CHAPMAN AND CUTLER LLP
111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
August 26, 2009
Via EDGAR Correspondence
Mr. Houghton Hallock
Division of Investment Management
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re: First Trust Strategic High Income Fund
First Trust Strategic High Income Fund II
First Trust Strategic High Income Fund III
Proxy Statement
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Dear Mr. Hallock:
We discussed your comments and questions via several telephonic
conferences between July 31, 2009 and August 7, 2009 regarding the Preliminary
Proxy Statement filed by First Trust Strategic High Income Fund, First Trust
Strategic High Income Fund II and First Trust Strategic High Income Fund III
(the "Funds") on July 24, 2009 (the "Proxy Statement"). (Undefined terms have
the meanings ascribed to such terms in the Proxy Statement.) As discussed, this
letter is intended to summarize your two principal comments that resulted in
modifications to the Proxy Statement and to briefly describe the modifications
made.
The Proxy Statement contains two proposals which pertain to each Fund:
(1) to approve a new investment sub-advisory agreement among the Fund, First
Trust Advisors L.P., as investment adviser, and Hyperion Brookfield Asset
Management, Inc. ("HBAM") as investment sub-adviser; and (2) to approve a change
in the Fund's industry concentration policy from being concentrated in
residential mortgage-backed securities ("RMBS") to being non-concentrated.
The following provides your comments and our responses:
COMMENT 1
Please add information pertaining to HBAM's current plans with respect
to the Funds' investments once the Funds are no longer concentrated in RMBS.
RESPONSE TO COMMENT 1
As we discussed, Proposal 2 of the Proxy Statement was modified to
address HBAM's anticipated plans for the Funds. The final proxy statement (the
"Final Proxy Statement") states that "[i]t is anticipated that replacing the
Funds' Current Concentration Policy with the Proposed Concentration Policy will
enable the Funds' sub-adviser to exploit opportunities more broadly across the
fixed income market." The Final Proxy Statement also describes the Funds'
investment objectives and certain aspects of their respective investment
strategies. Further, the Final Proxy Statement states that "[i]n accordance with
each Fund's investment objectives and investment strategy, HBAM currently
intends to invest each Fund's portfolio primarily across the fixed income market
with a current emphasis on corporate high yield securities." Some corresponding
risk disclosure was also added.
You and I also discussed the Funds' future anticipated investments in
mortgage-backed securities and, in this regard, the Final Proxy Statement states
that "[a]lthough HBAM anticipates that, at times, the Funds may have little or
no exposure to mortgage-backed securities (including RMBS), it does expect to
invest the Funds' portfolios in the mortgage-backed securities market when it
believes that opportunity and value exist."
COMMENT 2
Please add information pertaining to the transition process that HBAM
envisions for the Funds.
RESPONSE TO COMMENT 2
In response to your comment, the Final Proxy Statement provides that
"HBAM envisions a transition process where, ultimately, a substantial portion of
the securities that each Fund currently holds will likely be replaced." It also
states that "[t]he time needed to accomplish this transition is impossible to
predict and depends largely on market conditions and market liquidity; however,
based on its experience, HBAM believes that a transition period of up to
approximately one year would not be unusual."
TANDY ACKNOWLEDGEMENT
In connection with the Funds' proxy statement, each Fund acknowledges
that:
o the Fund is responsible for the adequacy and accuracy of the
disclosure in the filing;
o staff comments or changes to disclosure in response to staff
comments in the filings reviewed by the staff do not foreclose the
Commission from taking any action with respect to the filing; and
o the Fund may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
Please call me at (312) 845-3446 if you have any further questions
regarding these matters.
Very truly yours,
CHAPMAN AND CUTLER LLP
By: /s/ Suzanne M. Russell
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Suzanne M. Russell