0001445546-14-001777.txt : 20140325 0001445546-14-001777.hdr.sgml : 20140325 20140325124712 ACCESSION NUMBER: 0001445546-14-001777 CONFORMED SUBMISSION TYPE: N-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20140131 FILED AS OF DATE: 20140325 DATE AS OF CHANGE: 20140325 EFFECTIVENESS DATE: 20140325 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST TRUST HIGH INCOME LONG/SHORT FUND CENTRAL INDEX KEY: 0001494530 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FILING VALUES: FORM TYPE: N-Q SEC ACT: 1940 Act SEC FILE NUMBER: 811-22442 FILM NUMBER: 14715239 BUSINESS ADDRESS: STREET 1: 120 EAST LIBERTY DRIVE, SUITE 400 CITY: WHEATON STATE: IL ZIP: 60187 BUSINESS PHONE: 630-765-8000 MAIL ADDRESS: STREET 1: 120 EAST LIBERTY DRIVE, SUITE 400 CITY: WHEATON STATE: IL ZIP: 60187 N-Q 1 fsd_nq.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-Q QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY Investment Company Act file number 811-22442 ----------- First Trust High Income Long/Short Fund -------------------------------------------------------------------- (Exact name of registrant as specified in charter) 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 -------------------------------------------------------------------- (Address of principal executive offices) (Zip code) W. Scott Jardine, Esq. First Trust Portfolios L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 -------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 630-765-8000 -------------- Date of fiscal year end: October 31 ------------ Date of reporting period: January 31, 2014 ------------------ Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to the Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. SCHEDULE OF INVESTMENTS. The Schedule of Investments is attached herewith. FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS JANUARY 31, 2014 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- --------------------------------------- -------------- -------------- --------------- CORPORATE BONDS AND NOTES - 71.9% AUTOMOTIVE - 4.3% $ 334,000 Chrysler Group LLC/Chrysler Group Co-Issuer, Inc. ................... 8.00% 06/15/19 $ 365,312 4,367,000 Chrysler Group LLC/Chrysler Group Co-Issuer, Inc. (a)................ 8.25% 06/15/21 4,918,334 2,376,000 Ford Motor Co. (a)..................... 9.22% 09/15/21 3,092,694 553,000 Ford Motor Co. (a)..................... 8.90% 01/15/32 735,171 3,000,000 Ford Motor Co. (a)..................... 7.75% 06/15/43 3,615,843 2,480,000 Ford Motor Co. (a)..................... 9.98% 02/15/47 3,534,551 1,400,000 Goodyear Tire & Rubber (The) Co. ...... 6.50% 03/01/21 1,499,750 5,396,000 Goodyear Tire & Rubber (The) Co. (a)... 7.00% 05/15/22 5,895,130 21,432 Motors Liquidation Co. GUC Trust (Transferable) (b)................. N/A N/A 661,177 4,872,000 Navistar International Corp. (a)....... 8.25% 11/01/21 5,036,430 1,272,000 Tomkins LLC/Tomkins, Inc. ............. 9.00% 10/01/18 1,384,890 --------------- 30,739,282 --------------- BANKING - 1.5% 740,000 Ally Financial, Inc. (a)............... 8.00% 11/01/31 893,550 2,285,000 Ally Financial, Inc. (a)............... 8.00% 11/01/31 2,759,137 5,610,000 Bank of America Corp. ................. 7.63% 06/01/19 6,954,633 --------------- 10,607,320 --------------- BASIC INDUSTRY - 8.8% 4,500,000 AK Steel Corp. ........................ 8.38% 04/01/22 4,494,375 3,095,000 Aleris International, Inc. (a)......... 7.63% 02/15/18 3,276,831 2,160,000 Aleris International, Inc. (a)......... 7.88% 11/01/20 2,289,600 3,450,000 Alpha Natural Resources, Inc. (a)...... 6.00% 06/01/19 2,872,125 1,255,000 Arch Coal, Inc. ....................... 7.00% 06/15/19 980,469 1,428,000 Arch Coal, Inc. ....................... 7.25% 10/01/20 1,106,700 1,125,000 Arch Coal, Inc. ....................... 7.25% 06/15/21 857,813 4,405,000 Associated Materials LLC/AMH New Finance, Inc. (a).................. 9.13% 11/01/17 4,663,794 1,500,000 Axalta Coating Systems US Holdings, Inc./Axalta Coating Systems Dutch Holding B B.V. (c)................. 7.38% 05/01/21 1,623,750 1,700,000 Cloud Peak Energy Resources LLC/Cloud Peak Energy Finance Corp. (a)...... 8.25% 12/15/17 1,778,625 6,500,000 Hexion U.S. Finance Corp./Hexion Nova Scotia Finance ULC (a)............. 8.88% 02/01/18 6,792,500 8,655,000 Huntsman International LLC (a)......... 8.63% 03/15/21 9,801,787 1,950,000 Momentive Performance Materials, Inc... 10.00% 10/15/20 2,086,500 2,800,000 Polypore International, Inc. (a)....... 7.50% 11/15/17 2,966,250 5,150,000 Texas Industries, Inc. (a)............. 9.25% 08/15/20 5,999,750 4,000,000 United States Steel Corp. (a).......... 7.38% 04/01/20 4,350,000 1,878,000 USG Corp. (c).......................... 8.38% 10/15/18 2,037,630 4,000,000 USG Corp. (c).......................... 5.88% 11/01/21 4,215,000 --------------- 62,193,499 ---------------
See Notes to Quarterly Portfolio of Investments Page 1 FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- --------------------------------------- -------------- -------------- --------------- CORPORATE BONDS AND NOTES (CONTINUED) CAPITAL GOODS - 6.0% $ 2,000,000 Ducommun, Inc. (a)..................... 9.75% 07/15/18 $ 2,250,000 5,000,000 Manitowoc Co., Inc. (a)................ 8.50% 11/01/20 5,668,750 3,625,000 Mcron Finance Sub LLC/ Mcron Finance 8.38% 05/15/19 4,050,938 Corp. (c).......................... 2,945,000 Milacron LLC/Mcron Finance Corp. (c)... 7.75% 02/15/21 3,140,106 3,760,000 Mueller Water Products, Inc. (a)....... 7.38% 06/01/17 3,882,200 7,500,000 Reynolds Group Issuer, Inc. (a)........ 8.50% 05/15/18 7,912,500 2,085,000 Reynolds Group Issuer, Inc. (a)........ 9.88% 08/15/19 2,314,350 4,050,000 Terex Corp. ........................... 6.00% 05/15/21 4,222,125 4,000,000 Transdigm, Inc. (a).................... 7.75% 12/15/18 4,300,000 4,650,000 Triumph Group, Inc. (a)................ 8.63% 07/15/18 4,981,312 --------------- 42,722,281 --------------- CONSUMER NON-CYCLICAL - 0.3% 2,240,000 Smithfield Foods, Inc. (a)............. 6.63% 08/15/22 2,368,800 --------------- ENERGY - 11.0% 1,150,000 Atlas Pipeline Partners L.P./Atlas 4.75% 11/15/21 1,066,625 Pipeline Finance Corp. ............ 2,535,000 Atlas Pipeline Partners L.P./Atlas 5.88% 08/01/23 2,439,938 Pipeline Finance Corp. ............ 1,280,000 Basic Energy Services, Inc. ........... 7.75% 02/15/19 1,350,400 3,540,000 Basic Energy Services, Inc. (a)........ 7.75% 10/15/22 3,725,850 3,974,000 Berry Petroleum Co. (a)................ 6.75% 11/01/20 4,162,765 600,000 Chesapeake Energy Corp. (a)............ 7.25% 12/15/18 ..699,000 1,970,000 Chesapeake Energy Corp. (a)............ 6.63% 08/15/20 2,206,400 6,600,000 Chesapeake Energy Corp. (a)............ 5.38% 06/15/21 6,897,000 4,135,000 EP Energy LLC/EP Energy Finance, Inc. (a)........................... 9.38% 05/01/20 4,775,925 3,000,000 Ferrellgas L.P./Ferrellgas Finance Corp. (a).......................... 6.50% 05/01/21 3,105,000 800,000 Frontier Oil Corp. (a)................. 6.88% 11/15/18 860,000 1,000,000 Hornbeck Offshore Services, Inc. ...... 5.88% 04/01/20 1,037,500 3,960,000 Hornbeck Offshore Services, Inc. (a)... 5.00% 03/01/21 3,870,900 5,510,000 Kinder Morgan, Inc. (c)................ 5.00% 02/15/21 5,492,357 2,636,000 Linn Energy LLC/Linn Energy Finance Corp. (c).......................... 7.00% 11/01/19 2,688,720 4,240,000 Linn Energy LLC/Linn Energy Finance Corp. ............................. 8.63% 04/15/20 4,600,400 4,500,000 PHI, Inc. (a).......................... 8.63% 10/15/18 4,865,625 5,900,000 Plains Exploration & Production Co. (a)............................ 6.50% 11/15/20 6,497,375 3,998,000 Samson Investment Co. (c).............. 10.50% 02/15/20 4,417,790 3,695,000 Swift Energy Co. ...................... 8.88% 01/15/20 3,953,650 3,425,000 Targa Resources Partners L.P./Targa Resources Partners Finance Corp. (a).......................... 7.88% 10/15/18 3,699,000 5,800,000 Whiting Petroleum Corp. (a) ........... 5.75% 03/15/21 6,104,500 --------------- 78,516,720 --------------- FINANCIAL SERVICES - 4.5% 8,000,000 CIT Group, Inc. (a).................... 4.25% 08/15/17 8,330,000
Page 2 See Notes to Quarterly Portfolio of Investments FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- --------------------------------------- -------------- -------------- --------------- CORPORATE BONDS AND NOTES (CONTINUED) FINANCIAL SERVICES (CONTINUED) $ 6,155,000 Icahn Enterprises L.P./Icahn Enterprises Finance Corp. (c)...... 6.00% 08/01/20 $ 6,408,894 1,190,000 Icahn Enterprises L.P./Icahn Enterprises Finance Corp. (c)...... 5.88% 02/01/22 1,182,563 8,000,000 SLM Corp. (a).......................... 8.00% 03/25/20 8,960,000 2,395,000 Springleaf Finance Corp. .............. 6.00% 06/01/20 2,406,975 4,555,000 Springleaf Finance Corp. (a)........... 7.75% 10/01/21 4,953,562 --------------- 32,241,994 --------------- HEALTHCARE - 4.1% 5,074,000 Alere, Inc. ........................... 7.25% 07/01/18 5,581,400 665,000 Alere, Inc. ........................... 6.50% 06/15/20 686,612 2,725,000 CHS/Community Health Systems, Inc. (c). 5.13% 08/01/21 2,747,141 5,360,000 CHS/Community Health Systems, Inc. (c). 6.88% 02/01/22 5,504,050 2,500,000 Davita Healthcare Partners, Inc. ...... 5.75% 08/15/22 2,571,875 5,600,000 HCA Holdings, Inc. .................... 7.75% 05/15/21 6,160,000 3,150,000 Kinetic Concepts, Inc./KCI USA, Inc. .. 10.50% 11/01/18 3,638,250 1,735,000 Tenet Healthcare Corp. ................ 8.13% 04/01/22 1,897,656 --------------- 28,786,984 --------------- MEDIA - 2.2% 3,895,000 CCO Holdings LLC/CCO Holdings Capital Corp. (a).......................... 5.75% 01/15/24 3,797,625 1,151,000 Clear Channel Communications, Inc. (a). 5.50% 12/15/16 1,041,655 6,990,000 Clear Channel Communications, Inc. (a). 9.00% 03/01/21 7,094,850 456,000 Clear Channel Worldwide Holdings, Inc. 7.63% 03/15/20 481,080 3,193,000 Clear Channel Worldwide Holdings, Inc. (a)................................ 7.63% 03/15/20 3,384,580 --------------- 15,799,790 --------------- SERVICES - 17.3% 1,095,000 Ashtead Capital, Inc. (c).............. 6.50% 07/15/22 1,177,125 1,426,000 Qvis Budget Car Rental LLC/Avis Budget 8.25% 01/15/19 1,541,863 Finance, Inc. ..................... 4,915,000 Avis Budget Car Rental LLC/Avis Budget 5.50% 04/01/23 4,767,550 Finance, Inc. ..................... 6,500,000 Beazer Homes USA, Inc. ................ 8.13% 06/15/16 7,231,250 1,749,000 Caesars Entertainment Operating Co., Inc. .............................. 9.00% 02/15/20 1,700,902 11,397,000 Caesars Entertainment Operating Co., Inc. .............................. 9.00% 02/15/20 11,112,075 2,600,000 Caesars Entertainment Resort Properties, 8.00% 10/01/20 2,710,500 LLC (c)............................ 4,325,226 Continental Airlines 2003-ERJ1 Pass 7.88% 07/02/18 4,682,057 Through Trust ..................... 2,303,078 Continental Airlines 2005-ERJ1 Pass 9.80% 04/01/21 2,602,478 Through Trust ..................... 1,527,402 Delta Air Lines 2009-1 Series B Pass 9.75% 12/17/16 1,722,146 Through Trust ..................... 8,000,000 Hertz (The) Corp. ..................... 7.50% 10/15/18 8,580,000 5,250,000 Iron Mountain, Inc. (a)................ 8.38% 08/15/21 5,630,625
See Notes to Quarterly Portfolio of Investments Page 3 FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- --------------------------------------- -------------- -------------- --------------- CORPORATE BONDS AND NOTES (CONTINUED) SERVICES (CONTINUED) $ 3,500,000 Isle of Capri Casinos, Inc. (a)........ 7.75% 03/15/19 $ 3,832,500 4,160,000 K Hovnanian Enterprises, Inc. (c)...... 7.25% 10/15/20 4,524,000 3,479,000 KB Home ............................... 7.50% 09/15/22 3,722,530 9,175,000 MGM Resorts International ............. 6.75% 10/01/20 9,909,000 2,380,000 Mohegan Tribal Gaming Authority (c).... 9.75% 09/01/21 2,612,050 2,840,131 Northwest Airlines 2001-1 Class B Pass Through Trust ..................... 7.69% 04/01/17 3,152,546 4,127,000 Pinnacle Entertainment, Inc. .......... 7.75% 04/01/22 4,498,430 1,780,000 Pulte Group, Inc. (a).................. 7.63% 10/15/17 2,055,900 4,570,000 Pulte Group, Inc. (a).................. 7.88% 06/15/32 4,741,375 3,319,000 Shea Homes L.P./Shea Homes Funding Corp. ............................. 8.63% 05/15/19 3,667,495 5,500,000 Standard Pacific Corp. (a)............. 8.38% 05/15/18 6,476,250 2,243,906 UAL 2009-2B Pass Through Trust (c)..... 12.00% 01/15/16 2,541,223 375,000 United Rentals North America, Inc. .... 7.38% 05/15/20 417,656 7,062,000 United Rentals North America, Inc. (a). 8.38% 09/15/20 7,874,130 367,000 United Rentals North America, Inc. .... 7.63% 04/15/22 414,710 6,712,290 US Airways 2000-3C Pass Through Trust . 8.39% 03/01/22 6,980,782 2,000,000 US Airways Group, Inc. ................ 6.13% 06/01/18 2,070,000 --------------- 122,949,148 --------------- TECHNOLOGY & ELECTRONICS - 4.9% 4,199,000 CommScope, Inc. (c).................... 8.25% 01/15/19 4,582,159 9,050,000 First Data Corp. (c)................... 8.88% 08/15/20 10,000,250 4,175,000 First Data Corp. (c)................... 10.63% 06/15/21 4,571,625 2,950,000 Freescale Semiconductor, Inc. (c)...... 5.00% 05/15/21 2,942,625 5,405,000 NCR Corp. (c).......................... 6.38% 12/15/23 5,648,225 6,460,000 Sungard Data Systems, Inc. ............ 6.63% 11/01/19 6,799,150 --------------- 34,544,034 --------------- TELECOMMUNICATIONS - 5.3% 2,500,000 Frontier Communications Corp. (a)...... 9.00% 08/15/31 2,512,500 2,411,000 Hughes Satellite Systems Corp. (a)..... 7.63% 06/15/21 2,748,540 3,500,000 MetroPCS Wireless, Inc. (a)............ 7.88% 09/01/18 3,745,000 7,660,000 Sprint Capital Corp. (a)............... 8.75% 03/15/32 8,330,250 2,600,000 Sprint Communications, Inc. (a)........ 9.13% 03/01/17 3,068,000 6,000,000 Sprint Communications, Inc. (a)........ 9.25% 04/15/22 7,200,000 1,240,000 Sprint Communications, Inc. (a)........ 6.00% 11/15/22 1,224,500 1,700,000 T-Mobile USA, Inc. .................... 6.54% 04/28/20 1,806,250 2,750,000 T-Mobile USA, Inc. .................... 6.13% 01/15/22 2,818,750 2,428,000 Viasat, Inc. .......................... 6.88% 06/15/20 2,561,540 1,500,000 Windstream Corp. ...................... 6.38% 08/01/23 1,402,500 --------------- 37,417,830 --------------- UTILITY - 1.7% 5,986,000 Calpine Corp. (c)...................... 7.88% 07/31/20 6,584,600
Page 4 See Notes to Quarterly Portfolio of Investments FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- --------------------------------------- -------------- -------------- --------------- CORPORATE BONDS AND NOTES (CONTINUED) UTILITY (CONTINUED) $ 5,000,000 NRG Energy, Inc. (a)................... 8.25% 09/01/20 $ 5,487,500 --------------- 12,072,100 --------------- TOTAL CORPORATE BONDS AND NOTES ....................................... 510,959,782 (Cost $482,810,129) --------------- PRINCIPAL VALUE (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS) ---------------- --------------------------------------- -------------- -------------- --------------- FOREIGN CORPORATE BONDS AND NOTES - 21.9% AUTOMOTIVE - 1.7% 7,450,000 Banque PSA Finance S.A. (USD) (c)...... 5.75% 04/04/21 7,638,522 4,120,000 Schaeffler Finance B.V. (USD) (c)...... 4.75% 05/15/21 4,120,000 --------------- 11,758,522 --------------- BANKING - 3.2% 3,500,000 Banco do Brasil S.A. (USD) (c)......... 5.88% 01/19/23 3,290,000 2,200,000 Barclays Bank PLC (GBP) ............... 10.00% 05/21/21 4,764,118 2,000,000 Belfius Funding N.V. (GBP) (d)......... 1.22% 02/09/17 3,082,311 4,350,000 Industrial Senior Trust (USD) (c)...... 5.50% 11/01/22 3,980,250 3,000,000 Royal Bank of Scotland N.V. (EUR) (d).. 4.70% 06/10/19 4,147,279 3,700,000 Sberbank of Russia via SB Capital S.A. (USD) ............................. 5.13% 10/29/22 3,487,250 --------------- 22,751,208 --------------- BASIC INDUSTRY - 5.9% 3,868,000 Aperam (USD) (c)....................... 7.38% 04/01/16 4,017,885 2,648,000 Arcelormittal (USD) (a)................ 6.75% 02/25/22 2,869,770 3,592,000 Arcelormittal (USD) (a)................ 7.50% 10/15/39 3,547,100 185,000 Arcelormittal (USD) ................... 7.25% 03/01/41 178,294 4,000,000 Cemex Espana Luxembourg (USD) (a) (c).. 9.25% 05/12/20 4,346,000 1,611,000 FMG Resources Pty, Ltd. (USD) (c)...... 7.00% 11/01/15 1,677,534 2,694,628 INEOS Group Holdings S.A. (EUR) ....... 7.88% 02/15/16 3,645,461 6,300,000 Novelis, Inc. (USD) (a)................ 8.75% 12/15/20 7,024,500 3,700,000 Severstal OAO Via Steel Capital S.A. (USD) (c).......................... 5.90% 10/17/22 3,552,000 4,200,000 Stora Enso Oyj (USD) (c)............... 7.25% 04/15/36 3,979,500 6,785,000 Vedanta Resources PLC (USD) (c)........ 8.25% 06/07/21 6,814,685 --------------- 41,652,729 --------------- CAPITAL GOODS - 1.5% 3,000,000 Albea Beauty Holdings S.A. (USD) (c)... 8.38% 11/01/19 3,165,000 3,000,000 Ardagh Packaging Finance (EUR) ........ 9.25% 10/15/20 4,427,271 2,775,000 Bombardier, Inc. (USD) (c)............. 6.13% 01/15/23 2,747,250 --------------- 10,339,521 --------------- CONSUMER NON-CYCLICAL - 1.9% 6,000,000 JBS Finance II Ltd. (USD) (c).......... 8.25% 01/29/18 6,390,000 5,900,000 Minerva Luxembourg S.A. (USD) (c)...... 7.75% 01/31/23 5,752,500
See Notes to Quarterly Portfolio of Investments Page 5 FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED)
PRINCIPAL VALUE (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS) ---------------- --------------------------------------- -------------- -------------- --------------- FOREIGN CORPORATE BONDS AND NOTES (CONTINUED) CONSUMER NON-CYCLICAL (CONTINUED) 3,000,000 Virgolino de Oliveira Finance Ltd. (USD) (c).......................... 11.75% 02/09/22 $ 1,620,000 --------------- 13,762,500 --------------- ENERGY - 1.9% 1,500,000 CGG S.A. (USD)......................... 6.50% 06/01/21 1,533,750 7,840,000 CHC Helicopter S.A. (USD) (a).......... 9.25% 10/15/20 8,388,800 1,700,000 Precision Drilling Corp. (USD) ........ 6.63% 11/15/20 1,814,750 1,750,000 Precision Drilling Corp. (USD) ........ 6.50% 12/15/21 1,868,125 --------------- 13,605,425 --------------- HEALTHCARE - 1.0% 6,550,000 Valeant Pharmaceuticals International (USD) (c).......................... 7.50% 07/15/21 7,327,812 --------------- INSURANCE - 0.8% 1,650,000 Aviva PLC (EUR) (e).................... 6.88% 05/22/38 2,550,829 3,500,000 Oil Insurance Ltd. (USD) (c) (d)....... 3.23% (f) 3,197,240 --------------- 5,748,069 --------------- SERVICES - 2.5% 1,110,000 CEVA Group PLC (USD) (c)............... 8.38% 12/01/17 1,164,112 5,250,000 Hapag-Lloyd AG (USD) (c)............... 9.75% 10/15/17 5,630,625 5,755,000 Royal Caribbean Cruises Ltd. (USD) (a). 7.50% 10/15/27 6,129,075 5,930,000 Ukraine Railways Via Shortline PLC (USD) (c) ......................... 9.50% 05/21/18 5,188,750 --------------- 18,112,562 --------------- TELECOMMUNICATIONS - 1.5% 5,859,000 Intelsat Luxembourg S.A. (USD) (c)..... 7.75% 06/01/21 6,305,749 1,055,000 Intelsat Luxembourg S.A. (USD) (c)..... 8.13% 06/01/23 1,145,994 2,408,000 Unify Germany Holdings B.V. (EUR) ..... 10.75% 11/15/15 3,345,121 --------------- 10,796,864 --------------- TOTAL FOREIGN CORPORATE BONDS AND NOTES ............................... 155,855,212 (Cost $150,348,071) --------------- PAR AMOUNT (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS) ---------------- --------------------------------------- -------------- -------------- --------------- CAPITAL PREFERRED SECURITIES - 20.2% BANKING - 7.9% 6,500,000 ABN AMRO Bank N.V. (EUR) (e)........... 4.31% (f) 8,810,439 2,975,000 Ageas Hybrid Financing S.A. (EUR) (e).. 5.13% (f) 4,102,687 1,400,000 Barclays Bank PLC (EUR) (e)............ 4.75% (f) 1,674,543 6,750,000 Deutsche Postbank Funding Trust IV (EUR) (e) (g) ..................... 5.98% (f) 9,636,354
Page 6 See Notes to Quarterly Portfolio of Investments FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED)
PAR AMOUNT (LOCAL STATED STATED VALUE CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS) ---------------- --------------------------------------- -------------- -------------- --------------- CAPITAL PREFERRED SECURITIES (CONTINUED) BANKING (CONTINUED) 3,250,000 Dresdner Funding Trust I (USD) (c)..... 8.15% 06/30/31 $ 3,489,688 5,325,000 HBOS Capital Funding L.P. (GBP) (e).... 6.46% (f) 9,149,870 3,890,000 ICICI Bank Ltd. (USD) (e).............. 6.38% 04/30/22 3,831,650 3,250,000 Mellon Capital III (GBP) (e) (g)....... 6.37% 09/05/66 5,469,560 2,100,000 Mizuho Capital Investment USD 2, Ltd. (USD) (a) (c) (e).................. 14.95% (f) 2,223,438 3,000,000 National Westminster Bank PLC (GBP) (e) 5.98% (f) 4,657,988 2,250,000 UT2 Funding PLC (EUR) ................. 5.32% 06/30/16 3,058,113 --------------- 56,104,330 --------------- CAPITAL GOODS - 0.1% 700,000 Textron Financial Corp. (USD) (c) (e).. 6.00% 02/15/67 635,250 --------------- FINANCIAL SERVICES - 2.1% 10,500,000 GE Capital Trust IV (EUR) (e) (g)...... 4.63% 09/15/66 14,612,213 410,000 General Electric Capital Corp. (EUR) (e) (g) ..................... 5.50% 09/15/67 589,576 --------------- 15,201,789 --------------- INSURANCE - 10.1% 2,450,000 American International Group, Inc. (EUR) (e) (g) ..................... 8.00% 05/22/38 3,877,225 3,050,000 American International Group, Inc. (GBP) (e) (g)...................... 8.63% 05/22/38 5,893,830 1,800,000 American International Group, Inc. (EUR) (e) (g)...................... 4.88% 03/15/67 2,430,407 10,950,000 American International Group, Inc. (GBP) (e) (g)...................... 5.75% 03/15/67 18,018,695 5,000,000 CHUBB Corp. (USD) (a) (e).............. 6.38% 03/29/67 5,537,500 3,500,000 CNP Assurances (EUR) (e)............... 5.25% (f) 4,224,830 11,000,000 Glen Meadow Pass Through Trust (USD) (c) (e) ..................... 6.51% 02/12/67 11,000,000 5,000,000 ING Groep N.V. (GBP) (e)............... 5.14% (f) 8,198,946 6,500,000 Liberty Mutual Group, Inc. (USD) (c) (e)...................... 7.00% 03/15/37 6,792,500 3,500,000 Lincoln National Corp. (USD) (a) (e)... 7.00% 05/17/66 3,587,500 1,800,000 Lincoln National Corp. (USD) (a) (e)... 6.05% 04/20/67 1,782,000 --------------- 71,343,433 --------------- TOTAL CAPITAL PREFERRED SECURITIES .................................... 143,284,802 (Cost $122,459,260) --------------- PRINCIPAL STATED VALUE DESCRIPTION RATE (h) MATURITY (i) VALUE ---------------- --------------------------------------- -------------- -------------- --------------- SENIOR FLOATING-RATE LOAN INTERESTS - 2.4% AUTOMOTIVE - 1.1% $ 1,486,303 Allison Transmission, Inc. Term Loan B2 ........................... 3.16% 08/07/17 1,495,280 4,461,418 Allison Transmission, Inc. Term Loan B3 ........................... 3.75% 08/23/19 4,471,635
See Notes to Quarterly Portfolio of Investments Page 7 FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED)
PRINCIPAL STATED VALUE DESCRIPTION RATE (h) MATURITY (i) VALUE ---------------- --------------------------------------- -------------- -------------- --------------- SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED) AUTOMOTIVE (CONTINUED) $ 1,743,750 Navistar, Inc. Term Loan B ............ 5.75% 08/17/17 $ 1,766,645 --------------- 7,733,560 --------------- ENERGY - 0.8% 5,865,175 Meg Energy Term Loan .................. 3.75% 03/31/20 5,910,982 --------------- REAL ESTATE - 0.1% 393,684 Realogy Synthetic Letter of Credit .... 4.44% 10/10/16 396,242 --------------- SERVICES - 0.4% 3,000,000 US Airway Group Term Loan ............. 3.50% 05/23/19 3,011,730 --------------- TOTAL SENIOR FLOATING-RATE LOAN INTERESTS ............................. 17,052,514 (Cost $16,912,321) --------------- PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- --------------------------------------- -------------- -------------- --------------- ASSET-BACKED SECURITIES - 1.6% 3,098,349 Ace Securities Corp. Home Equity Loan Trust Series 2007-HE2, Class A2A (d)...................... 0.28% 12/25/36 1,722,766 1,911,379 Carrington Mortgage Loan Trust Series 2006-NC4, Class A5 (d)...... 0.22% 10/25/36 1,630,659 1,264,820 HSI Asset Securitization Corp. Trust Series 2007-NC1, Class A1 (d)...... 0.26% 04/25/37 1,149,490 2,175,877 Keycorp Student Loan Trust Series 2000-A, Class A2 (d)........ 0.56% 05/25/29 2,017,565 731,195 Morgan Stanley ABS Capital I, Inc. Trust Series 2006-HE6, Class A2B (d)...................... 0.26% 09/25/36 399,002 9,511,255 Securitized Asset Backed Receivables LLC Trust Series 2006-FR4, Class A2A (d)...................... 0.24% 08/25/36 3,924,667 1,014,400 Soundview Home Loan Trust Series 2006-EQ2, Class A2 (d)...... 0.27% 01/25/37 625,272 --------------- TOTAL ASSET-BACKED SECURITIES ......................................... 11,469,421 (Cost $13,976,707) --------------- MORTGAGE-BACKED SECURITIES - 0.7% COLLATERALIZED MORTGAGE OBLIGATIONS - 0.7% 1,195,318 Morgan Stanley Mortgage Loan Trust Series 2007-6XS, Class 2A1S (d).... 0.27% 02/25/47 1,108,654 1,732,555 Specialty Underwriting & Residential Finance Trust Series 2006-BC4, Class A2B (d)...................... 0.27% 09/25/37 898,645 3,306,128 Wells Fargo Mortgage Backed Securities Trust Series 2006-AR7 Trust, Class 2A4 (d)..................... 2.62% 05/25/36 3,129,029 --------------- TOTAL MORTGAGE-BACKED SECURITIES ...................................... 5,136,328 (Cost $5,360,257) ---------------
Page 8 See Notes to Quarterly Portfolio of Investments FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED)
PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- --------------------------------------- -------------- -------------- --------------- FOREIGN SOVEREIGN BONDS AND NOTES - 0.9% ENERGY - 0.6% $ 3,750,000 Georgian Oil and Gas Corp. JSC (c)..... 6.88% 05/16/17 $ 3,900,000 --------------- FINANCIAL SERVICES - 0.3% 1,750,000 Portugal Obrigacoes do Tesouro OT ..... 4.95% 10/25/23 2,382,903 --------------- TOTAL FOREIGN SOVEREIGN BONDS AND NOTES ............................... 6,282,903 (Cost $5,752,510) --------------- SHARES DESCRIPTION VALUE ---------------- ----------------------------------------------------------------------- --------------- COMMON STOCKS - 1.9% AUTOMOTIVE - 1.4% 448,000 Ford Motor Co.......................................................... 6,702,080 84,412 General Motors Co. (j)................................................. 3,045,585 --------------- 9,747,665 --------------- BANKING - 0.5% 75,700 Citigroup, Inc......................................................... 3,590,451 --------------- TOTAL COMMON STOCKS ................................................... 13,338,116 --------------- (Cost $13,968,453) WARRANTS - 0.4% AUTOMOTIVE - 0.4% 81,728 General Motors Co., expiring 07/10/16 (j).............................. 2,178,051 46,655 General Motors Co., expiring 07/10/19 (j).............................. 880,846 --------------- TOTAL WARRANTS ........................................................ 3,058,897 (Cost $3,294,518) --------------- SHORT-TERM INVESTMENTS - 0.1% 564,463 Dreyfus Government Cash Management - Institutional Shares ............. 564,463 --------------- TOTAL SHORT-TERM INVESTMENTS .......................................... 564,463 (Cost $564,463) --------------- TOTAL INVESTMENTS - 122.0% ............................................ 867,002,438 (Cost $815,446,689) (k) PRINCIPAL STATED STATED VALUE DESCRIPTION COUPON MATURITY VALUE ---------------- --------------------------------------- -------------- -------------- --------------- U.S. GOVERNMENT BONDS SOLD SHORT - (20.6%) $ (119,200,000) United States Treasury Note ........... 0.88% 02/28/17 (119,623,756) (27,500,000) United States Treasury Note ........... 2.00% 02/15/22 (26,707,230) --------------- TOTAL U.S. GOVERNMENT BONDS SOLD SHORT ............................. (146,330,986) (Proceeds $147,297,957) --------------- BORROWINGS - (3.7%) ................................................ (26,291,503) NET OTHER ASSETS AND LIABILITIES - 2.3% ............................ 16,141,679 --------------- NET ASSETS - 100.0% ................................................ $ 710,521,628 ===============
See Notes to Quarterly Portfolio of Investments Page 9 FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED) (a) This security or a portion of this security is segregated as collateral for investments sold short. (b) The Fund previously held non-transferable trust units that were originally issued to facilitate distribution of General Motors common stock and warrants pursuant to the General Motors Bankruptcy Plan of Reorganization. The non-transferable trust units existed only for the purpose of receiving residual cash, if any, from the General Motors Bankruptcy. These units were received in exchange for the previously owned General Motors 8.375% Corporate Notes that were scheduled to mature on July 15, 2033. On June 12, 2012, the holders of these units received new transferable General Motors Unsecured Claim (GUC) Trust Units, which were created to hold and administer the common stock and warrants of General Motors Company to be contributed to the GUC Trust under the General Motors Bankruptcy Plan of Reorganization. (c) 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, as amended, 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. Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At January 31, 2014, securities noted as such amounted to $212,495,605, or 29.91% of net assets. (d) Floating rate security. The interest rate shown reflects the rate in effect at January 31, 2014. (e) Fixed-to-floating or fixed-to-variable rate security. The interest rate shown reflects the fixed rate in effect at January 31, 2014. At a predetermined date, the fixed rate will change to a floating rate or a variable rate. (f) Perpetual maturity. (g) Security issued by a U.S. incorporated entity, that has its par amount denominated in the listed foreign currency. (h) 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 January 31, 2014. When a range of rates is disclosed the Fund holds more than one contract within the same tranche at varying rates. (i) 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. (j) Non-income producing security. (k) Aggregate cost for financial reporting purposes, which approximates the aggregate cost for federal income tax purposes. As of January 31, 2014, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $61,015,492 and the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $9,459,743. Currency Abbreviations: EUR Euro GBP British Pound Sterling USD United States Dollar Page 10 See Notes to Quarterly Portfolio of Investments FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED) VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of January 31, 2014 is as follows (see Note 2A - Portfolio Valuation in the Notes to Quarterly Portfolio of Investments): ASSETS TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE INVESTMENTS 7/31/2013 PRICES INPUTS INPUTS ---------------------------------------------- --------------- ------------- --------------- -------------- Corporate Bonds and Notes: Automotive................................ $ 30,739,282 $ 661,177 $ 30,078,105 $ -- Other Industry Categories *............... 480,220,500 -- 480,220,500 -- Foreign Corporate Bonds and Notes*............ 155,855,212 -- 155,855,212 -- Capital Preferred Securities*................. 143,284,802 -- 143,284,802 -- Senior Floating-Rate Loan Interests*.......... 17,052,514 -- 17,052,514 -- Asset-Backed Securities....................... 11,469,421 -- 11,469,421 -- Mortgage-Backed Securities.................... 5,136,328 -- 5,136,328 -- Foreign Sovereign Bonds and Notes*............ 6,282,903 -- 6,282,903 -- Common Stocks*................................ 13,338,116 13,338,116 -- -- Warrants*..................................... 3,058,897 3,058,897 -- -- Short-Term Investments........................ 564,463 564,463 -- -- --------------- ------------- --------------- -------------- Total Investments............................. 867,002,438 17,622,653 849,379,785 -- =============== ============= =============== ============== Other Financial Instruments: Forward Foreign Currency Contracts**.......... 1,287,584 -- 1,287,584 -- --------------- ------------- --------------- -------------- Total......................................... $ 868,290,022 $ 17,622,653 $ 850,667,369 $ -- =============== ============= =============== ============== LIABILITIES TABLE LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE 1/31/2014 PRICES INPUTS INPUTS --------------- ------------- --------------- -------------- U.S. Government Bonds Sold Short.............. $ (146,330,986) $ -- $ (146,330,986) $ -- Forward Foreign Currency Contracts**.......... (559,782) -- (559,782) -- Futures Contracts............................. (387) (387) -- -- --------------- ------------- --------------- -------------- Total......................................... $ (146,891,155) $ (387) $ (146,890,768) $ -- =============== ============= =============== ==============
* See the Portfolio of Investments for industry breakout. ** See the Schedule of Forward Foreign Currency Contracts 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 January 31, 2014. OPEN FUTURES CONTRACTS AT JANUARY 31, 2014 (see Note 2F - Futures Contracts in the Notes to Quarterly Portfolio of Investments):
UNREALIZED NUMBER OF EXPIRATION APPRECIATION/ SHORT FUTURES CONTRACTS CONTRACTS MONTH NOTIONAL VALUE (DEPRECIATION) ---------------------------------------------- --------------- ------------- --------------- --------------- U.S. Treasury 2-Year Notes 180 March-2014 $ 39,636,563 $ (387)
See Notes to Quarterly Portfolio of Investments Page 11 FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) PORTFOLIO OF INVESTMENTS (CONTINUED) JANUARY 31, 2014 (UNAUDITED) SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS: (see Note 2D - Forward Foreign Currency Contracts in the Notes to Quarterly Portfolio of Investments):
FORWARD FOREIGN CURRENCY CONTRACTS --------------------------------------------------------- PURCHASE SALE UNREALIZED SETTLEMENT AMOUNT AMOUNT VALUE AS OF VALUE AS OF APPRECIATION/ DATE COUNTERPARTY PURCHASED (l) SOLD (l) JANUARY 31, 2014 JANUARY 31, 2014 (DEPRECIATION) ---------- -------------- -------------------- ------------------ ---------------- ---------------- -------------- 02/20/14 JPM USD 75,416,656 EUR 54,963,000 $ 75,416,656 $ 74,129,072 $ 1,287,584 02/20/14 JPM USD 58,522,055 GBP 35,945,000 58,522,055 59,081,837 (559,782) ------------- Net Unrealized Appreciation (Depreciation)............................................................... $ 727,802 =============
(l) Please see Portfolio of Investments for currency descriptions. Counterparty Abbreviations: JPM JPMorgan Chase Page 12 See Notes to Quarterly Portfolio of Investments NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) JANUARY 31, 2014 (UNAUDITED) 1. ORGANIZATION First Trust High Income Long/Short Fund (the "Fund") is a diversified, closed-end management investment company organized as a Massachusetts business trust on June 18, 2010 , and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund trades under the ticker symbol FSD on the New York Stock Exchange ("NYSE"). 2. VALUATION AND INVESTMENT PRACTICES A. PORTFOLIO VALUATION: The net asset value ("NAV") of the Common Shares of the Fund is determined daily, as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The 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 in accordance with valuation procedures adopted by the Fund's Board of Trustees and in accordance with provisions of the 1940 Act. Market quotations and prices used to value the Fund's investments are primarily obtained from third party pricing services. The Fund's investments are valued as follows: Corporate bonds, notes, 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 an independent 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(R) 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 valued at the mean of the most recent bid and asked prices, if available, and otherwise at their closing bid price. The loan assignments, participations and commitments ("Senior Loans")(1) 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 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. Exchange-Traded futures contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, exchange-traded futures contracts are valued at the mean of the most recent bid and asked prices, if available, and otherwise at their closing bid price. Over-the-counter futures contracts are valued at the mean of the most recent bid and asked prices, if available, and otherwise at their closing bid price. Forward foreign currency contracts are 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 an independent pricing service. 1 The terms "security" and "securities" used throughout the Notes to Financial Statements include Senior Loans. See Notes to Quarterly Portfolio of Investments Page 13 NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) JANUARY 31, 2014 (UNAUDITED) Debt securities having a remaining maturity of sixty days or less when purchased are valued at cost adjusted for amortization of premiums and accretion of discounts. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Board of Trustees or its delegate 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 pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market 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 a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the pricing service, does not reflect the security's "fair value." As a general principle, the current "fair value" of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. The use of fair value prices by a Fund generally results in prices used by the Fund that may differ from current market quotations or official closing prices on the applicable exchange. 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 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 issuer; 5) the credit quality and cash flow of the 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 issuer, including any ability to obtain money or resources from a parent or affiliate and an assessment of the issuer's management; 11) the prospects for the issuer's industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry; and 12) 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 methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund's investments as of January 31, 2014, is included with the Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS: Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Page 14 See Notes to Quarterly Portfolio of Investments NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) JANUARY 31, 2014 (UNAUDITED) 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 unfunded delayed draw loan commitments as of January 31, 2014. 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 to exchange one currency for another at a future date and at a specified price. The Fund uses forward foreign currency contracts to facilitate transactions in foreign securities and to manage the Fund's foreign currency exposure. These contracts are valued daily, and the Fund's net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is included on the Schedule of Forward Foreign Currency Contracts. 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 Schedule of Forward Foreign Currency Contracts. For the fiscal year to date period (November 1, 2013 to January 31, 2014), the amount of notional values of forward foreign currency contracts opened and closed were $286,806,424 and $(286,620,590), respectively. 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. F. FUTURES CONTRACTS: The Fund purchases or sells (i.e. is long or short) futures contracts to hedge against changes in interest rates (interest rate risk). Futures contracts are agreements between the Fund and a counterparty to buy or sell a specific quantity of an underlying instrument at a specified price and at a specified date. Depending on the terms of the contract, futures contracts are settled either through physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. Open futures contracts can also be closed out prior to settlement by entering into an offsetting transaction in a matching futures contract. If the Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain margin deposits on the futures contract. When the contract is closed or expires, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed or expired. Upon entering into a futures contract, the Fund must deposit funds, called margin, with its custodian in the name of the clearing broker equal to a specified percentage of the current value of the contract. Open futures contacts are marked to market daily. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as variation margin. If market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the futures contract and may realize a loss. The use of futures contracts involves the risk of imperfect correlation in movements in the price of the futures contracts, interest rates and the underlying instruments. For the fiscal year to date period (November 1, 2013 to January 31, 2014), the amount of notional values of futures contracts opened and closed were $ 39,636,563 and $(39,484,219), respectively. G. 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 that are not currently owned in the Fund's portfolio. When a short sale is engaged in, the security sold short must be borrowed and delivered 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 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. 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 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. See Notes to Quarterly Portfolio of Investments Page 15 NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS FIRST TRUST HIGH INCOME LONG/SHORT FUND (FSD) JANUARY 31, 2014 (UNAUDITED) The Fund has established an account with Pershing, LLC ("Pershing") for the purpose of purchasing securities on margin. At January 31, 2014, the Fund owed Pershing $26,291,503 for securities purchased on margin (reflected as Borrowings in the Portfolio of Investments). Page 16 See Notes to Quarterly Portfolio of Investments ITEM 2. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 3. EXHIBITS. Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) First Trust High Income Long/Short Fund -------------------------------------------------------- By (Signature and Title)* /s/ Mark R. Bradley ---------------------------------------- Mark R. Bradley, President and Chief Executive Officer (principal executive officer) Date: March 20, 2014 ----------------- 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/ Mark R. Bradley ---------------------------------------- Mark R. Bradley, President and Chief Executive Officer (principal executive officer) Date: March 20, 2014 ----------------- By (Signature and Title)* /s/ James M. Dykas ---------------------------------------- James M. Dykas, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) Date: March 20, 2014 ----------------- * Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 cert_302.txt SECTION 302 CERTIFICATIONS CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, Mark R. Bradley, certify that: 1. I have reviewed this report on Form N-Q of First Trust High Income Long/Short Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 20, 2014 /s/ Mark R. Bradley --------------------- ---------------------------------------- Mark R. Bradley, President and Chief Executive Officer (principal executive officer) CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, James M. Dykas, certify that: 1. I have reviewed this report on Form N-Q of First Trust High Income Long/Short Fund; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report, based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 20, 2014 /s/ James M. Dykas --------------------- ---------------------------------------- James M. Dykas, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer)