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, Esq.
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 29, 2008
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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 (a)
FEBRUARY 29, 2008 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED
VALUE DESCRIPTION MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------------- ------------- -------------- ------------ ------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - 166.1%
AEROSPACE & DEFENSE - 4.5%
$ 3,491,790 DAE Aviation Holdings, Inc. ......................... B2 BB- 6.99%-8.75% 07/31/14 $ 3,321,565
2,336,001 GenCorp, Inc. ....................................... Ba2 BB 5.34%-5.38% 04/30/13 1,927,201
1,554,665 Hexcel Corp. ........................................ Ba1 BB+ 4.75%-6.63% 03/01/12 1,492,479
911,223 ILC Industries, Inc. ................................ NR(e) NR(e) 7.09% 02/24/12 792,764
834,085 Mid-Western Aircraft
Systems, Inc. .................................... Ba3 BBB- 5.68% 12/31/11 784,040
4,752,587 Robertson Aviation, LLC ............................. NR(e) NR(e) 6.13%-8.57% 04/19/13 4,681,298
997,494 Safenet, Inc. ....................................... B1 B+ 7.13% 04/12/14 795,501
1,000,000 Vought Aircraft Industries, Inc. .................... Ba3 B 7.34% 12/22/11 916,667
3,100,000 Vought Aircraft Industries, Inc. .................... Ba3 B 7.10% 12/22/10 2,841,668
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17,553,183
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AGRICULTURAL PRODUCTS - 2.1%
9,847,989 Dole Food Company, Inc. ............................. Ba3 BB- 5.13%-7.13% 04/12/13 8,267,387
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AIRLINES - 0.1%
500,000 Delta Air Lines, Inc. ............................... Ba2 NR(e) 5.11%-6.83% 04/30/12 425,000
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ALUMINUM - 1.0%
3,084,290 Novelis Corp. ....................................... Ba2 BB 6.83% 07/06/14 2,692,585
1,401,950 Novelis, Inc. ....................................... Ba2 BB 6.83% 07/06/14 1,223,903
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3,916,488
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APPAREL RETAIL - 0.6%
1,394,643 Hanesbrands, Inc. ................................... Ba2 BB 4.99%-5.02% 09/05/13 1,327,090
891,139 Neiman Marcus Group (The), Inc. ..................... Ba3 BB+ 4.93%-6.90% 04/06/13 822,554
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2,149,644
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APPLICATION SOFTWARE - 0.6%
2,815,385 Verint Systems, Inc. ................................ NR B+ 6.24% 05/25/14 2,364,923
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ASSET MANAGEMENT & CUSTODY BANKS - 2.0%
464,910 Gartmore Investment
Management ....................................... Ba3 BB+ 5.64% 05/11/14 395,173
1,457,624 Grosvenor Capital Management
Holdings, LLP .................................... NR(e) NR(e) 5.14%-7.12% 12/05/13 1,341,015
3,922,987 LPL Holdings, Inc. .................................. B1 B 6.83% 06/30/14 3,462,036
3,000,000 Nuveen Investments, Inc. ............................ Ba3 BB- 6.13%-7.86% 11/13/14 2,773,125
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7,971,349
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AUTO PARTS & EQUIPMENT - 0.2%
1,014,020 TRW Automotive, Inc. ................................ Baa3 BBB 4.69%-6.69% 02/09/14 944,560
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AUTOMOBILE MANUFACTURERS - 2.4%
2,907,858 Ford Motor Co. ...................................... Ba3 B+ 8.00% 12/15/13 2,485,410
7,959,950 General Motors Corp. ................................ Ba3 BB- 7.06% 11/29/13 6,971,587
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9,456,997
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AUTOMOTIVE RETAIL - 0.9%
3,987,487 KAR Holdings, Inc. .................................. Ba3 B+ 7.08% 10/18/13 3,562,820
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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 (a) - (CONTINUED)
FEBRUARY 29, 2008 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED
VALUE DESCRIPTION MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------------- ------------- -------------- ------------ ------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
BROADCASTING & CABLE TV - 21.1%
$ 1,985,000 Cequel Communications, LLC .......................... B1 BB- 5.07%-7.00% 11/05/13 $ 1,659,279
16,500,000 Charter Communications
Operating, LLC ................................... B1 B+ 5.26% 03/06/14 14,484,641
3,400,000 Citadel Broadcasting Corp. .......................... Ba3 BB- 4.75%-6.46% 06/12/14 2,545,750
8,807,500 CSC Holdings, Inc. .................................. Ba1 BB+ 6.90% 03/29/13 8,130,054
934,414 Cumulus Media, Inc. ................................. Ba3 B 4.87%-4.89% 06/07/14 749,867
500,000 DIRECTV Holdings, LLC ............................... Baa3 BBB- 4.62% 04/13/13 478,985
6,000,000 Gray Television, Inc. ............................... B1 B+ 6.21% 12/31/14 5,092,500
4,421,250 LBI Media, Inc. ..................................... Ba1 B+ 4.62% 03/31/12 3,979,125
977,486 NEP II, Inc. ........................................ NR(e) NR(e) 7.11% 02/16/14 859,374
6,912,500 PanAmSat Corp. ...................................... B1 BB 5.64% 02/03/13 6,278,850
3,500,000 Raycom Media, Inc. .................................. NR NR 4.63% 06/25/14 3,220,000
2,493,750 Sirius Satellite Radio, Inc. ........................ B1 B 5.38% 12/20/12 2,125,922
6,965,000 Tribune Co. ......................................... B2 BB- 7.91% 05/17/14 5,077,485
2,000,000 Tribune Co. ......................................... B2 BB- 7.40% 05/17/09 1,817,500
1,500,000 Univision Communications, Inc. (f) .................. B3 CCC+ 5.63% 03/29/09 1,434,375
18,362,416 Univision Communications, Inc. ...................... Ba3 B+ 5.38%-5.49% 09/29/14 15,364,403
637,584 Univision Communications, Inc. (g) .................. Ba3 B+ 1.00%(i) 09/29/14 533,486
9,000,000 UPC Distribution Holding B.V. ....................... Ba3 B+ 5.01% 12/31/14 7,869,375
994,937 Young Broadcasting, Inc. ............................ B1 B 5.69%-7.38% 11/03/12 883,006
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82,583,977
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BUILDING MATERIALS - 0.2%
1,000,000 South Edge, LLC ..................................... NR(e) NR(e) 5.13% 10/31/09 765,000
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CASINOS & GAMING - 13.2%
1,096,850 Cannery Casino Resorts, LLC ......................... B2 BB 5.32% 05/18/13 1,017,329
897,638 Cannery Casino Resorts, LLC (g) ..................... B2 BB 2.25%(i)-7.40% 05/18/13 832,559
3,424,920 CCM Merger, Inc. .................................... Ba3 BB- 5.08%-7.15% 10/21/12 2,962,555
2,270,892 Fontainebleau Resorts
Las Vegas, LLC ................................... B1 B+ 8.40% 06/06/14 1,873,486
229,108 Fontainebleau Resorts
Las Vegas, LLC (g) ............................... B1 B+ 2.00%(i) 06/06/14 189,014
1,573,091 Golden Nugget, Inc. ................................. B1 BB- 5.12%-5.13% 06/14/14 1,352,858
898,909 Golden Nugget, Inc. (g) ............................. B1 BB- 1.75%(i) 06/30/14 773,062
1,485,000 Great Canadian Gaming Corp. ......................... Ba2 BBB- 4.57% 02/14/14 1,403,325
956,136 Green Valley Ranch Gaming, LLC ...................... B1 BB- 5.09%-6.84% 02/16/14 764,909
990,000 Greenwood Racing, Inc. .............................. B2 BB- 5.38% 11/28/11 905,850
1,250,000 Herbst Gaming, Inc. ................................. B1 B- 9.22%-9.64% 12/02/11 976,562
995,883 Isle of Capri Casinos, Inc. ......................... Ba3 BB+ 4.88%-6.58% 11/30/13 851,479
11,144,000 Las Vegas Sands, LLC ................................ Ba3 BB 6.58% 05/23/14 9,897,265
2,800,000 Las Vegas Sands, LLC (g) ............................ Ba3 BB 0.75%(i) 05/23/14 2,486,750
4,497,449 Penn National Gaming, Inc. .......................... Ba2 BBB- 4.88%-6.60% 10/03/12 4,260,312
6,822,308 Seminole Tribe of Florida ........................... NR(e) NR(e) 4.57%-6.69% 03/05/14 6,430,025
6,000,000 VML US Finance, LLC ................................. B1 BB- 7.08% 05/25/13 5,420,454
2,142,857 WIMAR LANDCO, LLC ................................... B3 B- 5.37% 07/03/08 2,030,357
7,526,799 WIMAR OPCO, LLC ..................................... B2 B- 9.25% 01/03/12 7,365,809
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51,793,960
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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 (a) - (CONTINUED)
FEBRUARY 29, 2008 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED
VALUE DESCRIPTION MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------------- ------------- -------------- ------------ ------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
COMMODITY CHEMICALS - 0.4%
$ 989,899 Ineos Group Ltd. .................................... Ba3 B+ 7.86% 12/14/14 $ 871,359
989,899 Ineos Group Ltd. .................................... Ba3 B+ 7.36% 12/14/13 871,358
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1,742,717
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COMPUTER HARDWARE - 1.2%
5,762,698 Activant Solutions Holdings, Inc. ................... B1 B+ 6.75%-7.50% 05/02/13 4,869,480
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CONSTRUCTION MATERIALS - 0.4%
1,755,020 John Maneely Co. .................................... B3 B+ 6.35%-7.69% 12/08/13 1,519,189
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DISTILLERS & VINTNERS - 0.6%
2,500,000 Constellation Brands, Inc. .......................... Ba3 BB- 6.44%-6.69% 06/05/13 2,382,590
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DIVERSIFIED CHEMICALS - 3.7%
3,000,000 Brenntag Holding GmbH &
Company KG (f) ................................... Caa1 CCC+ 7.79% 06/23/15 2,520,000
1,374,545 Brenntag Holding GmbH &
Company KG ....................................... B1 B+ 5.79% 01/18/14 1,187,264
5,625,455 Brenntag Holding GmbH &
Company KG ....................................... B1 B+ 5.79% 12/23/13 4,858,986
6,222,102 Huntsman International, LLC ......................... Ba1 BB+ 4.88% 04/19/14 5,900,624
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14,466,874
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DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES- 5.6%
985,000 Acosta, Inc. ........................................ NR(e) NR(e) 5.37% 07/28/13 848,742
981,084 Advantage Sales & Marketing, Inc. ................... NR(e) NR(e) 5.13%-6.83% 03/29/13 843,732
2,303,018 Affinion Group, Inc. ................................ Ba2 BB 5.57%-5.61% 10/17/12 2,103,422
3,000,000 Cellnet Technology, Inc. (f) ........................ NR(e) NR 9.11% 10/22/11 2,700,000
6,965,000 Clarke American Corp. ............................... B1 BB- 7.33% 04/04/14 5,656,158
2,992,500 First Data Corp. .................................... Ba3 BB- 7.58%-7.63% 09/24/14 2,714,030
2,453,798 Itron, Inc. ......................................... Ba3 B+ 5.13%-6.83% 04/18/14 2,257,494
981,955 N.E.W. Holdings I, LLC .............................. NR(e) NR(e) 5.59%-7.65% 05/22/14 785,564
1,055,584 Open Solutions, Inc. ................................ Ba3 BB- 5.85% 01/23/14 886,690
3,226,831 RSC Equipment Rental ................................ Ba2 BB 6.40%-6.58% 11/30/12 3,017,087
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21,812,919
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DIVERSIFIED METALS & MINING - 0.7%
2,797,500 Alpha Natural Resources, LLC ........................ B1 BB- 6.59% 10/26/12 2,657,625
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EDUCATION SERVICES - 1.4%
1,931,818 Education Management, LLC ........................... B2 B+ 6.63% 06/01/13 1,664,986
4,062,292 PRO-QUEST-CSA, LLC .................................. Ba3 BB- 5.69%-7.35% 02/09/14 3,828,710
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5,493,696
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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 (a) - (CONTINUED)
FEBRUARY 29, 2008 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED
VALUE DESCRIPTION MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------------- ------------- -------------- ------------ ------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
ELECTRIC UTILITIES - 6.9%
$ 6,967,450 Calpine Corp. ....................................... B2 B+ 6.15%-7.71% 03/29/14 $ 6,187,966
7,959,794 Covanta Energy Corp. ................................ Ba2 BB 4.63%-7.06% 02/09/14 7,336,280
792,576 Mirant North America, LLC ........................... Ba2 BB 4.87% 01/03/13 744,691
10,656,915 NRG Energy, Inc. .................................... Ba1 BB 6.48%-6.58% 02/01/13 9,787,407
2,005,247 Riverside Energy Center, LLC ........................ Ba3 B 7.49% 06/24/11 1,957,622
1,255,926 Rocky Mountain Energy
Center, LLC ...................................... Ba3 B 7.49%-7.59% 06/24/11 1,226,098
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27,240,064
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ENVIRONMENTAL & FACILITIES SERVICES - 1.3%
5,388,392 EnergySolutions, LLC ................................ NR(e) NR(e) 5.37%-7.10% 06/07/13 4,930,378
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FOOD DISTRIBUTORS - 0.9%
847,826 B&G Foods, Inc. ..................................... Ba2 BB- 5.09% 02/23/13 784,239
859,167 Birds Eye Foods, Inc. ............................... NR(e) NR(e) 6.58% 03/22/13 749,623
1,985,000 Dean Foods Co. ...................................... B1 BB 6.58% 04/02/14 1,810,382
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3,344,244
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FOOD RETAIL - 2.3%
9,690,659 SUPERVALU, Inc. ..................................... Ba3 BB- 4.64% 06/02/12 9,111,913
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FOREST PRODUCTS - 4.1%
3,396,250 Georgia-Pacific Corp. ............................... Ba2 BB+ 6.58%-6.90% 12/29/12 3,125,118
13,979,774 Georgia-Pacific Corp. ............................... Ba2 BB+ 4.84%-6.90% 12/20/12 12,863,727
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15,988,845
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HEALTH CARE EQUIPMENT - 1.0%
3,985,000 Biomet, Inc. ........................................ B1 BB- 7.86% 03/25/15 3,808,664
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HEALTH CARE FACILITIES - 4.6%
5,957,431 HCA, Inc. ........................................... Ba3 BB 7.08% 11/17/13 5,475,254
6,820,227 Health Management Associates, Inc. ................. Ba2 BB- 6.58% 02/28/14 5,861,133
511,777 Lifepoint Hospitals, Inc. ........................... Ba2 BB 4.71% 04/15/12 466,082
5,854,869 Select Medical Corp. ................................ Ba2 BB- 5.02%-7.00% 02/24/12 5,262,063
832,419 USP Domestic Holdings, Inc. ......................... Ba3 B 5.49% 04/19/14 740,853
161,290 USP Domestic Holdings, Inc. (g) ..................... Ba3 B 1.75%(i)-6.79% 04/19/14 143,548
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17,948,933
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HEALTH CARE SERVICES - 9.8%
12,455,916 CHS/Community
Health Systems, Inc. ............................. Ba3 BB 5.34% 07/25/14 11,380,560
626,450 CHS/Community
Health Systems, Inc. (g) ......................... Ba3 BB 0.75%(i) 07/25/14 572,367
10,611,970 DaVita, Inc. ........................................ Ba1 BB+ 4.57%-6.23% 10/05/12 9,917,766
8,134,335 Fresenius Medical Care AG ........................... Ba1 BBB- 4.46%-6.32% 03/31/13 7,634,651
1,980,000 Healthways, Inc. .................................... Ba2 BB+ 6.33% 12/01/13 1,876,050
1,473,750 Quintiles Transnational Corp. ....................... B1 BB 6.83% 03/31/13 1,370,588
6,326,827 U.S. Oncology Holdings, Inc. ........................ Ba2 BB- 5.99%-7.58% 08/20/11 5,488,522
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38,240,504
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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 (a) - (CONTINUED)
FEBRUARY 29, 2008 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED
VALUE DESCRIPTION MOODY'S S&P COUPON MATURITY (c) VALUE
------------ -------------------------------------------------- ------------- ----------------- ------------ ------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 2.5%
$ 5,500,000 Dynegy Holdings, Inc. ............................ Ba1 BB- 4.76% 04/12/13 $ 4,928,000
5,486,250 Texas Competitive Electric
Holdings Company, LLC ......................... Ba3 B+ 6.48%-6.60% 10/10/14 5,002,030
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9,930,030
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INDUSTRIAL CONGLOMERATES - 0.1%
563,602 Mueller Water Products, Inc. ..................... Ba3 BB+ 4.87%-6.89% 05/24/14 511,469
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INDUSTRIAL MACHINERY - 0.5%
1,492,500 Edwards (Cayman Islands II) Ltd. ................. B1 BB 5.09% 05/31/14 970,125
530,000 Invensys International Holdings
Ltd./BTR Dunlop Finance, Inc. ................. Ba3 B+ 6.60% 01/15/11 498,200
470,000 Invensys International Holdings
Ltd./BTR Dunlop Finance, Inc. ................. Ba3 B+ 5.13% 12/15/10 452,375
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1,920,700
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INSURANCE BROKERS - 0.4%
918,571 HealthCare Partners, LLC ......................... Ba3 BB+ 6.58% 10/31/13 847,382
812,909 HUB International Holdings, Inc. ................. B2 B+ 7.33% 06/13/14 699,101
182,507 HUB International Holdings, Inc. (g) ............. B2 B+ 1.63%(i)-7.34% 06/13/14 156,956
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1,703,439
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INTEGRATED TELECOMMUNICATION SERVICES - 0.8%
3,224,409 Telesat Canada ................................... B1 BB- 6.13%-7.84% 10/31/14 2,964,441
275,591 Telesat Canada (g) ............................... B1 BB- 1.50%(i)-8.00% 10/31/14 253,371
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3,217,812
------------
INTERNET RETAIL - 0.5%
2,429,519 Sabre Holdings Corp. ............................. B1 B+ 5.24% 09/30/14 2,014,844
------------
INTERNET SOFTWARE & SERVICES - 2.1%
8,783,682 SunGard Data Systems, Inc. ....................... Ba3 BB 5.13% 02/28/14 8,090,140
------------
INVESTMENT BANKING & BROKERAGE - 0.8%
3,534,394 Ameritrade Holding Corp. ......................... Ba1 BB 4.62% 12/31/12 3,300,732
------------
IT CONSULTING & OTHER SERVICES - 4.2%
2,108,605 Alion Science and Technology Corp. ............... Ba3 BB- 7.33% 02/06/13 1,750,142
647,306 Apptis (DE), Inc. ................................ B1 B+ 6.38%-8.10% 12/20/12 563,156
997,409 CACI International, Inc. ......................... Ba1 NR 4.62%-6.65% 05/03/11 957,513
7,855,579 DynCorp International, LLC ....................... Ba2 BB 6.88% 06/28/12 7,187,854
973,762 iPayment, Inc. ................................... NR(e) NR(e) 5.12%-6.83% 05/10/13 779,010
5,925,150 West Corp. ....................................... B1 BB- 5.47%-6.09% 10/24/13 5,026,008
------------
16,263,683
------------
LEISURE FACILITIES - 2.3%
4,432,500 Cedar Fair, L.P. ................................. Ba3 BB 5.12% 08/30/12 4,111,144
987,437 London Area and Waterfront
Finance, LLC .................................. NR(e) NR(e) 7.63% 03/08/12 888,693
3,646,675 Six Flags, Inc. .................................. B1 B 5.33%-5.39% 04/30/15 3,076,882
992,500 Town Sports International, LLC ................... Ba2 BB 6.94% 02/27/14 823,775
------------
8,900,494
------------
See Notes to Quarterly Portfolio of Investments Page 5
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
FEBRUARY 29, 2008 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED
VALUE DESCRIPTION MOODY'S S&P COUPON MATURITY (c) VALUE
------------ -------------------------------------------------- ------------- ----------------- ------------ ------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
LEISURE PRODUCTS - 0.4%
$ 1,994,987 LodgeNet Entertainment Corp. ..................... B1 B+ 6.83% 04/04/14 $ 1,673,296
------------
LIFE & HEALTH INSURANCE - 1.1%
3,950,034 Conseco, Inc. .................................... Ba3 B+ 5.12% 10/10/13 3,219,278
1,296,151 Multiplan Merger Corp. ........................... B1 B+ 5.62% 04/12/13 1,168,561
------------
4,387,839
------------
MANAGED HEALTH CARE - 1.3%
3,025,167 IASIS Healthcare Corp. ........................... Ba2 B+ 5.01%-6.83% 03/15/14 2,631,896
953,895 IASIS Healthcare Corp. (g) ....................... Ba2 B+ 1.00%(i)-7.15% 03/15/14 829,889
1,940,782 Vanguard Health Systems, Inc. .................... Ba3 B+ 5.37% 09/23/11 1,790,371
------------
5,252,156
------------
METAL & GLASS CONTAINERS - 1.7%
7,181,250 Owens-Illinois Group, Inc. ....................... Ba2 BBB- 4.63% 06/14/13 6,702,498
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MOVIES & ENTERTAINMENT - 5.2%
4,802,000 AMC Entertainment, Inc. .......................... Ba1 BB- 4.62% 01/26/13 4,353,815
1,323,031 Deluxe Entertainment Services
Group, Inc. ................................... B1 B 7.08% 05/11/13 1,111,346
4,975,000 Discovery Communications
Holding, LLC .................................. NR(e) NR(e) 6.83% 05/14/14 4,554,613
2,000,000 National CineMedia, LLC .......................... B1 B+ 6.87% 02/13/15 1,705,626
9,592,262 WMG Acquisition Corp. ............................ Ba3 BB- 5.09%-5.89% 03/01/11 8,617,045
------------
20,342,445
------------
MULTI - UTILITIES - 0.4%
1,995,305 KGEN, LLC ........................................ Ba3 BB 6.63% 02/08/14 1,720,951
------------
OFFICE SERVICES & SUPPLIES - 1.2%
2,850,795 Emdeon Business Services, LLC .................... B1 BB- 6.83% 11/16/13 2,601,350
1,244,771 Pike Electric, Inc. .............................. NR(e) NR(e) 4.69% 07/01/12 1,154,525
885,703 Pike Electric, Inc. .............................. NR(e) NR(e) 4.63% 04/18/10 821,489
------------
4,577,364
------------
OIL & GAS EQUIPMENT & SERVICES - 1.4%
2,000,000 Hercules Offshore, Inc. .......................... Ba3 BB 6.58% 07/11/13 1,940,000
3,769,500 Targa Resources, Inc. ............................ Ba3 B+ 6.83%-6.91% 10/31/12 3,513,174
------------
5,453,174
------------
OIL & GAS EXPLORATION & PRODUCTION - 3.2%
7,920,348 ATP Oil & Gas Corp. .............................. NR NR 6.45%-8.33% 04/14/10 7,356,023
4,365,298 Plains Resources, Inc. ........................... Ba2 BB 4.63% 08/12/11 4,092,467
1,088,475 SemCrude, L.P. ................................... Ba2 NR 5.12% 03/16/11 1,039,494
------------
12,487,984
------------
Page 6 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
FEBRUARY 29, 2008 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED
VALUE DESCRIPTION MOODY'S S&P COUPON MATURITY (c) VALUE
------------ -------------------------------------------------- ------------- ----------------- ------------ ------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
OIL & GAS REFINING, MARKETING & TRANSPORTATION - 3.7%
$ 985,000 Alon USA, Inc. ................................... B1 BB 5.37% 06/22/13 $ 861,875
1,000,000 Calumet Lubricants Company, L.P. ................. B1 BB- 7.07%-8.55% 01/03/15 940,000
4,000,000 Energy Transfer Equity, L.P. ..................... Ba2 NR 4.88% 02/08/12 3,733,332
4,000,000 Enterprise GP Holdings, L.P. ..................... Ba2 BB- 5.44%-6.79% 11/08/14 3,860,000
5,543,571 Western Refining Company,
L.P. .......................................... B1 BB+ 4.99% 05/30/14 4,989,214
------------
14,384,421
------------
OTHER DIVERSIFIED FINANCIAL SERVICES - 2.1%
8,436,250 Royalty Pharma Finance Trust ..................... Baa2 BBB- 5.51% 04/16/13 8,341,342
------------
PACKAGED FOODS & MEATS - 2.0%
7,083,332 OSI Group, LLC ................................... NR(e) NR(e) 6.84% 09/02/11 6,304,166
514,361 THL Food Products Co. ............................ Ba3 BB- 6.85%-6.91% 11/21/10 495,073
990,000 Weight Watchers International, Inc. .............. Ba1 BB+ 6.38% 01/26/14 926,003
------------
7,725,242
------------
PAPER PACKAGING - 2.0%
992,500 Graham Packaging Holdings Co. .................... B1 B+ 6.81%-7.75% 10/07/11 898,461
5,848,627 Graphic Packaging
International, Inc. ........................... Ba2 BB- 5.33%-6.73% 05/16/14 5,235,334
1,955,000 Pregis Corp. ..................................... Ba2 BB- 7.08% 10/12/12 1,798,600
------------
7,932,395
------------
PAPER PRODUCTS - 0.6%
2,411,250 Domtar Corp. ..................................... Ba1 BB+ 4.49% 03/07/14 2,242,463
------------
PHARMACEUTICALS - 1.5%
3,980,000 Cardinal Health 409, Inc. ........................ Ba3 BB- 7.08% 04/10/14 3,283,500
1,933,333 Graceway Pharmaceuticals, LLC .................... Ba3 BB 7.58% 05/03/12 1,672,333
990,000 Steifel Laboratories, Inc. ....................... B1 BB- 6.69% 12/28/13 908,325
------------
5,864,158
------------
PUBLISHING - 7.9%
5,525,707 Cenveo Corp. ..................................... Ba2 BB+ 6.66% 06/21/13 4,807,365
617,737 Dex Media West, Inc. ............................. Ba1 BB+ 4.57%-6.33% 03/09/10 586,336
5,500,000 GateHouse Media, Inc. ............................ B1 BB- 5.09%-6.45% 08/28/14 3,894,000
9,900,000 Idearc, Inc. ..................................... Ba2 BBB- 6.83% 11/17/14 8,144,809
1,970,000 Media News Group, Inc. ........................... Ba3 B 7.08% 08/02/13 1,462,725
3,924,933 Media News Group, Inc. ........................... Ba3 B 6.58% 12/30/10 3,081,073
992,500 Readers Digest Association
(The), Inc. ................................... B1 B+ 7.13%-7.46% 03/02/14 802,933
5,346,359 RH Donnelley, Inc. ............................... Ba1 BB+ 4.59%-6.66% 06/30/11 4,924,552
1,689,962 WCP Exposition Services
Operating Company, LLC ........................ NR NR 8.35% 08/29/11 1,613,914
947,500 Wenner Media, LLC ................................ NR(e) NR(e) 6.59% 10/02/13 843,275
1,000,000 Yell Group PLC ................................... Ba3 BB- 5.12% 10/27/12 874,286
------------
31,035,268
------------
See Notes to Quarterly Portfolio of Investments Page 7
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
FEBRUARY 29, 2008 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED
VALUE DESCRIPTION MOODY'S S&P COUPON MATURITY (c) VALUE
------------ --------------------------------------- --------------- ----------- ------------ ----------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
RAILROADS - 0.4%
$ 1,500,000 Railamerica Transportation Corp. ................. NR NR 5.32% 08/14/08 $ 1,402,500
----------------
REAL ESTATE MANAGEMENT & DEVELOPMENT - 1.6%
1,870,000 LNR Property Corp. ............................... B2 BB 6.36% 07/12/09 1,496,000
3,080,000 LNR Property Corp. ............................... B2 BB 6.36% 07/12/11 2,510,200
989,924 Mattamy Funding Partnership ...................... NR(e) NR(e) 5.38% 04/11/13 900,831
830,303 Shea Capital I, LLC .............................. NR(e) NR(e) 6.00%-6.83% 10/27/11 639,333
1,000,000 Tishman Speyer Real Estate D.C.
Area Portfolio, L.P. .......................... Ba2 BB- 4.92% 12/27/12 840,000
----------------
6,386,364
----------------
RETAIL REIT'S - 2.2%
6,046,709 Capital Automotive, L.P. ......................... Ba1 BB+ 5.02% 12/16/10 5,609,163
1,394,737 General Growth Properties, Inc.. ................. Ba2 BB+ 4.42% 02/24/10 1,208,325
2,000,000 Macerich Partnership (The), L.P. ................. NR(e) NR(e) 4.81% 04/26/10 1,920,000
----------------
8,737,488
----------------
SEMICONDUCTORS - 1.8%
8,415,000 Freescale Semiconductors, Inc. ................... Ba1 BB 5.01% 12/01/13 7,125,401
----------------
SPECIALIZED CONSUMER SERVICES - 1.9%
2,992,429 Nielsen Finance, LLC ............................. Ba3 B+ 5.35% 08/09/13 2,635,830
5,290,711 RMK Acquisition Corp. ............................ Ba3 BB 6.71%-7.07% 01/26/14 4,895,712
----------------
7,531,542
----------------
SPECIALIZED FINANCE - 1.6%
3,000,000 J.G. Wentworth, LLC .............................. B2 B+ 7.09% 04/04/14 1,995,000
5,362,500 Peach Holdings, Inc. ............................. B2 B 7.34%-9.08% 11/21/13 4,290,000
----------------
6,285,000
----------------
SPECIALTY CHEMICALS - 1.3%
5,473,750 Celanese Holdings, LLC ........................... Ba3 BB+ 4.89%-6.48% 04/02/14 5,105,793
----------------
SPECIALTY STORES - 2.4%
1,203,563 Dollarama Group L.P. ............................. Ba1 BB- 4.99% 11/18/11 1,047,099
4,524,838 Harbor Freight Tools USA, Inc. ................... NR(e) NR(e) 5.37% 02/12/13 3,981,858
1,984,925 Michael Stores, Inc. ............................. B2 B 5.38%-6.00% 10/31/13 1,703,877
3,231,442 Yankee Candle Company
(The), Inc. ................................... Ba3 BB- 5.13%-6.86% 02/06/14 2,842,054
----------------
9,574,888
----------------
SYSTEMS SOFTWARE - 2.0%
4,747,058 Dealer Computer Services, Inc. ................... Ba2 BB 6.84% 10/26/12 4,153,676
3,884,107 Intergraph Corp. ................................. Ba3 BB- 5.09%-5.13% 05/29/14 3,485,986
----------------
7,639,662
----------------
Page 8 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
FEBRUARY 29, 2008 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED
VALUE DESCRIPTION MOODY'S S&P COUPON MATURITY (c) VALUE
------------ --------------------------------------- --------------- ----------- ------------ ----------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
TECHNOLOGY DISTRIBUTORS - 1.6%
$ 3,233,999 H3C Holdings, Ltd. ............................... Ba2 BB 8.14% 09/28/12 $ 2,587,199
4,531,000 Sensata Technologies Finance
Company, LLC .................................. NR(e) NR(e) 5.06% 04/27/13 3,836,787
----------------
6,423,986
----------------
TRUCKING - 1.9%
3,363,939 Hertz (The) Corp. ................................ Ba1 BB+ 4.64%-6.50% 12/21/12 3,110,803
3,912,500 OshKosh Corp. .................................... Ba3 BBB- 6.90% 12/06/13 3,642,702
794,855 Swift Transportation ............................. B1 B+ 6.50% 05/10/14 613,032
----------------
7,366,537
----------------
WIRELESS TELECOMMUNICATION SERVICES - 3.7%
1,000,000 Asurion Corp. .................................... NR(e) NR(e) 6.10% 07/03/14 846,000
1,995,001 Clearwire Corp. .................................. NR NR 8.97%-11.15% 07/03/12 1,720,688
4,963,852 Crown Castle Operating Co. ....................... Ba3 BB+ 6.33% 01/09/14 4,483,421
4,750,000 Intelsat (Bermuda), Ltd. (h) ..................... B3 B 5.64% 02/01/14 4,694,582
2,786,000 Windstream Corp. ................................. Baa3 BBB 5.50% 07/17/13 2,658,020
----------------
14,402,711
----------------
TOTAL SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) ............................................ 651,272,134
(Cost $726,995,919) ----------------
SENIOR FLOATING-RATE NOTES - 0.7%
BROADCASTING & CABLE TV - 0.3%
1,500,000 Paxson Communications Corp. (j) .................. B1 CCC+ 7.51% 01/15/12 1,245,000
----------------
ELECTRICAL COMPONENTS & EQUIPMENT - 0.1%
650,000 NXP B.V. ......................................... Ba3 BB+ 7.01% 10/15/13 524,875
----------------
LEISURE FACILITIES - 0.3%
1,225,000 HRP Myrtle Beach (j) ............................. B2 B+ 9.89% 04/01/12 1,065,750
----------------
TOTAL SENIOR FLOATING-RATE NOTES .............................................................. 2,835,625
(Cost $3,377,250) ----------------
NOTES - 0.0%
HOMEBUILDING - 0.0%
727,273 TOUSA, Inc. PIK (j) (k) .......................... NR NR 1.00% 07/01/15 58,182
----------------
TOTAL NOTES ................................................................................... 58,182
(Cost $453,257) ----------------
See Notes to Quarterly Portfolio of Investments Page 9
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
FEBRUARY 29, 2008 (UNAUDITED)
SHARES DESCRIPTION VALUE
------------ ------------------------------------------------------------------------------------------------- ----------------
PREFERRED STOCKS - 0.0%
HOMEBUILDING - 0.0%
4,273 TOUSA, Inc. (8.0%, Series A Convertible Payment-in-Kind Preferred Stock) (j) .................... $ 0
----------------
TOTAL PREFERRED STOCKS . ....................................................................... 0
(Cost $2,563,636) ----------------
COMMON STOCKS AND RIGHTS - 0.0%
OTHER DIVERSIFIED FINANCIAL SERVICES - 0.0%
690 Atkins Nutritionals Holdings - Common Stock ..................................................... 0
690 Atkins Nutritionals Holdings - Rights ........................................................... 0
----------------
TOTAL COMMON STOCKS AND RIGHTS .................................................................. 0
(Cost $36,260) ----------------
CLOSED-END FUNDS - 0.1%
ASSET MANAGEMENT & CUSTODY BANKS - 0.1%
81,700 ING Prime Rate Trust ............................................................................ 457,520
----------------
TOTAL CLOSED-END FUNDS .......................................................................... 457,520
(Cost $508,540) ----------------
PRINCIPAL STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
------------ -------------------------------------------------------------------- ----------- ------------ ----------------
SHORT-TERM INVESTMENTS - 4.6%
COMMERCIAL PAPER - 4.6%
$ 18,000,000 Elysian Funding, LLC ............................................... 3.50% 03/03/08 17,996,500
----------------
TOTAL SHORT-TERM INVESTMENTS .................................................................... 17,996,500
(Cost $17,996,500) ----------------
TOTAL INVESTMENTS - 171.5% ...................................................................... 672,619,961
(Cost $751,931,362) (l)
NET OTHER ASSETS AND LIABILITIES - (1.4)% ....................................................... (5,474,908)
LOAN OUTSTANDING - (44.6)% ...................................................................... (175,000,000)
AUCTION MARKET PREFERRED SHARES, AT LIQUIDATION VALUE - (25.5)% ................................. (100,000,000)
----------------
NET ASSETS APPLICABLE TO COMMON SHARES - 100.0% ................................................. $ 392,145,053
================
Page 10 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
FEBRUARY 29, 2008 (UNAUDITED)
----------
(a) All percentages shown in the Portfolio of Investments are based on net
assets applicable to Common Shares.
(b) Ratings below Baa3 by Moody's Investors Service, Inc. or BBB- by Standard
& Poor's Ratings Group are considered to be below investment grade.
(c) 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.
(d) 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
Interbank Offered Rate ("LIBOR"), (ii) the prime rate offered by one or
more major United States banks or (iii) the certificate of deposit rate.
(e) This Senior Loan Interest was privately rated upon issuance. The rating
agency does not provide ongoing surveillance on the rating.
(f) This issue is secured by a second lien on the issuer's assets.
(g) Delayed Draw Loan (See Note 1E).
(h) This issue is unsecured.
(i) Represents commitment fee rate on delayed draw loans.
(j) This security is restricted and cannot be offered for public sale without
first being registered under the Securities Act of 1933, as amended. Prior
to registration, restricted securities may only be resold in transactions
exempt from registration (See Note 1F).
(k) This security is a Senior Subordinated Payment-in-Kind Election Note
whereby 1.00% of interest per annum will be paid in cash and 13.75% of
interest per annum shall be paid by the issuer, at its option (i) entirely
in cash, (ii) entirely in Payment-in-Kind interest or (iii) in a
combination of (i) and (ii). Interest is paid semi-annually and the first
interest payment date was January 15, 2008.
(l) Aggregate cost for federal income tax and financial reporting purposes.
NR Not rated
CREDIT DEFAULT SWAP CONTRACTS OUTSTANDING
The Fund maintains $6,250,000 in cash or cash equivalents for the following
credit default swap contracts outstanding as of February 29, 2008 (See Note 1B):
UNREALIZED
REFERENCE BUY/SELL NOTIONAL (PAY)/RECEIVE EXPIRATION APPRECIATION/
ENTITY PROTECTION COUNTERPARTY AMOUNT FIXED RATE DATE (DEPRECIATION)
--------------- ---------- --------------- ----------- ------------- ---------- --------------
B&G Foods, Inc. Sell Lehman Brothers $ 2,250,000 1.27% 06/20/12 $ (98,277)
Dresser, Inc. Sell Lehman Brothers 4,000,000 1.65% 06/20/12 (171,082)
----------- ----------
$ 6,250,000 $ (269,359)
=========== ==========
See Notes to Quarterly Portfolio of Investments Page 11
--------------------------------------------------------------------------------
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS
--------------------------------------------------------------------------------
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
FEBRUARY 29, 2008 (UNAUDITED)
1. VALUATION AND INVESTMENT PRACTICES
A. PORTFOLIO VALUATION:
The net asset value ("NAV") of the Common Shares of First Trust/Four Corners
Senior Floating Rate Income Fund II (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. 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 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, First Trust Advisors L.P. ("First Trust") may use a fair value
method to value the Fund's securities and investments. Additionally, if events
occur after the close of the principal market for particular securities (e.g.,
domestic debt and foreign securities), but before the Fund values its assets,
that could materially affect NAV, 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 ("1940 Act").
The Senior Floating-Rate Term Loans ("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. CREDIT DEFAULT SWAPS:
The Fund may enter into credit default swap contracts for hedging purposes or to
gain exposure to a credit in which the Fund may otherwise invest. A credit
default swap contract is an agreement between two parties to exchange the credit
risk of an issuer. The Fund may be either the buyer or seller in a credit
default swap transaction. The "buyer" in a credit default swap contract is
obligated to pay the "seller" a periodic stream of payments over the term of the
contract provided that no event of default on the underlying reference
obligation has occurred. If an event of default occurs, the seller must pay the
buyer the full notional value, or "par value," of the reference obligation. In
exchange, the seller receives the par value of securities of the reference
obligor. An event of default may be a grace period extension, obligation
acceleration, repudiation/moratorium, or restructuring.
Page 12
--------------------------------------------------------------------------------
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
FEBRUARY 29, 2008 (UNAUDITED)
If the Fund is a buyer and no event of default occurs, the Fund will have made a
series of periodic payments and recover nothing of monetary value. However, if
an event of default occurs, the Fund (if the buyer) will receive the full
notional value, or "par value" of the reference obligation. Buying a credit
default swap contract involves the risk that the contract may expire worthless
and the credit risk that the seller may fail to satisfy its payment obligations
to the Fund in the event of default. If the Fund is a seller and no event of
default occurs, the Fund will have received a periodic stream of payments over
the term of the contract and paid nothing of monetary value. However, if an
event of default occurs, the Fund (if the seller) must pay the buyer the full
notional value, or "par value," of the reference obligation. In exchange, the
Fund receives the par value of securities of the reference obligor. Selling a
credit default swap contract involves greater risks than if the Fund had
invested in the reference obligation directly. The Fund will segregate assets in
the form of cash and/or cash equivalents in an amount equal to the aggregate
market value of the credit default swap contracts of which it is a seller.
Additionally, the Fund maintains liquid assets for the full notional amount of
the credit default swap contracts of which it is a seller. The Fund may enter
into such transactions with counterparties rated A- or higher.
Credit default swap contracts are marked to market daily based upon quotations
from brokers or market makers and the change in value, if any, is recorded as
unrealized appreciation (depreciation). For a credit default swap contract sold
by the Fund, payment of the agreed-upon amount made by the Fund in the event of
default of the referenced debt obligation is recorded as the cost of the
referenced debt obligation purchased/received.
C. 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
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.
D. 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. At February 29, 2008, the Fund had no
when-issued or delayed-delivery purchase commitments.
E. UNFUNDED LOAN COMMITMENTS:
The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund had unfunded delayed draw-loan commitments of
approximately $6,771,002 as of February 29, 2008. The Fund is obligated to fund
these loan commitments at the borrower's discretion.
Page 13
--------------------------------------------------------------------------------
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
FEBRUARY 29, 2008 (UNAUDITED)
F. RESTRICTED SECURITIES:
The Fund invests in restricted securities, which are securities that cannot be
offered for public sale without first being registered under the Securities Act
of 1933, as amended. Prior to registration, restricted securities may only be
resold in transactions exempt from registration. The Fund had restricted
securities at February 29, 2008 as 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 footnote (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.
% OF
NET ASSETS
CARRYING APPLICABLE TO
ACQUISITION PRINCIPAL VALUE COMMON
SECURITY DATE VALUE/SHARES PER SHARE CARRYING COST VALUE SHARES
--------------------------------------------------------------------------------------------------------------------
HRP Myrtle Beach 03/23/06 $ 1,225,000 $ 87.00 $ 1,225,000 $ 1,065,750 0.27%
Paxson Communications Corp. 12/19/05 1,500,000 83.03 1,500,000 1,245,500 0.32%
TOUSA, Inc.- Notes 07/31/07 727,273 8.00 453,257 58,182 0.01%
TOUSA, Inc.- Preferred Stock 07/31/07 4,273 0.00 2,563,636 0 0.00%
----------- ----------- ----
$ 5,741,893 $ 2,369,432 0.60%
=========== =========== ====
2. UNREALIZED APPRECIATION (DEPRECIATION)
As of February 29, 2008, the aggregate gross unrealized appreciation of all
securities in which there was an excess of value over tax cost was $136,972 and
the aggregate gross unrealized depreciation of all securities in which there was
an excess of tax cost over value was $79,448,373.
Page 14
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 21, 2008
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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 21, 2008
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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 21, 2008
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* Print the name and title of each signing officer under his or her signature.