
4,325,000 Whiting Petroleum Corp. (a)................................... 5.75% 03/15/21 4,325,000
--------------
56,275,517
--------------
Page 6 See Notes to Financial Statements
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
--------------- -------------------------------------------------------------- -------- -------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
Financial Services - 5.6%
$ 6,855,000 Icahn Enterprises L.P./Icahn Enterprises Finance Corp. (a).... 6.00% 08/01/20 $ 7,112,062
1,190,000 Icahn Enterprises L.P./Icahn Enterprises Finance Corp. (a).... 5.88% 02/01/22 1,230,163
3,385,000 MSCI, Inc. (b)................................................ 5.75% 08/15/25 3,664,263
7,265,000 Navient Corp. (a)............................................. 8.00% 03/25/20 7,991,500
5,150,000 OneMain Financial Holdings, Inc. (a) (b)...................... 7.25% 12/15/21 5,382,316
2,395,000 Springleaf Finance Corp....................................... 6.00% 06/01/20 2,460,863
4,555,000 Springleaf Finance Corp. (a).................................. 7.75% 10/01/21 4,899,472
2,825,000 Tempo Acquisition LLC/Tempo Acquisition Finance
Corp. (b).................................................. 6.75% 06/01/25 2,909,750
--------------
35,650,389
--------------
Healthcare - 7.5%
1,265,000 Alere, Inc.................................................... 6.50% 06/15/20 1,299,788
4,175,000 CHS/Community Health Systems, Inc............................. 6.88% 02/01/22 3,470,469
2,085,000 CHS/Community Health Systems, Inc............................. 6.25% 03/31/23 2,129,306
2,500,000 DaVita, Inc. (a).............................................. 5.75% 08/15/22 2,596,875
3,775,000 DaVita, Inc................................................... 5.00% 05/01/25 3,812,750
4,000,000 Greatbatch Ltd. (a) (b)....................................... 9.13% 11/01/23 4,210,000
1,500,000 HCA, Inc...................................................... 5.88% 05/01/23 1,636,050
10,850,000 HCA, Inc. (a)................................................. 5.00% 03/15/24 11,541,687
4,585,000 Hologic, Inc. (b)............................................. 5.25% 07/15/22 4,848,637
4,495,000 inVentiv Group Holdings, Inc./inVentiv Health, Inc./inVentiv
Health Clinical, Inc. (b).................................. 7.50% 10/01/24 4,663,563
4,315,000 MPH Acquisition Holdings LLC (a) (b).......................... 7.13% 06/01/24 4,649,413
3,195,000 Tenet Healthcare Corp......................................... 8.13% 04/01/22 3,258,900
--------------
48,117,438
--------------
Leisure - 5.6%
4,225,000 ClubCorp Club Operations, Inc. (b)............................ 8.25% 12/15/23 4,626,375
4,000,000 ESH Hospitality, Inc. (b)..................................... 5.25% 05/01/25 4,060,000
1,980,000 GLP Capital LP/GLP Financing II, Inc.......................... 5.38% 04/15/26 2,093,850
1,327,000 Isle of Capri Casinos, Inc.................................... 5.88% 03/15/21 1,370,957
3,670,000 Live Nation Entertainment, Inc. (b)........................... 4.88% 11/01/24 3,706,700
9,175,000 MGM Resorts International..................................... 6.75% 10/01/20 10,230,125
3,985,000 Scientific Games International, Inc........................... 10.00% 12/01/22 4,338,669
4,975,000 Wynn Las Vegas LLC/Wynn Las Vegas Capital Corp. (b)........... 5.50% 03/01/25 5,161,562
--------------
35,588,238
--------------
Media - 6.1%
7,245,000 CCO Holdings LLC/CCO Holdings Capital Corp. (a)............... 5.75% 01/15/24 7,643,475
2,370,000 CCO Holdings LLC/CCO Holdings Capital Corp. (a) (b)........... 5.75% 02/15/26 2,523,292
2,730,000 Clear Channel Worldwide Holdings, Inc., Series B.............. 7.63% 03/15/20 2,770,950
2,841,000 Clear Channel Worldwide Holdings, Inc., Series B.............. 6.50% 11/15/22 2,958,191
180,000 CSC Holdings LLC (b).......................................... 6.63% 10/15/25 197,325
2,325,000 CSC Holdings, Inc. (b)........................................ 5.50% 04/15/27 2,409,281
7,430,000 Dish DBS Corp. (a)............................................ 6.75% 06/01/21 8,098,700
7,415,000 iHeartCommunications, Inc..................................... 9.00% 03/01/21 5,663,206
2,515,000 Lamar Media Corp.............................................. 5.75% 02/01/26 2,747,638
3,725,000 Sirius XM Radio, Inc. (a) (b)................................. 5.38% 07/15/26 3,822,781
--------------
38,834,839
--------------
See Notes to Financial Statements Page 7
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
--------------- -------------------------------------------------------------- -------- -------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
Retail - 3.3%
$ 3,130,000 AdvancePierre Foods Holdings, Inc. (b)........................ 5.50% 12/15/24 $ 3,497,775
3,845,000 Dollar Tree, Inc. (a)......................................... 5.75% 03/01/23 4,098,770
6,395,000 Hanesbrands, Inc. (a) (b)..................................... 4.63% 05/15/24 6,379,013
3,300,000 KFC Holding Co./Pizza Hut Holdings LLC/
Taco Bell of America LLC (b)............................... 5.25% 06/01/26 3,390,750
3,500,000 Murphy Oil USA, Inc........................................... 6.00% 08/15/23 3,692,500
--------------
21,058,808
--------------
Services - 6.0%
2,120,000 Acosta, Inc. (b).............................................. 7.75% 10/01/22 1,807,300
4,845,000 Ashtead Capital, Inc. (a) (b)................................. 6.50% 07/15/22 5,044,856
2,500,000 CoreCivic, Inc. (a)........................................... 5.00% 10/15/22 2,600,000
2,810,000 GEO (The) Group, Inc.......................................... 6.00% 04/15/26 2,901,325
3,711,000 Herc Rentals, Inc. (b)........................................ 7.50% 06/01/22 4,054,267
1,090,000 Herc Rentals, Inc. (b)........................................ 7.75% 06/01/24 1,194,913
4,607,000 Iron Mountain, Inc. (b)....................................... 6.00% 10/01/20 4,831,591
4,250,000 Iron Mountain, Inc............................................ 5.75% 08/15/24 4,382,812
3,580,000 ServiceMaster (The) Co. LLC (a) (b)........................... 5.13% 11/15/24 3,705,300
111,000 United Rentals North America, Inc............................. 7.63% 04/15/22 116,134
3,097,000 United Rentals North America, Inc............................. 6.13% 06/15/23 3,244,108
1,400,000 United Rentals North America, Inc. (a)........................ 5.50% 07/15/25 1,469,552
2,900,000 United Rentals North America, Inc............................. 5.88% 09/15/26 3,070,375
--------------
38,422,533
--------------
Technology & Electronics - 6.8%
2,300,000 CommScope Technologies LLC (b)................................ 5.00% 03/15/27 2,325,875
3,780,000 CommScope, Inc. (b)........................................... 5.00% 06/15/21 3,898,125
4,896,000 Dell International LLC/EMC Corp. (b).......................... 8.35% 07/15/46 6,356,952
6,433,000 First Data Corp. (b).......................................... 7.00% 12/01/23 6,913,545
3,370,000 Match Group, Inc.............................................. 6.38% 06/01/24 3,681,725
4,715,000 NCR Corp. (a)................................................. 6.38% 12/15/23 5,066,267
3,519,000 PTC, Inc...................................................... 6.00% 05/15/24 3,774,128
4,475,000 Qorvo, Inc. (a)............................................... 7.00% 12/01/25 4,989,625
5,910,000 Zebra Technologies Corp. (a).................................. 7.25% 10/15/22 6,404,962
--------------
43,411,204
--------------
Telecommunications - 10.5%
4,985,000 CenturyLink, Inc., Series P................................... 7.60% 09/15/39 4,698,362
270,000 CyrusOne L.P./CyrusOne Finance Corp. (b)...................... 5.38% 03/15/27 278,775
3,025,000 Equinix, Inc.................................................. 5.88% 01/15/26 3,267,000
3,500,000 Equinix, Inc.................................................. 5.38% 05/15/27 3,665,515
1,550,000 Frontier Communications Corp.................................. 6.25% 09/15/21 1,441,500
6,450,000 Frontier Communications Corp. (a)............................. 11.00% 09/15/25 6,248,437
2,306,000 Hughes Satellite Systems Corp. (b)............................ 5.25% 08/01/26 2,352,120
4,070,000 Level 3 Financing, Inc. (a)................................... 5.38% 01/15/24 4,240,289
2,900,000 Level 3 Financing, Inc........................................ 5.25% 03/15/26 2,998,107
2,570,000 Sprint Capital Corp........................................... 6.88% 11/15/28 2,788,450
11,425,000 Sprint Capital Corp........................................... 8.75% 03/15/32 14,088,396
3,070,000 Sprint Communications, Inc. (a)............................... 9.25% 04/15/22 3,730,050
Page 8 See Notes to Financial Statements
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
--------------- -------------------------------------------------------------- -------- -------- --------------
CORPORATE BONDS AND NOTES (CONTINUED)
Telecommunications (Continued)
$ 7,900,000 T-Mobile USA, Inc............................................. 6.00% 03/01/23 $ 8,462,875
2,925,000 T-Mobile USA, Inc............................................. 6.00% 04/15/24 3,176,550
1,700,000 T-Mobile USA, Inc............................................. 6.50% 01/15/26 1,889,125
2,428,000 ViaSat, Inc. (a).............................................. 6.88% 06/15/20 2,478,078
1,500,000 Windstream Services LLC (a)................................... 6.38% 08/01/23 1,331,250
--------------
67,134,879
--------------
Transportation - 3.4%
2,000,000 American Airlines Group, Inc.................................. 6.13% 06/01/18 2,085,000
3,400,000 American Airlines Group, Inc. (b)............................. 4.63% 03/01/20 3,472,250
1,149,757 Continental Airlines 2003-ERJ1 Pass Through Trust............. 7.88% 07/02/18 1,179,938
1,334,968 Continental Airlines 2005-ERJ1 Pass Through Trust (a)......... 9.80% 04/01/21 1,465,127
5,406,371 US Airways 2000-3C Pass Through Trust......................... 8.39% 03/01/22 5,994,314
6,775,000 XPO Logistics, Inc. (a) (b)................................... 6.50% 06/15/22 7,198,438
--------------
21,395,067
--------------
Utility - 1.0%
6,660,000 Calpine Corp. (a)............................................. 5.75% 01/15/25 6,476,850
--------------
TOTAL CORPORATE BONDS AND NOTES..................................................... 602,728,884
(Cost $575,245,845) --------------
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLARS)
--------------- -------------------------------------------------------------- -------- -------- --------------
FOREIGN CORPORATE BONDS AND NOTES - 17.7%
Automotive - 0.1%
650,000 Dana Financing Luxembourg Sarl (USD) (b)...................... 5.75% 04/15/25 667,472
--------------
Basic Industry - 5.6%
709,000 Anglo American Capital PLC (USD) (b).......................... 4.13% 04/15/21 728,498
1,401,000 Anglo American Capital PLC (USD) (a) (b)...................... 4.88% 05/14/25 1,467,547
3,000 ArcelorMittal (USD)........................................... 7.00% 02/25/22 3,416
8,362,000 ArcelorMittal (USD)........................................... 7.75% 10/15/39 9,595,395
1,200,000 ArcelorMittal (USD) (a)....................................... 7.50% 03/01/41 1,356,000
2,000,000 Cemex SAB de CV (USD) (b)..................................... 7.75% 04/16/26 2,285,000
2,345,000 FMG Resources (August 2006) Pty Ltd. (USD) (b)................ 9.75% 03/01/22 2,709,941
1,670,000 FMG Resources (August 2006) Pty Ltd. (USD) (b)................ 6.88% 04/01/22 1,731,581
140,000 Masonite International Corp. (USD) (b)........................ 5.63% 03/15/23 145,950
3,300,000 MMC Norilsk Nickel OJSC via MMC
Finance DAC (USD) (b)...................................... 6.63% 10/14/22 3,725,462
1,925,000 SPCM S.A. (USD) (b)........................................... 4.88% 09/15/25 1,951,469
4,200,000 Stora Enso OYJ (USD) (a) (b).................................. 7.25% 04/15/36 4,872,000
650,000 Teck Resources Ltd. (USD)..................................... 3.75% 02/01/23 642,883
2,505,000 Teck Resources Ltd. (USD)..................................... 6.00% 08/15/40 2,589,544
1,795,000 Teck Resources Ltd. (USD)..................................... 6.25% 07/15/41 1,911,675
--------------
35,716,361
--------------
See Notes to Financial Statements Page 9
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2017 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLARS)
--------------- -------------------------------------------------------------- -------- -------- --------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
Capital Goods - 2.2%
900,000 Ardagh Packaging Finance PLC/Ardagh Holdings
USA, Inc. (USD) (b)........................................ 6.00% 06/30/21 $ 936,000
5,100,000 Ardagh Packaging Finance PLC/Ardagh Holdings
USA, Inc. (USD) (a) (b).................................... 7.25% 05/15/24 5,571,750
535,000 Ardagh Packaging Finance PLC/Ardagh Holdings
USA, Inc. (USD) (b)........................................ 6.00% 02/15/25 554,394
3,890,000 Bombardier, Inc. (USD) (b).................................... 6.00% 10/15/22 3,894,862
3,288,000 Bombardier, Inc. (USD) (a) (b)................................ 6.13% 01/15/23 3,288,000
--------------
14,245,006
--------------
Consumer Goods - 0.5%
3,425,000 Minerva Luxembourg S.A. (USD) (b)............................. 6.50% 09/20/26 3,412,122
--------------
Energy - 2.3%
300,000 CGG S.A. (USD) (g)............................................ 6.50% 06/01/21 144,000
2,750,000 Gazprom OAO Via Gaz Capital S.A. (USD) (b).................... 8.63% 04/28/34 3,644,311
970,000 Petrobras Global Finance B.V. (USD)........................... 7.38% 01/17/27 1,045,466
4,350,000 Petrobras Global Finance B.V. (USD) (a)....................... 6.88% 01/20/40 4,176,000
2,120,000 Petrobras Global Finance B.V. (USD)........................... 7.25% 03/17/44 2,119,293
100,000 Petrobras Global Finance B.V. (USD) (a)....................... 8.75% 05/23/26 116,850
3,900,000 Weatherford International Ltd. (USD) (a)...................... 4.50% 04/15/22 3,705,000
--------------
14,950,920
--------------
Healthcare - 1.5%
2,625,000 Endo Dac/Endo Finance LLC/Endo Finco,
Inc. (USD) (a) (b)......................................... 6.00% 02/01/25 2,229,938
5,375,000 Valeant Pharmaceuticals International, Inc. (USD) (b)......... 7.50% 07/15/21 4,467,969
2,819,000 Valeant Pharmaceuticals International, Inc. (USD) (b)......... 5.88% 05/15/23 2,096,631
1,324,000 Valeant Pharmaceuticals International, Inc. (USD) (b)......... 6.13% 04/15/25 982,408
--------------
9,776,946
--------------
Insurance - 0.5%
3,500,000 Oil Insurance Ltd. (USD) (b) (h).............................. 4.13% (i) 3,010,000
--------------
Leisure - 0.8%
3,755,000 Royal Caribbean Cruises Ltd. (USD)............................ 7.50% 10/15/27 4,872,113
--------------
Media - 2.1%
8,120,000 Altice Luxembourg S.A. (USD) (a) (b).......................... 7.75% 05/15/22 8,648,856
4,345,000 UPCB Finance IV Ltd. (USD) (b)................................ 5.38% 01/15/25 4,442,762
--------------
13,091,618
--------------
Services - 0.3%
1,690,000 Ritchie Bros. Auctioneers, Inc. (USD) (a) (b)................. 5.38% 01/15/25 1,749,150
--------------
TECHNOLOGY & ELECTRONICS - 1.1%
2,925,000 NXP B.V./NXP Funding LLC (USD) (b)............................ 4.63% 06/01/23 3,155,344
3,585,000 Sensata Technologies UK Financing Co., PLC (USD) (b).......... 6.25% 02/15/26 3,898,687
--------------
7,054,031
--------------
Page 10 See Notes to Financial Statements
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2017 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (U.S. DOLLARS)
--------------- -------------------------------------------------------------- -------- -------- --------------
FOREIGN CORPORATE BONDS AND NOTES (CONTINUED)
Telecommunications - 0.7%
880,000 Telecom Italia Capital S.A. (USD) (a)......................... 7.20% 07/18/36 $ 974,600
2,900,000 Telecom Italia Capital S.A. (USD)............................. 7.72% 06/04/38 3,356,750
--------------
4,331,350
--------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES............................................. 112,877,089
(Cost $106,051,587) --------------
PAR AMOUNT
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION RATE MATURITY (U.S. DOLLARS)
--------------- -------------------------------------------------------------- -------- -------- --------------
CAPITAL PREFERRED SECURITIES - 8.3%
Banking - 4.1%
5,155,000 Bank of America Corp., Series DD (USD) (a) (j)................ 6.30% (i) 5,689,831
850,000 Capital One Financial Corp., Series E (USD) (j)............... 5.55% (i) 886,125
6,700,000 Citigroup, Inc., Series M (USD) (j)........................... 6.30% (i) 7,078,885
3,250,000 Dresdner Funding Trust I (USD) (b)............................ 8.15% 06/30/31 3,867,500
2,825,000 HBOS Capital Funding L.P. (GBP) (j)........................... 6.46% (i) 3,887,705
1,700,000 RBS Capital Trust II (USD) (j)................................ 6.43% (i) 1,861,500
2,370,000 Wells Fargo & Co., Series S (USD) (j)......................... 5.90% (i) 2,521,087
610,000 Wells Fargo Capital X (USD)................................... 5.95% 12/15/36 661,850
--------------
26,454,483
--------------
Capital Goods - 0.5%
3,760,000 Textron Financial Corp. (USD) (b) (h)......................... 2.77% 02/15/42 3,026,800
--------------
Insurance - 3.7%
1,800,000 Aviva PLC (GBP) (j)........................................... 6.13% 11/14/36 2,688,017
3,175,000 Chubb (The) Corp. (USD) (h)................................... 3.41% 04/15/37 3,151,188
3,500,000 CNP Assurances (EUR) (j)...................................... 5.25% (i) 3,517,080
11,000,000 Glen Meadow Pass-Through Trust (USD) (b) (h).................. 3.16% 02/12/47 9,666,250
3,500,000 Lincoln National Corp. (USD) (a) (h).......................... 3.40% 05/17/66 3,119,375
1,800,000 Lincoln National Corp. (USD) (h).............................. 3.20% 04/20/67 1,561,500
--------------
23,703,410
--------------
TOTAL CAPITAL PREFERRED SECURITIES.................................................. 53,184,693
(Cost $51,153,386) --------------
PRINCIPAL STATED
VALUE DESCRIPTION RATE (k) MATURITY (l) VALUE
--------------- -------------------------------------------------------------- -------- ---------- --------------
SENIOR FLOATING-RATE LOAN INTERESTS - 1.2%
Automotive - 0.3%
$ 1,721,953 Navistar, Inc. Term Loan B.................................... 5.00% 08/07/20 1,742,754
--------------
HEALTHCARE - 0.9%
6,136,475 Ortho-Clinical Term Loan B3................................... 4.75% 06/30/21 6,103,277
--------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS........................................... 7,846,031
(Cost $7,807,881) --------------
See Notes to Financial Statements Page 11
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
--------------- -------------------------------------------------------------- -------- -------- --------------
MORTGAGE-BACKED SECURITIES - 1.4%
Collateralized Mortgage Obligations - 0.4%
Morgan Stanley Mortgage Loan Trust
$ 209,186 Series 2007-6XS, Class 2A1S (h)............................ 1.10% 02/25/47 $ 206,159
Specialty Underwriting & Residential Finance Trust
1,419,035 Series 2006-BC4, Class A2B (h)............................. 1.10% 09/25/37 666,642
Wells Fargo Mortgage Backed Securities
1,639,428 Series 2006-AR7 Trust, Class 2A4 (h)....................... 3.28% 05/25/36 1,567,005
--------------
2,439,806
--------------
Commercial Mortgage-Backed Securities - 1.0%
ACE Securities Corp. Home Equity Loan Trust
2,471,112 Series 2007-HE2, Class A2A (h)............................. 1.11% 12/25/36 1,555,334
Carrington Mortgage Loan Trust
451,162 Series 2006-NC4, Class A5 (h).............................. 1.05% 10/25/36 445,456
HSI Asset Securitization Corp. Trust
13,301 Series 2007-NC1, Class A1 (h).............................. 1.09% 04/25/37 9,251
Morgan Stanley ABS Capital I, Inc. Trust
630,589 Series 2006-HE6, Class A2B (h)............................. 1.09% 09/25/36 308,001
Securitized Asset Backed Receivables LLC Trust
8,191,468 Series 2006-FR4, Class A2A (h)............................. 1.07% 08/25/36 3,565,960
Soundview Home Loan Trust
752,277 Series 2006-EQ2, Class A2 (h).............................. 1.10% 01/25/37 542,971
--------------
6,426,973
--------------
TOTAL MORTGAGE-BACKED SECURITIES.................................................... 8,866,779
(Cost $11,748,148) --------------
ASSET-BACKED SECURITIES - 0.1%
Keycorp Student Loan Trust
825,093 Series 2000-A, Class A2 (h)................................ 1.37% 05/25/29 799,297
(Cost $768,455) --------------
SHARES DESCRIPTION VALUE
--------------- ------------------------------------------------------------------------------------ --------------
SHORT-TERM INVESTMENT - 0.1%
204,738 Dreyfus Government Cash Management - Institutional Shares........................... 204,738
(Cost $204,738) --------------
TOTAL INVESTMENTS - 123.1%.......................................................... 786,507,511
(Cost $752,980,040) (m) --------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
--------------- -------------------------------------------------------------- -------- -------- --------------
U.S. GOVERNMENT BONDS SOLD SHORT - (15.3%)
$ (101,950,000) United States Treasury Note................................... 1.38% 09/30/23 (97,856,096)
(Proceeds $98,822,755) --------------
CORPORATE BONDS SOLD SHORT - (0.7%)
Energy - (0.7%)
(2,400,000) Noble Energy, Inc............................................. 4.15% 12/15/21 (2,538,941)
Page 12 See Notes to Financial Statements
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
--------------- -------------------------------------------------------------- -------- -------- --------------
CORPORATE BONDS SOLD SHORT (CONTINUED)
Energy (CONTINUED)
$ (2,100,000) Noble Energy, Inc............................................. 3.90% 11/15/24 $ (2,147,021)
--------------
TOTAL CORPORATE BONDS SOLD SHORT.................................................... (4,685,962)
(Proceeds $4,093,914) --------------
TOTAL INVESTMENTS SOLD SHORT - (16.0%).............................................. (102,542,058)
(Proceeds $102,916,669)
OUTSTANDING LOAN - (8.7%)........................................................... (55,466,470)
NET OTHER ASSETS AND LIABILITIES - 1.6%............................................. 10,475,577
--------------
NET ASSETS - 100.0%................................................................. $ 638,974,560
==============
-----------------------------
(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
of the Securities Act of 1933, 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 April 30, 2017, securities noted as such amounted to
$308,831,077 of total investments or 48.3% of net assets.
(c) On October 24, 2014, Momentive Performance Materials, Inc. completed
a Bankruptcy Plan of Reorganization. As part of the Bankruptcy Plan
of Reorganization, the holders of Momentive Performance Materials,
Inc. Senior Secured Lien Notes ("Senior Secured Lien Notes")
scheduled to mature on October 15, 2020, received new Momentive
Performance Materials, Inc. Second Priority Senior Secured Notes
maturing on April 24, 2022, in an exchange for the existing Senior
Secured Lien Notes, and received an escrow claim, Momentive
Performance Escrow Claim. The escrow claim represents a claim on any
cash that remains in a Fee Reserve account. It is unknown if any
remaining cash held in the Fee Reserve account will be available
after future legal and financial costs are paid.
(d) 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 April 30, 2017, securities noted as such are
valued at $2 or 0.0% of net assets.
(e) 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.
(f) Non-income producing security.
(g) The issuer is in default and interest is not being accrued.
(h) Floating rate security. The interest rate shown reflects the rate in
effect at April 30, 2017.
(i) Perpetual maturity.
(j) Fixed-to-floating or fixed-to-variable rate security. The interest
rate shown reflects the fixed rate in effect at April 30, 2017. At a
predetermined date, the fixed rate will change to a floating rate or
a variable rate.
(k) 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 London Inter-Bank
Offered Rate ("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. The interest rate shown reflects the rate in
effect at April 30, 2017. When a range of rates is disclosed, the
Fund holds more than one contract within the same tranche at varying
rates.
(l) 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.
(m) Aggregate cost for financial reporting purposes, which approximates
the aggregate cost for federal income tax purposes. As of April 30,
2017, the aggregate gross unrealized appreciation for all securities
in which there was an excess of value over tax cost was $44,989,992
and the aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over value was $11,462,521.
Currency Abbreviations:
EUR Euro
GBP British Pound Sterling
USD United States Dollar
See Notes to Financial Statements Page 13
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2017 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2017 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2017 PRICES INPUTS INPUTS
---------------- ---------------- ---------------- ----------------
Corporate Bonds and Notes:
Basic Industry............................. $ 73,760,114 $ -- $ 73,760,112 $ 2
Other Industry Categories*................. 528,968,770 -- 528,968,770 --
Foreign Corporate Bonds and Notes*............ 112,877,089 -- 112,877,089 --
Capital Preferred Securities*................. 53,184,693 -- 53,184,693 --
Senior Floating-Rate Loan Interests*.......... 7,846,031 -- 7,846,031 --
Mortgage-Backed Securities:
Collateralized Mortgage Obligations........ 2,439,806 -- 2,439,806 --
Commercial Mortgage-Backed Securities...... 6,426,973 -- 6,426,973 --
Asset-Backed Securities....................... 799,297 -- 799,297 --
Short-Term Investment......................... 204,738 204,738 -- --
---------------- ---------------- ---------------- ----------------
Total Investments............................. $ 786,507,511 $ 204,738 $ 786,302,771 $ 2
================ ================ ================ ================
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2017 PRICES INPUTS INPUTS
---------------- ---------------- ---------------- ----------------
U.S. Government Bonds Sold Short.............. $ (97,856,096) $ -- $ (97,856,096) $ --
Corporate Bonds Sold Short*................... (4,685,962) -- (4,685,962) --
Forward Foreign Currency Contracts**.......... (158,755) -- (158,755) --
---------------- ---------------- ---------------- ----------------
Total......................................... $ (102,700,813) $ -- $ (102,700,813) $ --
================ ================ ================ ================
* See the Portfolio of Investments for industry breakout.
** See the Forward Foreign Currency Contracts table for contract and currency
detail.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at April 30, 2017.
The Level 3 Corporate Bond (Momentive Performance Escrow Claim) that is fair
valued by the Advisor's Pricing Committee is footnoted in the Portfolio of
Investments. The Level 3 Corporate Bond (Momentive Performance Escrow Claim)
values are based on unobservable and non-quantitative inputs. The Fund's Board
of Trustees has adopted valuation procedures that are utilized by the Advisor's
Pricing Committee to oversee the day-to-day valuation of the Fund's investments.
The Advisor's Pricing Committee, through the Fund's fund accounting agent,
monitors the daily pricing via tolerance checks and stale and unchanged price
reviews. The Advisor's Pricing Committee also reviews monthly back testing of
third-party pricing service prices by comparing sales prices of the Fund's
investments to prior day third-party pricing service prices. Additionally, the
Advisor's Pricing Committee reviews periodic information from the Fund's
third-party pricing service that compares secondary market trade prices to their
daily valuations.
Page 14 See Notes to Financial Statements
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2017 (UNAUDITED)
The following table presents the activity of the Fund's investments measured at
fair value on a recurring basis using significant unobservable inputs (Level 3)
for the period presented.
BEGINNING BALANCE AT OCTOBER 31, 2016
Corporate Bonds and Notes................ $ 2
Net Realized Gain (Loss).................... --
Net Change in Unrealized Appreciation/
Depreciation............................. --
Purchases................................... --
Sales....................................... --
Transfers In................................ --
Transfers Out............................... --
ENDING BALANCE AT APRIL 30, 2017
Corporate Bonds and Notes................ 2
----------------
Total Level 3 holdings...................... $ 2
================
There was no net change in unrealized appreciation (depreciation) from Level 3
investments held as of April 30, 2017.
FORWARD FOREIGN CURRENCY CONTRACTS (see Note 2D - Forward Foreign Currency
Contracts in the Notes to Financial Statements):
FORWARD FOREIGN CURRENCY CONTRACTS
--------------------------------------------------
PURCHASE SALE UNREALIZED
SETTLEMENT AMOUNT AMOUNT VALUE AS OF VALUE AS OF APPRECIATION/
DATE COUNTERPARTY PURCHASED + SOLD + APRIL 30, 2017 APRIL 30, 2017 (DEPRECIATION)
---------- ------------ -------------- -------------- ---------------- ---------------- --------------
08/01/17 JPM USD 3,622,375 EUR 3,371,000 $ 3,622,375 $ 3,690,153 $ (67,778)
08/01/17 JPM USD 6,606,891 GBP 5,157,000 6,606,891 6,697,868 (90,977)
--------------
Net Unrealized Appreciation (Depreciation)....................................................... $ (158,755)
==============
+ Please see Portfolio of Investments for currency descriptions.
Counterparty Abbreviations:
JPM JPMorgan Chase
See Notes to Financial Statements Page 15
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2017 (UNAUDITED)
ASSETS:
Investments, at value
(Cost $752,980,040)........................................................................... $ 786,507,511
Foreign currency (Cost $17,501).................................................................... 18,107
Receivables:
Interest...................................................................................... 11,650,334
Investment securities sold.................................................................... 6,408,887
Prepaid expenses................................................................................... 32,254
--------------
Total Assets.................................................................................. 804,617,093
--------------
LIABILITIES:
Borrowings......................................................................................... 55,466,470
Investments sold short, at value (proceeds $102,916,669)........................................... 102,542,058
Due to custodian................................................................................... 1,773,750
Due to broker...................................................................................... 101,854
Unrealized depreciation on forward foreign currency contracts...................................... 158,755
Payables:
Investment securities purchased............................................................... 4,749,237
Investment advisory fees...................................................................... 520,674
Interest on investments sold short............................................................ 193,956
Administrative fees........................................................................... 32,994
Audit and tax fees............................................................................ 32,670
Printing fees................................................................................. 26,624
Transfer agent fees........................................................................... 14,025
Custodian fees................................................................................ 7,925
Trustees' fees and expenses................................................................... 1,675
Legal fees.................................................................................... 1,296
Financial reporting fees...................................................................... 771
Other liabilities.................................................................................. 17,799
--------------
Total Liabilities............................................................................. 165,642,533
--------------
NET ASSETS......................................................................................... $ 638,974,560
==============
NET ASSETS CONSIST OF:
Paid-in capital.................................................................................... $ 672,779,967
Par value.......................................................................................... 352,319
Accumulated net investment income (loss)........................................................... (510,114)
Accumulated net realized gain (loss) on investments, forward foreign currency
contracts, swap contracts, foreign currency transactions, futures and investments sold short.... (67,400,787)
Net unrealized appreciation (depreciation) on investments, forward foreign
currency contracts, foreign currency translation and investments sold short..................... 33,753,175
--------------
NET ASSETS......................................................................................... $ 638,974,560
==============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)............................... $ 18.14
==============
Number of Common Shares outstanding (unlimited number of Common Shares
has been authorized)............................................................................ 35,231,949
==============
Page 16 See Notes to Financial Statements
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2017 (UNAUDITED)
INVESTMENT INCOME:
Interest........................................................................................... $ 24,673,614
Other.............................................................................................. 30,511
--------------
Total investment income....................................................................... 24,704,125
--------------
EXPENSES:
Investment advisory fees........................................................................... 3,115,947
Margin interest expense............................................................................ 1,145,037
Interest expense on investments sold short......................................................... 822,921
Administrative fees................................................................................ 164,630
Printing fees...................................................................................... 63,894
Custodian fees..................................................................................... 38,368
Audit and tax fees................................................................................. 28,394
Short sale fees.................................................................................... 14,228
Legal fees......................................................................................... 14,142
Transfer agent fees................................................................................ 13,400
Trustees' fees and expenses........................................................................ 9,148
Financial reporting fees........................................................................... 4,624
Other.............................................................................................. 39,886
--------------
Total expenses................................................................................ 5,474,619
--------------
NET INVESTMENT INCOME (LOSS)....................................................................... 19,229,506
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................................................... (1,113,286)
Forward foreign currency contracts............................................................ (149,988)
Foreign currency transactions................................................................. 31,228
Short sales................................................................................... 270,006
--------------
Net realized gain (loss)........................................................................... (962,040)
--------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................................................... 19,239,381
Forward foreign currency contracts............................................................ (136,687)
Foreign currency translation.................................................................. 48,090
Short positions............................................................................... 910,978
--------------
Net change in unrealized appreciation (depreciation)............................................... 20,061,762
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS)............................................................ 19,099,722
--------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................... $ 38,329,228
==============
See Notes to Financial Statements Page 17
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR
4/30/2017 ENDED
(UNAUDITED) 10/31/2016
-------------- --------------
OPERATIONS:
Net investment income (loss)..................................................... $ 19,229,506 $ 35,407,079
Net realized gain (loss)......................................................... (962,040) (26,171,825)
Net change in unrealized appreciation (depreciation)............................. 20,061,762 41,241,069
-------------- --------------
Net increase (decrease) in net assets resulting from operations.................. 38,329,228 50,476,323
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................ (23,257,907) (37,536,441)
-------------- --------------
Total distributions to shareholders.............................................. (23,257,907) (37,536,441)
-------------- --------------
CAPITAL TRANSACTIONS:
Repurchase of Common Shares*..................................................... (205,540) (9,139,757)
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions........ (205,540) (9,139,757)
-------------- --------------
Total increase (decrease) in net assets.......................................... 14,865,781 3,800,125
NET ASSETS:
Beginning of period.............................................................. 624,108,779 620,308,654
-------------- --------------
End of period.................................................................... $ 638,974,560 $ 624,108,779
============== ==============
Accumulated net investment income (loss) at end of period........................ $ (510,114) $ 3,518,287
============== ==============
CAPITAL TRANSACTIONS WERE AS FOLLOWS:
Common Shares at beginning of period............................................. 35,245,603 35,902,223
Common Shares repurchased........................................................ (13,654) (656,620)
-------------- --------------
Common Shares at end of period................................................... 35,231,949 35,245,603
============== ==============
-----------------------------
* 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 September 15, 2017. For the six months ended
April 30, 2017 and the year ended October 31, 2016, the Fund repurchased
13,654 and 656,620, respectively, of its shares at a weighted-average
discount of 13.69% and 15.14%, respectively, 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 978,598 common
shares (for an aggregate of 1,802,808), or (ii) September 15, 2017.
Page 18 See Notes to Financial Statements
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2017 (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations.................. $ 38,329,228
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by operating activities:
Purchases of investments.................................................... (173,359,468)
Borrowed investments sold short............................................. 44,852,969
Sales, maturities and paydowns of investments............................... 177,059,587
Borrowed investments purchased.............................................. (55,504,082)
Net amortization/accretion of premiums/discounts on investments............. (135,419)
Net realized gain/loss on investments....................................... 1,113,286
Net realized gain/loss on investments sold short............................ (270,006)
Net change in unrealized appreciation/depreciation on forward foreign
currency contracts....................................................... 136,687
Net change in unrealized appreciation/depreciation on
investments sold short................................................... (910,978)
Net change in unrealized appreciation/depreciation on investments........... (19,239,381)
CHANGES IN ASSETS AND LIABILITIES:
Decrease in due from broker................................................. 825,573
Decrease in interest receivable............................................. 482,525
Increase in prepaid expenses................................................ (32,254)
Increase in due to broker................................................... 101,854
Decrease in interest payable on investments sold short...................... (116,794)
Decrease in investment advisory fees payable................................ (10,793)
Decrease in audit and tax fees payable...................................... (24,530)
Decrease in legal fees payable.............................................. (3,667)
Decrease in printing fees payable........................................... (16,824)
Increase in administrative fees payable..................................... 2,506
Increase in custodian fees payable.......................................... 1,750,974
Increase in transfer agent fees payable..................................... 9,754
Increase in Trustees' fees and expenses payable............................. 231
Decrease in financial reporting fees payable................................ (2)
Increase in other liabilities payable....................................... 14,598
--------------
CASH PROVIDED BY OPERATING ACTIVITIES............................................ $ 15,055,574
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of Common Shares................................................. (205,540)
Distributions to Common Shareholders from net investment income............. (23,257,907)
Net proceeds from borrowing................................................. 8,266,686
--------------
CASH USED IN FINANCING ACTIVITIES................................................ (15,196,761)
--------------
Decrease in cash and foreign currency (a)........................................ (141,187)
Cash and foreign currency at beginning of period................................. 159,294
--------------
Cash and foreign currency at end of period....................................... $ 18,107
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees................................ $ 2,084,752
==============
-----------------------------
(a) Includes net change in unrealized appreciation (depreciation) on foreign
currency of $48,090.
See Notes to Financial Statements Page 19
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED YEAR ENDED OCTOBER 31,
APRIL 30, 2017 --------------------------------------------------------------
(UNAUDITED) 2016 2015 2014 2013 2012
------------ ---------- ---------- ---------- ---------- ----------
Net asset value, beginning of period........ $ 17.71 $ 17.28 $ 19.47 $ 19.63 $ 19.05 $ 17.82
-------- -------- -------- -------- -------- --------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................ 0.55 1.00 1.11 1.31 1.35 1.41
Net realized and unrealized gain (loss)..... 0.54 0.44 (2.05) (0.15) 0.64 1.42
-------- -------- -------- -------- -------- --------
Total from investment operations............ 1.09 1.44 (0.94) 1.16 1.99 2.83
-------- -------- -------- -------- -------- --------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income....................... (0.66) (1.06) (1.26) (1.32) (1.33) (1.44)
Net realized gain........................... -- -- -- -- -- (0.16)
Return of capital........................... -- -- -- -- (0.08) --
-------- -------- -------- -------- -------- --------
Total distributions to Common Shareholders (0.66) (1.06) (1.26) (1.32) (1.41) (1.60)
-------- -------- -------- -------- -------- --------
Capital share repurchases................... 0.00 (a) 0.05 0.01 -- -- --
-------- -------- -------- -------- -------- --------
Net asset value, end of period.............. $ 18.14 $ 17.71 $ 17.28 $ 19.47 $ 19.63 $ 19.05
======== ======== ======== ======== ======== ========
Market value, end of period................. $ 17.30 $ 15.52 $ 14.96 $ 17.19 $ 17.62 $ 18.78
======== ======== ======== ======== ======== ========
TOTAL RETURN BASED ON NET ASSET VALUE (b)... 6.63% 10.24% (3.89)% 6.86% 11.32% 17.09%
======== ======== ======== ======== ======== ========
TOTAL RETURN BASED ON MARKET VALUE (b)...... 16.04% 11.58% (5.76)% 5.12% 1.36% 23.69%
======== ======== ======== ======== ======== ========
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........ $638,975 $624,109 $620,309 $701,955 $707,807 $686,715
Ratio of total expenses to average net
assets................................... 1.76% (c) 1.54% 1.66% 1.75% 1.72% 1.88%
Ratio of total expenses to average net
assets excluding interest expense........ 1.13% (c) 1.16% 1.21% 1.26% 1.27% 1.32%
Ratio of net investment income (loss) to
average net assets....................... 6.17% (c) 5.92% 6.05% 6.59% 6.93% 7.83%
Portfolio turnover rate..................... 20% 36% 26% 28% 28% 24%
-----------------------------
(a) Amount represents less than $0.01 per share.
(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.
(c) Annualized.
Page 20 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
APRIL 30, 2017 (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 (the "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 BofA Merrill Lynch 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 its
financial statements. The preparation of 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:
-----------------------------
(1) The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
Page 21
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
APRIL 30, 2017 (UNAUDITED)
Corporate bonds, notes, capital preferred securities, U.S. government
securities, mortgage-backed securities, asset-backed securities and other
debt securities are 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.
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 60
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) 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
Page 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
APRIL 30, 2017 (UNAUDITED)
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 a 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:
o 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.
o 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.
o 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 April 30, 2017, 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 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 April 30, 2017, 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 did not have any unfunded delayed draw loan
commitments as of April 30, 2017.
Page 23
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
APRIL 30, 2017 (UNAUDITED)
D. 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/(depreciation) on forward foreign
currency contracts" on the Statement of Assets and Liabilities. When the forward
contract is closed, the 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 and 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.
E. 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 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.
F. 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 effected 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 ("Pershing") for the
purpose of purchasing or borrowing securities on margin. At April 30, 2017, the
Fund had $55,466,470 in borrowings associated with investments sold short as
shown in "Borrowings" on the Statement of Assets and Liabilities and
$102,542,058 of investments sold short as shown in "Investments sold short, at
value" on the Statement of Assets and Liabilities. Interest is charged on these
balances at a rate equal to the Overnight Bank Funding Rate plus 75 basis points
and is charged on payable credit margin balances at a rate equal to the
Overnight Bank Funding Rate less 40 basis points. At April 30, 2017, the Fund
had a debit margin balance with an interest rate of 1.66%. For the six months
ended April 30, 2017, margin interest expense was $1,145,037 as shown on the
Statement of Operations. For the six months ended April 30, 2017, the average
margin balance and interest rate were $166,939,773 and 1.41%, respectively.
Page 24
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
APRIL 30, 2017 (UNAUDITED)
G. 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 income and capital gains are determined in accordance with
U.S. 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. The character of
distributions for tax reporting purposes will depend on the Fund's investment
experience during the remainder of its fiscal year.
The tax character of distributions paid during the fiscal year ended October 31,
2016 was as follows:
Distributions paid from:
Ordinary income.................................... $ 37,536,441
Capital gain....................................... --
Return of capital.................................. --
As of October 31, 2016, the distributable earnings and net assets on a tax basis
were as follows:
Undistributed ordinary income...................... $ 2,962,105
Undistributed capital gains........................ --
------------
Total undistributed earnings....................... 2,962,105
Accumulated capital and other losses............... (66,385,309)
Net unrealized appreciation (depreciation)......... 14,543,352
------------
Total accumulated earnings (losses)................ (48,879,852)
Other.............................................. (349,195)
Paid-in capital.................................... 673,337,826
------------
Net assets......................................... $624,108,779
============
H. 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 or 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, 2016, the Fund had no pre-enactment net
capital losses for federal income tax purposes. At October 31, 2016, the Fund
had post-enactment net capital losses for federal income tax purposes of
$66,385,309 to be carried forward indefinitely.
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.
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 ending 2013, 2014,
2015 and 2016 remain open to federal and state audit. As of April 30, 2017,
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.
Page 25
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
APRIL 30, 2017 (UNAUDITED)
I. EXPENSES
The Fund will pay all expenses directly related to its operations.
J. NEW AND AMENDED FINANCIAL REPORTING RULES AND FORMS
On October 13, 2016, the SEC adopted new rules and forms, and amended existing
rules and forms. The new and amended rules and forms are intended to modernize
the reporting of information provided by funds and to improve the quality and
type of information that funds provide to the SEC and investors. The new and
amended rules and forms will be effective for the First Trusts funds, including
the Fund, for reporting periods beginning on and after June 1, 2018. Management
is evaluating the new and amended rules and forms to determine the impact to the
Fund.
K. NEW ACCOUNTING PRONOUNCEMENT
In December 2016, FASB released Accounting Standards Update ("ASU") 2016-19 that
makes technical changes to various sections of the ASC, including Topic 820,
Fair Value Measurement. The changes to Topic 820 are intended to clarify the
difference between a valuation approach and a valuation technique. The changes
to ASC 820-10-50-2 require a reporting entity to disclose, for Level 2 and Level
3 fair value measurements, a change in either or both a valuation approach and a
valuation technique and the reason(s) for the change. The changes to Topic 820
are effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2016. At this time, management is evaluating the
implications of the ASU and has not yet determined its impact on the financial
statements and disclosures.
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. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investments, excluding short-term
investments and investments sold short, for the six months ended April 30, 2017,
were $103,347,976 and $110,543,616, respectively. The cost of purchases to cover
short sales and the proceeds of short sales were $55,504,082 and $44,852,969,
respectively.
Page 26
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
APRIL 30, 2017 (UNAUDITED)
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Fund at April
30, 2017, 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 RISK STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND
INSTRUMENTS EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
------------------ ------------------ --------------------------- ---------- --------------------------- ----------
Forward foreign Currency Risk Unrealized appreciation $ -- Unrealized depreciation $ 158,755
currency contracts on forward foreign on forward foreign
currency contracts currency contracts
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the six months
ended April 30, 2017, on derivative instruments, as well as the primary
underlying risk exposure associated with each instrument.
STATEMENT OF OPERATIONS LOCATION
------------------------------------------------------------------------------
CURRENCY RISK
Net realized gain (loss) on forward foreign currency contracts $ (149,988)
Net change in unrealized appreciation (depreciation) on forward
foreign currency contracts (136,687)
During the six months ended April 30, 2017, the notional values of forward
foreign currency contracts opened and closed were $54,038,664 and $68,379,202,
respectively.
The Fund does not have the right to offset financial assets and financial
liabilities related to forward foreign currency contracts on the Statement of
Assets and Liabilities.
6. 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.
7. PLAN FOR TENDER OFFER AND DISTRIBUTION POLICY
The Fund announced on January 20, 2017, that the Fund's Board approved the
commencement (subject to certain conditions), no later than the week of June 15,
2017, of a cash tender offer for up to 15% of the Fund's then outstanding common
shares of beneficial interest at a price per share equal to 98% of the Fund's
net asset value ("NAV") per share. The Fund will repurchase shares tendered and
accepted in the tender offer in exchange for cash. The cash tender offer
commenced on June 14, 2017. The tender offer is being conducted pursuant to an
agreement between the Fund and Saba Capital Management, Inc. ("Saba") and
certain associated parties. Pursuant to the agreement, Saba has agreed to be
bound by certain standstill covenants for two years from the date of the
agreement. In addition, Saba has agreed, among other things, to withdraw its
shareholder proposal for the 2017 annual meeting of shareholders of the Fund.
Pursuant to the agreement, the Fund has agreed not to close the tender offer
prior to July 13, 2017.
The Fund's Board of Trustees has also 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 provides 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 over the prior 12 months. Under the
distribution policy, monthly distributions may be sourced from income, paid-in
capital, and/or capital gains, if any.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events to the Fund through
the date the financial statements were issued, and has determined that there was
the following subsequent event:
On May 22, 2017, the Fund declared a distribution of $0.1247 per share to Common
Shareholders of record on June 5, 2017, payable June 15, 2017.
Page 27
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
APRIL 30, 2017 (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.
You may elect to opt-out of or withdraw from the Plan at any time by giving
written notice to the Plan Agent, or by telephone at (866) 340-1104, in
accordance with such reasonable requirements as the Plan Agent and the Fund may
agree upon. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan, and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions.
The Plan Agent maintains all Common Shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. The Plan Agent will forward to each
participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund. Any proxy you receive will
include all Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.
Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
Capital gains and income are realized although cash is not received by you.
Consult your financial advisor for more information.
If you hold your Common Shares with a brokerage firm that does not participate
in the Plan, you will not be able to participate in the Plan and any dividend
reinvestment may be effected on different terms than those described above.
The Fund reserves the right to amend or terminate the Plan if in the judgment of
the Board of Trustees the change is warranted. There is no direct service charge
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable by the participants. Additional
information about the Plan may be obtained by writing BNY Mellon Investment
Servicing (US) Inc., 301 Bellevue Parkway, Wilmington, Delaware 19809.
--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies and information on how the Fund voted proxies relating to
portfolio investments during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website located at
http://www.sec.gov.
Page 28
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
APRIL 30, 2017 (UNAUDITED)
PORTFOLIO HOLDINGS
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Qs
are available (1) by calling (800) 988-5891; (2) on the Fund's website located
at http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov;
and (4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.
SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Fund held its Annual Meeting of Shareholders ("Annual Meeting") on April 24,
2017. At the Annual Meeting, Robert F. Keith was elected by the Common
Shareholders of the First Trust High Income Long/Short Fund as a Class I Trustee
for a three-year term expiring at the Fund's annual meeting of shareholders in
2020. The number of votes cast in favor of Mr. Keith was 31,245,467, the number
of votes against was 198,895 and the number of broker non-votes was 3,787,587.
James A. Bowen, Richard E. Erickson, Thomas R. Kadlec and Niel B. Nielson are
the other current and continuing Trustees.
RISK CONSIDERATIONS
Risks are inherent in all investing. The following summarizes some, but not all,
of the risks that should be considered for the Fund. For additional information
about the risks associated with investing in the Fund, please see the Fund's
prospectus and statement of additional information, as well as other Fund
regulatory filings.
INVESTMENT AND MARKET RISK: An investment in the Fund's Common Shares is subject
to investment risk, including the possible loss of the entire principal
invested. An investment in Common Shares represents an indirect investment in
the securities owned by the Fund. The value of these securities, like other
market investments, may move up or down, sometimes rapidly and unpredictably.
Common Shares at any point in time may be worth less than the original
investment, even after taking into account the reinvestment of Fund dividends
and distributions. Security prices can fluctuate for several reasons including
the general condition of the securities markets, or when political or economic
events affecting the issuers occur. When the Advisor or Sub-Advisor determines
that it is temporarily unable to follow the Fund's investment strategy or that
it is impractical to do so (such as when a market disruption event has occurred
and trading in the securities is extremely limited or absent), the Fund may take
temporary defensive positions.
BELOW-INVESTMENT GRADE SECURITIES RISK: The Fund invests in below-investment
grade securities. The market values for high-yield securities tend to be very
volatile, and these securities are less liquid than investment grade debt
securities. For these reasons, an investment in the Fund is subject to the
following specific risks: (a) increased price sensitivity to changing interest
rates and to a deteriorating economic environment; (b) greater risk of loss due
to default or declining credit quality; (c) adverse issuer specific events are
more likely to render the issuer unable to make interest and/or principal
payments; and (d) a negative perception of the high-yield market may depress the
price and liquidity of high-yield securities.
DISTRESSED SECURITIES RISK: The Fund may invest in securities issued by
companies in a bankruptcy reorganization proceeding, subject to some other form
of a public or private debt restructuring or otherwise in default or in
significant risk of default in the payment of interest or repayment of principal
or trading at prices substantially below other below-investment grade debt
securities of companies in similar industries. Distressed securities frequently
do not produce income while they are outstanding. The Fund may be required to
incur certain extraordinary expenses in order to protect and recover its
investment. Therefore, to the extent the Sub-Advisor seeks capital appreciation
through investment in distressed securities, the ability to achieve current
income may be diminished.
ECONOMIC CONDITIONS RISK: Adverse changes in economic conditions are more likely
to lead to a weakened capacity of a high-yield issuer to make principal payments
and interest payments than an investment grade issuer. An economic downturn
could severely affect the ability of highly leveraged issuers to service their
debt obligations or to repay their obligations upon maturity. Under adverse
market or economic conditions, the secondary market for high-yield securities
could contract further, independent of any specific adverse changes in the
condition of a particular issuer and these securities may become illiquid. As a
result, the Sub-Advisor could find it more difficult to sell these securities or
may be able to sell the securities only at prices lower than if such securities
were widely traded.
FIXED-INCOME SECURITIES RISK: Debt securities, including high-yield securities,
are subject to certain risks, including: (i) issuer risk, which is the risk that
the value of fixed-income securities may decline for a number of reasons which
directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer's goods and services or, in the case
of asset-backed issuers, a decline in the value and/or cash flows of the
underlying assets; (ii) reinvestment risk, which is the risk that income from
the Fund's portfolio will decline if the proceeds from matured, traded or called
bonds are reinvested at market interest rates that are below the portfolio's
Page 29
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD)
APRIL 30, 2017 (UNAUDITED)
current earnings rate; (iii) prepayment risk, which is the risk that during
periods of declining interest rates, the issuer of a security may exercise its
option to prepay principal earlier than scheduled, forcing the reinvestment in
lower yielding securities; and (iv) credit risk, which is the risk that a
security in the Fund's portfolio will decline in price or the issuer fails to
make interest payments when due because the issuer of the security experiences a
decline in its financial status.
INTEREST RATE RISK: The Fund's portfolio is also subject to interest rate risk.
Interest rate risk is the risk that fixed-income securities will decline in
value because of changes in market interest rates. Investments in debt
securities with long-term maturities may experience significant price declines
if long-term interest rates increase.
SHORT SELLING RISK: Short selling allows the Fund to profit from a decline in
market price to the extent such decline exceeds the transaction costs and the
costs of borrowing the securities. If a security sold short increases in price,
the Fund may have to cover its short position at a higher price than the short
sale price, resulting in a loss. The Fund may have substantial short positions
and must borrow those securities to make delivery to the buyer. The Fund may not
be able to borrow a security that it needs to deliver or it may not be able to
close out a short position at an acceptable price and may have to sell related
long positions before it had intended to do so. Thus, the Fund may not be able
to successfully implement its short sale strategy due to limited availability of
desired securities or for other reasons. 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. Because losses on short sales arise from increases in the
value of the security sold short, such losses are theoretically unlimited. The
use of short sales in combination with long positions in the Fund's portfolio in
an attempt to improve performance or reduce overall portfolio risk may not be
successful and may result in greater losses or lower positive returns than if
the Fund held only long positions. It is possible that the Fund's long
securities positions will decline in value at the same time that the value of
its short securities positions increase, thereby increasing potential losses to
the Fund.
By investing the proceeds received from selling securities short, the Fund could
be deemed to be employing a form of leverage, which creates special risks. The
use of leverage may increase the Fund's exposure to long securities positions
and make any change in the Fund's NAV greater than it would be without the use
of leverage. This could result in increased volatility of returns. There is no
guarantee that any leveraging strategy the Fund employs will be successful
during any period in which it is employed.
CURRENCY RISK: The value of securities denominated or quoted in foreign
currencies may be adversely affected by fluctuations in the relative currency
exchange rates and by exchange control regulations. The Fund's investment
performance may be negatively affected by a devaluation of a currency in which
the Fund's investments are denominated or quoted. Further, the Fund's investment
performance may be significantly affected, either positively or negatively, by
currency exchange rates because the U.S. dollar value of securities denominated
or quoted in another currency will increase or decrease in response to changes
in the value of such currency in relation to the U.S. dollar. While certain of
the Fund's non-U.S. dollar-denominated securities may be hedged into U.S.
dollars, hedging may not alleviate all currency risks.
Page 30
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FIRST TRUST
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
MacKay Shields LLC
1345 Avenue of the Americas
43rd floor
New York, NY 10105
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
ADMINISTRATOR,
FUND ACCOUNTANT,
AND CUSTODIAN
The Bank of New York Mellon
101 Barclay Street, 20th Floor
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
There has been no change, as of the date of this filing, in any of the
portfolios managers identified in response to paragraph (a)(1) of this Item in
the Registrant's most recently filed annual report on Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
(A) TOTAL (C) TOTAL NUMBER OF (D) MAXIMUM NUMBER (OR
NUMBER OF (B) AVERAGE SHARES (OR UNITS) APPROXIMATE DOLLAR VALUE) OF
SHARES (OR PRICE PAID PURCHASED AS PART OF SHARES (OR UNITS) THAT MAY YET
UNITS) PER SHARE PUBLICLY ANNOUNCED BE PURCHASED UNDER THE PLANS
PERIOD PURCHASED (OR UNIT) PLANS OR PROGRAMS OR PROGRAMS
-------------------------------------------------------------------------------------------------------------
Month #1
(11/01/2016 -
11/30/2016) 13,654 $15.03 13,654 978,598 shares
Month #2
(12/01/2016 - 0 N/A 978,598 shares
12/31/2016)
Month #3
(01/01/2017 - 0 N/A 978,598 shares
01/31/2017)
Month #4
(02/01/2017 - 0 N/A 978,598 shares
02/29/2017)
Month #5
(03/01/2017 - 0 N/A 978,598 shares
03/31/2017)
Month #6
(04/01/2017 - 0 N/A 978,598 shares
04/30/2017)
Total 13,654 $15.03 13,654 978,598 shares
-------------------------------------------------------------------------------------------------------------
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 September 15, 2017. For the reporting period, 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 978,598 common
shares (for an aggregate of 1,802,808), or (ii) September 15, 2017.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. 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 second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 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: June 20, 2017
-------------------
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: June 20, 2017
-------------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: June 20, 2017
-------------------
* Print the name and title of each signing officer under his or her signature.