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
Date of fiscal year end: MAY 31
Date of reporting period: AUGUST 31, 2006
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
AUGUST 31, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - 152.0%
AEROSPACE & DEFENSE - 6.0%
AEROSPACE & DEFENSE - 6.0%
$ 3,623,537 GenCorp Inc. ...................... B1 BB- 8.58%-8.65% 12/06/10 $ 3,639,390
3,280,584 Hexcel Corp. ...................... B2 B+ 7.06%-7.25% 3/01/12 3,280,584
2,902,078 Hunter Defense Holdings, Inc. ..... NR(a) NR(a) 8.38%-10.00% 3/10/11 2,909,333
1,881,357 K&F Industries, Inc. .............. B2 B+ 7.33% 11/18/12 1,883,122
990,000 Mid-Western Aircraft Systems, Inc. B1 BB- 7.75% 12/31/11 993,960
2,732,484 MRO Acquisition Corp. ............. B1 B+ 7.90% 8/27/10 2,746,146
5,835,165 Robertson Aviation, LLC. .......... NR(a) NR(a) 8.83%-9.12% 4/19/13 5,864,341
4,230,769 Standard Aero Holdings, Inc. ...... B2 B+ 7.58%-7.61% 8/24/12 4,228,125
3,100,000 Vought Aircraft Industries, Inc. .. B1 B+ 7.83% 12/22/10 3,123,250
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TOTAL AEROSPACE & DEFENSE 28,668,251
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AUTO COMPONENTS - 1.8%
AUTO PARTS & EQUIPMENT - 1.8%
5,000,000 Axletech International Holdings,
Inc. (c) ....................... Caa1 B- 12.01% 4/21/13 5,027,085
3,410,095 TRW Automotive Inc. ............... Ba2 BB+ 7.19% 6/30/12 3,403,466
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TOTAL AUTO COMPONENTS 8,430,551
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BEVERAGES - 0.2%
SOFT DRINKS - 0.2%
803,953 Culligan Corp. .................... B1 B+ 7.33% 9/30/11 803,451
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TOTAL BEVERAGES 803,451
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BUILDING PRODUCTS - 2.8%
BUILDING PRODUCTS - 2.8%
1,733,567 Custom Building Products .......... NR(a) NR(a) 7.75% 10/20/11 1,737,901
2,271,275 Headwaters, Inc. .................. Ba3 BB- 7.33%-7.50% 4/30/11 2,278,846
4,934,235 NCI Building Systems, Inc. ........ Ba2 BB 6.71% 6/18/10 4,928,067
3,422,980 PGT Industries, Inc. .............. NR(a) NR(a) 8.41% 2/14/12 3,435,816
1,000,000 South Edge, LLC ................... NR(a) NR(a) 7.33% 10/31/09 999,583
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TOTAL BUILDING PRODUCTS 13,380,213
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CAPITAL MARKETS - 2.3%
ASSET MANAGEMENT & CUSTODY BANKS - 0.9%
3,972,519 LPL Holdings, Inc. ................ B2 B 8.13%-8.75% 6/28/13 4,012,244
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INVESTMENT BANKING & BROKERAGE - 1.4%
1,958,636 Ameritrade Holding Corp. .......... Ba1 BB 6.90% 12/31/12 1,955,454
4,922,589 NASDAQ Stock Market (The), Inc. ... Ba3 BB+ 6.97%-7.25% 4/18/12 4,913,975
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6,869,429
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TOTAL CAPITAL MARKETS 10,881,673
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CHEMICALS - 4.1%
COMMODITY CHEMICALS - 0.2%
506,075 Basell USA, Inc. .................. Ba3 B+ 7.73% 8/01/13 511,769
506,075 Basell USA, Inc. .................. Ba3 B+ 8.23% 8/01/14 511,769
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1,023,538
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See Notes to Quarterly Portfolio of Investments Page 1
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - CONTINUED
CHEMICALS - (CONTINUED)
DIVERSIFIED CHEMICALS - 3.9%
$ 5,000,000 BCP Crystal US Holdings Corp. ..... B1 BB- 7.49% 1/26/09 $ 5,031,250
3,000,000 Brenntag Holding GmbH &
Company KG (c) ................. B3 B- 12.08% 7/23/15 3,073,125
7,000,000 Brenntag Holding GmbH &
Company KG ..................... B2 B+ 8.08% 12/23/13 7,030,811
3,259,587 Huntsman International, LLC ....... Ba3 BB- 7.08% 8/16/12 3,248,892
--------------
18,384,078
--------------
TOTAL CHEMICALS 19,407,616
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COMMERCIAL SERVICES & SUPPLIES - 7.2%
DIVERSIFIED COMMERCIAL & PROFESSIONAL SERVICES - 5.0%
1,000,000 Acosta, Inc. ...................... NR(a) NR(a) 8.16% 7/28/13 1,008,750
997,500 Advantage Sales & Marketing Inc. .. NR(a) NR(a) 7.33%-7.46% 3/29/13 990,435
2,742,525 Affinion Group, Inc. .............. B1 B+ 8.08%-8.18% 10/17/12 2,756,238
1,965,909 Clarke American Corp. ............. B1 B+ 8.75%-8.87% 12/15/11 1,990,483
6,467,500 IAP Worldwide Services, Inc. ...... B2 B 8.50% 12/30/12 6,489,056
4,000,000 IAP Worldwide Services, Inc. (c) .. B3 CCC+ 13.50% 6/30/13 4,080,000
1,000,000 N.E.W. Customer Service
Companies, Inc. ............... NR(a) NR(a) TBA 8/04/13 1,005,000
2,000,000 N.E.W. Customer Service
Companies, Inc. (c) ........... NR(a) NR(a) TBA 2/04/14 2,020,000
500,000 TransFirst Holdings, Inc. (c) ..... Caa1 B- 11.57% 8/15/13 503,750
2,943,750 United Rentals, Inc. .............. B2 BB- 7.33% 2/14/11 2,946,379
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23,790,091
--------------
ENVIRONMENTAL & FACILITIES SERVICES - 1.5%
7,000,000 EnergySolutions, LLC .............. NR(a) NR(a) 7.58%-7.77% 6/07/13 7,039,375
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OFFICE SERVICES & SUPPLIES - 0.7%
3,548,366 Pike Electric, Inc. ............... NR(a) NR(a) 6.88%-6.94% 7/01/12 3,541,713
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TOTAL COMMERCIAL SERVICES & SUPPLIES 34,371,179
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COMPUTERS & PERIPHERALS - 1.3%
COMPUTER HARDWARE - 1.3%
6,175,000 Activant Solutions Holdings Inc. .. NR(a) NR(a) 7.44%-7.50% 5/02/13 6,082,375
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TOTAL COMPUTERS & PERIPHERALS 6,082,375
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CONSTRUCTION & ENGINEERING - 0.4%
CONSTRUCTION & ENGINEERING - 0.4%
2,000,000 Standard Pacific Corp. ............ Ba2 BB 6.93% 5/05/13 1,967,500
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TOTAL CONSTRUCTION & ENGINEERING 1,967,500
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CONTAINERS & PACKAGING - 4.7%
METAL & GLASS CONTAINERS - 1.8%
962,500 Captive Plastics, Inc. ............ NR(a) B- 8.50% 8/16/11 963,703
7,500,000 Owens-Illinois Group, Inc. ........ B1 BB- 7.08% 6/14/13 7,500,000
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8,463,703
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Page 2 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - CONTINUED
CONTAINERS & PACKAGING - (CONTINUED)
PAPER PACKAGING - 2.9%
$ 1,156,497 Boise Cascade, LLC ................ Ba3 BB 7.09%-7.25% 10/28/11 $ 1,160,374
4,760,916 Graham Packaging Holdings
Company ....................... B2 B 7.56%-7.88% 10/07/11 4,769,843
6,000,000 Graham Packaging Holdings
Company (c) ................... B3 CCC+ 9.75% 4/07/12 6,064,998
1,985,000 Pregis Corp. ...................... B1 B+ 7.75% 10/12/12 1,994,925
--------------
13,990,140
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TOTAL CONTAINERS & PACKAGING 22,453,843
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DIVERSIFIED CONSUMER SERVICES - 0.7%
EDUCATION SERVICES - 0.4%
2,000,000 Education Management LLC .......... B2 B 8.06% 6/01/13 2,008,126
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SPECIALIZED CONSUMER SERVICES - 0.3%
1,502,946 Coinstar, Inc. .................... Ba3 BB- 7.51% 7/01/11 1,508,582
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TOTAL DIVERSIFIED CONSUMER SERVICES 3,516,708
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DIVERSIFIED FINANCIAL SERVICES - 0.2%
SPECIALIZED FINANCE - 0.2%
1,000,000 J.G.Wentworth, LLC ................ B2 B 9.01% 4/12/11 1,008,750
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TOTAL DIVERSIFIED FINANCIAL SERVICES 1,008,750
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DIVERSIFIED TELECOMMUNICATION SERVICES - 0.4%
INTEGRATED TELECOMMUNICATION SERVICES - 0.4%
1,975,000 Telcordia Technologies, Inc. ...... B1 B+ 7.86%-7.90% 9/15/12 1,871,313
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TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 1,871,313
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ELECTRIC UTILITIES - 7.8%
ELECTRIC UTILITIES - 7.8%
1,000,000 Astoria Generating Company
Acquisitions, LLC (c) ......... B3 B 9.20% 8/23/13 1,009,750
328,344 Calpine Corp.,
(Debtor in Possession) (f) .... NR(a) NR(a) 0.75%-7.75% 12/20/07 329,576
829,787 Calpine Corp.,
(Debtor in Possession) (c) (f) NR(a) NR(a) 9.50% 12/20/07 839,122
353,886 Cogentrix Delaware Holdings, Inc. . Ba2 BB+ 7.00% 4/14/12 353,812
7,145,528 Covanta Energy Corp. .............. B1 B+ 7.58%-7.71% 6/24/12 7,184,235
1,919,192 LSP Gen Finance Co., LLC .......... Ba3 BB- 7.25% 5/04/13 1,911,995
80,808 LSP Gen Finance Co., LLC .......... Ba3 BB- 0.88%-7.08% 1/03/13 80,505
716,722 LSP-Kendall Energy, LLC ........... B1 B 7.50% 10/07/13 708,957
6,427,331 Midwest Generation, LLC ........... Ba2 BB- 7.24%-7.31% 4/27/11 6,427,331
995,000 Mirant North America, LLC ......... B1 BB- 7.08% 1/03/13 991,979
9,000,000 NRG Energy, Inc. .................. Ba2 BB- 7.50% 2/01/13 9,023,625
4,549,812 Plum Point Energy Associates, LLC . B1 B 8.62%-8.75% 3/14/14 4,566,873
2,126,125 Riverside Energy Center, LLC ...... B1 B 9.74% 6/24/11 2,179,278
1,638,827 Rocky Mountain Energy Center, LLC . B1 B 9.74%-9.84% 6/24/11 1,679,797
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TOTAL ELECTRIC UTILITIES 37,286,835
--------------
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, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - CONTINUED
ELECTRONIC EQUIPMENT & INSTRUMENTS - 1.4%
ELECTRONIC EQUIPMENT MANUFACTURERS - 0.4%
$ 1,907,017 VeriFone, Inc. .................... B1 BB- 7.24% 6/30/11 $ 1,904,633
--------------
TECHNOLOGY DISTRIBUTORS - 1.0%
4,600,000 Sensata Technologies Finance
Company, LLC .................. NR NR TBA 4/27/13 4,567,142
--------------
TOTAL ELECTRONIC EQUIPMENT & INSTRUMENTS 6,471,775
--------------
ENERGY EQUIPMENT & SERVICES - 2.1%
OIL & GAS EQUIPMENT & SERVICES - 2.1%
2,985,000 Key Energy Services, Inc. ......... NR NR 8.90%-9.23% 6/30/12 2,998,059
6,957,661 Targa Resources, Inc. ............. Ba3 B+ 7.58%-7.75% 10/31/12 6,978,737
--------------
TOTAL ENERGY EQUIPMENT & SERVICES 9,976,796
--------------
FOOD & STAPLES RETAILING - 3.8%
DRUG RETAIL - 0.7%
3,574,976 Jean Coutu Group (PJC) (The) Inc. . B2 BB- 8.00% 7/30/11 3,579,816
--------------
FOOD DISTRIBUTORS - 1.0%
1,955,000 Golden State Foods Corp. .......... B1 NR(a) 7.25% 2/25/11 1,950,113
2,914,286 Nash Finch Company ................ B1 B+ 7.63% 11/12/10 2,921,571
--------------
4,871,684
--------------
FOOD RETAIL - 2.1%
9,977,500 SUPERVALU, Inc. ................... Ba3 BB- 7.06% 6/02/12 9,960,039
--------------
TOTAL FOOD & STAPLES RETAILING 18,411,539
--------------
FOOD PRODUCTS - 6.2%
AGRICULTURAL PRODUCTS - 2.3%
997,500 Del Monte Corp. ................... Ba3 BB 7.00%-7.07% 2/08/12 997,707
8,984,128 Dole Food Company, Inc. ........... Ba3 B+ 7.38%-9.25% 4/12/13 8,845,620
995,000 Wm. Bolthouse Farms, Inc. ......... B2 B+ 7.81% 12/16/12 1,001,634
--------------
10,844,961
--------------
PACKAGED FOODS & MEATS - 3.9%
7,888,348 Keystone Foods Holdings, LLC ...... NR(a) NR(a) 7.13%-7.25% 6/16/11 7,893,278
8,849,887 OSI Group, LLC .................... NR(a) NR(a) 7.25% 9/02/11 8,827,762
1,995,000 THL Foods Products Company ........ B1 B+ 7.03%-7.55% 11/21/10 1,999,156
--------------
18,720,196
--------------
TOTAL FOOD PRODUCTS 29,565,157
--------------
HEALTH CARE EQUIPMENT & SUPPLIES - 0.4%
HEALTH CARE SUPPLIES - 0.4%
1,852,500 Angiotech Pharmaceuticals Inc. .... Ba3 BB- 6.83%-7.00% 3/23/13 1,823,555
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TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 1,823,555
--------------
HEALTH CARE PROVIDERS & SERVICES - 11.2%
HEALTH CARE FACILITIES - 1.6%
904,182 Lifepoint Hospitals, Inc. ......... Ba3 BB 7.13% 4/15/12 899,034
5,945,175 Select Medical Corp. .............. B1 BB- 7.08%-9.00% 2/24/12 5,846,307
1,000,000 USP Domestic Holdings Inc. ........ Ba2 BB- 7.12% 6/07/13 1,002,500
--------------
7,747,841
--------------
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, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - CONTINUED
HEALTH CARE PROVIDERS & SERVICES - (CONTINUED)
HEALTH CARE SERVICES - 8.3%
$ 8,875,251 CHS/Community Health Systems, Inc. Ba3 BB- 7.08%-7.15% 8/19/11 $ 8,866,935
4,276,225 DaVita Inc. ....................... B1 BB- 7.11%-7.69% 10/05/12 4,285,009
983,214 DJ Orthopedics, LLC ............... Ba3 BB- 6.88%-7.06% 4/07/13 978,913
6,982,500 Fresenius Medical Care AG ......... Ba2 BB+ 6.78%-6.87% 3/31/13 6,920,433
294,872 Matria Healthcare, Inc. ........... B1 BB- 7.65% 1/19/07 291,554
956,324 Multiplan Merger Corp. ............ B2 B+ 7.50% 4/12/13 949,948
1,770,115 Per-Se Technologies, Inc. ......... B1 B+ 7.68%-7.75% 1/06/13 1,774,540
1,496,250 Quintiles Transnational Corp. ..... B1 BB- 7.50% 3/31/13 1,493,913
2,985,000 Team Finance, LLC ................. B2 B+ 7.83%-7.90% 11/23/12 2,995,262
6,427,819 US Oncology Holdings, Inc. ........ Ba3 B+ 7.65%-7.88% 8/20/11 6,439,871
4,661,491 VWR International, Inc. ........... B2 B+ 7.77% 4/07/11 4,667,318
--------------
39,663,696
--------------
MANAGED HEALTH CARE - 1.3%
4,405,088 IASIS Healthcare Corp. ............ B1 B+ 7.73%-7.75% 6/22/11 4,423,444
1,970,150 Vanguard Health Systems, Inc. ..... B2 B 7.75%-7.87% 9/23/11 1,970,150
--------------
6,393,594
--------------
TOTAL HEALTH CARE PROVIDERS & SERVICES 53,805,131
--------------
HOTELS, RESTAURANTS & LEISURE - 11.7%
CASINOS & GAMING - 6.7%
5,880,000 Boyd Gaming Corp. ................. Ba2 BB 6.61%-7.00% 6/30/11 5,872,650
2,972,490 CCM Merger, Inc. .................. B1 B+ 7.24%-7.49% 10/21/12 2,957,627
3,154,632 Global Cash Access, Inc. .......... Ba3 B+ 7.08% 3/10/10 3,150,688
6,000,000 MGM Mirage ........................ Ba2 BB 6.28% 11/22/09 5,984,250
1,985,000 Penn National Gaming, Inc. ........ Ba2 BB 7.02%-7.25% 10/03/12 1,991,203
5,000,000 Pinnacle Entertainment, Inc. ...... B1 BB- 0.75% 12/14/11 4,993,750
1,000,000 Pinnacle Entertainment, Inc. ...... B1 BB- 7.33% 12/14/11 1,001,250
6,000,000 VML US Finance, LLC ............... B1 BB- 8.20% 5/25/13 5,985,936
--------------
31,937,354
--------------
HOTELS, RESORTS & CRUISE LINES - 2.2%
6,000,000 Kerzner International Ltd. ........ B3 B- 0.50%-8.39% 9/01/13 5,970,000
4,761,129 OpBiz, LLC ........................ B3 B- 6.76% 8/31/10 4,599,251
--------------
10,569,251
--------------
LEISURE FACILITIES - 2.4%
6,806,356 American Skiing Company ........... NR NR 9.75%-10.03% 11/24/10 6,823,372
4,500,000 Cedar Fair, L.P. .................. Ba3 BB- TBA 7/03/12 4,521,564
--------------
11,344,936
--------------
RESTAURANTS - 0.4%
2,000,000 QCE LLC (c) ....................... NR(a) NR(a) 11.25% 11/05/13 2,023,750
--------------
TOTAL HOTELS, RESTAURANTS & LEISURE 55,875,291
--------------
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, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - CONTINUED
HOUSEHOLD DURABLES - 2.7%
HOMEBUILDING - 2.3%
$ 2,038,576 Kyle Acquisition Group, LLC ....... NR(a) NR(a) 7.38% 7/20/08 $ 2,033,479
2,775,964 Kyle Acquisition Group, LLC ....... NR(a) NR(a) 7.38% 7/20/10 2,769,024
1,000,000 Technical Olympic USA, Inc. ....... NR(a) NR 8.25% 8/01/08 993,750
5,000,000 Technical Olympic USA, Inc.,
(Mezzanine Debt) (c) ........... NR(a) NR 10.75% 8/01/09 4,950,000
--------------
10,746,253
--------------
HOUSEWARES & SPECIALTIES - 0.4%
2,007,966 Jostens IH Corp. .................. B1 B+ 7.07% 10/04/11 2,014,994
--------------
TOTAL HOUSEHOLD DURABLES 12,761,247
--------------
INDUSTRIAL CONGLOMERATES - 0.7%
INDUSTRIAL CONGLOMERATES - 0.7%
2,653,929 Goodman Global Holdings, Inc. ..... B1 B+ 7.25% 12/23/11 2,641,490
757,853 Mueller Group, Inc. ............... B1 BB- 7.11%-7.62% 10/03/12 762,048
--------------
TOTAL INDUSTRIAL CONGLOMERATES 3,403,538
--------------
INSURANCE - 0.8%
LIFE & HEALTH INSURANCE - 0.8%
3,970,441 Conseco, Inc. ..................... Ba3 BB- 7.08% 6/22/10 3,970,441
--------------
TOTAL INSURANCE 3,970,441
--------------
INTERNET SOFTWARE & SERVICES - 1.9%
INTERNET SOFTWARE & SERVICES - 1.9%
8,917,444 SunGard Data Systems Inc. ......... B1 B+ 8.00% 2/11/13 8,975,567
--------------
TOTAL INTERNET SOFTWARE & SERVICES 8,975,567
--------------
IT SERVICES - 4.3%
DATA PROCESSING & OUTSOURCED SERVICES - 0.2%
987,500 Fidelity National Information
Solutions, Inc. & Fidelity
National Tax Service, Inc. ... Ba1 BB+ 6.58% 3/09/11 983,797
--------------
IT CONSULTING & OTHER SERVICES - 4.1%
3,104,762 Alion Science and Technology Corp. B1 B+ 8.25% 8/02/09 3,104,762
8,887,500 DynCorp International, LLC ........ Ba3 BB- 7.31%-7.81% 6/28/12 8,909,719
997,500 iPayment, Inc. .................... NR(a) NR(a) 7.58%-7.75% 5/10/13 996,253
1,946,667 Vertafore, Inc. ................... NR(a) NR(a) 7.83%-9.75% 1/31/12 1,950,317
3,125,000 Wyle Laboratories, Inc. (c) ....... NR(a) B- 11.97% 7/28/11 3,171,875
1,422,900 Wyle Laboratories, Inc. ........... NR(a) B+ 8.22% 1/28/11 1,428,236
--------------
19,561,162
--------------
TOTAL IT SERVICES 20,544,959
--------------
LEISURE EQUIPMENT & PRODUCTS - 0.7%
LEISURE PRODUCTS - 0.7%
3,491,250 Easton-Bell Sports, Inc. .......... B1 B+ 6.81%-7.08% 3/16/12 3,489,794
--------------
TOTAL LEISURE EQUIPMENT & PRODUCTS 3,489,794
--------------
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, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - CONTINUED
MACHINERY - 0.2%
INDUSTRIAL MACHINERY - 0.2%
$ 470,000 Invensys International Holdings Ltd.
/BTR Dunlop Finance, Inc. ......... Ba3 B- 7.45% 12/15/10 $ 471,469
530,000 Invensys International Holdings Ltd.
/BTR Dunlop Finance, Inc. ......... Ba3 B- 7.31% 1/15/11 531,656
--------------
TOTAL MACHINERY 1,003,125
--------------
MEDIA - 30.4%
ADVERTISING - 0.4%
2,031,906 Adams Outdoor Advertising, L.P. ... B1 B+ 7.15%-7.27% 10/18/12 2,033,811
--------------
BROADCASTING & CABLE TV - 18.3%
3,920,000 Bragg Communications, Inc. ........ NR(a) NR 7.33% 8/31/11 3,920,000
17,380,000 Century Cable Holdings LLC (g) .... NR NR 10.25% 6/30/09 16,846,191
3,000,000 Cequel Communications, LLC ........ B1 B+ 7.74% 12/05/13 2,976,963
3,000,000 Cequel Communications, LLC ........ NR NR 10.49% 5/05/14 2,988,750
12,983,858 Charter Communications
Operating, LLC ................ B2 B 8.13% 4/27/13 13,011,812
10,972,500 CSC Holdings, Inc. ................ Ba3 BB 6.99%-7.26% 3/29/13 10,908,146
1,000,000 Cumulus Media Inc. ................ Ba3 B 7.33%-7.63% 6/07/13 998,594
1,329,975 DIRECTV Holdings LLC .............. Ba1 BB 6.82% 4/13/13 1,329,698
3,491,250 LBI Media, Inc. ................... B1 B 6.76% 3/31/12 3,447,609
2,893,581 NEP Supershooters, L.P. ........... B1 NR(a) 9.00% 2/03/11 2,918,900
1,000,000 NextMedia Operating, Inc. (c) ..... B3 CCC+ 9.83% 11/15/13 1,002,083
2,000,000 NTL Investment Holdings Ltd. ...... Ba3 BB- TBA 12/21/12 2,007,500
7,000,000 PanAmSat Corp. .................... B1 BB 8.01% 12/03/13 7,042,658
1,500,000 Panavision, Inc. (c) .............. B3 CCC 12.49% 3/30/12 1,520,625
1,000,000 Paxson Communications Corp. ....... B2 CCC+ 8.76% 1/15/12 1,012,500
6,466,250 Raycom Media, Inc. ................ NR NR 7.00% 8/28/13 6,425,836
4,500,000 UPC Distribution Holding B.V. ..... B1 B 7.64% 12/31/13 4,489,952
4,500,000 UPC Distribution Holding B.V. ..... B1 B 7.64% 3/31/13 4,489,952
--------------
87,337,769
--------------
MOVIES & ENTERTAINMENT - 5.6%
4,875,500 AMC Entertainment, Inc. ........... Ba3 B+ 7.53% 1/26/13 4,899,877
1,577,363 Deluxe Entertainment Services
Group, Inc. .................... B1 B 9.25% 1/28/11 1,585,702
6,982,500 Metro-Goldwyn-Mayer Holdings
II, Inc. ...................... NR(a) NR(a) 8.75% 4/08/12 6,950,946
3,682,419 Regal Cinemas Corp. ............... Ba2 BB- 7.07%-7.25% 11/10/10 3,667,461
9,767,334 WMG Acquisition Corp. ............. Ba2 B+ 7.21%-7.51% 3/01/11 9,791,752
--------------
26,895,738
--------------
PUBLISHING - 6.1%
997,500 Caribe Information Investments Inc. B1 B 7.46%-7.66% 3/31/13 996,877
4,705,882 CBD Media, LLC .................... B1 B 7.87% 12/31/09 4,723,529
853,311 Dex Media West, Inc. .............. Ba2 BB 6.91%-7.00% 3/09/10 849,045
1,970,050 Media News Group, Inc. ............ Ba3 BB- 6.58% 12/30/10 1,943,783
2,000,000 Media News Group, Inc. ............ Ba3 BB- 7.16% 8/02/13 2,002,500
5,000,000 Newspaper Holdings, Inc. .......... NR NR 6.94% 8/24/12 4,984,375
958,418 Nexstar Broadcasting, Inc. ........ Ba3 B 7.25% 10/01/12 954,824
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, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - CONTINUED
MEDIA - (CONTINUED)
PUBLISHING - (CONTINUED)
$ 930,890 Nexstar Broadcasting, Inc. ........ Ba3 B+ 7.25% 10/01/12 $ 927,399
1,500,000 PBI Media, Inc. ................... B2 B 7.74%-7.75% 9/30/12 1,498,751
990,000 PRIMEDIA Inc. ..................... B2 B 7.65% 9/30/13 975,398
6,768,519 RH Donnelley Inc. ................. Ba3 BB 6.74%-7.01% 6/30/11 6,719,561
1,814,504 WCP Exposition Services
Operating Company, LLC ........ NR NR 9.00%-9.12% 8/29/11 1,823,577
1,000,000 Yell Group PLC .................... Ba3 BB- TBA 2/09/13 1,003,375
--------------
29,402,994
--------------
TOTAL MEDIA 145,670,312
--------------
METALS & MINING - 1.6%
ALUMINUM - 1.0%
4,910,380 Novelis Corp. ..................... Ba2 BB- 7.72% 1/06/12 4,921,089
--------------
DIVERSIFIED METALS & MINING - 0.6%
2,985,000 Alpha Natural Resources, LLC ...... B1 BB- 7.25% 10/26/12 2,976,606
--------------
TOTAL METALS & MINING 7,897,695
--------------
MULTI - UTILITIES - 1.5%
MULTI-UTILITIES - 1.5%
987,500 KGEN, LLC ......................... B2 B 8.12% 8/05/11 987,500
5,697,444 KGEN, LLC (c) (h) ................. B3 B- 14.5% 8/05/11 5,811,393
500,000 Thermal North America, Inc. ....... Ba3 BB- 7.16% 10/12/13 498,125
--------------
TOTAL MULTI - UTILITIES 7,297,018
--------------
OIL, GAS & CONSUMABLE FUELS - 7.9%
OIL & GAS EXPLORATION & PRODUCTION - 3.4%
5,940,000 ATP Oil & Gas Corp. ............... NR NR 8.32%-8.86% 4/14/10 5,999,400
4,365,298 Plains Resources Inc. ............. Ba2 BB 6.90% 8/12/11 4,359,841
2,000,000 Resolute Aneth, LLC (c) ........... NR NR 10.47% 4/13/12 2,015,000
1,888,898 SemCrude, L.P. .................... Ba3 B 7.58%-7.75% 3/16/11 1,893,620
2,000,000 Venoco, Inc. (c) .................. Caa1 B- 9.75%-10.00% 4/27/11 2,008,750
--------------
16,276,611
--------------
OIL & GAS REFINING, MARKETING & TRANSPORTATION - 4.5%
1,000,000 Alon USA, Inc. .................... B2 BB- 1.25%-7.91% 6/22/13 1,010,000
443,333 Calumet Lubricants Company, L.P. .. B2 BB- 8.63%-8.78% 12/09/12 443,333
4,962,500 Cheniere LNG Holdings, LLC ........ NR BB 8.25% 8/31/12 4,993,516
2,000,000 Coffeyville Resources, LLC (c) .... B3 B 12.13% 7/08/13 2,057,500
6,907,863 Eagle Rock Gas Gathering &
Processing, Ltd. .............. NR NR 8.01% 10/01/12 6,907,863
3,000,000 El Paso Corp. ..................... B1 B+ 7.37% 7/31/11 3,013,392
990,000 EPCO Holdings, Inc. ............... Ba3 B+ 7.22%-7.49% 8/18/10 994,641
2,000,000 Regency Gas Service, LLC .......... B1 B+ 7.87% 8/15/13 2,016,666
--------------
21,436,911
--------------
TOTAL OIL, GAS & CONSUMABLE FUELS 37,713,522
--------------
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, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - CONTINUED
PAPER & FOREST PRODUCTS - 4.0%
FOREST PRODUCTS - 4.0%
$ 14,193,750 Georgia-Pacific Corp. ............. Ba2 BB- 7.30%-7.50% 12/20/12 $ 14,205,573
4,750,000 Georgia-Pacific Corp. (c) ......... Ba3 B+ 8.30% 12/23/13 4,789,188
--------------
TOTAL PAPER & FOREST PRODUCTS 18,994,761
--------------
PERSONAL PRODUCTS - 0.2%
PERSONAL PRODUCTS - 0.2%
1,000,000 American Safety Razor Company (c) . Caa1 CCC+ 11.72% 1/31/14 1,015,000
--------------
TOTAL PERSONAL PRODUCTS 1,015,000
--------------
REAL ESTATE INVESTMENT TRUSTS (REITS) - 4.5%
OFFICE REITS - 0.9%
371,111 Maguire Properties, Inc. .......... Ba2 BB+ 7.08% 3/15/10 371,111
4,000,000 Trizec Partners Real Estate, L.P. . NR(a) NR(a) 6.78% 5/02/07 3,992,500
--------------
4,363,611
--------------
RESIDENTIAL REITS - 0.0%
77,895 Lion Gables Realty, L.P. .......... Ba2 BB+ 7.12% 9/30/06 77,879
--------------
RETAIL REITS - 3.6%
6,349,109 Capital Automotive, L.P. .......... Ba1 BB+ 7.16% 12/16/10 6,356,163
9,000,000 General Growth Properties, Inc. ... Ba2 BB+ 6.58% 2/24/10 8,869,689
2,000,000 Macerich Partnership (The), L.P. .. NR(a) NR(a) 6.94% 4/26/10 1,990,000
--------------
17,215,852
--------------
TOTAL REAL ESTATE INVESTMENT TRUSTS (REITS) 21,657,342
--------------
REAL ESTATE MANAGEMENT & DEVELOPMENT - 5.5%
REAL ESTATE MANAGEMENT & DEVELOPMENT - 5.5%
1,257,143 Ginn-LA CS Borrower, LLC .......... B1 B+ 8.29% 6/08/11 1,238,286
2,742,857 Ginn-LA CS Borrower, LLC .......... B1 BB 8.41% 6/08/11 2,701,714
2,125,000 LNR Property Corp. ................ B2 NR(a) 8.22% 6/12/09 2,128,984
4,500,000 LNR Property Corp. ................ B2 NR(a) 8.22% 7/12/11 4,524,750
732,099 Newkirk Master (The) L.P. ......... Ba2 BB+ 7.15%-8.75% 8/11/08 731,641
997,500 November 2005 Land Investors, LLC . B1 BB 8.25% 5/31/11 997,500
1,000,000 November 2005 Land Investors, LLC (c) B2 B+ 12.50% 5/30/12 1,005,000
3,935,075 Palmdale Hills Property, LLC ...... B1 B+ 8.26%-8.50% 5/19/10 3,895,725
4,967,475 Pivotal Promontory, LLC ........... NR(a) NR(a) 8.08% 8/31/10 4,884,682
1,850,000 Rhodes Companies (The), LLC ....... Ba3 BB- 8.75% 11/21/10 1,850,000
1,500,000 Shea Capital I, LLC ............... NR(a) NR(a) 7.49% 10/27/11 1,473,750
950,933 Yellowstone Development, LLC ...... NR(a) NR(a) 7.71% 9/30/10 945,584
--------------
TOTAL REAL ESTATE MANAGEMENT & DEVELOPMENT 26,377,616
--------------
ROAD & RAIL - 1.0%
TRUCKING - 1.0%
4,590,202 Hertz (The) Corp. ................. Ba2 BB 7.58%-7.73% 12/21/12 4,617,251
--------------
TOTAL ROAD & RAIL 4,617,251
--------------
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, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - CONTINUED
SPECIALTY RETAIL - 3.5%
APPAREL RETAIL - 1.8%
$ 2,000,000 Hanesbrands, Inc. ................. Ba2 BB- TBA 8/10/13 $ 2,015,358
1,000,000 Hanesbrands, Inc. ................. Ba3 B- TBA 2/10/14 1,016,563
5,848,101 Neiman Marcus Group (The), Inc. ... B1 B+ 7.77% 4/06/13 5,890,015
--------------
8,921,936
--------------
SPECIALTY STORES - 1.7%
1,221,938 Dollarama Group L.P. .............. B1 B+ 7.49% 11/18/11 1,225,756
3,784,979 Harbor Freight Tools USA, Inc. .... NR(a) NR(a) 7.13%-7.18% 7/15/10 3,779,301
2,985,000 TravelCenters of America, Inc. .... B1 BB 6.86%-7.25% 12/01/11 2,981,269
--------------
7,986,326
--------------
TOTAL SPECIALTY RETAIL 16,908,262
--------------
TOBACCO - 0.8%
TOBACCO - 0.8%
937,250 Commonwealth Brands, Inc. ......... NR(a) NR(a) 7.75% 12/22/12 941,936
3,000,000 Reynolds American Inc. ............ Ba1 BB+ 7.19%-7.31% 5/31/12 3,010,782
--------------
TOTAL TOBACCO 3,952,718
--------------
TRANSPORTATION INFRASTRUCTURE - 1.0%
MARINE PORTS & SERVICES - 1.0%
4,870,378 Horizon Lines Holding, LLC ........ B2 B 7.75% 7/07/11 4,882,554
--------------
TOTAL TRANSPORTATION INFRASTRUCTURE 4,882,554
--------------
WIRELESS TELECOMMUNICATION SERVICES - 2.1%
WIRELESS TELECOMMUNICATION SERVICES - 2.1%
2,000,000 Clearwire Corp. ................... NR NR 12.08% 8/18/09 2,010,000
1,000,000 Crown Castle Operating Company .... B2 BB 7.65% 6/01/14 1,005,208
3,000,000 MetroPCS Wireless, Inc. ........... NR NR(a) 10.44% 5/31/11 3,065,001
4,000,000 Windstream Corp. .................. Ba2 BBB- 7.26% 7/17/13 4,019,284
--------------
TOTAL WIRELESS TELECOMMUNICATION SERVICES 10,099,493
--------------
TOTAL SENIOR FLOATING RATE TERM LOAN INTERESTS** 727,291,717
--------------
(Cost $728,205,351)
SENIOR FLOATING RATE NOTES - 5.7%
ENERGY EQUIPMENT & SERVICES - 0.2%
OIL & GAS DRILLING - 0.2%
1,000,000 Parker Drilling Company (e) ....... NR NR 9.98% 9/01/10 1,018,750
--------------
TOTAL ENERGY EQUIPMENT & SERVICES 1,018,750
--------------
FOOD & STAPLES RETAILING - 0.5%
FOOD DISTRIBUTORS - 0.5%
2,100,000 Nutro Products, Inc. (e) .......... B3 CCC 9.23% 10/15/13 2,163,000
--------------
TOTAL FOOD & STAPLES RETAILING 2,163,000
--------------
HEALTH CARE PROVIDERS & SERVICES - 0.2%
HEALTH CARE FACILITIES - 0.2%
1,000,000 US Oncology Holdings, Inc.(d)(e) .. Caa1 B- 10.32% 3/15/15 1,015,000
--------------
TOTAL HEALTH CARE PROVIDERS & SERVICES 1,015,000
--------------
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, 2006 (UNAUDITED)
PRINCIPAL RATINGS+ STATED MARKET
VALUE DESCRIPTION* MOODY'S S&P COUPON MATURITY* VALUE
----------- ---------------------------------- ------------- ------------- ---------- ----------------
SENIOR FLOATING RATE TERM LOAN INTERESTS** - CONTINUED
HOTELS, RESTAURANTS & LEISURE - 0.8%
LEISURE FACILITIES - 0.8%
$ 2,000,000 HRP Myrtle Beach (e) .............. B3 B 9.82% 4/01/12 $ 1,990,000
2,000,000 Universal City Florida Holding
Company (e) ................... B3 B- 10.24% 5/01/10 2,045,000
--------------
TOTAL HOTELS, RESTAURANTS & LEISURE 4,035,000
--------------
HOUSEHOLD DURABLES - 0.6%
HOMEBUILDING - 0.6%
3,000,000 Builders Firstsource, Inc. (c) (e) B3 B- 9.66% 2/15/12 3,037,500
--------------
TOTAL HOUSEHOLD DURABLES 3,037,500
--------------
MEDIA - 1.7%
BROADCASTING & CABLE TV - 1.7%
3,000,000 EchoStar Communications Corp. (e) . NR NR 8.76% 10/01/08 3,037,500
5,000,000 Paxson Communications Corp. (e) ... B2 CCC+ 8.76% 1/15/12 4,975,000
--------------
TOTAL MEDIA 8,012,500
--------------
PAPER & FOREST PRODUCTS - 0.2%
PAPER PRODUCTS - 0.2%
1,000,000 Verso Paper Holdings LLC (e) ...... B1 B+ 9.24% 8/01/14 1,007,500
--------------
TOTAL PAPER & FOREST PRODUCTS 1,007,500
--------------
PHARMACEUTICALS - 0.5%
PHARMACEUTICALS - 0.5%
2,500,000 Elan Finance PLC (d) (e) .......... B3 B 9.41% 11/15/11 2,525,000
--------------
TOTAL PHARMACEUTICALS 2,525,000
--------------
WIRELESS TELECOMMUNICATION SERVICES - 1.0%
WIRELESS TELECOMMUNICATION SERVICES - 1.0%
4,500,000 Intelsat (Bermuda), Ltd. (d) (e) .. B2 B+ 9.61% 1/15/12 4,567,500
--------------
TOTAL WIRELESS TELECOMMUNICATION SERVICES 4,567,500
--------------
TOTAL SENIOR FLOATING RATE NOTES ................................................ 27,381,750
--------------
(Cost $27,120,130)
MARKET
SHARES DESCRIPTION* VALUE
----------- --------------------------------------------------------------------------------- --------------
CLOSED-END FUNDS - 2.9%
OTHER DIVERSIFIED FINANCIAL SERVICES - 2.9%
903,900 ING Prime Rate Trust ............................................................ 6,435,768
881,900 Van Kampen Senior Income Trust .................................................. 7,293,313
--------------
TOTAL OTHER DIVERSIFIED FINANCIAL SERVICES 13,729,081
--------------
TOTAL CLOSED-END FUNDS .......................................................... 13,729,081
--------------
(Cost $13,110,710)
COMMON STOCKS AND RIGHTS - 0.0%
OTHER DIVERSIFIED FINANCIAL SERVICES - 0.0%
690 Atkins Nutritionals Holdings .................................................... 0
690 Atkins Nutritionals Holdings - Rights ........................................... 0
--------------
TOTAL OTHER DIVERSIFIED FINANCIAL SERVICES 0
--------------
TOTAL COMMON STOCKS AND RIGHTS .................................................. 0
--------------
(Cost $36,260)
See Notes to Quarterly Portfolio of Investments Page 11
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
PORTFOLIO OF INVESTMENTS - (CONTINUED)
AUGUST 31, 2006 (UNAUDITED)
PRINCIPAL MARKET
VALUE DESCRIPTION* VALUE
----------- --------------------------------------------------------------------------------- --------------
REPURCHASE AGREEMENT - 2.2%
(Cost $10,700,000)
$ 10,700,000 Agreement with Wachovia Capital Markets, LLC, 5.15%
dated 8/31/06, to be repurchased at $10,701,531 on 9/1/06,
collateralized by $10,755,000 Federal Home Loan Bank, 5.38% due
8/19/11 (Value $10,976,627) .................................................. $ 10,700,000
--------------
TOTAL INVESTMENTS - 162.8% ...................................................... 779,102,548
(Cost $779,172,451) (b)
NET OTHER ASSETS AND LIABILITIES - (4.5)% ....................................... (21,517,366)
--------------
LOAN OUTSTANDING - (37.4)% ...................................................... (179,000,000)
--------------
AUCTION MARKET PREFERRED SHARES, AT LIQUIDATION VALUE - (20.9)% ................. (100,000,000)
--------------
NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS - 100.0% ........................... $ 478,585,182
==============
----------------------------------------------
o All percentages shown in the Portfolio of Investments are based on
net assets applicable to Common Shares.
(a) This Senior Loan Interest was privately rated upon issuance. The
rating agency does not provide ongoing surveillance on the rating.
(b) Aggregate cost for federal income tax and financial reporting
purposes.
(c) This issue is secured by a second lien on the issuer's assets.
(d) This issue is unsecured.
(e) Securities are restricted and cannot be offered for public sale
without first being registered under the Securities Act of 1933,
as amended (Note 1E).
(f) This borrower has filed for protection in a federal bankruptcy
court.
(g) This Senior Loan Interest was purchased subsequent to the
borrower's filing for protection in federal bankruptcy court and
has priority over other debt holders.
(h) Payment-in-kind.
+ Ratings below Baa3 by Moody's Investors Service, Inc. or BBB- by
Standard & Poor's Ratings Group are considered to be below
investment grade.
NR Not rated
TBA To be announced.
* Senior Loans generally are subject to mandatory and/or optional
prepayment. Prepayments of Senior Loans may occur because of the
mandatory prepayment conditions and because there may be
significant economic incentives for a borrower to optionally
prepay. As a result, the actual remaining maturity of Senior Loans
may be substantially less than the stated maturities shown. Senior
Loans generally have maturities that range from five to eight
years; however, the Fund estimates that refinancing and
prepayments result in an average maturity of the Senior Loans held
in its portfolio to be approximately 18-30 months.
** Senior Loans in which the Fund invests generally pay interest at
rates which are periodically predetermined by reference to a base
lending rate plus a premium. These base lending rates are
generally (i) the lending rate offered by one or more major
European banks, such as the London Inter-Bank Offered Rate
("LIBOR"), (ii) the prime rate offered by one or more major United
States banks or (iii) the certificate of deposit rate.
Page 12 See Notes to Quarterly Portfolio of Investments
--------------------------------------------------------------------------------
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS-(UNAUDITED)
--------------------------------------------------------------------------------
FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
AUGUST 31, 2006
1. VALUATION AND INVESTMENT PRACTICES
A. PORTFOLIO VALUATION:
The net asset value ("NAV") of the Common Shares of the First Trust/Four Corners
Senior Floating Rate Income Fund II (the "Fund") is computed based upon the
value of the Fund's portfolio and other assets less any accrued liabilities. The
NAV is determined as of the close of regular trading on the 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 Fund calculates NAV per Common Share by subtracting the Fund's
liabilities (including accrued expenses, dividends payable and any borrowings of
the Fund) and the liquidation value of any outstanding Preferred Shares from the
Fund's Total Assets (the value of securities and other investments the Fund
holds plus cash or other assets, including interest accrued but not yet
received), and dividing the result by the total number of Common Shares
outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value according
to procedures adopted by the Fund's Board of Trustees. A majority of the Fund's
assets are valued using market information supplied by third parties. In the
event that market quotations are not readily available, the pricing service does
not provide a valuation for a particular asset, or the valuations are deemed
unreliable, or if events occurring after the close of the principal markets for
particular securities (e.g., domestic debt and foreign securities), but before
the Fund values its assets, would materially affect NAV, First Trust Advisors
L.P. ("First Trust") may use a fair value method to value the Fund's securities
and investments. The use of fair value pricing by the Fund is governed by
valuation procedures adopted by the Fund's Board of Trustees, and in accordance
with the provisions of the Investment Company Act of 1940, as amended (the "1940
Act").
The senior floating rate 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. 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.
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, 2006
C. SECURITIES TRANSACTIONS:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income on such securities
is not accrued until settlement date. The Fund maintains liquid assets with a
current value at least equal to the amount of its when-issued or delayed
delivery purchase commitments.
D. UNFUNDED LOAN COMMITMENTS:
The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund had unfunded Senior Loan commitments of approximately
$840,426 as of August 31, 2006. The Fund is obligated to fund these Senior Loan
commitments at the borrower's discretion. The Fund will maintain cash, liquid
securities and/or liquid Senior Loans with an aggregate value at least equal to
the amount or unfunded Senior Loan commitments. Net unrealized depreciation of
$10,505 from these commitments is included in "Net Other Assets and Liabilities"
on the Portfolio of Investments.
E. RESTRICTED SECURITIES:
The Fund may invest a portion of its assets in restricted securities. Restricted
securities are securities that cannot be offered for public sale without first
being registered under the Securities Act of 1933, as amended. As of August 31,
2006, the Fund currently holds the restricted securities shown in the following
table. The Fund does not have the right to demand that such securities be
registered. These securities are valued using market quotations according to the
valuation procedures as stated in the Portfolio Valuation section (Note 1A) and
are not expressed as a discount to the carrying value of a comparable
unrestricted security. There are no unrestricted securities with the same
maturity dates and yields for these issuers.
CARRYING COST
CARRYING PER SHARE
ACQUISITION PRINCIPAL VALUE AT ACQUISITION MARKET % OF
SECURITY DATE VALUE PER SHARE DATE VALUE NET ASSETS
------------------------------------------------------------------------------------------------------------------------
Builders Firstsource, Inc. 2/8/05 $3,000,000 $101.25 $100.00 $3,037,500 0.63%
EchoStar Communications Corp. 5/8/06 3,000,000 101.25 102.06 3,037,500 0.63%
Elan Finance PLC 3/2/05 1,500,000 101.00 86.50 1,515,000 0.32%
Elan Finance PLC 3/31/05 1,000,000 101.00 75.75 1,010,000 0.21%
HRP Myrtle Beach 3/23/06 2,000,000 99.50 100.00 1,990,000 0.42%
Intelsat, Ltd. 2/14/05 3,000,000 101.50 103.50 3,045,000 0.64%
Intelsat, Ltd. 6/19/06 1,000,000 101.50 101.38 1,015,000 0.21%
Intelsat, Ltd. 6/20/06 500,000 101.50 101.25 507,500 0.11%
Nutro Products, Inc. 4/13/06 100,000 103.00 100.00 103,000 0.02%
Nutro Products, Inc. 4/13/06 1,000,000 103.00 102.50 1,030,000 0.22%
Nutro Products, Inc. 4/18/06 1,000,000 103.00 102.25 1,030,000 0.22%
Parker Drilling Company 8/22/06 1,000,000 101.88 102.13 1,018,750 0.21%
Paxson Communications Corp. 12/19/04 5,000,000 99.50 100.00 4,975,000 1.04%
Universal City Florida
Holding Company 4/3/06 2,000,000 102.25 102.00 2,045,000 0.43%
US Oncology Holdings, Inc. 7/14/06 1,000,000 101.50 102.50 1,015,000 0.21%
Verso Paper Holdings LLC 7/26/06 500,000 100.75 100.00 503,750 0.11%
Verso Paper Holdings LLC 7/26/06 500,000 101.25 100.00 503,750 0.11%
----------- ----------- ----
$27,100,000 $27,381,750 5.74%
=========== =========== ====
Page 14
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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, 2006
2. UNREALIZED APPRECIATION/(DEPRECIATION)
As of August 31, 2006, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $2,706,418
and the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $2,776,321.
Page 15
ITEM 2. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers,
or persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the
"1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within
90 days of the filing date of the report that includes the disclosure
required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17
CFR 270.30a-3(d)) that occurred during the registrant's last fiscal
quarter that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) FIRST TRUST/FOUR CORNERS SENIOR FLOATING RATE INCOME FUND II
By (Signature and Title)* /S/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date OCTOBER 24, 2006
----------------------------------------------------------------------------
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 24, 2006
----------------------------------------------------------------------------
By (Signature and Title)* /S/ MARK R. BRADLEY
-------------------------------------------------------
Mark R. Bradley, Treasurer, Controller,
Chief Financial Officer and Chief Accounting Officer
(principal financial officer)
Date OCTOBER 24, 2006
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.