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
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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: July 31, 2012
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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
PORTFOLIO OF INVESTMENTS
JULY 31, 2012 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- -------------- -------------- ---------------
CORPORATE BONDS AND NOTES - 89.1%
AUTOMOTIVE - 4.3%
$ 334,000 Chrysler Group LLC/Chrysler Group
Co-Issuer, Inc. ................... 8.00% 06/15/19 $ 349,030
4,367,000 Chrysler Group LLC/Chrysler Group
Co-Issuer, Inc. ................... 8.25% 06/15/21 4,568,974
2,376,000 Ford Motor Co. (a)..................... 9.22% 09/15/21 3,026,430
553,000 Ford Motor Co. (a)..................... 8.90% 01/15/32 713,370
3,000,000 Ford Motor Co. (a)..................... 7.75% 06/15/43 3,333,750
2,480,000 Ford Motor Co. (a)..................... 9.98% 02/15/47 3,468,900
21,000,000 General Motors Unsecured Claim Trust
Units (Non-transferable) (b)....... N/A N/A 2,100
21,432 General Motors Unsecured Claim Trust
Units (Transferable) (b)........... N/A N/A 303,048
5,396,000 Goodyear Tire & Rubber (The) Co. ...... 7.00% 05/15/22 5,537,645
4,872,000 Navistar International Corp. (a)....... 8.25% 11/01/21 4,591,860
2,065,000 Tomkins Inc., LLC ..................... 9.00% 10/01/18 2,305,056
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28,200,163
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BANKING - 4.1%
740,000 Ally Financial, Inc. .................. 8.00% 11/01/31 872,796
2,285,000 Ally Financial, Inc. .................. 8.00% 11/01/31 2,747,713
5,610,000 Bank of America Corp. ................. 7.63% 06/01/19 6,834,730
6,500,000 Capital One Capital III (a)............ 7.69% 08/15/36 6,589,375
6,750,000 Deutsche Postbank Funding Trust IV (EUR)
(c) (d)............................ 5.98% 06/29/49 6,104,517
4,000,000 Fifth Third Capital Trust IV (a) (d)... 6.50% 04/15/37 4,010,000
---------------
27,159,131
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BASIC INDUSTRY - 11.1%
4,500,000 AK Steel Corp. (a)..................... 8.38% 04/01/22 3,825,000
5,250,000 Aleris International, Inc. ............ 7.63% 02/15/18 5,486,250
4,200,000 Alpha Natural Resources, Inc. (a)...... 6.00% 06/01/19 3,675,000
596,000 Alpha Natural Resources, Inc. ......... 6.25% 06/01/21 518,520
1,255,000 Arch Coal, Inc. ....................... 7.00% 06/15/19 1,101,263
408,000 Arch Coal, Inc. ....................... 7.25% 10/01/20 355,980
825,000 Arch Coal, Inc. ....................... 7.25% 06/15/21 713,625
6,215,000 Associated Materials LLC .............. 9.13% 11/01/17 6,013,012
3,500,000 Boise Cascade LLC (a).................. 7.13% 10/15/14 3,521,875
3,635,000 Boise Paper Holdings LLC/Boise Finance
Co. (a)............................ 9.00% 11/01/17 4,080,287
1,357,000 Century Aluminum Co. (a)............... 8.00% 05/15/14 1,363,785
3,600,000 Cloud Peak Energy Resources Corp., LLC
(a)................................ 8.25% 12/15/17 3,798,000
6,500,000 Hexion U.S. Finance Corp./Hexion Nova
Scotia Finance ULC (a)............. 8.88% 02/01/18 6,613,750
8,655,000 Huntsman International LLC (a)......... 8.63% 03/15/21 9,996,525
1,300,000 Momentive Performance Materials, Inc. (e) 10.00% 10/15/20 1,322,750
See Notes to Quarterly Portfolio of Investments Page 1
FIRST TRUST HIGH INCOME LONG/SHORT FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2012 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- -------------- -------------- ---------------
CORPORATE BONDS AND NOTES - (CONTINUED)
BASIC INDUSTRY - (CONTINUED)
$ 5,000,000 Momentive Performance Materials, Inc. (a) 9.00% 01/15/21 $ 3,675,000
4,000,000 Polypore International, Inc. (a)....... 7.50% 11/15/17 4,300,000
5,150,000 Texas Industries, Inc. (a)............. 9.25% 08/15/20 5,433,250
4,000,000 USG Corp. ............................. 6.30% 11/15/16 3,915,000
1,878,000 USG Corp. (e).......................... 8.38% 10/15/18 2,018,850
1,800,000 Vertellus Specialties, Inc. (e)........ 9.38% 10/01/15 1,494,000
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73,221,722
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CAPITAL GOODS - 7.7%
6,390,000 American Railcar Industries, Inc. (a).. 7.50% 03/01/14 6,533,775
3,467,000 Ducommun, Inc. ........................ 9.75% 07/15/18 3,605,680
5,000,000 Manitowoc (The), Inc., Co. (a)......... 8.50% 11/01/20 5,475,000
3,625,000 Mcron Finance Sub LLC/ Mcron Finance
Corp. (e).......................... 8.38% 05/15/19 3,760,937
3,760,000 Mueller Water Products, Inc. (a)....... 7.38% 06/01/17 3,835,200
7,500,000 Reynolds Group Issuer, Inc., LLC ...... 8.50% 05/15/18 7,593,750
485,000 Reynolds Group Issuer, Inc., LLC ...... 9.88% 08/15/19 516,525
1,600,000 Reynolds Group Issuer, Inc., LLC (e)... 9.88% 08/15/19 1,698,000
7,500,000 Terex Corp. (a)........................ 8.00% 11/15/17 7,931,250
4,000,000 Transdigm, Inc. (a).................... 7.75% 12/15/18 4,480,000
4,650,000 Triumph Group, Inc. (a)................ 8.63% 07/15/18 5,208,000
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50,638,117
---------------
CONSUMER NON-CYCLICAL - 0.4%
2,240,000 Smithfield Foods, Inc. ................ 6.63% 08/15/22 2,329,600
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ENERGY - 8.2%
3,974,000 Berry Petroleum Co. ................... 6.75% 11/01/20 4,257,147
5,700,000 Chesapeake Energy Corp. (a)............ 9.50% 02/15/15 6,156,000
600,000 Chesapeake Energy Corp. ............... 7.25% 12/15/18 621,000
1,970,000 Chesapeake Energy Corp. (a)............ 6.63% 08/15/20 1,970,000
3,275,000 Everest Acquisition LLC/Everest
Acquisition Finance, Inc. (e)...... 9.38% 05/01/20 3,528,813
3,000,000 Ferrellgas Finance Corp., L.P. (a)..... 6.50% 05/01/21 2,865,000
800,000 Frontier Oil Corp. (a)................. 6.88% 11/15/18 852,000
2,850,000 Geokinetics Holdings USA, Inc. (a)..... 9.75% 12/15/14 1,603,125
2,654,000 Helix Energy Solutions Group, Inc. (e). 9.50% 01/15/16 2,783,383
4,000,000 Hornbeck Offshore Services, Inc. (a)... 8.00% 09/01/17 4,300,000
2,636,000 Linn Energy LLC/Linn Energy Finance Corp.
(e)................................ 6.25% 11/01/19 2,612,935
5,240,000 Linn Energy LLC/Linn Energy Finance Corp. 8.63% 04/15/20 5,711,600
5,500,000 PHI, Inc. (a).......................... 8.63% 10/15/18 5,706,250
3,499,000 Regency Energy Partners L.P./Regency
Energy Finance Corp. (a)........... 9.38% 06/01/16 3,875,142
3,248,000 Samson Investment Co. (e).............. 9.75% 02/15/20 3,373,860
Page 2 See Notes to Quarterly Portfolio of Investments
FIRST TRUST HIGH INCOME LONG/SHORT FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2012 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- -------------- -------------- ---------------
CORPORATE BONDS AND NOTES - (CONTINUED)
ENERGY - (CONTINUED)
$ 3,425,000 Targa Resources Partners L.P./Targa
Resources Partners Finance Corp. (a) 7.88% 10/15/18 $ 3,750,375
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53,966,630
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FINANCIAL SERVICES - 7.8%
7,486,262 CIT Group, Inc. (e).................... 7.00% 05/02/17 7,533,051
1,665,000 CIT Group, Inc. ....................... 5.00% 05/15/17 1,740,966
8,385,000 CIT Group, Inc......................... 4.25% 08/15/17 8,385,000
10,500,000 GE Capital Trust IV (EUR) (c) (d)...... 4.63% 09/15/66 11,858,848
410,000 General Electric Capital Corp. (EUR) (c)
(d)................................ 5.50% 09/15/67 479,243
7,500,000 Icahn Enterprises L.P./Icahn Enterprises
Finance Corp. (a).................. 8.00% 01/15/18 8,006,250
8,000,000 SLM Corp. ............................. 8.00% 03/25/20 9,020,000
5,000,000 Springleaf Finance Corp. .............. 6.90% 12/15/17 4,100,000
700,000 Textron Financial Corp. (d) (e)........ 6.00% 02/15/67 563,500
---------------
51,686,858
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HEALTHCARE - 2.9%
5,880,000 Alere, Inc. ........................... 9.00% 05/15/16 6,129,900
3,207,000 Bausch & Lomb, Inc. ................... 9.88% 11/01/15 3,363,341
5,600,000 HCA Holdings, Inc. .................... 7.75% 05/15/21 6,125,000
3,150,000 Kinetic Concepts, Inc. (e)............. 10.50% 11/01/18 3,346,875
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18,965,116
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INSURANCE - 7.2%
2,450,000 American International Group, Inc. (EUR)
(c) (d)............................ 8.00% 05/22/38 3,104,929
1,800,000 American International Group, Inc. (EUR)
(c) (d)............................ 4.88% 03/15/67 1,683,195
3,050,000 American International Group, Inc. (GBP)
(c) (d)............................ 8.63% 05/22/38 5,011,731
10,950,000 American International Group, Inc. (GBP)
(c) (d)............................ 5.75% 03/15/67 13,373,822
5,000,000 CHUBB Corp. (a) (d).................... 6.38% 03/29/67 5,250,000
11,000,000 Glen Meadow Pass Through Trust (d) (e). 6.51% 02/12/67 8,167,500
6,500,000 Liberty Mutual Group, Inc. (d) (e)..... 7.00% 03/15/37 5,882,500
3,500,000 Lincoln National Corp. (a) (d)......... 7.00% 05/17/66 3,491,250
1,800,000 Lincoln National Corp. (a) (d)......... 6.05% 04/20/67 1,746,000
---------------
47,710,927
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MEDIA - 2.3%
3,500,000 Cequel Communications Holdings I
LLC/Cequel Capital Corp. (e)....... 8.63% 11/15/17 3,788,750
3,931,000 Clear Channel Communications, Inc. (a). 5.50% 12/15/16 1,808,260
1,800,000 Clear Channel Communications, Inc. (a). 9.00% 03/01/21 1,512,000
4,008,000 Clear Channel Worldwide Holdings, Inc. 9.25% 12/15/17 4,328,640
324,000 Clear Channel Worldwide Holdings, Inc. 9.25% 12/15/17 351,540
456,000 Clear Channel Worldwide Holdings, Inc.
(e)................................ 7.63% 03/15/20 429,780
See Notes to Quarterly Portfolio of Investments Page 3
FIRST TRUST HIGH INCOME LONG/SHORT FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2012 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- -------------- -------------- ---------------
CORPORATE BONDS AND NOTES - (CONTINUED)
MEDIA - (CONTINUED)
$ 3,193,000 Clear Channel Worldwide Holdings, Inc.
(e)................................ 7.63% 03/15/20 $ 3,073,263
---------------
15,292,233
---------------
SERVICES - 20.4%
5,270,312 American Airlines Pass Through Trust
2001-01 ........................... 6.98% 05/23/21 4,980,445
3,500,000 ARAMARK Corp. (a)...................... 8.50% 02/01/15 3,587,535
2,000,000 Ashtead Capital, Inc. (e).............. 9.00% 08/15/16 2,067,500
1,095,000 Ashtead Capital, Inc. (e).............. 6.50% 07/15/22 1,142,906
5,500,000 Avis Budget Car Rental LLC/Avis Budget
Finance, Inc. ..................... 9.63% 03/15/18 6,111,875
1,426,000 Avis Budget Car Rental LLC/Avis Budget
Finance, Inc. (a).................. 8.25% 01/15/19 1,538,298
6,500,000 Beazer Homes USA, Inc. (a)............. 8.13% 06/15/16 6,621,875
5,542,387 Continental Airlines 2003-ERJ1 Pass
Through Trust ..................... 7.88% 07/02/18 5,597,811
2,655,197 Continental Airlines 2005-ERJ1 Pass
Through Trust ..................... 9.80% 04/01/21 2,841,061
1,712,294 Delta Air Lines 2009-1 Series B Pass
Through Trust ..................... 9.75% 12/17/16 1,849,277
7,000,000 Delta Air Lines, Inc. (e).............. 12.25% 03/15/15 7,630,000
5,986,000 Energysolutions, Inc., LLC ............ 10.75% 08/15/18 5,192,855
9,000,000 Harrah's Operating, Inc., Co. ......... 10.00% 12/15/18 5,760,000
8,000,000 Hertz (The) Corp. ..................... 7.50% 10/15/18 8,670,000
5,250,000 Iron Mountain, Inc. (a)................ 8.38% 08/15/21 5,840,625
3,500,000 Isle of Capri Casinos, Inc. (a)........ 7.75% 03/15/19 3,661,875
5,000,000 K Hovnanian Enterprises, Inc. (a)...... 10.63% 10/15/16 5,225,000
8,000,000 MGM Resorts International ............. 11.13% 11/15/17 8,980,000
3,500,000 Mohegan Tribal Gaming Authority (e).... 10.50% 12/15/16 3,097,500
3,449,569 Northwest Airlines 2001-1 Class B Pass
Through Trust ..................... 7.69% 04/01/17 3,553,056
1,780,000 Pulte Group, Inc. (a).................. 7.63% 10/15/17 1,971,350
4,570,000 Pulte Group, Inc. (a).................. 7.88% 06/15/32 4,592,850
3,319,000 Shea Homes L.P./Shea Homes Funding Corp. 8.63% 05/15/19 3,626,007
5,500,000 Standard Pacific Corp. (a)............. 8.38% 05/15/18 6,160,000
3,506,791 UAL 2009-2B Pass Through Trust (e)..... 12.00% 01/15/16 3,787,334
7,000,000 United Air Lines, Inc. (e)............. 12.00% 11/01/13 7,332,500
522,000 United Rentals North America, Inc. .... 9.25% 12/15/19 587,250
5,312,000 United Rentals North America, Inc. (a). 8.38% 09/15/20 5,657,280
375,000 UR Financing Escrow Corp. (e).......... 7.38% 05/15/20 397,500
367,000 UR Financing Escrow Corp. (e).......... 7.63% 04/15/22 391,314
6,971,154 US Airways 2000-3C Pass Through Trust . 8.39% 03/01/22 6,343,750
---------------
134,796,629
---------------
TECHNOLOGY & ELECTRONICS - 4.4%
5,500,000 Alcatel-Lucent USA, Inc. (a)........... 6.45% 03/15/29 3,162,500
5,675,000 CommScope, Inc. (e).................... 8.25% 01/15/19 5,965,844
Page 4 See Notes to Quarterly Portfolio of Investments
FIRST TRUST HIGH INCOME LONG/SHORT FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2012 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- -------------- -------------- ---------------
CORPORATE BONDS AND NOTES - (CONTINUED)
TECHNOLOGY & ELECTRONICS - (CONTINUED)
$ 9,050,000 First Data Corp. (e)................... 8.88% 08/15/20 $ 9,955,000
8,834,000 Freescale Semiconductor, Inc. (e)...... 10.13% 03/15/18 9,673,230
---------------
28,756,574
---------------
TELECOMMUNICATIONS - 5.4%
7,000,000 Frontier Communications Corp. (a)...... 9.00% 08/15/31 6,930,000
1,496,000 Hughes Satellite Systems Corp. (a)..... 7.63% 06/15/21 1,660,560
3,500,000 MetroPCS Wireless, Inc. (a)............ 7.88% 09/01/18 3,727,500
10,000,000 Sprint Capital Corp. (a)............... 8.75% 03/15/32 10,000,000
2,600,000 Sprint Nextel Corp. (e)................ 9.13% 03/01/17 2,905,500
6,000,000 Sprint Nextel Corp. (a)................ 9.25% 04/15/22 6,630,000
3,250,000 Viasat, Inc. (a)....................... 8.88% 09/15/16 3,493,750
---------------
35,347,310
---------------
UTILITY - 2.9%
7,500,000 Calpine Corp. (e)...................... 7.88% 07/31/20 8,493,750
3,350,000 Energy Future Intermediate Holding Co.,
LLC/Energy Future Intermediate
Holding Finance, Inc. (a).......... 10.00% 12/01/20 3,705,938
5,000,000 NRG Energy, Inc. (a)................... 8.25% 09/01/20 5,412,500
2,150,000 Texas Competitive Electric Holdings Co.
LLC/Texas Competitive Electric
Holdings Finance, Inc. (e)......... 11.50% 10/01/20 1,601,750
---------------
19,213,938
---------------
TOTAL CORPORATE BONDS AND NOTES ....................................... 587,284,948
(Cost $584,719,876) ---------------
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- --------------------------------------- -------------- -------------- ---------------
FOREIGN CORPORATE BONDS AND NOTES - 24.1%
BANKING - 4.9%
6,500,000 ABN AMRO Bank N.V. (EUR) (d)........... 4.31% 03/29/49 5,637,135
2,200,000 Barclays Bank PLC (GBP) ............... 10.00% 05/21/21 3,917,635
8,264,000 Egg Banking PLC (GBP) (d).............. 7.50% 05/29/49 13,209,284
3,300,000 IKB Deutsche Industriebank AG (EUR) (f) 1.58% 05/28/13 3,654,305
175,000 IKB Deutsche Industriebank AG (EUR) ... 4.50% 07/09/13 196,481
2,100,000 Mizuho Capital Investment, Ltd. (USD)
(a) (d) (e)........................ 14.95% 12/29/49 2,570,257
3,000,000 Royal Bank of Scotland N.V. (EUR) (f).. 4.70% 06/10/19 3,062,513
---------------
32,247,610
---------------
BASIC INDUSTRY - 5.8%
4,500,000 Aperam (USD) (e)....................... 7.38% 04/01/16 3,960,000
3,451,000 Boart Longyear Management Pty., Ltd.
(USD) (e).......................... 7.00% 04/01/21 3,614,923
See Notes to Quarterly Portfolio of Investments Page 5
FIRST TRUST HIGH INCOME LONG/SHORT FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2012 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- --------------------------------------- -------------- -------------- ---------------
FOREIGN CORPORATE BONDS AND NOTES - (CONTINUED)
BASIC INDUSTRY - (CONTINUED)
4,645,000 Evraz Group S.A. (USD) (e)............. 7.40% 04/24/17 $ 4,649,180
3,135,000 FMG Resources Pty, Ltd. (USD) (e)...... 7.00% 11/01/15 3,229,050
1,000,000 INEOS Finance PLC (EUR) ............... 9.25% 05/15/15 1,313,458
4,000,000 INEOS Group Holdings PLC (EUR) ........ 7.88% 02/15/16 4,232,596
6,300,000 Novelis, Inc. (USD) (a)................ 8.75% 12/15/20 7,024,500
4,200,000 Stora Enso Oyj (USD) (e)............... 7.25% 04/15/36 3,801,000
6,785,000 Vedanta Resources PLC (USD) (e)........ 8.25% 06/07/21 6,479,675
---------------
38,304,382
---------------
CAPITAL GOODS - 0.6%
3,000,000 Ardagh Packaging Finance (EUR) ........ 9.25% 10/15/20 3,737,358
---------------
CONSUMER NON-CYCLICAL - 2.0%
6,000,000 JBS Finance II Ltd. (USD) (e).......... 8.25% 01/29/18 6,037,200
3,770,000 Minerva Luxembourg S.A. (USD) (e)...... 12.25% 02/10/22 4,024,475
3,000,000 Virgolino de Oliveira Finance Ltd. (USD)
(e)................................ 11.75% 02/09/22 2,970,000
---------------
13,031,675
---------------
ENERGY - 3.5%
9,400,000 CHC Helicopter S.A. (USD) ............. 9.25% 10/15/20 9,635,000
3,750,000 Georgian Oil and Gas Corp. (USD) (e)... 6.88% 05/16/17 3,695,625
5,600,000 OGX Petroleo e Gas Participacoes S.A.
(USD) (e).......................... 8.50% 06/01/18 4,963,000
5,000,000 Petroleos de Venezuela S.A. (USD) ..... 12.75% 02/17/22 4,850,000
---------------
23,143,625
---------------
INSURANCE - 1.5%
1,150,000 Aviva PLC (EUR) (d).................... 6.88% 05/22/38 1,280,392
5,000,000 ING Groep N.V. (GBP) (d)............... 5.14% 03/29/49 5,691,259
3,500,000 Oil Insurance Ltd. (USD) (e) (f)....... 3.44% 12/29/49 3,057,201
---------------
10,028,852
---------------
SERVICES - 3.4%
4,600,000 Desarrolladora Homex Sab de CV (USD) (e) 9.75% 03/25/20 4,807,000
1,800,000 Empresas ICA Sab de CV (USD) (e)....... 8.38% 07/24/17 1,813,500
5,250,000 Hapag-Lloyd AG (USD) (e)............... 9.75% 10/15/17 4,974,375
5,755,000 Royal Caribbean Cruises Ltd. (USD) (a). 7.50% 10/15/27 5,862,906
4,500,000 Urbi Desarrollos Urbanos Sab de CV (USD)
(e)................................ 9.75% 02/03/22 4,578,750
---------------
22,036,531
---------------
TELECOMMUNICATIONS - 1.7%
2,857,000 En Germany Holdings B.V. (EUR) ........ 10.75% 11/15/15 3,515,269
4,900,000 Intelsat Luxembourg S.A. (USD) (a)..... 11.25% 02/04/17 5,114,375
2,550,000 Intelsat Luxembourg S.A. (USD) (a) (g). 11.50% 02/04/17 2,661,563
---------------
11,291,207
---------------
Page 6 See Notes to Quarterly Portfolio of Investments
FIRST TRUST HIGH INCOME LONG/SHORT FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2012 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- --------------------------------------- -------------- -------------- ---------------
FOREIGN CORPORATE BONDS AND NOTES - (CONTINUED)
UTILITY - 0.7%
5,000,000 Intergen N.V. (USD) (e)................ 9.00% 06/30/17 $ 4,887,500
---------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES ............................... 158,708,740
(Cost $164,284,300) ---------------
PRINCIPAL STATED
VALUE DESCRIPTION RATE (h) MATURITY (i) VALUE
---------------- --------------------------------------- -------------- -------------- ---------------
SENIOR FLOATING-RATE LOAN INTERESTS - 4.3%
AUTOMOTIVE - 2.1%
$ 7,190,255 Allison Transmission, Inc.............. 3.75% 08/07/17 7,151,715
7,168,638 Federal Mogul Corp Term Loan B ........ 2.18% 12/27/14 6,806,836
---------------
13,958,551
---------------
ENERGY - 0.9%
5,955,000 Meg Energy Term Loan .................. 4.00% 03/18/18 5,952,499
---------------
REAL ESTATE - 0.6%
3,373,206 Realogy Initial Term Loan B ........... 4.50% 10/10/16 3,196,112
476,160 Realogy Synthetic Letter of Credit .... 4.49% 10/10/16 451,162
---------------
3,647,274
---------------
SERVICES - 0.7%
4,861,111 US Airways Term Loan .................. 2.75% 03/23/14 4,657,576
---------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS ............................. 28,215,900
(Cost $28,377,241) ---------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- -------------- -------------- ---------------
ASSET-BACKED SECURITIES - 2.0%
Ace Securities Corp.
3,473,741 Series 2007-HE2, Class A2A (f)..... 0.37% 12/25/36 2,000,512
Carrington Mortgage Loan Trust
2,759,975 Series 2006-NC4, Class A5 (f)...... 0.31% 10/25/36 1,838,262
HSI Asset Securitization Corp. Trust
2,318,039 Series 2007-NC1, Class A1 (f)...... 0.35% 04/25/37 1,855,429
Keycorp Student Loan Trust
3,048,076 Series 2000-A, Class A2 (f)........ 0.79% 05/25/29 2,790,076
Morgan Stanley ABS Capital I
1,213,018 Series 2006-HE6, Class A2B (f)..... 0.35% 09/25/36 967,746
Securitized Asset Backed Receivables LLC
Trust
10,198,701 Series 2006-FR4, Class A2A (f)..... 0.33% 08/25/36 2,987,164
Soundview Home Equity Loan Trust
1,429,705 Series 2006-EQ2, Class A2 (f)...... 0.36% 01/25/37 708,592
---------------
TOTAL ASSET-BACKED SECURITIES ......................................... 13,147,781
(Cost $17,462,767) ---------------
See Notes to Quarterly Portfolio of Investments Page 7
FIRST TRUST HIGH INCOME LONG/SHORT FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2012 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- -------------- -------------- ---------------
MORTGAGE-BACKED SECURITIES - 1.1%
COLLATERALIZED MORTGAGE OBLIGATIONS - 0.8%
Morgan Stanley Mortgage Loan Trust
$ 1,887,631 Series 2007-6XS, Class 2A1S (f).... 0.36% 02/25/47 $ 1,578,779
Wells Fargo Mortgage Backed Securities
Trust
4,142,567 Series 2006-AR7, Class 2A4 (f)..... 2.62% 05/25/36 3,255,078
---------------
4,833,857
---------------
COMMERCIAL MORTGAGE-BACKED SECURITIES - 0.3%
Specialty Underwriting & Residential
Finance
2,685,423 Series 2006-BC4, Class A2B (f)..... 0.36% 09/25/37 2,013,353
---------------
TOTAL MORTGAGE-BACKED SECURITIES ...................................... 6,847,210
(Cost $7,411,661) ---------------
SHARES DESCRIPTION VALUE
---------------- ----------------------------------------------------------------------- ---------------
COMMON STOCKS - 1.2%
AUTOMOTIVE - 0.9%
448,000 Ford Motor Co.......................................................... 4,139,520
98,768 General Motors Co. (j)................................................. 1,946,717
---------------
6,086,237
---------------
BANKING - 0.3%
75,700 Citigroup, Inc......................................................... 2,053,741
---------------
TOTAL COMMON STOCKS ................................................... 8,139,978
(Cost $14,700,177) ---------------
WARRANTS - 0.2%
AUTOMOTIVE - 0.2%
77,608 General Motors Co. (j)................................................. 856,792
77,608 General Motors Co. (j)................................................. 523,078
---------------
TOTAL WARRANTS ........................................................ 1,379,870
(Cost $4,065,974) ---------------
SHORT-TERM INVESTMENTS - 1.3%
8,684,307 Dreyfus Government Cash Management ..................................... 8,684,307
---------------
TOTAL SHORT-TERM INVESTMENTS ........................................... 8,684,307
(Cost $8,684,307) ---------------
TOTAL INVESTMENTS - 123.3% ............................................. 812,408,734
(Cost $829,706,303) (k) ---------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- -------------- -------------- ---------------
U.S. GOVERNMENT BONDS SOLD SHORT - (22.7%)
$ (16,000,000) United States Treasury Note ........... 0.25% 03/31/14 (16,010,000)
(103,200,000) United States Treasury Note ........... 0.88% 02/28/17 (104,820,550)
Page 8 See Notes to Quarterly Portfolio of Investments
FIRST TRUST HIGH INCOME LONG/SHORT FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2012 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- -------------- -------------- ---------------
U.S. GOVERNMENT BONDS SOLD SHORT - (CONTINUED)
$ (27,500,000) United States Treasury Note ........... 2.00% 02/15/22 $ (28,857,812)
---------------
TOTAL U.S. GOVERNMENT BONDS SOLD SHORT ................................ (149,688,362)
(Cost $(147,072,527)) ---------------
NET OTHER ASSETS AND LIABILITIES - (0.6%) ............................. (3,607,014)
---------------
NET ASSETS - 100.0% ................................................... $ 659,113,358
===============
(a) This security or a portion of this security is segregated as
collateral for investments sold short.
(b) The non-transferable trust units were originally issued to
facilitate distribution of General Motors common stock and warrants
pursuant to the General Motors Bankruptcy Plan of Reorganization. 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. As such, the
non-transferable trust units currently exist only for the purpose of
receiving any 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 7/15/33.
(c) Security issued by a U.S. incorporated entity, that has its
principal value denominated in the listed foreign currency.
(d) Fixed-to-floating rate security. The interest rate shown reflects
the fixed rate in effect at July 31, 2012. At a predetermined date,
the fixed rate will change to a floating rate.
(e) 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 (the "1933 Act"), and may
be resold in transactions exempt from registration, normally to
qualified institutional buyers. Pursuant to procedures adopted by
the Fund's Board of Trustees, this security has been determined to
be liquid by MacKay Shields LLC, the Fund's sub-advisor. 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 July 31, 2012, securities noted as such amounted to
$193,933,086, or 29.42% of net assets.
(f) Floating rate security. The interest rate shown reflects the rate in
effect at July 31, 2012.
(g) This security is a Payment-in-Kind ("PIK")/Toggle Note whereby
interest will be paid either in cash or PIK until 2/15/13. If the
interest is paid in PIK then the coupon is 1 percentage point higher
than the stated coupon rate.
(h) Senior Loans in which the Fund invests generally 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 base LIBOR rate.
(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.
See Notes to Quarterly Portfolio of Investments Page 9
FIRST TRUST HIGH INCOME LONG/SHORT FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2012 (UNAUDITED)
(k) Aggregate cost for financial reporting purposes, which approximates
the aggregate cost for federal income tax purposes. As of July 31,
2012, the aggregate gross unrealized appreciation for all securities
in which there was an excess of value over tax cost was $23,317,822
and the aggregate gross unrealized depreciation for all securities
in which there was an excess of tax cost over value was $40,615,391.
N/A Not Applicable.
Currency Abbreviations:
EUR Euro Dollar
GBP British Pound Sterling
USD United States Dollar
---------------------------------------------------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of July 31, 2012
is as follows (see Note A - 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
7/31/2012 PRICES INPUTS INPUTS
--------------- ------------- --------------- --------------
Corporate Bonds and Notes:
Automotive................................. $ 28,200,163 $ -- $ 28,198,063 $ 2,100
Other Industry Categories*................. 559,084,785 -- 559,084,785 --
--------------- ------------- --------------- --------------
Total Corporate Bonds and Notes......... 587,284,948 -- 587,282,848 2,100
Foreign Corporate Bonds and Notes*............ 158,708,740 -- 158,708,740 --
Senior Floating-Rate Loan Interests*.......... 28,215,900 -- 28,215,900 --
Asset-Backed Securities....................... 13,147,781 -- 13,147,781 --
Mortgage-Backed Securities:
Collateralized Mortgage Obligations........ 4,833,857 -- 4,833,857 --
Commercial Mortgage-Backed Securities...... 2,013,353 -- 2,013,353 --
Common Stocks*................................ 8,139,978 8,139,978 -- --
Warrants*..................................... 1,379,870 1,379,870 -- --
Short-Term Investments........................ 8,684,307 8,684,307 -- --
--------------- ------------- --------------- --------------
Total Investments............................. $ 812,408,734 $ 18,204,155 $ 794,204,579 $ 2,100
=============== ============= =============== ==============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
7/31/2012 PRICES INPUTS INPUTS
--------------- ------------- --------------- --------------
U.S. Government Bonds Sold Short.............. $ (149,688,362) $ -- $ (149,688,362) $ --
Forward Foreign Currency Contracts**.......... (633,883) (633,883) -- --
--------------- ------------- --------------- --------------
Total......................................... $ (150,322,195) $ (633,883) $ (149,688,362) $ --
=============== ============= =============== ==============
* See the Portfolio of Investments for industry breakout.
** See the Schedule of Forward Foreign Currency Contracts for contract and
currency detail.
Page 10 See Notes to Quarterly Portfolio of Investments
FIRST TRUST HIGH INCOME LONG/SHORT FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2012 (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.
INVESTMENTS AT FAIR VALUE CHANGE IN NET BALANCE
USING SIGNIFICANT BALANCE AS OF TRANSFERS NET REALIZED UNREALIZED NET AS OF
UNOBSERVABLE INPUTS OCTOBER 31, IN (OUT) OF GAINS APPRECIATION PURCHASES JULY 31,
(LEVEL 3) 2011 LEVEL 3 (LOSSES) (DEPRECIATION) (SALES) 2012
------------------------------ -------------- -------------- -------------- ---------------- ------------- -----------
Corporate Bonds and Notes $ -- $ 2,100 $ -- $ -- $ -- $ 2,100
There was no net change in unrealized appreciation (depreciation) from Level 3
investments held as of July 31, 2012.
See Notes to Quarterly Portfolio of Investments Page 11
FIRST TRUST HIGH INCOME LONG/SHORT FUND
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
JULY 31, 2012 (UNAUDITED)
FORWARD FOREIGN CURRENCY CONTRACTS
---------------------------------------------------------
PURCHASE SALE UNREALIZED
SETTLEMENT AMOUNT AMOUNT VALUE AS OF VALUE AS OF APPRECIATION/
DATE COUNTERPARTY PURCHASED (a) SOLD (a) JULY 31, 2012 JULY 31, 2012 (DEPRECIATION)
---------- -------------- -------------------- ------------------ --------------- --------------- --------------
09/13/12 JPM USD 39,514,853 GBP 25,490,000 $ 39,514,853 $ 39,963,510 $ (448,657)
09/13/12 JPM USD 49,109,018 EUR 40,042,000 49,109,018 49,294,244 (185,226)
--------------
Net Unrealized Appreciation (Depreciation)............................................................ $ (633,883)
==============
(a) 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
JULY 31, 2012 (UNAUDITED)
VALUATION AND INVESTMENT PRACTICES
A. PORTFOLIO VALUATION:
The net asset value ("NAV") of the Common Shares of First Trust High Income
Long/Short Fund (the "Fund") is determined daily, as of the close of regular
trading on the New York Stock Exchange ("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 in accordance with valuation procedures
adopted by the Fund's Board of Trustees and in accordance with provisions of the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund's
securities will be valued as follows:
Corporate bonds, notes, U.S. Government Securities, Mortgage-backed
Securities ("MBS"), Asset-backed Securities ("ABS") 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.
A ready market does not exist for some of these investments. As such,
these values may differ from the values that would have been used had a
ready market for these investments existed, and the differences could be
material.
Common stocks, and other securities listed on any national or foreign
exchange (excluding the NASDAQ National Market ("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. If
there are no transactions on the valuation day, the securities are valued
at the mean between the most recent bid and asked prices.
Securities listed on the NASDAQ or the AIM are valued at the official
closing price. If there is no official closing price on the valuation day,
the securities are valued at the mean between the most recent bid and
asked prices.
Securities traded in the over-the-counter market are valued at their
closing bid prices.
Credit default swaps, if any, are valued using a pricing service or, if
the pricing service does not provide a value, by quotes provided by the
selling dealer or financial institution.
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.
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.
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.
1 The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
Page 13
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
FIRST TRUST HIGH INCOME LONG/SHORT FUND
JULY 31, 2012 (UNAUDITED)
In the event the pricing service or dealer does not provide a valuation, or the
valuations received are deemed unreliable, the Fund's Board of Trustees has
designated First Trust Advisors L.P. ("First Trust") to use a fair value method
to value the Fund's securities. Additionally, if events occur after the close of
the principal markets for certain securities (e.g., domestic debt and foreign
securities) that could materially affect the Fund's NAV, First Trust may use a
fair value method to value the Fund's securities. The use of fair value pricing
is governed by valuation procedures adopted by the Fund's Board of Trustees, and
in accordance with the provisions of the 1940 Act. As a general principle, the
fair value of a security is the amount which the Fund might reasonably expect to
receive for the security upon its current sale. However, in light of the
judgment involved in fair valuations, there can be no assurance that a fair
value assigned to a particular security will be the amount which the Fund might
be able to receive upon its current sale. Fair valuation of a security is based
on the consideration of all available information, 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
investments.
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 July 31, 2012, 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.
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 July 31, 2012, the Fund had no when-issued, delayed-delivery or forward
purchase commitments.
Page 14
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
FIRST TRUST HIGH INCOME LONG/SHORT FUND
JULY 31, 2012 (UNAUDITED)
C. 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.
During the period ended July 31, 2012, the open and close notional values of
forward foreign currency contracts were $1,234,561,202 and $(1,237,204,037),
respectively.
D. 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.
E. 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.
Page 15
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 September 24, 2012
-------------------------
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 September 24, 2012
-------------------------
By (Signature and Title)* /s/ James M. Dykas
------------------------------------------------
James M. Dykas, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date September 24, 2012
-------------------------
* Print the name and title of each signing officer under his or her signature.