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 811-21539
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FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
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(Exact name of registrant as specified in charter)
1001 Warrenville Road, Suite 300
LISLE, IL 60532
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(Address of principal executive offices) (Zip code)
W. Scott Jardine
First Trust Portfolios L.P.
1001 Warrenville Road, Suite 300
LISLE, IL 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: 630-241-4141
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Date of fiscal year end: MAY 31
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Date of reporting period: FEBRUARY 28, 2007
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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(s) of Investments is attached herewith.
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - 152.8%
AEROSPACE & DEFENSE - 6.0%
AEROSPACE & DEFENSE - 6.0%
$ 3,619,959 GenCorp Inc. .................... Ba2 BB- 8.32%-8.36% 12/06/10 $ 3,633,534
2,876,418 Hexcel Corp. .................... B2 B+ 7.13% 3/01/12 2,878,814
1,419,325 Hunter Defense Holdings, Inc. ... NR(a) NR(a) 8.63% 3/10/11 1,426,422
1,000,000 ILC Industries, Inc. ............ NR(a) NR(a) 8.35% 2/24/12 1,007,500
1,703,030 K&F Industries, Inc. ............ B2 B+ 7.32% 11/18/12 1,711,013
842,531 Mid-Western Aircraft Systems, Inc. Ba3 BB+ 7.11% 12/31/11 846,348
2,732,484 MRO Acquisition Corp. ........... B1 B+ 7.86% 8/27/10 2,758,101
1,500,000 PGS, Inc. ....................... NR NR 7.61% 2/14/13 1,518,750
5,340,659 Robertson Aviation, LLC ......... NR(a) NR(a) 8.82%-8.87% 4/19/13 5,367,363
4,510,132 Standard Aero Holdings, Inc. .... Ba3 B+ 7.57%-7.61% 8/24/12 4,529,864
3,100,000 Vought Aircraft Industries, Inc. Ba2 B- 7.82% 12/22/10 3,124,543
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TOTAL AEROSPACE & DEFENSE 28,802,252
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AUTO COMPONENTS - 0.9%
AUTO PARTS & EQUIPMENT - 0.9%
1,000,000 Axletech International Holdings,
Inc. (c) ........................ Caa1 B- 11.86% 4/21/13 1,005,417
3,392,785 TRW Automotive, Inc. ............ Ba1 BB+ 6.94% 6/30/12 3,392,785
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TOTAL AUTO COMPONENTS 4,398,202
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AUTOMOBILES - 1.3%
AUTOMOBILE MANUFACTURERS - 1.3%
3,000,000 Ford Motor Company .............. Ba3 B 8.36% 12/15/13 3,031,251
3,000,000 General Motors Company .......... Ba3 B+ 7.7% 11/29/13 3,031,500
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TOTAL AUTOMOBILES 6,062,751
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BEVERAGES - 0.2%
SOFT DRINKS - 0.2%
795,833 Culligan Corp. .................. Ba2 BB- 7.07% 9/30/11 796,828
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TOTAL BEVERAGES 796,828
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BUILDING PRODUCTS - 1.0%
BUILDING PRODUCTS - 1.0%
2,789,285 NCI Building Systems, Inc. ...... Ba1 BB 6.82%-6.87% 6/18/10 2,799,745
1,000,000 South Edge, LLC ................. NR(a) NR(a) 7.38% 10/31/09 997,500
750,000 South Edge, LLC ................. NR(a) NR(a) 7.13% 10/31/07 748,125
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TOTAL BUILDING PRODUCTS 4,545,370
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CAPITAL MARKETS - 2.6%
ASSET MANAGEMENT & CUSTODY BANKS - 1.0%
1,000,000 Grosvenor Capital Management
Holdings LLP .................. NR(a) NR(a) 7.63% 12/05/13 1,003,750
3,962,538 LPL Holdings, Inc. .............. B2 B 7.86% 6/30/14 4,014,546
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5,018,296
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See Notes to Quarterly Portfolio of Investments Page 1
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
CAPITAL MARKETS - (CONTINUED)
INVESTMENT BANKING & BROKERAGE - 1.6%
$ 1,776,818 Ameritrade Holding Corp. ........ Ba1 BB 6.82% 12/31/12 $ 1,783,112
5,840,499 NASDAQ Stock Market (The), Inc. . Ba3 BB+ 7.10%-7.11% 4/18/12 5,864,228
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7,647,340
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TOTAL CAPITAL MARKETS 12,665,636
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CHEMICALS - 5.8%
COMMODITY CHEMICALS - 0.2%
506,075 Basell USA, Inc. ................ Ba3 B+ 7.60% 8/01/13 510,820
506,075 Basell USA, Inc. ................ Ba3 B+ 8.35% 8/01/14 510,820
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1,021,640
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DIVERSIFIED CHEMICALS - 5.6%
5,000,000 BCP Crystal U.S. Holdings Corp. . Ba3 BB- 7.36% 1/26/09 5,012,500
3,000,000 BCP Crystal U.S. Holdings Corp. . Ba3 BB- 7.11% 4/06/11 3,020,832
3,000,000 Brenntag Holding GmbH &
Company KG (c) ................ B3 CCC+ 11.89% 1/18/14 3,059,064
5,625,455 Brenntag Holding GmbH &
Company KG .................... B2 B 7.89% 12/23/13 5,685,225
1,374,545 Brenntag Holding GmbH &
Company KG .................... B2 B 7.89% 1/18/14 1,389,150
5,626,134 Huntsman International, LLC ..... Ba3 BB- 7.07% 8/16/12 5,657,078
2,487,500 Lyondell Chemical Company ....... Ba2 BB 7.11% 8/16/13 2,503,738
500,000 Valley National Gases, Inc. (c) . NR NR 8.35% 8/28/14 500,000
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26,827,587
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TOTAL CHEMICALS 27,849,227
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COMMERCIAL SERVICES & SUPPLIES - 5.5%
DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES - 3.4%
995,000 Acosta, Inc. .................... NR(a) NR(a) 7.57% 7/28/13 1,003,291
992,500 Advantage Sales & Marketing, Inc. NR(a) NR(a) 7.36%-7.37% 3/29/13 993,344
2,654,623 Affinion Group, Inc. ............ Ba2 B+ 7.82%-7.86%% 10/17/12 2,677,851
1,811,364 Clarke American Corp. ........... B1 B+ 8.57%-8.63% 12/15/11 1,820,420
4,440,038 IAP Worldwide Services, Inc. .... B2 B 9.69% 12/30/12 4,448,363
1,000,000 N.E.W. Holdings I, LLC (c) ..... NR(a) NR(a) 12.35%-12.36% 2/08/14 1,011,250
878,049 N.E.W. Holdings I, LLC .......... NR(a) NR(a) 8.10%-8.11% 8/08/13 884,634
2,000,000 RSC Equipment Rental (c) ....... Caa1 B- 8.85%-8.86% 11/30/13 2,034,376
1,496,250 RSC Equipment Rental ............ Ba2 BB- 7.07%-7.10% 11/30/12 1,500,926
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16,374,455
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ENVIRONMENTAL & FACILITIES SERVICES - 1.4%
6,922,228 EnergySolutions, LLC ............ NR(a) NR(a) 7.57%-7.63% 6/07/13 6,982,797
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6,982,797
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OFFICE SERVICES & SUPPLIES - 0.7%
1,327,043 Pike Electric, Inc. ............. NR(a) NR(a) 7.13% 4/18/10 1,325,937
1,865,033 Pike Electric, Inc. ............. NR(a) NR(a) 7.13% 7/01/12 1,863,479
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3,189,416
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TOTAL COMMERCIAL SERVICES & SUPPLIES 26,546,668
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Page 2 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
COMPUTERS & PERIPHERALS - 1.9%
COMPUTER HARDWARE - 1.9%
$ 5,762,698 Activant Solutions Holdings, Inc. B1 B 7.38% 5/02/13 $ 5,766,300
3,102,729 Advanced Micro Devices, Inc. .... Ba3 BB- 7.57% 12/31/13 3,130,582
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TOTAL COMPUTERS & PERIPHERALS 8,896,882
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CONSTRUCTION & ENGINEERING - 1.2%
CONSTRUCTION & ENGINEERING - 1.2%
6,000,000 Standard Pacific Corp. .......... Ba2 BB 6.86% 5/05/13 5,966,250
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TOTAL CONSTRUCTION & ENGINEERING 5,966,250
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CONSTRUCTION MATERIALS - 1.5%
CONSTRUCTION MATERIALS - 1.5%
6,945,525 John Maneely Co. ................ B3 B+ 8.60%-8.62% 12/08/13 7,022,218
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TOTAL CONSTRUCTION MATERIALS 7,022,218
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CONTAINERS & PACKAGING - 4.7%
METAL & GLASS CONTAINERS - 1.8%
927,673 Captive Plastics, Inc. .......... NR(a) B- 8.11% 8/16/11 932,311
7,331,250 Owens-Illinois Group, Inc. ...... Ba2 BB- 6.82% 6/14/13 7,351,103
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8,283,414
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PAPER PACKAGING - 2.9%
1,156,497 Boise Cascade, LLC .............. Ba3 BB 7.09%-7.13% 10/28/11 1,164,448
4,736,749 Graham Packaging Holdings Company B1 B 7.63%-7.69% 10/07/11 4,786,229
6,000,000 Graham Packaging Holdings
Company (c) ................... B3 CCC+ 9.63% 4/07/12 6,054,000
1,975,000 Pregis Corp. .................... Ba2 B+ 7.61% 10/12/12 1,984,875
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13,989,552
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TOTAL CONTAINERS & PACKAGING 22,272,966
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DISTRIBUTORS - 0.1%
DISTRIBUTORS - 0.1%
500,000 McJunkin Corp. .................. B2 B+ 7.60% 1/31/14 505,000
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TOTAL DISTRIBUTORS 505,000
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DIVERSIFIED CONSUMER SERVICES - 2.9%
EDUCATION SERVICES - 1.3%
1,990,000 Education Management LLC ........ B2 B 7.88% 6/01/13 2,005,423
4,250,000 PRO-QUEST - CSA, LLC ............ NR NR 8.35% 2/09/14 4,265,938
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6,271,361
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SPECIALIZED CONSUMER SERVICES - 1.6%
1,495,619 Coinstar, Inc. .................. Ba3 BB- 7.36% 7/01/11 1,501,228
6,000,000 RMK Acquisition Corporation ..... Ba3 B+ 7.45%-7.47% 1/26/14 6,059,250
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7,560,478
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TOTAL DIVERSIFIED CONSUMER SERVICES 13,831,839
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See Notes to Quarterly Portfolio of Investments Page 3
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
DIVERSIFIED FINANCIAL SERVICES - 1.4%
SPECIALIZED FINANCE - 1.4%
1,000,000 J.G.Wentworth, LLC .............. B2 B 8.86% 4/12/11 $ 1,010,000
5,500,000 Peach Holdings, Inc. ............ B2 B 9.12% 11/21/13 5,506,875
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TOTAL DIVERSIFIED FINANCIAL SERVICES 6,516,875
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ELECTRIC UTILITIES - 8.8%
ELECTRIC UTILITIES - 8.8%
1,000,000 Astoria Generating Company
Acquisitions, LLC (c) ......... B3 B 9.12% 8/23/13 1,012,917
66,742 Calpine Corp. (f) .............. NR(a) NR(a) 2.25% 12/20/07 66,575
326,902 Calpine Corp.,
(Debtor in Possession) (c)(f) . NR(a) NR(a) 7.62% 12/20/07 327,923
829,787 Calpine Corp.,
(Debtor in Possession) (f) .... NR(a) NR(a) 9.36% 12/20/07 836,702
280,116 Cogentrix Delaware Holdings, Inc. Ba2 BB+ 6.87% 4/14/12 280,641
8,000,000 Covanta Energy Corp ............. Ba2 BB- 5.28%-6.88% 2/09/14 8,033,336
1,922,480 LSP Gen Finance Co., LLC ........ Ba3 BB- 7.11% 5/04/13 1,927,287
699,275 LSP Kendall Energy, LLC ......... B1 B 7.36% 10/07/13 696,070
6,390,511 Midwest Generation, LLC ......... Baa3 BB 6.83%-6.86% 4/27/11 6,403,292
990,000 Mirant North America, LLC ....... Ba3 BB- 7.07% 1/03/13 992,846
13,500,000 NRG Energy, Inc. ................ Ba1 BB- 7.36% 2/01/13 13,622,013
4,320,814 Plum Point Energy Associates, LLC B1 B 8.61% 3/14/14 4,358,621
2,111,827 Riverside Energy Center, LLC .... B1 B 9.61% 6/24/11 2,154,063
1,514,518 Rocky Mountain Energy Center, LLC B1 B 9.61% 6/24/11 1,544,808
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TOTAL ELECTRIC UTILITIES 42,257,094
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ELECTRICAL EQUIPMENT - 0.2%
ELECTRICAL COMPONENTS & EQUIPMENT - 0.2%
1,006,935 Electrical Components International
Holding Company ............... Ba3 B 7.88% 5/01/13 1,014,488
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TOTAL ELECTRICAL EQUIPMENT 1,014,488
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ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.0%
TECHNOLOGY DISTRIBUTORS - 1.0%
4,577,000 Sensata Technologies Finance
Company, LLC .................. NR(a) NR(a) 7.09%-7.11% 4/27/13 4,582,149
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TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS 4,582,149
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ENERGY EQUIPMENT & SERVICES - 1.7%
OIL & GAS EQUIPMENT & SERVICES - 1.7%
1,000,000 Brand Energy & Infrastructure
Services, Inc. (c) ............ B1 B 11.38% 2/07/15 1,011,250
6,929,436 Targa Resources, Inc. ........... B1 B+ 7.36% 10/31/12 6,981,406
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TOTAL ENERGY EQUIPMENT & SERVICES 7,992,656
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FOOD & STAPLES RETAILING - 3.5%
DRUG RETAIL - 0.7%
3,555,102 Jean Coutu Group (PJC) Inc. ..... B1 BB- 7.88% 7/30/11 3,557,835
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Page 4 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
FOOD & STAPLES RETAILING - (CONTINUED)
FOOD DISTRIBUTORS - 0.7%
$ 1,500,000 B&G Foods, Inc. ................. Ba2 B+ 8.35% 2/23/13 $ 1,518,750
1,945,000 Golden State Foods Corp. ........ B1 NR(a) 7.11% 2/25/11 1,945,000
--------------
3,463,750
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FOOD RETAIL - 2.1%
9,927,487 SUPERVALU, Inc. ................. Ba3 BB- 7.10% 6/02/12 9,976,897
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TOTAL FOOD & STAPLES RETAILING 16,998,482
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FOOD PRODUCTS - 4.5%
AGRICULTURAL PRODUCTS - 2.1%
9,938,748 Dole Food Company, Inc. ......... Ba3 B 7.36%-9.25% 4/12/13 9,943,715
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PACKAGED FOODS & MEATS - 2.4%
7,807,400 OSI Group, LLC .................. NR(a) NR(a) 7.36% 9/02/11 7,822,040
1,767,778 THL Foods Products Company ...... Ba3 B+ 7.36% 11/21/10 1,773,670
2,000,000 Weight Watchers International, Inc. Ba1 BB 6.88% 1/26/14 2,009,166
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11,604,876
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TOTAL FOOD PRODUCTS 21,548,591
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HEALTH CARE EQUIPMENT & SUPPLIES - 0.2%
HEALTH CARE EQUIPMENT - 0.2%
997,500 ReAble Therapeutics Finance, LLC Ba3 B 7.85%-7.90% 11/03/13 999,994
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TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 999,994
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HEALTH CARE PROVIDERS & SERVICES - 15.0%
HEALTH CARE FACILITIES - 3.7%
3,000,000 HCA, Inc. ....................... Ba3 BB 7.61% 11/17/13 3,034,251
7,000,000 Health Management Associates, Inc. Ba2 B+ 7.32% 2/28/14 7,050,316
904,182 Lifepoint Hospitals, Inc. ....... Ba3 BB 6.99% 4/15/12 903,165
5,915,073 Select Medical Corp. ............ Ba1 B+ 7.07%-9.00% 2/24/12 5,898,943
995,000 USP Domestic Holdings, Inc. ..... Ba2 BB- 7.10%-7.18% 6/07/13 995,000
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17,881,675
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HEALTH CARE SERVICES - 9.9%
4,488,750 CHS/Community Health Systems, Inc. Ba3 BB- 7.11% 2/29/12 4,510,494
8,830,085 CHS/Community Health Systems, Inc. Ba3 BB- 7.07%-7.10% 8/19/11 8,872,857
5,224,264 Davita, Inc. .................... Ba1 BB- 6.82%-6.86% 10/05/12 5,250,819
935,000 DJ Orthopedics, LLC ............. Ba3 BB- 6.88% 4/07/13 934,415
2,980,132 Emdeon Business Services, LLC ... B1 B+ 7.87% 11/16/13 2,991,308
5,945,025 Fresenius Medical Care AG ....... Ba2 BB+ 6.74% 3/31/13 5,945,025
928,571 Healthcare Partners, LLC ........ Ba3 BB 7.10% 10/31/13 931,184
2,000,000 Healthways, Inc. ................ Ba2 BB 7.11% 12/01/13 2,005,000
901,176 Multiplan Merger Corp. .......... B1 B+ 7.82% 4/12/13 907,935
1,488,750 Quintiles Transnational Corp. ... B1 BB- 7.36% 3/31/13 1,490,146
2,970,000 Team Finance, LLC ............... B1 B+ 7.82%-7.86% 11/23/12 2,989,801
6,376,399 U.S. Oncology Holdings, Inc. .... Ba2 B+ 7.61%-7.63% 8/20/11 6,412,265
4,106,254 VWR International, Inc. ......... Ba2 B+ 7.61% 4/07/11 4,134,485
--------------
47,375,734
--------------
See Notes to Quarterly Portfolio of Investments Page 5
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
HEALTH CARE PROVIDERS & SERVICES - (CONTINUED)
MANAGED HEALTH CARE - 1.4%
$ 4,382,613 IASIS Healthcare Corp. .......... Ba2 B+ 7.57%-7.61% 6/22/11 $ 4,423,152
1,960,311 Vanguard Health Systems, Inc. ... Ba3 B 7.61% 9/23/11 1,975,831
--------------
6,398,983
--------------
TOTAL HEALTH CARE PROVIDERS & SERVICES 71,656,392
--------------
HOTELS, RESTAURANTS & LEISURE - 10.8%
CASINOS & GAMING - 8.0%
5,850,000 Boyd Gaming Corp. ............... Ba1 BB 6.86% 6/30/11 5,871,938
2,957,483 CCM Merger, Inc. ................ Ba3 B 7.35%-7.36% 10/21/12 2,977,816
1,500,000 Great Canadian Gaming Corp. ..... Ba2 BB 6.86% 2/14/14 1,508,438
963,636 Green Valley Ranch Gaming, LLC .. Ba3 B+ 7.36% 2/16/14 974,075
500,000 Green Valley Ranch Gaming, LLC (c) Caa1 CCC+ 8.56% 8/16/14 508,000
1,000,000 Greenwood Racing, Inc. .......... B2 B+ 7.57% 11/28/11 1,007,500
4,333,333 Herbst Gaming, Inc. ............. Ba3 B+ 7.24%-7.25% 12/02/11 4,364,026
1,000,000 PA Meadows, LLC ................. B2 B 8.36% 11/14/11 1,006,250
5,000,000 Pinnacle Entertainment, Inc. .... B1 BB- 1.00% 8/27/10 4,991,665
1,000,000 Pinnacle Entertainment, Inc. .... B1 BB- 7.32% 12/14/11 1,009,167
6,000,000 VML US Finance, LLC ............. B1 BB- 8.12% 5/25/13 6,060,750
2,142,857 Wimar Landco, LLC. .............. B2 B+ 7.86% 7/03/08 2,156,250
5,832,143 Wimar OPCO, LLC. ................ Ba3 B+ 7.86% 1/03/12 5,893,707
--------------
38,329,582
--------------
LEISURE FACILITIES - 2.8%
6,771,305 American Skiing Co. ............. NR NR 9.81% 11/24/10 6,771,305
4,477,500 Cedar Fair, L.P. ................ Ba3 BB- 7.32% 8/30/12 4,520,036
997,487 London Arena and Waterfront
Finance, LLC .................. NR(a) NR(a) 7.85% 3/08/12 1,003,722
1,000,000 Town Sports International, LLC .. Ba2 B+ 7.07% 2/27/14 1,003,750
--------------
13,298,813
--------------
TOTAL HOTELS, RESTAURANTS & LEISURE 51,628,395
--------------
HOUSEHOLD DURABLES - 0.6%
HOMEBUILDING - 0.6%
1,000,000 EH/Transeastern, LLC and TE/TOUSA
Senior, LLC (g) ............... NR(a) NR 8.25% 8/01/08 967,143
5,000,000 TE/TOUSA Mezzanine, LLC,
(Mezzanine Debt) (c) (g) ...... NR(a) NR 10.75% 8/01/09 2,025,000
--------------
TOTAL HOUSEHOLD DURABLES 2,992,143
--------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.5%
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.5%
2,500,000 HCP Acquisition, Inc. ........... B1 B- 8.35% 2/13/14 2,525,000
--------------
TOTAL INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 2,525,000
--------------
Page 6 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
INDUSTRIAL CONGLOMERATES - 0.2%
INDUSTRIAL CONGLOMERATES - 0.2%
$ 754,035 Mueller Group, Inc. ............. B1 BB- 7.36% 10/03/12 $ 760,633
--------------
TOTAL INDUSTRIAL CONGLOMERATES 760,633
--------------
INSURANCE - 0.8%
LIFE & HEALTH INSURANCE - 0.8%
3,990,000 Conseco, Inc. ................... Ba3 BB- 7.32% 10/10/13 4,009,950
--------------
TOTAL INSURANCE 4,009,950
--------------
INTERNET SOFTWARE & SERVICES - 2.7%
INTERNET SOFTWARE & SERVICES - 2.7%
3,000,000 Cellnet Technology, Inc. (c) ... NR(a) NR 6.86% 10/22/11 3,030,000
1,000,000 Open Solutions, Inc. ............ Ba3 B+ 7.49% 1/23/14 1,009,375
8,872,406 SunGard Data Systems, Inc. ...... Ba3 B+ 7.36% 2/28/14 8,956,277
--------------
TOTAL INTERNET SOFTWARE & SERVICES 12,995,652
--------------
IT SERVICES - 6.2%
IT CONSULTING & OTHER SERVICES - 6.2%
3,326,168 Alion Science and Technology Corp. Ba2 B+ 8.11% 8/02/09 3,342,798
1,000,000 Apptis (DE), Inc. ............... B1 B+ 8.57%-8.61% 12/20/12 1,005,000
8,842,500 DynCorp International, LLC ...... Ba2 BB- 7.63%-7.69% 6/28/12 8,905,131
992,500 iPayment, Inc. .................. NR(a) NR(a) 7.32%-7.36% 5/10/13 997,463
1,000,000 National Processing Company
Group, Inc. ................... B2 B 8.35%-8.36% 9/29/13 1,005,000
3,000,000 Sanmina - SCI Corp. (d) ........ Ba3 BB- 7.88% 1/31/08 3,012,000
1,000,000 Sitel, LLC. ..................... B2 B+ 7.82%-9.75% 1/30/14 1,005,417
6,000,000 West Corporation ................ Ba3 B+ 7.74%-7.76% 10/24/13 6,049,164
3,125,000 Wyle Laboratories, Inc. (c)...... NR(a) B- 11.86% 7/28/11 3,152,345
1,341,082 Wyle Laboratories, Inc. ......... NR(a) B+ 8.11% 1/28/11 1,345,273
--------------
TOTAL IT SERVICES 29,819,591
--------------
MACHINERY - 0.2%
INDUSTRIAL MACHINERY - 0.2%
470,000 Invensys International Holdings Ltd./
BTR Dunlop Finance Inc. ....... Ba3 B- 7.36% 12/15/10 472,938
530,000 Invensys International Holdings Ltd./
BTR Dunlop Finance Inc. ....... Ba3 B- 7.36% 1/15/11 533,313
--------------
TOTAL MACHINERY 1,006,251
--------------
MEDIA - 27.5%
BROADCASTING & CABLE TV - 13.6%
3,900,000 Bragg Communications, Inc. ...... NR(a) NR 7.11% 8/31/11 3,909,750
3,000,000 Cequel Communications, LLC ...... B1 B+ 7.61% 11/05/13 3,028,593
3,000,000 Cequel Communications, LLC ...... NR NR 10.32% 10/30/07 2,996,250
12,983,858 Charter Communications
Operating, LLC ................ B1 B 7.99% 4/28/13 13,067,448
10,917,500 CSC Holdings, Inc. .............. Ba2 BB 7.11% 3/29/13 10,968,453
See Notes to Quarterly Portfolio of Investments Page 7
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
MEDIA - (CONTINUED)
BROADCASTING & CABLE TV - (CONTINUED)
$ 995,000 Cumulus Media, Inc. ............. Ba3 B 7.32%-7.37% 6/07/13 $ 1,001,218
1,323,258 DIRECTV Holdings LLC ............ Baa3 BB 6.82% 4/13/13 1,327,544
3,468,182 LBI Media, Inc. ................. Ba2 B 6.82%-6.86% 3/31/12 3,429,165
3,000,000 NEP II, Inc. .................... NR(a) NR(a) 7.60% 2/16/14 3,029,064
6,982,500 PanAmSat Corp. .................. Ba2 BB 7.86% 12/03/13 7,047,479
1,000,000 Paxson Communications Corp. ..... B1 CCC+ 8.61% 1/15/12 1,022,500
5,432,500 Raycom Media, Inc. .............. NR NR 6.88% 8/28/13 5,432,500
4,500,000 UPC Distribution Holding B.V. ... B1 B 7.37% 3/31/13 4,514,576
4,500,000 UPC Distribution Holding B.V. ... B1 B 7.37% 12/31/13 4,514,319
--------------
65,288,859
--------------
MOVIES & ENTERTAINMENT - 5.3%
4,851,000 AMC Entertainment, Inc. ......... Ba1 B+ 7.45% 1/26/13 4,889,405
1,472,659 Deluxe Entertainment Services
Group, Inc. ................... B1 B 8.36% 1/28/11 1,480,259
6,947,500 Metro-Goldwyn-Mayer Holdings II,
Inc. .......................... NR(a) NR(a) 8.61% 4/08/12 7,004,490
2,000,000 National CineMedia, LLC ......... B1 B+ 7.07% 2/13/15 2,015,000
9,708,977 WMG Acquisition Corp. ........... Ba2 BB- 7.36%-7.41% 3/01/11 9,750,783
--------------
25,139,937
--------------
PUBLISHING - 8.6%
934,435 Caribe Information Investments, Inc. B1 B 7.61%-7.62% 3/31/13 937,940
4,313,726 CBD Media, LLC .................. Ba3 B 7.82% 12/31/09 4,333,495
779,878 Dex Media West, Inc. ............ Ba1 BB 6.85%-6.86% 3/09/10 781,047
10,000,000 Idearc, Inc. .................... Ba2 BB+ 7.32% 11/17/14 10,081,250
1,960,100 Media News Group, Inc. .......... Ba2 BB- 6.57% 12/30/10 1,950,300
1,990,000 Media News Group, Inc. .......... Ba2 BB- 7.07% 8/02/13 1,996,219
3,630,000 Newspaper Holdings, Inc. ........ NR NR 6.88% 8/24/12 3,605,044
953,590 Nexstar Broadcasting, Inc. ...... Ba3 B 7.11% 10/01/12 952,398
903,608 Nexstar Broadcasting, Inc. ...... Ba3 B+ 7.11% 10/01/12 902,479
3,000,000 Penton Media, Inc. and Prism
Business Media Inc. ........... B1 B+ 7.57% 2/01/13 3,027,501
990,000 PRIMEDIA, Inc. .................. B2 B 7.57% 9/30/13 989,278
6,532,972 RH Donnelley, Inc. .............. Ba1 BB 6.85%-6.87% 6/30/11 6,533,822
1,500,000 Riverdeep Interactive Learning
USA, Inc. ..................... B1 B 8.10% 12/20/13 1,513,437
1,786,660 WCP Exposition Services Operating
Company, LLC .................. NR NR 8.87% 8/29/11 1,795,594
997,500 Wenner Media LLC ................ NR(a) NR(a) 7.11% 10/02/13 1,002,488
1,000,000 Yell Group PLC .................. Ba3 BB- 7.32% 10/27/13 1,008,073
--------------
41,410,365
--------------
TOTAL MEDIA 131,839,161
--------------
Page 8 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
METALS & MINING - 1.5%
ALUMINUM - 0.9%
$ 4,356,923 Novelis Corp. ................... Ba2 BB- 7.61% 1/07/12 $ 4,360,035
--------------
4,360,035
--------------
DIVERSIFIED METALS & MINING - 0.6%
2,970,000 Alpha Natural Resources, LLC .... B1 BB- 7.11% 10/26/12 2,974,642
--------------
2,974,642
--------------
TOTAL METALS & MINING 7,334,677
--------------
MULTI-UTILITIES - 0.2%
MULTI-UTILITIES - 0.2%
1,000,000 KGEN, LLC ....................... Ba3 BB- 7.10% 2/08/14 1,004,375
--------------
TOTAL MULTI-UTILITIES 1,004,375
--------------
OIL, GAS & CONSUMABLE FUELS - 6.3%
OIL & GAS EXPLORATION & PRODUCTION - 3.5%
8,404,087 ATP Oil & Gas Corp. ............. NR NR 8.85%-8.91% 4/14/10 8,461,867
4,365,298 Plains Resources, Inc. .......... Ba2 BB 6.86% 8/12/11 4,368,027
2,000,000 Resolute Aneth, LLC (c).......... NR NR 10.36% 4/13/12 2,000,000
1,874,482 SemCrude, L.P. .................. Ba2 B+ 7.57% 3/16/11 1,889,848
--------------
16,719,742
--------------
OIL & GAS REFINING, MARKETING & TRANSPORTATION - 2.8%
995,000 Alon USA, Inc. .................. B1 BB- 7.57% 6/22/13 1,000,596
442,222 Calumet Lubricants Company. L.P. B1 BB- 8.70%-8.85% 12/09/12 442,222
6,890,593 Eagle Rock Gas Gathering &
Processing, Ltd. .............. NR NR 7.61% 12/03/12 6,890,593
3,000,000 El Paso Corp. ................... Ba3 B+ 7.22% 7/31/11 3,016,875
1,000,000 Energy Transfer Equity, L.P. .... Ba2 NR 7.10% 2/08/12 1,008,750
980,155 EPCO Holdings, Inc. ............. Ba2 BB- 7.36% 8/18/10 991,006
166,667 Regency Gas Service LLC ......... Ba1 B+ 7.86% 8/15/13 167,031
--------------
13,517,073
--------------
TOTAL OIL, GAS & CONSUMABLE FUELS 30,236,815
--------------
PAPER & FOREST PRODUCTS - 3.7%
FOREST PRODUCTS - 3.7%
14,122,425 Georgia-Pacific Corp. ........... Ba2 BB- 7.35%-7.36% 12/20/12 14,245,996
3,430,556 Georgia-Pacific Corp. ........... Ba2 BB- 7.11% 12/29/12 3,454,378
--------------
TOTAL PAPER & FOREST PRODUCTS 17,700,374
--------------
PERSONAL PRODUCTS - 0.2%
PERSONAL PRODUCTS - 0.2%
1,000,000 American Safety Razor Company (c) B3 CCC+ 11.63% 1/30/14 1,017,500
--------------
TOTAL PERSONAL PRODUCTS 1,017,500
--------------
See Notes to Quarterly Portfolio of Investments Page 9
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
PHARMACEUTICALS - 0.6%
PHARMACEUTICALS - 0.6%
$ 2,000,000 Graceway Pharmaceuticals, LLC ... Ba3 B+ 7.84% 12/29/11 $ 2,013,750
1,000,000 Stiefel Laboratories, Inc. ...... Ba3 B+ 7.57%-7.61% 12/28/13 1,010,000
--------------
TOTAL PHARMACEUTICALS 3,023,750
--------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 2.9%
RETAIL REITS - 2.9%
6,046,709 Capital Automotive, L.P. ........ Ba1 BB+ 7.07% 12/16/10 6,101,129
6,000,000 General Growth Properties, Inc. . Ba2 BB+ 6.57% 2/24/10 5,984,466
2,000,000 Macerich Partnership (The), L.P. NR(a) NR(a) 6.88% 4/26/10 2,003,334
--------------
TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 14,088,929
--------------
REAL ESTATE MANAGEMENT & DEVELOPMENT - 3.1%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 3.1%
2,125,000 LNR Property Corp. .............. NR(a) NR(a) 8.07%-8.11% 6/12/09 2,127,656
4,500,000 LNR Property Corp. .............. NR(a) NR(a) 8.11% 7/12/11 4,526,519
263,925 Newkirk Master (The) L.P. ....... Ba2 BB+ 7.07% 8/11/08 263,760
396,647 November 2005 Land Investors, LLC B1 BB 8.11% 5/09/11 398,135
1,000,000 November 2005 Land Investors,
LLC (c) ....................... Caa1 B 12.36% 5/30/12 1,007,500
2,161,008 Pivotal Promontory, LLC ......... NR(a) NR(a) 8.07% 8/31/10 2,150,203
1,649,330 Rhodes Companies (The), LLC .... B1 BB- 8.61% 11/21/10 1,647,268
1,496,250 Shea Capital I, LLC ............. NR(a) NR(a) 7.37% 10/27/11 1,492,509
1,000,000 Tishman Speyer Real Estate D.C.
Area Portfolio L.P. ........... Ba2 BB- 7.07% 12/27/12 1,007,500
--------------
TOTAL REAL ESTATE MANAGEMENT & DEVELOPMENT 14,621,050
--------------
ROAD & RAIL - 2.2%
TRUCKING - 2.2%
3,392,200 Hertz (The) Corp. ............... Ba1 BB 7.07%-7.12% 12/21/12 3,420,026
7,000,000 Oshkosh Truck Corp. ............. Ba3 BB 7.35% 12/06/13 7,054,999
--------------
TOTAL ROAD & RAIL 10,475,025
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 1.8%
SEMICONDUCTORS - 1.8%
8,500,000 Freescale Semiconductors, Inc. .. Baa3 BB 7.12% 12/01/13 8,563,750
--------------
TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 8,563,750
--------------
SOFTWARE - 0.5%
SYSTEMS SOFTWARE - 0.5%
2,250,000 Intergraph Corp. ................ B1 B 7.82%-7.86% 5/29/14 2,265,469
--------------
TOTAL SOFTWARE 2,265,469
--------------
SPECIALTY RETAIL - 4.9%
APPAREL RETAIL - 1.7%
1,852,143 Hanesbrands, Inc. ............... Ba2 BB- 7.07%-7.11% 9/05/13 1,867,655
1,000,000 Hanesbrands, Inc. (c) .......... B1 B- 9.11% 2/05/14 1,027,500
5,302,278 Neiman Marcus Group (The), Inc. . Ba3 B+ 7.35% 4/06/13 5,360,276
--------------
8,255,431
--------------
Page 10 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
SPECIALTY RETAIL - (CONTINUED)
SPECIALTY STORES - 3.2%
$ 1,215,813 Dollarama Group L.P. ............ Ba1 B+ 7.36% 11/18/11 $ 1,222,651
4,766,006 Harbor Freight Tools USA, Inc. .. NR(a) NR(a) 7.60%-7.61% 2/12/13 4,805,721
5,860,313 Michaels Stores, Inc. ........... B2 B- 8.13% 10/31/13 5,912,504
3,500,000 Yankee Candle Company (The), Inc. Ba3 B+ 7.32% 2/06/14 3,500,000
--------------
15,440,876
--------------
TOTAL SPECIALTY RETAIL 23,696,307
--------------
TOBACCO - 0.8%
TOBACCO - 0.8%
921,525 Commonwealth Brands, Inc. ....... NR(a) NR(a) 7.63% 12/22/12 924,980
2,985,000 Reynolds American, Inc. ......... Baa2 BBB- 7.10%-7.19% 5/31/12 3,006,922
--------------
TOTAL TOBACCO 3,931,902
--------------
TRANSPORTATION INFRASTRUCTURE - 0.9%
MARINE PORTS & SERVICES - 0.9%
4,349,823 Horizon Lines Holding, LLC ...... Ba2 B 7.62% 7/07/11 4,374,290
--------------
TOTAL TRANSPORTATION INFRASTRUCTURE 4,374,290
--------------
WIRELESS TELECOMMUNICATION SERVICES - 1.8%
WIRELESS TELECOMMUNICATION SERVICES - 1.8%
1,995,000 Clearwire Corp. ................. NR NR 12.07% 8/18/09 2,014,950
3,750,000 Intelsat, Ltd. (d) ............. B2 B+ 7.86% 2/01/14 3,767,411
2,800,000 Windstream Corp. ................ Ba1 BBB- 8.35% 7/17/13 2,819,832
--------------
TOTAL WIRELESS TELECOMMUNICATION SERVICES 8,602,193
--------------
TOTAL SENIOR FLOATING RATE TERM LOAN INTERESTS**................................ 732,241,993
--------------
(Cost $729,940,357)
SENIOR FLOATING RATE NOTES - 4.2%
CONTAINERS & PACKAGING - 0.1%
METAL & GLASS CONTAINERS - 0.1%
250,000 Berry Plastics Corp. (c)(e) .... B2 CCC+ 9.24% 9/15/14 258,125
--------------
TOTAL CONTAINERS & PACKAGING 258,125
--------------
DIVERSIFIED CONSUMER SERVICES - 0.1%
SPECIALIZED CONSUMER SERVICES - 0.1%
500,000 RMK Acquisition Corporation (d)(e) B3 B- 8.86% 2/01/15 516,250
--------------
TOTAL DIVERSIFIED CONSUMER SERVICES 516,250
--------------
ELECTRICAL COMPONENTS & EQUIPMENT - 0.1%
ELECTRICAL COMPONENTS & EQUIPMENT - 0.1%
650,000 NXP B.V. (e) ................... Ba2 BB+ 8.11% 10/15/13 664,625
--------------
TOTAL ELECTRICAL COMPONENTS & EQUIPMENT 664,625
--------------
See Notes to Quarterly Portfolio of Investments Page 11
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
------------ ----------------------------- ------------------ ----------- -------------- --------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - (CONTINUED)
ENERGY EQUIPMENT & SERVICES - 0.2%
OIL & GAS DRILLING - 0.2%
$ 1,000,000 Parker Drilling Company ......... B2 B- 10.12% 9/01/10 $ 1,020,000
--------------
TOTAL ENERGY EQUIPMENT & SERVICES 1,020,000
--------------
FOOD & STAPLES RETAILING - 0.5%
FOOD DISTRIBUTORS - 0.5%
2,100,000 Nutro Products, Inc. (e) ........ B3 CCC 9.40% 10/15/13 2,181,375
--------------
TOTAL FOOD & STAPLES RETAILING 2,181,375
--------------
HEALTH CARE PROVIDERS & SERVICES - 0.2%
HEALTH CARE FACILITIES - 0.2%
1,000,000 U.S. Oncology Holdings, Inc. (d). B3 B- 10.68% 3/15/15 1,022,500
--------------
TOTAL HEALTH CARE PROVIDERS & SERVICES 1,022,500
--------------
HOTELS, RESTAURANTS & LEISURE - 0.9%
LEISURE FACILITIES - 0.9%
2,000,000 HRP Myrtle Beach (e)............. B2 B 10.12% 4/01/12 2,020,000
2,000,000 Universal City Florida Holding
Company ....................... B3 B- 10.11% 5/01/10 2,070,000
--------------
TOTAL HOTELS, RESTAURANTS & LEISURE 4,090,000
--------------
MEDIA - 1.0%
BROADCASTING & CABLE TV - 1.0%
5,000,000 Paxson Communications Corp. ..... B1 CCC+ 8.61% 1/15/12 4,975,000
--------------
TOTAL MEDIA 4,975,000
--------------
PAPER & FOREST PRODUCTS - 0.2%
PAPER PRODUCTS - 0.2%
1,000,000 Verso Paper Holdings LLC (e) ... B2 BB 9.11% 8/01/14 1,030,000
--------------
TOTAL PAPER & FOREST PRODUCTS 1,030,000
--------------
PHARMACEUTICALS - 0.5%
PHARMACEUTICALS - 0.5%
2,500,000 Elan Finance and Elan Finance
Corp. (d) ..................... B3 B 9.36% 11/15/11 2,543,750
--------------
TOTAL PHARMACEUTICALS 2,543,750
--------------
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT - 0.4%
2,000,000 Freescale Semiconductors, Inc. (d)(e) B1 B 9.24% 12/15/14 2,020,000
--------------
TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 2,020,000
--------------
TOTAL SENIOR FLOATING RATE NOTES................................................ 20,321,625
--------------
(Cost $21,844,115)
Page 12 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
FEBRUARY 28, 2007 (UNAUDITED)
MARKET
SHARES DESCRIPTION* VALUE
------------ --------------------------------------------------------------------------------- --------------
CLOSED-END FUNDS - 0.3%
CAPITAL MARKETS - 0.3%
ASSET MANAGEMENT & CUSTODY BANKS - 0.3%
217,800 ING Prime Rate Trust............................................................ $ 1,613,898
--------------
TOTAL CAPITAL MARKETS 1,613,898
--------------
TOTAL CLOSED-END FUNDS.......................................................... 1,613,898
--------------
(Cost $1,524,305)
REPURCHASE AGREEMENT - 1.1%
5,000,000 Repurchase agreement with Deutsche Bank Securities, Inc., 5.28%
dated 02/28/07, to be repurchased at $5,000,733 on 03/01/07,
collateralized by $5,140,000, Freddie Mac Discount Note,
5.30% due 04/13/07 (Value $5,100,000) ........................................ 5,000,000
--------------
TOTAL REPURCHASE AGREEMENT...................................................... 5,000,000
--------------
(Cost $5,000,000)
TOTAL INVESTMENTS - 158.4%...................................................... 759,177,516
(Cost $758,308,777) (b)
NET OTHER ASSETS AND LIABILITIES - (2.9)%....................................... (14,042,450)
LOAN OUTSTANDING - (34.6)%...................................................... (166,000,000)
PREFERRED SHARES, AT LIQUIDATION VALUE - (20.9)%................................ (100,000,000)
--------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS - 100.0%........................... $ 479,135,066
==============
--------------------------
o All percentages shown in the Portfolio of Investments are based on net
assets applicable to Common Shares.
(a) This Senior Loan Interest was privately rated upon issuance. The rating
agency does not provide ongoing surveillance on the rating.
(b) Aggregate cost for federal income tax and financial reporting purposes.
(c) This issue is secured by a second lien on the issuer's assets.
(d) This issue is unsecured.
(e) Securities are restricted and cannot be offered for public sale without
first being registered under the Securities Act of 1933, as amended (Note
1E).
(f) This borrower has filed for protection in a federal bankruptcy court.
(g) This Senior Loan Interest is non-income producing.
Freescale Semiconductors, Inc. 11/17/06 2,000,000 101.00
Poor's Ratings Group are considered to be below investment grade.
NR Not rated
* Senior Loans generally are subject to mandatory and/or optional prepayment.
Prepayments of Senior Loans may occur because of the mandatory prepayment
conditions and because there may be significant economic incentives for a
borrower to optionally prepay. As a result, the actual remaining maturity
of Senior Loans may be substantially less than the stated maturities shown.
Senior Loans generally have maturities that range from five to eight years;
however, the Fund estimates that refinancing and prepayments result in an
average maturity of the Senior Loans held in its portfolio to be
approximately 18-36 months.
** 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 major
United States banks or (iii) the certificate of deposit rate.
See Notes to Quarterly Portfolio of Investments Page 13
--------------------------------------------------------------------------------
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
FEBRUARY 28, 2007
1. VALUATION AND INVESTMENT PRACTICES
A. PORTFOLIO VALUATION:
The net asset value ("NAV") of the Common Shares of the First Trust/Four Corners
Senior Floating Rate Income Fund II (the "Fund") is computed based upon the
value of the Fund's portfolio and other assets less any accrued liabilities. The
NAV is determined 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. Domestic debt
securities and foreign securities are priced using data reflecting the earlier
closing of the principal markets for those securities. The Fund calculates NAV
per Common Share by subtracting the Fund's liabilities (including accrued
expenses, dividends payable and any borrowings of the Fund) and the liquidation
value of any outstanding Preferred Shares from the Fund's Total Assets (the
value of securities and other investments the Fund holds plus cash or other
assets, including interest accrued but not yet received), and dividing the
result 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 according
to procedures adopted by the Fund's Board of Trustees. A majority of the Fund's
assets are valued using market information supplied by third parties. In the
event that market quotations are not readily available, the pricing service does
not provide a valuation for a particular asset, or the valuations are deemed
unreliable, or if events occurring after the close of the principal markets for
particular securities (e.g., domestic debt securities and foreign securities),
but before the Fund values its assets, would materially affect NAV, First Trust
Advisors L.P. ("First Trust") may use a fair value method to value the Fund's
securities and investments. The use of fair value pricing by the Fund is
governed by valuation procedures adopted by the Fund's Board of Trustees, and in
accordance with the provisions of the Investment Company Act of 1940, as amended
(the "1940 Act").
The Senior Loans in which the Fund invests 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 in the past several years, 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 an independent third party pricing service. If the
pricing service cannot or does not provide a valuation for a particular Senior
Loan or such valuation is deemed unreliable, First Trust may value such Senior
Loan at a fair value according to procedures adopted by the Fund's Board of
Trustees, and in accordance with the provisions of the 1940 Act.
Portfolio securities listed on any exchange other than the NASDAQ National
Market ("NASDAQ") are valued at the last sale price on the business day as of
which such value is being determined. If there has been no sale on such day, the
securities are valued at the mean of the most recent bid and asked prices on
such day. Securities traded on the NASDAQ are valued at the NASDAQ Official
Closing Price as determined by NASDAQ. Portfolio securities traded on more than
one securities exchange are valued at the last sale price on the business day as
of which such value is being determined at the close of the exchange
representing the principal market for such securities. Portfolio securities
traded in the over-the-counter market, but excluding securities traded on the
NASDAQ, are valued at the closing bid prices. Short-term investments that mature
in less than 60 days are valued at amortized cost.
B. REPURCHASE AGREEMENTS:
The Fund engages in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund takes possession of an underlying debt
obligation subject to an obligation of the seller to repurchase, and the Fund to
resell, the obligation at an agreed-upon price and time, thereby determining the
yield during the Fund's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the Fund's holding
period. The value of the collateral is at all times at least equal to the total
amount of the repurchase obligation, including interest. In the event of a
counterparty default, the Fund has the right to use the collateral to offset
losses incurred. There is potential loss to the Fund in the event the Fund is
delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the value of the
underlying securities during the period while the Fund seeks to assert its
rights. The Fund reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Fund enters into repurchase agreements to
evaluate potential risks.
Page 14
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NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS (UNAUDITED)(CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
FEBRUARY 28, 2007
C. 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 or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income on such securities
is not accrued until settlement date. The Fund maintains liquid assets with a
current value at least equal to the amount of its when-issued or
delayed-delivery purchase commitments.
D. UNFUNDED LOAN COMMITMENTS:
The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund had unfunded loan commitments of approximately $840,426 as
of February 28, 2007. The Fund is obligated to fund these loan commitments at
the borrower's discretion. Net unrealized depreciation of $2,101 from these
commitments is included in "Net Other Assets and Liabilities" on the Portfolio
of Investments.
E. RESTRICTED SECURITIES:
The Fund may invest a portion of its assets in restricted securities. Restricted
securities are securities that cannot be offered for public sale without first
being registered under the Securities Act of 1933, as amended. The Fund
currently holds the restricted securities shown in the following table. The Fund
does not have the right to demand that such securities be registered. These
securities are valued using market quotations according to the valuation
procedures as stated in the Portfolio Valuation section (Note 1A) and are not
expressed as a discount to the carrying value of a comparable unrestricted
security. There are no unrestricted securities with the same maturity dates and
yields for these issuers.
CARRYING CARRYING COST
VALUE PER SHARE
ACQUISITION PRINCIPAL PER SHARE AT ACQUISITION 2/28/06 % OF
SECURITY DATE VALUE 2/28/06 DATE VALUE NET ASSETS
--------- ------------ ------------ ----------- -------------- ----------- ----------
Berry Plastics Corp. 09/15/06 $ 250,000 $103.25 $100.00 $ 258,125 0.05%
Freescale Semiconductors, Inc. 11/17/06 2,000,000 101.00 100.875 2,020,000 0.42
HRP Myrtle Beach 03/23/06 2,000,000 101.00 100.00 2,020,000 0.42
Nutro Products, Inc. 04/18/06 2,100,000 103.875 102.25 2,181,375 0.46
NXP B.V. 10/05/06 650,000 102.25 101.50 664,625 0.14
RMK Acquisition Corporation 01/17/07 500,000 103.25 100.00 516,250 0.11
Verso Paper Holdings, LLC 07/26/06 1,000,000 103.00 101.25 1,030,000 0.21
------------ ----------- -------
$ 8,500,000 $ 8,690,375 1.81%
============ =========== =======
2. UNREALIZED APPRECIATION/(DEPRECIATION)
As of February 28, 2007, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $4,310,461
and the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $3,441,722.
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/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
By (Signature and Title)* /S/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date APRIL 18, 2007
----------------------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /S/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date APRIL 18, 2007
----------------------------------------------------------------------------
By (Signature and Title)* /S/ MARK R. BRADLEY
-------------------------------------------------------
Mark R. Bradley, Treasurer, Controller, Chief Financial
Officer and Chief Accounting Officer
(principal financial officer)
Date APRIL 18, 2007
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.