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: August 31, 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 (Sections 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. Section 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
AUGUST 31, 2007 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED MARKET
VALUE DESCRIPTION (a) MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------- ---------------- --------------- ------------ --------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - 157.7%
AEROSPACE & DEFENSE - 3.2%
$ 876,275 Gencorp, Inc. ................................. Ba2 BB 7.80% 04/13/13 $ 830,270
1,464,118 Gencorp, Inc. ................................. Ba2 BB 7.82% 04/30/13 1,387,252
2,145,695 Hexcel Corp. .................................. B2 B+ 7.13%-7.25% 03/01/12 2,081,323
974,502 ILC Industries, Inc. .......................... NR(e) NR(e) 7.61% 02/24/12 930,650
838,308 Mid-Western Aircraft
Systems, Inc. .............................. Ba3 BBB- 7.11% 12/31/11 825,733
5,178,427 Robertson Aviation, LLC ....................... NR(e) NR(e) 8.58%-8.63% 04/19/13 5,126,642
3,100,000 Vought Aircraft Industries, Inc. .............. Ba2 B- 7.82% 12/22/10 2,995,375
--------------
14,177,245
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AGRICULTURAL PRODUCTS - 2.1%
9,893,368 Dole Food Company, Inc. ....................... Ba3 BB- 7.36%-9.25% 04/12/13 9,299,767
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AIRLINES - 0.1%
500,000 Delta Air Lines, Inc. (n) ..................... Ba2 NR(e) 7.36% 04/30/12 474,688
--------------
ALUMINUM - 0.4%
2,000,000 Novelis Corp. ................................. Ba2 BB 7.36% 07/06/14 1,931,666
--------------
APPAREL RETAIL - 1.5%
1,852,143 Hanesbrands, Inc. ............................. Ba2 BB 7.11%-7.26% 09/05/13 1,796,868
5,068,355 Neiman Marcus Group
(The), Inc ................................. Ba3 B+ 7.09%-7.11% 04/06/13 4,914,494
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6,711,362
--------------
APPLICATION SOFTWARE - 0.6%
2,815,385 Verint Systems ................................ NR B+ 8.11% 05/25/14 2,695,731
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ASSET MANAGEMENT & CUSTODY BANKS - 1.3%
500,000 Gartmore Investment Management
Holdings, Inc. ............................. Ba3 BB+ 7.11% 05/11/14 464,500
1,494,785 Grosvenor Capital Management
Holdings, LLP .............................. NR(e) NR(e) 7.33%-7.36% 12/05/13 1,434,994
3,942,749 LPL Holdings, Inc. ............................ B1 B 7.36% 06/30/14 3,745,612
--------------
5,645,106
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AUTO PARTS & EQUIPMENT - 0.4%
1,000,000 Federal Mogul Corp. (f) ....................... NR NR(e) 7.25% 12/31/07 987,083
1,019,116 TRW Automotive, Inc. .......................... Baa3 BBB 6.88% 02/09/14 988,542
--------------
1,975,625
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AUTOMOBILE MANUFACTURERS - 1.2%
2,420,019 Ford Motor Company ............................ Ba3 B+ 8.36% 12/15/13 2,267,633
2,985,000 General Motors Corp. .......................... Ba3 BB- 7.74% 11/29/13 2,839,481
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5,107,114
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AUTOMOTIVE RETAIL - 0.3%
1,500,000 KAR Holdings, Inc. ............................ Ba3 B+ 7.61% 10/18/13 1,403,438
--------------
BROADCASTING & CABLE TV - 20.7%
1,995,000 Cequel Communications, LLC .................... B1 B+ 7.36%-9.25% 11/05/13 1,881,397
See Notes to Quarterly Portfolio of Investments Page 1
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2007 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED MARKET
VALUE DESCRIPTION (a) MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------- ---------------- --------------- ------------ --------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
BROADCASTING & CABLE TV - (CONTINUED)
$ 16,500,000 Charter Communications
Operating, LLC ................................ B1 B+ 7.36% 03/06/14 $ 15,585,141
3,000,000 Citadel Broadcasting Corp. .................... Ba3 BB- 6.99% 06/12/14 2,760,000
10,862,500 CSC Holdings, Inc. ............................ Ba2 BB 7.07% 03/29/13 10,402,787
939,111 Cumulus Media, Inc. ........................... Ba3 B 7.11%-7.37% 06/07/14 891,214
1,316,541 DIRECTV Holdings, LLC ......................... Baa3 BB 7.00% 04/13/13 1,291,238
6,000,000 Gray Television, Inc. ......................... Ba3 B+ 6.86% 11/27/14 5,621,249
4,443,750 LBI Media, Inc. ............................... Ba1 B+ 7.07% 03/31/12 4,266,000
2,992,495 NEP II, Inc. .................................. NR(e) NR(e) 7.61% 02/16/14 2,847,859
6,947,500 PanAmSat Corp. ................................ Ba2 BB 7.36% 12/03/13 6,714,759
3,500,000 Raycom Media, Inc. ............................ NR NR 6.88% 06/25/14 3,360,000
2,500,000 Sirius Satellite Radio, Inc. .................. B1 B 7.63% 12/20/12 2,331,250
7,000,000 Tribune Company ............................... Ba2 BB 8.36% 05/17/14 6,341,566
1,500,000 Univision Communications, Inc. (g) ............ B3 CCC+ 8.01% 03/29/09 1,464,000
17,852,349 Univision Communications, Inc. ................ Ba3 B+ 7.61% 09/29/14 16,483,663
1,147,651 Univision Communications, Inc. (h) ............ Ba3 B+ 1.00% (i) 09/29/14 1,059,664
9,000,000 UPC Distribution Holding B.V. ................. Ba3 B 7.13% 12/31/14 8,415,000
--------------
91,716,787
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BUILDING PRODUCTS - 0.3%
370,669 South Edge, LLC ............................... NR(e) NR(e) 7.38% 10/31/07 346,576
1,000,000 South Edge, LLC ............................... NR(e) NR(e) 7.63% 10/31/09 930,000
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1,276,576
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CASINOS & GAMING - 10.7%
1,102,362 Cannery Casino Resorts, LLC ................... B2 BB 7.76% 05/18/13 1,036,220
897,638 Cannery Casino Resorts, LLC (h) ............... B2 BB 2.25% (i)-7.61% 05/18/13 843,780
3,442,477 CCM Merger, Inc. .............................. Ba3 BB- 7.36%-7.51% 10/21/12 3,330,596
1,666,667 Fontainebleau Resorts
Las Vegas, LLC ............................. B1 B+ 8.61% 06/06/14 1,548,612
833,333 Fontainebleau Resorts
Las Vegas, LLC (h) ......................... B1 B+ 2.00% (i) 06/06/14 774,306
1,573,091 Golden Nugget, Inc. ........................... B1 CCC+ 7.51%-7.59% 06/14/14 1,490,504
898,909 Golden Nugget, Inc. (h) ....................... B1 CCC+ 0.50% (i) 06/30/14 851,716
1,492,500 Great Canadian Gaming Corp. ................... Ba2 BB 7.00% 02/14/14 1,477,575
961,136 Green Valley Ranch
Gaming, LLC ................................ B1 BB- 7.36%-7.57% 02/16/14 913,080
995,000 Greenwood Racing, Inc. ........................ B2 BB- 7.80%-7.82% 11/28/11 952,713
588,235 Isle of Capri Casinos, Inc. ................... Ba3 BB+ 7.26% 11/30/13 558,824
235,294 Isle of Capri Casinos, Inc. (h) ............... Ba3 BB+ 7.25% 11/30/13 223,529
176,471 Isle of Capri Casinos, Inc. (h) ............... Ba3 BB+ 0.50% (i) 11/30/13 167,647
2,800,000 Las Vegas Sands, LLC (h) ...................... Ba3 BB 0.75% (i) 05/23/14 2,656,850
11,200,000 Las Vegas Sands, LLC. ......................... Ba3 BB 7.11% 05/23/14 10,627,400
6,093,118 Seminole Tribe of Florida (h) ................. NR(e) NR(e) 6.88% 03/05/14 5,920,481
906,884 Seminole Tribe of Florida (h) ................. NR(e) NR(e) 0.75% (i)-7.02% 03/05/14 881,188
Page 2 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2007 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED MARKET
VALUE DESCRIPTION (a) MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------- ---------------- --------------- ------------ --------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
CASINOS & GAMING - (CONTINUED)
$ 6,000,000 VML US Finance, LLC ........................... B1 BB- 7.61% 05/25/13 $ 5,794,284
2,142,857 WIMAR LANDCO, LLC ............................. B2 BB- 7.61% 07/03/08 2,091,071
5,696,824 WIMAR OPCO, LLC ............................... Ba3 BB- 7.61% 01/03/12 5,409,949
--------------
47,550,325
--------------
COMPUTER HARDWARE - 1.2%
5,762,698 Activant Solutions, Inc. ...................... B1 B+ 7.38% 05/02/13 5,373,717
--------------
CONSTRUCTION & ENGINEERING - 1.3%
6,000,000 Standard Pacific Corp. ........................ Ba3 BB 7.02% 05/05/13 5,569,998
--------------
CONSTRUCTION MATERIALS - 0.4%
1,836,984 John Maneely Co. .............................. B3 B+ 8.61% 12/08/13 1,643,335
--------------
DISTRIBUTORS - 0.1%
497,500 McJunkin Corp. ................................ B2 B+ 7.82% 01/31/14 483,197
--------------
DIVERSIFIED CHEMICALS - 4.0%
3,000,000 Brenntag Holding GmbH &
Company KG (g) ............................. Caa1 CCC+ 9.39% 01/18/14 2,887,500
5,625,454 Brenntag Holding GmbH &
Company KG ................................. B1 B+ 7.39% 12/23/13 5,400,437
1,374,545 Brenntag Holding GmbH &
Company KG ................................. B1 B+ 7.39% 01/18/14 1,319,564
5,626,134 Huntsman International, LLC ................... Ba1 BB+ 7.25% 04/19/14 5,505,409
2,475,000 Lyondell Chemical Company ..................... Ba2 BB+ 6.84%-6.86% 08/16/13 2,440,969
--------------
17,553,879
--------------
DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES - 3.3%
990,000 Acosta, Inc. .................................. NR(e) NR(e) 7.82% 07/28/13 949,162
983,792 Advantage Sales &
Marketing, Inc. ............................ NR(e) NR(e) 7.36%-7.51% 03/29/13 933,372
2,390,919 Affinion Group, Inc. .......................... Ba2 BB 8.00%-8.01% 10/17/12 2,311,223
7,000,000 Clarke American Corp. ......................... B1 BB- 7.86% 04/04/14 6,387,500
981,955 N.E.W. Holdings I, LLC ........................ NR(e) NR(e) 7.86%-8.01% 05/22/14 900,943
1,488,750 RSC Equipment Rental .......................... Ba2 BB 7.11% 11/30/12 1,421,756
1,591,681 RSC Equipment Rental (g) ...................... B3 B- 8.86% 11/30/13 1,539,952
--------------
14,443,908
--------------
DIVERSIFIED METALS & MINING - 0.7%
2,955,000 Alpha Natural Resources, LLC .................. B1 BB- 7.11% 10/26/12 2,899,594
--------------
EDUCATION SERVICES - 1.3%
1,980,000 Education Management, LLC ..................... B2 B+ 7.13% 06/01/13 1,878,800
4,062,292 PRO-QUEST-CSA, LLC ............................ NR NR 8.33%-8.51% 02/09/14 4,031,824
--------------
5,910,624
--------------
ELECTRIC UTILITIES - 6.4%
1,000,000 Astoria Generating Company
Acquisitions, LLC (g) ...................... B3 B 9.11% 08/23/13 979,167
2,992,500 Calpine Corp. (f) (o) ......................... NR(e) NR(e) 7.61% 03/29/09 2,893,107
See Notes to Quarterly Portfolio of Investments Page 3
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2007 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED MARKET
VALUE DESCRIPTION (a) MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------- ---------------- --------------- ------------ --------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
ELECTRIC UTILITIES - (CONTINUED)
$ 278,715 Cogentrix Delaware
Holdings, Inc. ............................. Ba2 BB+ 6.86% 04/14/12 $ 270,354
7,986,598 Covanta Energy Corp. .......................... Ba2 BB 6.86%-6.88% 02/09/14 7,637,184
797,576 Mirant North America, LLC ..................... Ba3 BB- 7.42% 01/03/13 775,310
12,977,017 NRG Energy, Inc. .............................. Ba1 BB 7.01%-7.11% 02/01/13 12,467,203
2,082,913 Riverside Energy Center, LLC .................. B1 B 9.82% 06/24/11 2,065,556
1,449,116 Rocky Mountain Energy
Center, LLC ................................ B1 B 9.92% 06/24/11 1,437,041
--------------
28,524,922
--------------
ENVIRONMENTAL & FACILITIES SERVICES - 1.4%
6,605,247 EnergySolutions, LLC .......................... NR(e) NR(e) 7.66%-7.84% 06/07/13 6,316,266
--------------
FOOD DISTRIBUTORS - 0.8%
847,826 B&G Foods, Inc. ............................... Ba2 BB- 7.51% 02/23/13 830,869
864,167 Birds Eye Foods ............................... NR(e) NR(e) 7.11% 03/22/13 841,482
1,995,000 Dean Foods Co. ................................ Ba3 BB+ 6.86% 04/02/14 1,931,908
--------------
3,604,259
--------------
FOOD RETAIL - 2.1%
9,739,975 SUPERVALU, Inc. ............................... Ba3 BB- 6.86% 06/02/12 9,469,087
--------------
FOREST PRODUCTS - 3.8%
14,051,099 Georgia-Pacific Corp. ......................... Ba2 BB+ 7.11%-7.26% 12/20/12 13,425,557
3,413,403 Georgia-Pacific Corp. ......................... Ba2 BB+ 7.11% 12/29/12 3,261,442
--------------
16,686,999
--------------
HEALTH CARE EQUIPMENT - 1.5%
6,000,000 Biomet, Inc. .................................. B1 BB- 0.50% 12/04/14 5,748,750
992,500 ReAble Therapeutics
Finance, LLC ............................... Ba3 B+ 7.82%-7.86% 11/03/13 967,687
--------------
6,716,437
--------------
HEALTH CARE FACILITIES - 4.1%
4,985,000 HCA, Inc. ..................................... Ba3 BB 7.61% 11/17/13 4,794,558
6,982,500 Health Management
Associates, Inc. ........................... Ba2 BB- 7.11% 02/28/14 6,548,279
511,777 Lifepoint Hospitals, Inc. ..................... Ba2 BB 7.17% 04/15/12 493,331
5,884,971 Select Medical Corp. .......................... Ba2 BB- 7.36%-9.25% 02/24/12 5,553,941
836,613 USP Domestic Holdings, Inc. ................... Ba3 B 7.38% 04/19/14 781,187
161,291 USP Domestic Holdings, Inc. (h) ............... Ba3 B 1.25% (i)-7.43% 04/19/14 150,605
--------------
18,321,901
--------------
HEALTH CARE SERVICES - 9.5%
12,664,733 CHS/Community Health
Systems, Inc. .............................. Ba3 BB 7.76% 07/25/14 12,145,833
835,267 CHS/Community Health
Systems, Inc. (h) .......................... Ba3 BB 0.50% (i) 07/25/14 801,044
10,611,968 DaVita, Inc. .................................. Ba1 BB+ 6.86%-7.01% 10/05/12 10,267,080
830,000 DJ Orthopedics, LLC ........................... Ba3 BB 6.88%-7.13% 04/07/13 819,625
Page 4 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2007 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED MARKET
VALUE DESCRIPTION (a) MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------- ---------------- --------------- ------------ --------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
HEALTH CARE SERVICES - (CONTINUED)
$ 8,134,335 Fresenius Medical Care AG ..................... Ba1 BBB- 6.74%-6.89% 03/31/13 $ 7,860,257
928,572 HealthCare Partners, LLC ...................... Ba3 BB 7.13% 10/31/13 865,893
1,990,000 Healthways, Inc. .............................. Ba2 BB 6.86% 12/01/13 1,950,200
1,481,250 Quintiles Transnational Corp. ................. B1 BB 7.36% 03/31/13 1,407,188
6,359,876 U.S. Oncology Holdings, Inc. .................. Ba1 BB 7.61% 08/20/11 6,137,279
--------------
42,254,399
--------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 2.0%
797,500 Broadway Gen Funding, LLC ..................... B1 BB- 7.36% 05/01/14 755,631
4,500,000 Dynegy Holdings, Inc. ......................... Ba1 BB- 7.01% 04/12/13 4,270,500
4,000,000 NRG Holdings, Inc. (h) ........................ B2 B- 0.50% (i) 06/08/14 3,855,000
--------------
8,881,131
--------------
INDUSTRIAL CONGLOMERATES - 0.1%
566,434 Mueller Water Products, Inc. .................. Ba3 BB+ 7.11%-7.32% 05/24/14 550,386
--------------
INDUSTRIAL MACHINERY - 0.5%
1,500,000 Edwards (Cayman Islands II)
Limited .................................... B1 BB- 7.54% 05/31/14 1,372,500
470,000 Invensys International Holdings
Ltd./BTR Dunlop Finance Inc. ............... Ba3 B+ 7.36% 12/15/10 458,250
530,000 Invensys International Holdings
Ltd./BTR Dunlop Finance Inc. ............... Ba3 B+ 7.36% 01/15/11 517,413
--------------
2,348,163
--------------
INSURANCE BROKER - 0.2%
816,993 HUB International
Holdings, Inc. ............................. B2 B 7.86% 06/13/14 781,250
183,006 HUB International
Holdings, Inc. (h) ......................... B2 B 1.38% (i)-8.01% 06/13/14 175,000
--------------
956,250
--------------
INTERNET RETAIL - 0.5%
2,429,519 Sabre Holdings Corp. .......................... B1 B+ 7.36% 09/30/14 2,246,394
--------------
INTERNET SOFTWARE & SERVICES - 2.8%
3,000,000 Cellnet Technology, Inc. (g) .................. NR(e) NR 9.62% 10/22/11 2,902,500
1,060,901 Open Solutions, Inc. .......................... Ba3 BB- 7.63% 01/23/14 986,638
8,828,044 SunGard Data Systems, Inc. .................... Ba3 BB 7.36% 02/28/14 8,530,098
--------------
12,419,236
--------------
INVESTMENT BANKING & BROKERAGE - 1.6%
1,534,394 Ameritrade Holding Corp. ...................... Ba1 BB 7.07% 12/31/12 1,490,664
5,811,127 NASDAQ Stock Market
(The), Inc. ................................ Ba3 BBB- 7.32% 04/18/12 5,726,382
--------------
7,217,046
--------------
See Notes to Quarterly Portfolio of Investments Page 5
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2007 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED MARKET
VALUE DESCRIPTION (a) MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------- ---------------- --------------- ------------ --------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
IT CONSULTING & OTHER SERVICES - 4.8%
$ 3,307,630 Alion Science and
Technology Corp. ........................... Ba3 BB- 7.82%-7.86% 02/06/13 $ 3,142,248
728,333 Apptis (DE), Inc. ............................. Ba3 B+ 8.61%-10.50% 12/20/12 701,021
7,895,967 DynCorp International, LLC .................... Ba2 BB 7.38% 06/28/12 7,501,169
987,500 iPayment, Inc. ................................ NR(e) NR(e) 7.36%-7.59% 05/10/13 928,250
989,744 National Processing Company
Group, Inc. ................................ B2 B+ 8.32%-10.25% 09/29/13 957,578
973,460 Sitel, LLC .................................... B2 BB- 7.86%-8.07% 01/30/14 934,521
5,940,224 West Corp. .................................... B1 B+ 7.74%-7.88% 10/24/13 5,729,839
1,312,814 Wyle Laboratories, Inc. ....................... NR(e) B+ 8.11% 01/28/11 1,247,173
--------------
21,141,799
--------------
LEISURE FACILITIES - 1.8%
4,455,000 Cedar Fair, L.P. .............................. Ba3 BB 7.57% 08/30/12 4,313,924
992,462 London Area and Waterfront
Finance, LLC ............................... NR(e) NR(e) 7.86% 03/08/12 962,688
2,000,000 Six Flags, Inc. ............................... Ba3 B+ 7.75% 04/30/15 1,861,428
997,500 Town Sports International, LLC ................ Ba2 BB 7.38% 02/27/14 917,700
--------------
8,055,740
--------------
LIFE & HEALTH INSURANCE - 1.1%
3,970,000 Conseco, Inc. ................................. Ba3 B+ 7.51% 10/10/13 3,692,100
1,360,641 Multiplan Merger Corp. ........................ B1 B+ 8.07%-8.11% 04/12/13 1,311,317
--------------
5,003,417
--------------
MANAGED HEALTH CARE - 1.3%
3,039,126 IASIS Healthcare Corp. ........................ Ba2 B+ 7.36%-7.62% 03/15/14 2,835,884
953,896 IASIS Healthcare Corp. (h) .................... Ba2 B+ 1.00% (i)-7.36% 03/15/14 890,104
1,950,522 Vanguard Health Systems, Inc. ................. Ba3 B+ 7.61% 09/23/11 1,865,187
--------------
5,591,175
--------------
METAL & GLASS CONTAINERS - 1.8%
854,852 Captive Plastics, Inc. ........................ NR(e) NR(e) 8.11% 08/16/11 816,384
7,331,250 Owens-Illinois Group, Inc. .................... Ba2 BB 6.86% 06/14/13 7,028,836
--------------
7,845,220
--------------
MOVIES & ENTERTAINMENT - 5.0%
4,826,500 AMC Entertainment, Inc. ....................... Ba1 BB- 7.32% 01/26/13 4,609,307
1,412,008 Deluxe Entertainment Services
Group, Inc. ................................ B1 B 7.61% 05/11/13 1,341,407
5,000,000 Discovery Communications
Holding, LLC ............................... NR(e) NR 7.36% 05/14/14 4,854,165
2,000,000 National CineMedia, LLC ....................... B1 B+ 7.11% 02/13/15 1,880,000
9,650,618 WMG Acquisition Corp. ......................... Ba2 BB- 7.36%-7.54% 03/01/11 9,433,481
--------------
22,118,360
--------------
MULTI - UTILITIES - 0.4%
1,998,435 KGEN, LLC ..................................... Ba3 BB 7.13% 02/08/14 1,898,514
--------------
Page 6 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2007 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED MARKET
VALUE DESCRIPTION (a) MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------- ---------------- --------------- ------------ --------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
OFFICE SERVICES & SUPPLIES - 1.2%
$ 2,925,397 Emdeon Business Services, LLC B1 BB- 7.61% 11/16/13 $ 2,793,754
1,050,147 Pike Electric, Inc. ........................... NR(e) NR(e) 7.13% 04/18/10 1,010,767
1,475,882 Pike Electric, Inc. ........................... NR(e) NR(e) 6.88% 07/01/12 1,420,537
--------------
5,225,058
--------------
OIL & GAS EQUIPMENT & SERVICES - 1.5%
6,901,210 Targa Resources, Inc. ......................... Ba3 B+ 7.35%-7.54% 10/31/12 6,648,163
--------------
OIL & GAS EXPLORATION & PRODUCTION - 3.1%
8,361,992 ATP Oil & Gas Corp. ........................... NR NR 8.82%-8.89% 04/14/10 8,213,048
4,365,298 Plains Resources, Inc. ........................ Ba2 BB 6.95% 08/12/11 4,234,339
1,404,484 SemCrude, L.P. ................................ Ba2 B+ 7.11% 05/08/12 1,365,861
--------------
13,813,248
--------------
OIL & GAS REFINING, MARKETING & TRANSPORTATION - 4.5%
989,999 Alon USA, Inc. ................................ B1 BB 7.61%-7.82% 06/22/13 945,449
223,333 Calumet Lubricants
Company, L.P................................ B1 BB- 8.71%-8.86% 12/09/12 216,633
6,890,593 Eagle Rock Gas Gathering &
Processing, Ltd. ........................... NR NR 8.11% 12/03/12 6,718,328
3,000,000 El Paso Corp. ................................. Ba3 B+ 7.12% 07/31/11 2,938,125
4,000,000 Energy Transfer Equity, L.P. .................. Ba2 NR 7.11% 02/08/12 3,875,000
5,571,429 Western Refining Company, L.P. ................ B1 BB+ 7.07% 05/30/14 5,292,857
--------------
19,986,392
--------------
OIL & GAS STORAGE & TRANSPORTATION - 0.8%
3,618,182 Kinder Morgan, Inc. ........................... Ba2 BB- 7.07%-7.12% 05/30/14 3,431,621
--------------
PACKAGED FOODS & MEATS - 1.9%
7,119,939 OSI Group, LLC ................................ NR(e) NR(e) 7.36% 09/02/11 6,852,941
574,549 THL Food Products Company ..................... Ba3 BB- 7.36% 11/21/10 551,567
995,000 Weight Watchers
International, Inc. ........................ Ba1 BB+ 6.88% 01/26/14 976,759
--------------
8,381,267
--------------
PAPER PACKAGING - 1.5%
496,936 Boise Cascade, LLC ............................ Ba2 BB+ 6.88%-7.09% 04/30/14 477,369
1,745,624 Graham Packaging Holdings
Company .................................... B1 B+ 7.63% 10/07/11 1,696,167
1,000,000 Graphic Packaging
International, Inc. ........................ Ba2 BB- 7.36%-7.51% 05/16/14 984,582
1,965,000 Pregis Corp. .................................. Ba2 BB- 7.61% 10/12/12 1,969,913
1,496,250 Tegrant Corp. ................................. NR NR 8.11% 03/08/14 1,406,475
--------------
6,534,506
--------------
PAPER PRODUCTS - 0.6%
2,700,000 Domtar Corp. .................................. Ba1 BB+ 6.93% 03/07/14 2,582,550
--------------
See Notes to Quarterly Portfolio of Investments Page 7
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2007 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED MARKET
VALUE DESCRIPTION (a) MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------- ---------------- --------------- ------------ --------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
PHARMACEUTICALS - 3.3%
$ 4,000,000 Cardinal Health 409, Inc. ..................... Ba3 BB- 7.61% 04/10/14 $ 3,650,000
1,983,333 Graceway Pharmaceuticals, LLC Ba3 BB 8.11% 05/03/12 1,861,027
8,478,750 Royalty Pharma Finance Trust .................. Baa2 BBB- 6.84% 04/16/13 8,340,970
563,780 Steifel Laboratories, Inc. .................... Ba3 B+ 7.61% 12/28/13 546,162
431,220 Stiefel Laboratories, Inc. (h) ................ Ba3 B+ 7.61% 12/28/13 417,744
--------------
14,815,903
--------------
PUBLISHING - 10.0%
4,000,000 CBD Media, LLC ................................ Ba3 B 8.07% 12/31/09 3,910,000
182,302 Cenveo Corp. (h) .............................. Ba3 BB- 7.11% 06/21/13 173,642
5,369,302 Cenveo Corp. .................................. Ba3 BB- 7.11% 06/21/13 5,114,260
675,931 Dex Media West, Inc. .......................... Ba1 BB+ 7.08%-7.09% 03/09/10 659,031
4,005,435 Gatehouse Media, Inc. ......................... B1 BB- 7.51% 08/28/14 3,624,918
1,494,565 Gatehouse Media, Inc. (h) ..................... B1 BB- 7.36%-7.51% 08/28/14 1,352,582
9,950,000 Idearc, Inc. .................................. Ba2 BBB- 7.36% 11/17/14 9,615,322
3,945,061 Media News Group, Inc. ........................ Ba2 BB- 6.59% 12/30/10 3,728,083
1,980,000 Media News Group, Inc. ........................ Ba2 BB- 7.09% 08/02/13 1,888,425
997,500 Reader's Digest Association
(The), Inc. ................................ B1 B+ 7.35%-7.38% 03/02/14 922,687
6,376,656 RH Donnelley, Inc. ............................ Ba1 BB 6.86%-7.05% 06/30/11 6,155,041
3,492,474 Riverdeep Interactive Learning
USA, Inc. .................................. B1 B 8.11% 12/20/13 3,417,386
1,717,147 WCP Exposition Services
Operating Company, LLC ..................... NR NR 8.86% 08/29/11 1,674,218
952,500 Wenner Media, LLC ............................. NR(e) NR(e) 7.11% 10/02/13 914,400
1,000,000 Yell Group PLC ................................ Ba3 BB- 7.57% 10/27/12 967,188
--------------
44,117,183
--------------
RAILROADS - 0.3%
1,500,000 Railamerica Transportation Corp. NR NR 7.81% 08/14/08 1,451,250
--------------
REAL ESTATE MANAGEMENT & DEVELOPMENT - 2.2%
2,125,000 LNR Property Corp. ............................ B2 B+ 8.11% 07/12/09 2,018,750
4,500,000 LNR Property Corp. ............................ B2 B+ 8.11% 07/12/11 4,357,499
994,962 Mattamy Funding Partnership ................... NR(e) NR(e) 7.81% 04/11/13 960,139
1,488,750 Shea Capital I, LLC ........................... NR(e) NR(e) 7.36% 10/27/11 1,339,875
1,000,000 Tishman Speyer Real Estate
D.C. Area Portfolio, L.P. .................. Ba2 BB- 7.08% 12/27/12 960,000
--------------
9,636,263
--------------
RETAIL REITS - 2.1%
6,046,709 Capital Automotive, L.P. ...................... Ba1 BB+ 7.07% 12/16/10 5,865,308
1,394,737 General Growth Properties, Inc. ............... Ba2 BB+ 6.58% 02/24/10 1,356,963
2,000,000 Macerich Partnership (The), L.P. .............. NR(e) NR(e) 6.88% 04/26/10 1,930,000
--------------
9,152,271
--------------
SEMICONDUCTORS - 1.8%
8,457,500 Freescale Semiconductors, Inc. ................ Baa3 BB+ 7.11% 12/01/13 7,891,423
--------------
Page 8 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2007 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED MARKET
VALUE DESCRIPTION (a) MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------- ---------------- --------------- ------------ --------------
SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) - (CONTINUED)
SPECIALIZED CONSUMER SERVICES - 1.5%
$ 1,487,949 Coinstar, Inc. ................................ Ba3 BB- 7.36% 07/01/11 $ 1,458,190
5,409,216 RMK Acquisition Corporation ................... Ba3 BB- 7.36% 01/26/14 5,205,019
--------------
6,663,209
--------------
SPECIALIZED FINANCE - 1.8%
3,000,000 J.G. Wentworth, LLC ........................... B2 B+ 7.61% 04/04/14 2,782,500
5,431,250 Peach Holdings, Inc. .......................... B2 B 9.11% 11/21/13 5,295,469
--------------
8,077,969
--------------
SPECIALTY CHEMICALS - 1.2%
5,491,250 Celanese Holdings, LLC ........................ Ba3 BB 7.07%-7.11% 04/02/14 5,288,760
--------------
SPECIALTY STORES - 2.4%
1,209,688 Dollarama Group L.P. .......................... Ba1 BB- 7.11% 11/18/11 1,179,445
4,565,919 Harbor Freight Tools USA, Inc. ................ NR(e) NR(e) 7.61% 02/12/13 4,360,453
1,994,975 Michael Stores, Inc. .......................... B2 B 7.63%-7.69% 10/31/13 1,875,989
3,491,250 Yankee Candle Company ......................... Ba3 BB- 7.36% 02/06/14 3,347,236
(The), Inc.
--------------
10,763,123
--------------
SYSTEM SOFTWARE - 0.4%
1,939,018 Intergraph Corp. .............................. B1 B 7.03%-7.51% 05/29/14 1,854,186
--------------
TECHNOLOGY DISTRIBUTORS - 1.6%
3,266,666 H3C Holdings Limited .......................... NR(e) NR(e) 8.37% 09/28/12 2,972,666
4,554,000 Sensata Technologies Finance
Company, LLC ............................... NR(e) NR(e) 7.09%-7.11% 04/27/13 4,333,892
--------------
7,306,558
--------------
TRUCKING - 2.5%
3,378,033 Hertz (The) Corp. ............................. Ba1 BB+ 7.08%-7.11% 12/21/12 3,273,075
6,965,000 OshKosh Truck Corp. ........................... Ba3 BBB- 7.11% 12/06/13 6,679,874
1,325,581 Swift Transportation .......................... B1 BB- 8.38% 05/10/14 1,171,758
--------------
11,124,707
--------------
WIRELESS TELECOMMUNICATION SERVICES - 2.9%
997,500 American Cellular Corp. ....................... B1 B- 7.36% 03/15/14 986,777
1,000,000 Asurion Corp. ................................. NR(e) NR(e) 8.36% 07/03/14 934,167
1,241,400 Clearwire Corp. (h) ........................... NR NR 11.62% 07/03/12 1,221,227
758,600 Clearwire Corp. ............................... NR NR 11.33% 07/03/12 746,273
1,496,250 Crown Castle Operating
Company .................................... Ba3 BB+ 6.82%-6.84% 01/09/14 1,421,437
4,750,000 Intelsat (Bermuda), Ltd. (k) .................. B2 B 7.86% 02/01/14 4,607,500
2,800,000 Windstream Corp. .............................. Baa3 BBB- 6.86% 07/17/13 2,720,200
--------------
12,637,581
--------------
TOTAL SENIOR FLOATING-RATE TERM LOAN INTERESTS (d) .............................................. 699,393,974
(Cost $731,367,295 --------------
See Notes to Quarterly Portfolio of Investments Page 9
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2007 (UNAUDITED)
PRINCIPAL RATINGS (b) STATED MARKET
VALUE DESCRIPTION (a) MOODY'S S&P COUPON MATURITY (c) VALUE
------------ ----------------------------------------------- ---------------- --------------- ------------ --------------
SENIOR FLOATING RATE NOTES - 1.5%
BROADCASTING & CABLE TV - 1.1%
$ 5,000,000 Paxson Communications Corp. (l) ............... B1 CCC+ 8.61% 01/15/12 $ 4,931,250
--------------
ELECTRICAL COMPONENTS & EQUIPMENT - 0.1%
650,000 NXP B.V. ...................................... Ba2 BB+ 8.11% 10/15/13 589,063
--------------
LEISURE FACILITIES - 0.3%
1,225,000 HRP Myrtle Beach (l) .......................... B2 B+ 10.07% 04/01/12 1,163,750
--------------
TOTAL SENIOR FLOATING RATE NOTES ................................................................ 6,684,063
(Cost $6,877,250) --------------
NOTE - 0.1%
HOMEBUILDING - 0.1%
727,273 TOUSA, Inc. (j) (l) ........................... NR NR 14.75% 01/15/15 436,364
--------------
TOTAL NOTE ...................................................................................... 436,364
(Cost $727,273) --------------
SHARES
------------
PREFERRED STOCK - 0.6%
HOMEBUILDING - 0.6%
4,273 TOUSA, Inc. (8.0% Series A Convertible Payment-in-Kind Preferred Stock (l) ........................ 2,563,636
--------------
TOTAL PREFERRED STOCK ............................................................................. 2,563,636
(Cost $4,272,727) --------------
COMMON STOCKS AND RIGHTS - 0.0%
PACKAGED FOODS AND MEATS - 0.0%
690 Atkins Nutritionals Holdings - Common Stock ....................................................... 0
690 Atkins Nutritionals Holdings - Rights ............................................................. 0
--------------
TOTAL COMMON STOCKS AND RIGHTS .................................................................... 0
(Cost $36,259) --------------
CLOSED-END FUND - 0.2%
ASSET MANAGEMENT & CUSTODY BANKS - 0.2%
113,300 ING Prime Rate Trust .............................................................................. 747,780
--------------
TOTAL CLOSED-END FUND ............................................................................. 747,780
(Cost $711,030) --------------
PRINCIPAL
VALUE
------------
REPURCHASE AGREEMENT - 3.4%
$ 15,100,000 Agreement with Deutsche Bank, 5.15% dated 8/31/07, to be repurchased at
$15,108,641 on 9/04/07, collateralized by $15,402,000 Federal Home Loan
Mortgage Corp., 6.125% due 5/23/16 (Cost $15,100,000) .......................................... 15,100,000
--------------
Page 10 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2007 (UNAUDITED)
MARKET
VALUE
--------------
TOTAL INVESTMENTS - 163.5% ........................................................................ $ 724,925,817
(Cost $759,091,834) (m)
NET OTHER ASSETS AND LIABILITIES - (2.4)% ......................................................... (10,524,129)
LOAN OUTSTANDING - (38.6)% ........................................................................ (171,000,000)
AUCTION MARKET PREFERRED SHARES, AT LIQUIDATION VALUE - (22.5)% ................................... (100,000,000)
--------------
NET ASSETS APPLICABLE TO COMMON SHARES - 100.0% ................................................... $ 443,401,688
==============
----------
(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. Prepayments of Senior Loans may occur because of the
mandatory prepayment conditions or 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 18-30 months.
(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 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.
(e) This Senior Loan Interest was privately rated upon issuance. The
rating agency does not provide ongoing surveillance on the rating.
(f) This Senior Loan Interest was purchased subsequent to the borrower's
filing for protection in federal bankruptcy court and has priority
over other debt holders.
(g) This issue is secured by a second lien on the issuer's assets.
(h) Delayed Draw Loan (See Note 1E)
(i) Represents commitment fee rate on delayed draw loans.
(j) 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)
a combination thereof. Interest is paid semi-annually and the first
interest payment date is January 15, 2008.
(k) This issue is unsecured.
(l) Securities are 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 be resold
in transactions exempt from registration. (See Note 1F).
(m) Aggregate cost for federal income tax and financial reporting
purposes.
(n) Revolving Credit Agreement
(o) Debtor-In-Possession Loan
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 August 31, 2007 (See Note 1B):
UNREALIZED
REFERENCE BUY/SELL NOTIONAL (PAY)/RECEIVE EXPIRATION APPRECIATION/
ENTITY PROTECTION COUNTERPARTY AMOUNT FIXED RATE DATE (DEPRECIATION)
---------------- ---------- ------------ ----------- ------------- ---------- --------------
B&G Fooods, Inc. Sell Lehman $ 2,250,000 1.27% 06/20/12 $ (25,835)
Dresser, Inc. Sell Lehman 4,000,000 1.65% 06/20/12 (85,400)
----------- ---------
$ 6,250,000 $(111,235)
=========== =========
See Notes to Quarterly Portfolio of Investments Page 11
--------------------------------------------------------------------------------
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS (UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
AUGUST 31, 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 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.
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.
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
Page 12
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NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (UNAUDITED) (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
AUGUST 31, 2007
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 cash and/or cash
equivalents for the full notional amount of the credit default swap contracts of
which it is a seller. The Fund may only 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
reference 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 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.
D. SECURITIES TRANSACTIONS:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on an 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 August 31, 2007, 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 $12,134,524 as of August 31, 2007. The Fund is obligated to fund
these loan commitments at the borrower's discretion.
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 currently holds
restricted securities 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 (See 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.
Page 13
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NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (UNAUDITED) (CONTINUED)
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FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
AUGUST 31, 2007
CARRYING
VALUE MARKET
ACQUISITION PRINCIPAL PER SHARE CURRENT VALUE % OF
SECURITY DATE VALUE 08/31/07 CARRYING COST 08/31/07 NET ASSETS
------------- ----------- ------------ --------- ------------- ----------- ----------
HRP Myrtle Beach 03/23/06 $ 1,225,000 $ 95.00 $ 1,225,000 $ 1,163,750 0.26%
Paxson Communications Corp. 12/19/05 5,000,000 98.63 5,000,000 4,931,250 1.11
TOUSA, Inc. - Note 07/31/07 727,273 100.00 727,273 436,364 0.10
TOUSA, Inc. - Preferred Stock 07/31/07 4,272,727 100.00 4,272,727 2,563,636 0.58
------------ ------------- ----------- ----------
$ 11,225,000 $ 11,225,000 $ 9,095,000 2.05%
============ ============= =========== ==========
2. UNREALIZED APPRECIATION/(DEPRECIATION)
As of August 31, 2007, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $38,908 and
the aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over value was $34,204,925.
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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
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By (Signature and Title)* /s/ James A. Bowen
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James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date October 23, 2007
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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 October 23, 2007
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By (Signature and Title)* /s/ Mark R. Bradley
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Mark R. Bradley, Treasurer, Controller,
Chief Financial Officer and Chief Accounting Officer
(principal financial officer)
Date October 26, 2007
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* Print the name and title of each signing officer under his or her signature.