UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number 811-21842
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First Trust Strategic High Income Fund II
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(Exact name of registrant as specified in charter)

120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)

W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)

registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: October 31
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Date of reporting period: October 31, 2012
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
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 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. REPORTS TO STOCKHOLDERS.

The Report to Shareholders is attached herewith.

FIRST TRUST
STRATEGIC
High Income
Fund II

ANNUAL REPORT
FOR THE YEAR ENDED
OCTOBER 31, 2012

FIRST TRUST BROOKFIELD

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TABLE OF CONTENTS
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FIRST TRUST STRATEGIC HIGH INCOME FUND II (FHY)
ANNUAL REPORT
OCTOBER 31, 2012

Shareholder Letter.......................................................... 1
At A Glance................................................................. 2
Portfolio Commentary........................................................ 3
Portfolio of Investments.................................................... 6
Statement of Assets and Liabilities......................................... 14
Statement of Operations..................................................... 15
Statements of Changes in Net Assets......................................... 16
Statement of Cash Flows..................................................... 17
Financial Highlights........................................................ 18
Notes to Financial Statements............................................... 19
Report of Independent Registered Public Accounting Firm..................... 28
Additional Information...................................................... 29
Board of Trustees and Officers.............................................. 33
Privacy Policy.............................................................. 35

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Brookfield Investment Management Inc.
("Brookfield" or the "Sub-Advisor") and their respective representatives, taking
into account the information currently available to them. Forward-looking
statements include all statements that do not relate solely to current or
historical fact. For example, forward-looking statements include the use of
words such as "anticipate," "estimate," "intend," "expect," "believe," "plan,"
"may," "should," "would" or other words that convey uncertainty of future events
or outcomes.

Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
First Trust Strategic High Income Fund II (the "Fund") to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. When evaluating the information
included in this report, you are cautioned not to place undue reliance on these
forward-looking statements, which reflect the judgment of the Advisor and/or
Sub-Advisor and their respective representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.

PERFORMANCE AND RISK DISCLOSURE

There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money by investing in the Fund. See "Risk Considerations" in the Notes to
Financial Statements for a discussion of certain other risks of investing in the
Fund.

Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and common share price will fluctuate and Fund shares,
when sold, may be worth more or less than their original cost.

HOW TO READ THIS REPORT

This report contains information that may help you evaluate your investment. It
includes details about the Fund and presents data and analysis that provide
insight into the Fund's performance and investment approach.

By reading the portfolio commentary by the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of relevant market
benchmarks.

It is important to keep in mind that the opinions expressed by personnel of
Brookfield are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The risks of investing in the Fund are
spelled out in the prospectus, the statement of additional information, this
report and other Fund regulatory filings.

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SHAREHOLDER LETTER
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FIRST TRUST STRATEGIC HIGH INCOME FUND II ANNUAL LETTER
FROM THE CHAIRMAN AND CEO

OCTOBER 31, 2012

Dear Shareholders:

I am pleased to present you with the annual report for your investment in First
Trust Strategic High Income Fund II (the "Fund").

The report you hold contains detailed information about your investment; a
portfolio commentary from the Fund's management team that provides a recap of
the period; a performance analysis and a market and Fund outlook. Additionally,
you will find the Fund's financial statements for the period this report covers.
I encourage you to read this document and discuss it with your financial
advisor. A successful investor is also typically a knowledgeable one, as we have
found to be the case at First Trust.

First Trust remains committed to being a long-term investor and investment
manager and to bringing you quality financial solutions regardless of market ups
and downs. We have always believed, as I have written previously, that there are
two ways to attain success in reaching your financial goals: staying invested in
quality products and having a long-term investment horizon. We are committed to
this approach in the products we manage or supervise and offer to investors.

As you know, First Trust offers a variety of products that we believe could fit
many financial plans to help investors seeking long-term investment success. We
encourage you to talk to your advisor about the other investments First Trust
offers that might also fit your financial goals and to discuss those goals with
your advisor regularly so that he or she can help keep you on track.

First Trust will continue to make available up-to-date information about your
investments so you and your financial advisor are current on any First Trust
investments you own. We value our relationship with you, and thank you for the
opportunity to assist you in achieving your financial goals. I look forward to
the New Year and to the next edition of your Fund's report.

Sincerely,

/s/ James A. Bowen

James A. Bowen
Chairman of the Board of Trustees of First Trust Strategic High Income Fund II
and Chief Executive Officer of First Trust Advisors L.P.

Page 1

FIRST TRUST STRATEGIC HIGH INCOME FUND II
"AT A GLANCE"
AS OF OCTOBER 31, 2012 (UNAUDITED)

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FUND STATISTICS
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Symbol on New York Stock Exchange FHY
Common Share Price $17.69
Common Share Net Asset Value ("NAV") $17.06
Premium (Discount) to NAV 3.69%
Net Assets Applicable to Common Shares $144,204,625
Current Monthly Distribution per Common Share (1) $0.1325
Current Annualized Distribution per Common Share $1.5900
Current Distribution Rate on Closing Common Share Price (2) 8.99%
Current Distribution Rate on NAV (2) 9.32%

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COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
----------------------------------------------------------------------
Common Share Price NAV
10/11 14.51 16.17
14.22 16.03
14.44 15.88
14.35 15.73
11/11 14.23 15.48
14.44 15.68
14.57 15.81
14.50 15.81
15.12 15.91
12/11 15.28 16.00
15.08 16.02
15.15 16.14
15.71 16.28
1/12 16.20 16.51
16.63 16.49
16.89 16.42
16.60 16.53
2/12 17.66 16.64
17.48 16.62
17.41 16.52
17.06 16.56
17.15 16.56
3/12 17.31 16.62
17.07 16.49
17.09 16.45
17.36 16.54
4/12 17.35 16.67
17.11 16.68
17.28 16.67
15.82 16.38
5/12 16.76 16.29
16.36 16.04
16.73 16.13
16.38 16.09
16.83 16.30
6/12 17.03 16.41
17.00 16.39
17.13 16.49
17.36 16.61
7/12 17.58 16.58
17.59 16.64
17.51 16.73
17.46 16.72
17.28 16.80
8/12 17.45 16.83
17.30 16.88
17.79 17.16
17.68 17.18
9/12 17.84 17.04
17.88 17.04
17.65 17.03
17.69 17.13
17.77 17.08
10/12 17.69 17.06

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PERFORMANCE
--------------------------------------------------------------------------------------------------
Average Annual Total Return
-------------------------------------
1 Year Ended 5 Years Ended Inception (3/28/2006)
10/31/2012 10/31/2012 to 10/31/2012

FUND PERFORMANCE (3)
NAV 16.11% -6.16% -4.82%
Market Value 34.16% -4.07% -4.96%

INDEX PERFORMANCE
Barclays Capital Ba U.S. High Yield Index 13.61% 9.40% 8.99%
--------------------------------------------------------------------------------------------------

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% OF TOTAL
ASSET CLASSIFICATION INVESTMENTS
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Corporate Bonds and Notes 81.6%
Residential Mortgage-Backed Securities 9.1
Foreign Corporate Bonds and Notes 5.6
Manufactured Housing Loans 2.1
Commercial Mortgage-Backed Securities 1.3
Senior Floating-Rate Loan Interests 0.3
Collateralized Debt Obligations 0.0*
Equity 0.0*
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Total 100.0%
======
* Amount is less than 0.1%.

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% OF TOTAL
FIXED-INCOME
CREDIT QUALITY (4) INVESTMENTS
-------------------------------------------------------
AAA 0.8%
AA- 0.6
A- 1.1
BBB- 2.6
BB+ 5.4
BB 9.1
BB- 9.5
B+ 17.5
B 15.7
B- 16.7
CCC+ 13.2
CCC 2.1
CCC- 1.6
CC 1.4
C 1.4
D 1.3
-------------------------------------------------------
Total 100.0%
======

(1) Most recent distribution paid or declared through 10/31/2012. Subject to
change in the future. The distribution was decreased subsequent to
10/31/12. See Note 11 - Subsequent Events in the Notes to Financial
Statements.

(2) Distribution rates are calculated by annualizing the most recent
distribution paid or declared through the report date and then dividing by
Common Share price or NAV, as applicable, as of 10/31/2012. Subject to
change in the future.

(3) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan and changes in NAV per share for NAV
returns and changes in Common Share price for market value returns. Total
returns do not reflect sales load and are not annualized for periods less
than one year. Past performance is not indicative of future results.

(4) The credit quality and ratings information presented above reflects the
ratings assigned by one or more nationally recognized statistical rating
organizations (NRSROs), including Standard & Poor's Ratings Group, a
division of the McGraw Hill Companies, Inc., Moody's Investors Service,
Inc., Fitch Ratings or a comparably rated NRSRO. For situations in which a
security is rated by more than one NRSRO and the ratings are not
equivalent, the highest ratings are used. Sub-investment grade ratings are
those rated BB+/Ba1 or lower. Investment grade ratings are those rated
BBB-/Baa3 or higher.

Page 2

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PORTFOLIO COMMENTARY
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FIRST TRUST STRATEGIC HIGH INCOME FUND II
(FHY) ANNUAL REPORT
OCTOBER 31, 2012

SUB-ADVISOR

BROOKFIELD INVESTMENT MANAGEMENT INC.

Brookfield Investment Management Inc. ("Brookfield") serves as the Fund's
Sub-Advisor. Brookfield is a wholly-owned subsidiary of Brookfield Asset
Management, a global alternative asset manager with approximately $168 billion
in assets under management as of September 30, 2012. The firm has over a
100-year history of owning and operating assets with a focus on property,
renewable power, infrastructure and private equity. They offer a range of public
and private investment products and services. On behalf of their clients,
Brookfield is also an active investor in the public securities markets.

Through their registered investment advisor, Brookfield Investment Management,
their public market activities complement the firm's core competencies as a
direct investor. These activities encompass global listed real estate and
infrastructure equities, corporate high-yield investments, opportunistic credit
strategies and a dedicated insurance asset management division. Headquartered in
New York, NY, Brookfield maintains offices and investment teams in Toronto,
Chicago, Boston and London.

PORTFOLIO MANAGEMENT TEAM

DANA E. ERIKSON, CFA
MANAGING DIRECTOR

Mr. Erikson, Senior Portfolio Manager and the Head of the Global High Yield
Team, is responsible for the firm's corporate high-yield exposures and the
establishment of portfolio objectives and strategies. Mr. Erikson has 25 years
of investment experience. Prior to joining the firm, he was with Evergreen
Investments or one of its predecessor firms since 1996. He was a senior
portfolio manager and the Head of the High Yield team. Prior to that, he was
Head of High Yield Research. Mr. Erikson received a Bachelor of Arts in
Economics from Brown University and an MBA, with honors, from Northeastern
University. He is a member of the Boston Security Analysts Society. He holds the
Chartered Financial Analyst designation.

ANTHONY BREAKS, CFA
DIRECTOR

Mr. Breaks is a Portfolio Manager on the Securitized Products Investments Team.
Mr. Breaks is one of four team leaders in MBS/ABS and is a member of the team's
securities analysis committee. In his role, Mr. Breaks is one of the team's
portfolio managers. Mr. Breaks also has managed securitized product vehicles,
such as SIV, ABCP and CDOs for Brookfield and has experience in insurance
company asset management. Mr. Breaks earned a Bachelor of Science degree in
Electrical Engineering from the Massachusetts Institute of Technology. He holds
the Chartered Financial Analyst designation.

COMMENTARY

FIRST TRUST STRATEGIC HIGH INCOME FUND II

The primary investment objective of the First Trust Strategic High Income Fund
II ("FHY" or the "Fund") is to seek a high level of current income. The Fund
seeks capital growth as a secondary objective. The Fund seeks to achieve its
investment objectives by investing in a diversified portfolio of
below-investment grade and investment grade debt securities and equity
securities that the Sub-Advisor believes offer attractive yield and/or capital
appreciation potential. There can be no assurance that the Fund will achieve its
investment objectives. The Fund may not be appropriate for all investors.

MARKET RECAP AND OUTLOOK

High Yield

After a difficult start in November 2011, with the market down 2.2%, the
high-yield market performed well for the balance of the fiscal year ended
October 31, 2012. For this reporting period, the total return for the BofA
Merrill Lynch U.S. High Yield Master II Index was 13.18%,(1) which outperformed
the Russell 2000 Index's return of 12.08%.(2) We reference this BofA Merrill
Lynch index since we believe it is a good indicator of the yield market. See the
Performance Analysis section later in this commentary for the Fund's benchmark
performance. Spreads tightened by 138 basis points1 as yields fell from 8.51% to
7.07% during the reporting period. The strong equity market, combined with
investors' search for attractive yields, overcame lingering concerns about
problems in Europe, the outlook for growth in the U.S., and uncertainty about
U.S. elections and their impact on spending, growth and taxes. As of October 31,
2012, current spreads of 574 basis points are still wide of the

-----------------------

1 BofA Merrill Lynch U.S. High Yield Master II Index, Bloomberg

2 Bloomberg

Page 3

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PORTFOLIO COMMENTARY - (CONTINUED)
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400 to 500 basis points that we typically expect to see at this point in the
credit cycle. However, with yields at historical lows and the average price in
the market above par, our expectations for further spread tightening or price
appreciation are muted. Despite our tempered outlook for total return, we find
the market attractive from a yield perspective, and believe that it offers sound
value for investors when compared to fixed-income alternatives.

Corporate credit continues to be strong, as it has been for the past several
years. Companies have been deleveraging their balance sheets since the global
financial crisis, and we believe that this has had the effect of improving the
high-yield market's overall credit quality. As of October 31, 2012, the trailing
12-month default rate was 1.8%(4) which is well below the long-term average
default rate of 4.2%.(5) Actions taken by credit ratings agencies confirm the
improving trend in corporate credit as 1.21 times as many high-yield companies
were upgraded as were downgraded in the past 12 months.(6) This ratings trend
reflects improving corporate balance sheets, the refinancing of near-term debt
maturities, and lower interest expense from issuing new, lower-cost debt.

Market supply and demand was generally positive during the reporting period and
high-yield mutual funds continued to experience strong inflows.(7) New issue
volume was strong as well, with $310 billion of new issuance in the 12 months
ended October 31, 2012, compared to $221 billion in 2011. With investors enticed
by attractive yields, new issues were generally oversubscribed and traded higher
in the secondary market. Approximately 59% of the proceeds from new issuance
were used to refinance debt, which has the effect of improving credit quality by
eliminating near-term maturities.(8)

Brookfield has been positive on the high-yield market for some time, noting the
market's strong and improving credit quality, ample corporate liquidity, and
impressive progress on the part of corporate treasurers in managing their debt
structures. Investors have taken note of these positive underpinnings, and
generally have looked past any external macro-related turmoil or short-term
weakness in the equity markets. Indeed, during the most recent equity market
sell-off, the Russell 2000 Index was down 5.16% from September 14, 2012 through
October 31, 2012; however, the high-yield market was resilient, producing a
small positive return of 0.29% during the same period.(9) With these positive
fundamentals in place, we continue to view the market favorably; however, we do
recognize that there are potential headwinds in coming months, namely lingering
issues in Europe, the "fiscal cliff," and the prospect for slowing economic
growth in the U.S. as a result of policy decisions in Washington. Absent any
major macro event, we do not believe there is meaningful risk to the market and
expect that investors looking for an attractive coupon will be appropriately
rewarded.

Securitized Products

Securitized Products also had a tough start in November 2011. Three issues
weighed on investor sentiment: weakening U.S. economic data, anticipation of
higher capital requirements along with tighter regulation for financial
institutions, and the threat of a European financial crisis. The market was
worried about forced selling of securitized products and weakening performance
for securitized assets such as home loans and commercial real-estate loans. From
a recent high in March of 2011, the subprime securities index (Markit ABX.HE
Index) fell an average of 12%, the prime jumbo mortgage securities index (Markit
PrimeX Index) fell an average of 1% and the commercial mortgage securities index
(Markit CMBX Index) fell an average of 6%. The Markit ABX.HE Index is a
synthetic tradeable index referencing a basket of 20 subprime mortgage-backed
securities. The Markit PrimeX Index is a synthetic credit default swap index
referencing a basket of prime mortgage-backed securities. The Markit CMBX Index
is a synthetic tradeable index referencing a basket of 25 commercial
mortgage-backed securities.

At the start of 2012, U.S. economic activity increased and fears over the crisis
in Europe were allayed by policy action. On the U.S. economic front, we saw the
typical "Spring Thaw" occur early due to unusually warm weather and investors
seized on the improving economic data to credit and risk-oriented assets.
Trading activity was brisk for the period as large amounts of supply met strong
demand from insurance companies and money managers. A notable seller during this
period was the Federal Reserve, which began selling assets from its bailout of
AIG and Bear Stearns. Although issuance of Residential Mortgage-Backed
Securities ("RMBS") continued to be light, there were three new issue deals
announced in the first quarter of 2012 and $4 billion of Commercial
Mortgage-Backed Securities ("CMBS").

Also notable were those not selling bonds during the period. European banks did
not need to sell their structured finance bonds due to policy actions by the
European Central Bank ("ECB") to provide financing for these assets. The
financing helped keep (euro)200 billion in assets that otherwise would have
risked a fire sale-type liquidation. Taken together with the ECB's commitment to
cure sovereign ills with their "Open Market Transactions" policy, a European
meltdown was forestalled, if not averted.

-----------------------

4 JP Morgan Default Monitor, November 1, 2012, p. 4

5 Ibid., p. 2

6 Ibid., p.10

7 Credit Suisse Leveraged Finance Strategy Monthly p. 10

8 JP Morgan Default Monitor, p. 11

9 BofA Merrill Lynch U.S. High Yield Master II Index, Bloomberg

Page 4

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PORTFOLIO COMMENTARY - (CONTINUED)
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The Federal Reserve extended its commitment to holding interest rates low for an
"extended period" to support the U.S. economy and employment. In addition to
maintaining an accommodative interest rate policy, the Fed committed to
purchasing $40 billion of Agency Mortgage-Backed Securities ("MBS") per month as
part of a new quantitative easing or "QE" program and reinvesting all paydowns
from its Agency MBS holdings (which is estimated to be approximately $1
trillion). These policies brought down mortgage rates from 4.07% in October 2011
to 3.38% in October 2012. Lower interest rates helped support home prices by
making home purchases more affordable and encourages refinancing of existing
borrowers in a lower rate mortgage.

Lower interest rates and a stronger economy helped improve home prices for the
year. Higher home prices increase the performance of the Fund's RMBS exposure in
a number of ways, including better recoveries on defaulted loans, decreased loan
delinquency and increased prepayments. Prior to October 2011, most investors
expected a further 5 to 10% decline in home prices. Instead, we saw price
increases in most regions handily beating expectations during the spring home
buying season. While these gains will likely slip as winter approaches, we
expect the year to end with a small net gain, which should help mark an official
bottom for the housing market.

In our last report, we posted positive returns in securitized products on
improving forecasts for collateral performance and lower required yields from
investors. These dynamics remain intact as the 2012 calendar year comes to a
close. With a contraction in the premium for risk, we remain focused on
stability and income. We believe bonds with these characteristics will be the
first choice for more conventional investors dipping a toe back into this
market. In addition, we will add securities which we believe will benefit the
most from a housing recovery. For these reasons, we continue to emphasize
various types of private label RMBS and CMBS.

PERFORMANCE ANALYSIS

For the 12 months ended October 31, 2012, the Fund had a total return(10) of
16.11% based on net asset value ("NAV"). For the period, the Fund traded from a
discount to NAV of -10.27% to a premium to NAV of 3.69%, resulting in a total
return11 of 34.16%, based on market price.

The total return for the Fund's benchmark, the Barclays Capital Ba U.S. High
Yield Index, was 13.61% for the 12 months ended October 31, 2012. While the
benchmark contains mostly corporate debt, it is important to note that the Fund
maintained exposure to structured finance and mortgage-related securities during
the period.

As of October 31, 2012, the Fund's leverage was approximately 27.39% of Managed
Assets which contributed positively to the Fund's performance during the period.
However, the Fund may utilize leverage in an amount up to 33.33% of Managed
Assets. Where our overall budget for risk warrants it and when the return
opportunities are compelling, we are likely to increase leverage in an attempt
to improve returns. In periods of stability, this may be an especially important
tool.

An important factor impacting the return of the Fund relative to its benchmarks
was the Fund's use of financial leverage through the use of bank borrowings. The
Fund uses leverage because its managers believe that, over time, leverage
provides opportunities for additional income and total return for common
shareholders. However, the use of leverage also can expose common shareholders
to additional volatility. For example, as the prices of securities held by the
Fund decline, the negative impact of the valuation changes on common share net
asset value and common shareholder total return is magnified by the use of
leverage. Conversely, leverage may enhance common share returns during periods
when the prices of securities held by the Fund generally are rising.

Individual contributors of performance included USG Corp., Pulte Group, and
Standard Pacific Corp. Each of these top contributors is related to the
homebuilding industry, and sentiment for the housing market improved markedly
during the period, as it became increasingly apparent that the U.S. was at last
emerging from its multi-year housing bust. Both Standard Pacific Corp. and Pulte
Group are homebuilders that are benefitting directly from improved demand for
new homes, low inventory levels, and attractive financing for buyers. USG Corp.
is a building materials company that is benefitting from both improvements in
the new building market, and from growth in repair and remodel construction.

Detractors from performance included Freescale Semiconductor, whose business is
suffering from weak demand, particularly in Europe, and increased competition
globally. Additional detractors of performance included BALL 2005-MIB L, a
junior CMBS that has suffered as more loans fell delinquent, although one which
we feel will benefit from collateral recoveries, and Harborview 2005-9 B10, a
junior RMBS security that has had coupon payment deferrals and diminished credit
enhancement.

-----------------------

10 Total return is based on NAV is the combination of reinvested dividend,
capital gain and return of capital distributions, if any, at prices
obtained by the Dividend Reinvestment Plan and changes in NAV per share
for NAV returns and changes in Common Share price for market value returns
and does not reflect sales load. Past performance is not indicative of
future results.

Page 5

FIRST TRUST STRATEGIC HIGH INCOME FUND II
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 2012

PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------------- --------- ------------ ------------
CORPORATE BONDS AND NOTES - 107.6%

AUTOMOTIVE - 6.6%

$ 1,750,000 American Axle & Manufacturing, Inc. (a)...... 7.88% 03/01/17 $ 1,817,812
500,000 American Axle & Manufacturing, Inc. ......... 6.63% 10/15/22 496,875
1,750,000 Chrysler Group LLC/Chrysler Group
Co-Issuer, Inc. .......................... 8.25% 06/15/21 1,879,062
1,500,000 Ford Motor Co. (a)........................... 6.50% 08/01/18 1,719,375
1,950,000 Pittsburgh Glass Works LLC (a) (b)........... 8.50% 04/15/16 1,808,625
425,000 Tenneco, Inc. ............................... 6.88% 12/15/20 464,844
1,270,000 Visteon Corp. (a)............................ 6.75% 04/15/19 1,312,863
------------
9,499,456
------------
BASIC INDUSTRY - 16.2%
1,750,000 AK Steel Corp. (a)........................... 7.63% 05/15/20 1,522,500
775,000 Alpha Natural Resources, Inc. ............... 6.25% 06/01/21 678,125
1,675,000 Arch Coal, Inc. (a).......................... 8.75% 08/01/16 1,704,312
1,750,000 Associated Materials LLC (a)................. 9.13% 11/01/17 1,741,250
500,000 Building Materials Corp. of America (b)...... 6.75% 05/01/21 546,250
1,160,000 Georgia-Pacific LLC (a)...................... 7.38% 12/01/25 1,604,364
415,000 Georgia-Pacific LLC (a)...................... 7.25% 06/01/28 538,533
1,750,000 Hexion US Finance Corp. ..................... 9.00% 11/15/20 1,579,375
1,100,000 Huntsman International LLC (a)............... 8.63% 03/15/21 1,256,750
1,750,000 Ply Gem Industries, Inc. (a)................. 8.25% 02/15/18 1,876,875
1,700,000 Polymer Group, Inc. (a)...................... 7.75% 02/01/19 1,827,500
1,600,000 Steel Dynamics, Inc. (a)..................... 7.63% 03/15/20 1,762,000
1,250,000 United States Steel Corp. (a)................ 7.00% 02/01/18 1,275,000
675,000 United States Steel Corp. (a)................ 7.38% 04/01/20 681,750
2,100,000 USG Corp. (a) (c)............................ 9.75% 01/15/18 2,304,750
1,225,000 Verso Paper Holdings LLC/Verso Paper,
Inc. (b).................................. 11.75% 01/15/19 1,292,375
1,355,000 Xerium Technologies, Inc. (a)................ 8.88% 06/15/18 1,151,750
------------
23,343,459
------------
CAPITAL GOODS - 8.6%
1,750,000 Berry Plastics Corp. (a)..................... 9.50% 05/15/18 1,911,875
1,750,000 Coleman Cable, Inc. (a)...................... 9.00% 02/15/18 1,872,500
1,700,000 Crown Cork & Seal Co., Inc. (a).............. 7.38% 12/15/26 1,865,750
1,755,000 Mueller Water Products, Inc. (a)............. 7.38% 06/01/17 1,816,425
1,750,000 Owens-Illinois, Inc. (a)..................... 7.80% 05/15/18 2,021,250
950,000 Tekni-Plex, Inc. (b)......................... 9.75% 06/01/19 1,021,250
1,100,000 Terex Corp. (a).............................. 8.00% 11/15/17 1,150,875
650,000 Terex Corp. ................................. 6.50% 04/01/20 685,750
------------
12,345,675
------------
CONSUMER CYCLICAL - 6.7%
1,750,000 Levi Strauss & Co. (a)....................... 7.63% 05/15/20 1,920,625
1,775,000 Limited Brands, Inc. (a)..................... 7.60% 07/15/37 1,839,344
560,000 Neiman Marcus Group, Inc. (a)................ 10.38% 10/15/15 572,606
1,725,000 Pharmaceutical Product Development,
Inc. (b).................................. 9.50% 12/01/19 1,936,312
550,000 Phillips-Van Heusen Corp. (a)................ 7.38% 05/15/20 618,750

Page 6 See Notes to Financial Statements

FIRST TRUST STRATEGIC HIGH INCOME FUND II
PORTFOLIO OF INVESTMENTS - (Continued)
OCTOBER 31, 2012

PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------------- --------- ------------ ------------
CORPORATE BONDS AND NOTES - (CONTINUED)

CONSUMER CYCLICAL - (Continued)

$ 2,100,000 Reynolds Group Issuer, Inc. (a).............. 9.00% 04/15/19 $ 2,136,750
550,000 Rite Aid Corp. (a)........................... 9.75% 06/12/16 602,250
------------
9,626,637
------------
CONSUMER NON-CYCLICAL - 3.9%
1,700,000 B&G Foods, Inc. (a).......................... 7.63% 01/15/18 1,840,250
1,069,000 C&S Group Enterprises LLC (b)................ 8.38% 05/01/17 1,131,804
425,000 Cott Beverages, Inc. (a)..................... 8.13% 09/01/18 473,875
1,000,000 Easton-Bell Sports, Inc. (a)................. 9.75% 12/01/16 1,078,760
1,125,000 YCC Holdings LLC ............................ 10.25% 02/15/16 1,168,594
------------
5,693,283
------------
ENERGY - 17.2%
1,750,000 Breitburn Energy Partners LP/Breitburn
Finance Corp. (a)......................... 8.63% 10/15/20 1,903,125
250,000 Breitburn Energy Partners L.P./Breitburn
Finance Corp. (b)......................... 7.88% 04/15/22 260,000
425,000 Calfrac Holdings LP (a) (b).................. 7.50% 12/01/20 422,875
1,875,000 Crosstex Energy LP/Crosstex Energy Finance
Corp. (a)................................. 8.88% 02/15/18 2,020,312
2,060,000 EV Energy Partners LP/EV Energy Finance
Corp. .................................... 8.00% 04/15/19 2,178,450
801,163 GMX Resources, Inc. (a) (d).................. 11.00% 12/01/17 764,109
1,050,000 Hercules Offshore LLC (a) (b)................ 10.50% 10/15/17 1,113,000
1,700,000 Hilcorp Energy I LP/Hilcorp Finance
Co. (a) (b)............................... 8.00% 02/15/20 1,870,000
1,750,000 Key Energy Services, Inc. (a)................ 6.75% 03/01/21 1,750,000
950,000 Linn Energy LLC/Linn Energy Finance
Corp. (a)................................. 8.63% 04/15/20 1,043,812
800,000 Linn Energy LLC/Linn Energy Finance
Corp. .................................... 7.75% 02/01/21 858,000
1,750,000 McJunkin Red Man Corp. (a)................... 9.50% 12/15/16 1,892,844
1,840,000 Niska Gas Storage US LLC/Niska Gas Storage
Canada ULC (a)............................ 8.88% 03/15/18 1,918,200
1,275,000 Pioneer Natural Resources Co. (a)............ 6.65% 03/15/17 1,519,032
1,675,000 Plains Exploration & Production Co. (a)...... 7.63% 06/01/18 1,783,875
650,000 Quicksilver Resources, Inc. (a).............. 11.75% 01/01/16 672,750
294,000 Sesi LLC (a)................................. 6.88% 06/01/14 294,550
250,000 Vanguard Natural Resources LLC/VNR Finance
Corp. .................................... 7.88% 04/01/20 255,313
2,100,000 Venoco, Inc. (a)............................. 8.88% 02/15/19 1,858,500
415,000 W&T Offshore, Inc. .......................... 8.50% 06/15/19 438,863
------------
24,817,610
------------
FINANCIAL SERVICES - 1.7%
525,000 General Motors Financial Co., Inc. (b)....... 4.75% 08/15/17 538,066
1,750,000 Level 3 Communications, Inc. (b)............. 8.88% 06/01/19 1,844,063
------------
2,382,129
------------

See Notes to Financial Statements Page 7

FIRST TRUST STRATEGIC HIGH INCOME FUND II
PORTFOLIO OF INVESTMENTS - (Continued)
OCTOBER 31, 2012

HEALTHCARE - 5.4%

$ 1,750,000 Community Health Systems, Inc. .............. 7.13% 07/15/20 $ 1,852,812
1,000,000 DJO Finance LLC/DJO Finance Corp. (b)........ 9.88% 04/15/18 985,000
1,750,000 HCA, Inc. (a)................................ 8.00% 10/01/18 2,025,625
900,000 Health Management Associates, Inc. .......... 7.38% 01/15/20 974,250
1,045,000 Inventiv Health, Inc. (b).................... 10.25% 08/15/18 950,950
1,000,000 Kindred Healthcare, Inc. .................... 8.25% 06/01/19 985,000
------------
7,773,637
------------
MEDIA - 10.2%
1,700,000 American Reprographics Co. (a)............... 10.50% 12/15/16 1,802,000
1,850,000 Cablevision Systems Corp. (a)................ 8.63% 09/15/17 2,169,125
1,700,000 CCO Holdings LLC/CCO Holdings Capital
Corp. (a)................................. 8.13% 04/30/20 1,921,000
1,700,000 Clear Channel Communications, Inc. (a)....... 9.00% 03/01/21 1,491,750
1,750,000 Cumulus Media Holdings, Inc. ................ 7.75% 05/01/19 1,719,375
1,700,000 Deluxe Corp. (a)............................. 7.38% 06/01/15 1,740,375
1,700,000 Lamar Media Corp. (a)........................ 7.88% 04/15/18 1,878,500
1,750,000 Mediacom LLC/Mediacom Capital Corp. (a)...... 9.13% 08/15/19 1,946,875
------------
14,669,000
------------
REAL ESTATE - 1.3%
1,750,000 Realogy Corp. (a) (b)........................ 7.88% 02/15/19 1,890,000
------------
RETAIL - 1.1%
1,500,000 Michaels Stores, Inc. ....................... 7.75% 11/01/18 1,618,125
------------
SERVICES - 18.9%
1,650,000 AMC Entertainment, Inc. (a).................. 8.75% 06/01/19 1,831,500
1,750,000 Avis Budget Car Rental LLC/Avis Budget
Finance, Inc. (a)......................... 8.25% 01/15/19 1,918,438
850,000 Beazer Homes USA, Inc. (a)................... 9.13% 06/15/18 895,688
2,000,000 Boyd Gaming Corp. (b)........................ 9.00% 07/01/20 2,015,000
1,400,000 Caesars Entertainment Operating Co., Inc. (a). 11.25% 06/01/17 1,522,500
650,000 Caesars Entertainment Operating Co., Inc. (b). 8.50% 02/15/20 640,250
2,550,000 Casella Waste Systems, Inc. (b).............. 7.75% 02/15/19 2,511,750
800,000 Cenveo Corp. ................................ 8.88% 02/01/18 726,000
1,750,000 CityCenter Holdings LLC/CityCenter Finance
Corp. (a)................................. 7.63% 01/15/16 1,876,875
1,750,000 MGM Resorts International (a)................ 7.63% 01/15/17 1,850,625
525,000 MGM Resorts International (b)................ 8.63% 02/01/19 570,281
1,261,979 MTR Gaming Group, Inc. ...................... 11.50% 08/01/19 1,325,077
1,250,000 National Cinemedia LLC (b)................... 6.00% 04/15/22 1,325,000
1,700,000 Palace Entertainment Holdings LLC/Palace
Entertainment Holdings Corp. (a) (b)...... 8.88% 04/15/17 1,802,000
2,100,000 Pulte Group, Inc. (a)........................ 6.38% 05/15/33 2,047,500
875,000 RSC Equipment Rental, Inc./RSC Holdings
III LLC (a)............................... 10.25% 11/15/19 1,015,000
875,000 RSC Equipment Rental, Inc./RSC Holdings
LLC ...................................... 8.25% 02/01/21 971,250
2,100,000 Standard Pacific Corp. (a)................... 8.38% 05/15/18 2,457,000
------------
27,301,734
------------

Page 8 See Notes to Financial Statements

FIRST TRUST STRATEGIC HIGH INCOME FUND II
PORTFOLIO OF INVESTMENTS - (Continued)
OCTOBER 31, 2012

TECHNOLOGY & ELECTRONICS - 2.4%

$ 88,000 First Data Corp. ............................ 9.88% 09/24/15 $ 90,310
1,750,000 First Data Corp. (a) (b)..................... 8.25% 01/15/21 1,758,750
1,775,000 Freescale Semiconductor, Inc. (a)............ 8.05% 02/01/20 1,668,500
------------
3,517,560
------------
TELECOMMUNICATIONS - 6.2%
860,000 Cincinnati Bell, Inc. (a).................... 8.25% 10/15/17 924,500
900,000 Cincinnati Bell, Inc. (a).................... 8.75% 03/15/18 913,500
1,750,000 Frontier Communications (a).................. 7.13% 03/15/19 1,890,000
1,700,000 PAETEC Holding Corp. (a)..................... 9.88% 12/01/18 1,950,750
1,450,000 Qwest Corp. (a).............................. 6.88% 09/15/33 1,464,500
1,725,000 Windstream Corp. (a)......................... 7.00% 03/15/19 1,774,594
------------
8,917,844
------------
UTILITY - 1.2%
1,700,000 Calpine Corp. (a) (b)........................ 7.25% 10/15/17 1,810,500
------------
TOTAL CORPORATE BONDS AND NOTES ......................................... 155,206,649
(Cost $147,810,936) ------------

MORTGAGE-BACKED SECURITIES - 9.0%

COLLATERALIZED MORTGAGE OBLIGATIONS - 7.4%
Banc of America Mortgage Securities
289,489 Series 2007-1, Class 1A26 ................. 6.00% 03/25/37 272,340
Citicorp Mortgage Securities, Inc.
2,418,200 Series 2007-2, Class 1A3 .................. 6.00% 02/25/37 2,530,107
Countrywide Alternative Loan Trust ..........
265,141 Series 2006-41CB, Class 2A14 ............. 6.00% 01/25/37 206,104
212,719 Series 2007-11T1, Class A37 (e)........... 38.76% 05/25/37 419,979
Countrywide Home Loan Mortgage Pass
Through Trust
332,109 Series 2006-21, Class A8 ................. 5.75% 02/25/37 292,779
933,795 Series 2007-10, Class A5 ................. 6.00% 07/25/37 818,333
HarborView Mortgage Loan Trust
3,597,355 Series 2005-9, Class B10 (e) (f).......... 1.96% 06/20/35 160,036
MASTR Asset Securitization Trust
338,839 Series 2006-2, Class 1A10 (e)............. 6.00% 06/25/36 319,283
Residential Accredit Loans, Inc.
222,022 Series 2007-QS6, Class A2 (e)............. 53.80% 04/25/37 544,475
Residential Asset Securitization Trust
1,303,333 Series 2005-A8CB, Class A11 .............. 6.00% 07/25/35 1,167,191
Structured Asset Securities Corp.
173,606 Series 2003-10, Class A .................. 6.00% 04/25/33 185,842
WaMu Mortgage Pass-Through Certificates
1,169,109 Series 2007-OA1, Class A1A (e)............ 0.85% 02/25/47 808,769
Washington Mutual Alternative Mortgage
Pass-Through Certificates
66,913 Series 2007-5, Class A11 (e).............. 38.22% 06/25/37 119,137

See Notes to Financial Statements Page 9

FIRST TRUST STRATEGIC HIGH INCOME FUND II
PORTFOLIO OF INVESTMENTS - (Continued)
OCTOBER 31, 2012

COLLATERALIZED MORTGAGE OBLIGATIONS - (Continued)

Wells Fargo Mortgage Backed Securities Trust
$ 1,303,967 Series 2006-8, Class A15 ................. 6.00% 07/25/36 $ 1,299,863
161,000 Series 2006-AR1, Class 2A5 (e)............ 5.35% 03/25/36 159,918
443,106 Series 2007-7, Class A38 ................. 6.00% 06/25/37 428,510
308,922 Series 2007-7, Class A6 .................. 6.00% 06/25/37 313,550
119,922 Series 2007-8, Class 1A16 ................ 6.00% 07/25/37 117,860
508,834 Series 2007-8, Class 2A2 ................. 6.00% 07/25/37 504,109
------------
10,668,185
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES - 1.6%
Banc of America Large Loan, Inc.
2,620,406 Series 2005-MIB1, Class L (e) (g) (h)..... 3.21% 03/15/22 285,290
Greenwich Capital Commercial Funding Corp.
1,180,000 Series 2007-GG11, Class AJ (e)............ 5.97% 12/10/49 993,297
Vornado DP LLC
930,000 Series 2010-VNO, Class D (b).............. 6.36% 09/13/28 1,075,473
------------
2,354,060
------------
TOTAL MORTGAGE-BACKED SECURITIES .......................................... 13,022,245
(Cost $13,044,645) ------------

ASSET-BACKED SECURITIES - 7.4%

Ace Securities Corp.
1,177,095 Series 2003-MH1, Class A4 (b)............. 6.50% 08/15/30 1,261,959
BankAmerica Manufactured Housing Contract
Trust II
2,300,000 Series 1997-1, Class B1 (f)............... 6.94% 06/10/21 2,176,815
Bombardier Capital Mortgage Securitization Corp.
290,087 Series 1999-B, Class A1B ................. 6.61% 12/15/29 168,963
Citigroup Mortgage Loan Trust, Inc.
2,301,000 Series 2003-HE3, Class M4 (e)............. 3.21% 12/25/33 841,667
Conseco Finance Securitizations Corp.
2,007,715 Series 2000-6, Class M1 .................. 7.72% 09/01/31 470,822
Countrywide Asset-Backed Certificates
20,344 Series 2004-6, Class 2A5 (e).............. 0.60% 11/25/34 19,637
Green Tree Financial Corp.
1,114,781 Series 1996-6, Class B1 .................. 8.00% 09/15/27 332,520
119,236 Series 1997-4, Class B1 .................. 7.23% 02/15/29 9,154
735,980 Series 1998-4, Class M1 .................. 6.83% 04/01/30 374,293
2,360,353 Series 1999-3, Class M1 .................. 6.96% 02/01/31 227,342
GSAMP Trust
2,859,664 Series 2006-S3, Class A2 (h).............. 6.27% 05/25/36 105,503
2,938,174 Series 2006-S5, Class A1 (e).............. 0.30% 09/25/36 46,425
1,461,012 Series 2007-HE1, Class A2B ............... 0.31% 03/25/47 1,097,964
231,475 Series 2007-NC1, Class A2A ............... 0.26% 12/25/46 103,414
447,948 Series 2007-NC1, Class A2B ............... 0.31% 12/25/46 200,136
3,004,983 Series 2007-NC1, Class A2C ............... 0.36% 12/25/46 1,339,652

Page 10 See Notes to Financial Statements

FIRST TRUST STRATEGIC HIGH INCOME FUND II
PORTFOLIO OF INVESTMENTS - (Continued)
OCTOBER 31, 2012

IMC Home Equity Loan Trust
$ 2,487,075 Series 1997-3, Class B ................... 7.87% 08/20/28 $ 1,158,037
2,526,537 Series 1997-5, Class B ................... 7.59% 11/20/28 513,272
Independence III CDO, Ltd.
7,000,000 Series 3A, Class C1 (e) (g) (i)........... 2.86% 10/03/37 19,810
Oakwood Mortgage Investors, Inc.
871,869 Series 1999-B, Class M1 .................. 7.18% 12/15/26 220,083
Park Place Securities, Inc.
488,581 Series 2004-WCW2, Class M10 (e) (g)....... 2.96% 10/25/34 5,476
------------
TOTAL ASSET-BACKED SECURITIES ............................................. 10,692,944
(Cost $8,659,084) ------------

FOREIGN CORPORATE BONDS AND NOTES - 7.4%

AUTOMOTIVE - 1.0%
1,300,000 Jaguar Land Rover PLC (b).................... 8.13% 05/15/21 1,407,250
------------
BASIC INDUSTRY - 5.7%
1,540,000 Cascades, Inc. (a)........................... 7.88% 01/15/20 1,640,100
1,150,000 FMG Resources (August 2006) Pty Ltd. (b)..... 6.88% 04/01/22 1,085,313
1,750,000 Ineos Group Holdings Ltd. (a) (b)............ 8.50% 02/15/16 1,697,500
1,750,000 Masonite International Corp. (a) (b)......... 8.25% 04/15/21 1,863,750
1,775,000 Tembec Industries, Inc. (a).................. 11.25% 12/15/18 1,885,937
------------
8,172,600
------------
ENERGY - 0.7%
375,000 Petroleum Geo-Services ASA (b)............... 7.38% 12/15/18 400,313
645,000 Precision Drilling Corp. .................... 6.63% 11/15/20 693,375
------------
1,093,688
------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES ................................... 10,673,538
(Cost $10,396,174) ------------

SENIOR FLOATING-RATE LOAN INTERESTS - 0.4%

UTILITY - 0.4%
834,744 Texas Competitive Electric Holdings Co., LLC
Tranche B2 (e)............................ 4.72%-4.94% 10/10/17 537,158
------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................. 537,158
(Cost $807,219) ------------

STRUCTURED NOTES - 0.0%

5,750,000 Preferred Term Securities XXV, Ltd. (g)...... (j) 06/22/37 575
2,500,000 Preferred Term Securities XXVI, Ltd.
Subordinated Note (g)..................... (j) 09/22/37 250
------------
TOTAL STRUCTURED NOTES .................................................. 825
(Cost $0) ------------

See Notes to Financial Statements Page 11

FIRST TRUST STRATEGIC HIGH INCOME FUND II
PORTFOLIO OF INVESTMENTS - (Continued)
OCTOBER 31, 2012

SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------------- ------------
PREFERRED SECURITIES - 0.1%

$ 3,500 Independence III CDO, Ltd., Series 3A, Class PS (g) (j).................... $ 3,500
4,000 Soloso CDO, Ltd., Series 2005-1 (g) (j).................................... 40,000
9,000 White Marlin CDO, Ltd., Series AI (g) (i) (j).............................. 45,000
------------
TOTAL PREFERRED SECURITIES................................................. 88,500
(Cost $0) ------------

TOTAL INVESTMENTS - 131.9%................................................. 190,221,859
(Cost $180,718,058) (k)

OUTSTANDING LOAN - (37.7%) ................................................ (54,400,000)
NET OTHER ASSETS AND LIABILITIES - 5.8% ................................... 8,382,766
------------
NET ASSETS - 100.0% ....................................................... $144,204,625
------------

---------------------------------------
(a) All or a portion of this security is available to serve as
collateral on the outstanding loan.

(b) This security, sold within the terms of a private placement
memorandum, is exempt from registration upon resale under Rule 144A
under the Securities Act of 1933, as amended (the "1933 Act"), and
may be resold in transactions exempt from registration, normally to
qualified institutional buyers. Pursuant to procedures adopted by
the Fund's Board of Trustees, this security has been determined to
be liquid by Brookfield Investment Management Inc., the Fund's
sub-advisor. Although market instability can result in periods of
increased overall market illiquidity, liquidity for each security is
determined based on security specific factors and assumptions, which
require subjective judgment. At October 31, 2012, securities noted
as such amounted to $38,835,659 or 26.93% of net assets.

(c) Multi-Step Coupon Bond - Coupon steps up or down based upon ratings
changes by Standard & Poor's Ratings Group or Moody's Investors
Service, Inc. The interest rate shown reflects the rate in effect at
October 31, 2012.

(d) This security is a Payment-in-Kind ("PIK") whereby interest will be
paid either in cash at the stated coupon or at the rate of 13%, of
which 9% will be in cash and 4% PIK.

(e) Floating rate security. The interest rate shown reflects the rate in
effect at October 31, 2012.

(f) Security missed one or more of its interest payments.

(g) This security, sold within the terms of a private placement
memorandum, is exempt from registration upon resale under Rule 144A
under the 1933 Act, and may be resold in transactions exempt from
registration, normally to qualified institutional buyers (see Note
2C - Restricted Securities in the Notes to Financial Statements).

(h) Security is receiving less than the stated coupon.

(i) The issuer is in default. Income is not being accrued.

(j) Zero coupon security.

(k) Aggregate cost for federal income tax purposes is $219,353,193. As
of October 31, 2012, the aggregate gross unrealized appreciation for
all securities in which there was an excess of value over tax cost
was $10,809,163 and the aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over value
was $39,940,497.

CDO Collateralized Debt Obligation

Page 12 See Notes to Financial Statements

FIRST TRUST STRATEGIC HIGH INCOME FUND II
PORTFOLIO OF INVESTMENTS - (Continued)
OCTOBER 31, 2012

---------------------------------------

VALUATION INPUTS

A summary of the inputs used to value the Fund's investments as of October 31,
2012 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):

LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
10/31/2012 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------

Corporate Bonds and Notes*......................... $ 155,206,649 $ -- $ 155,206,649 $ --
Mortgage-Backed Securities:
Collateralized Mortgage Obligations............ 10,668,185 -- 10,668,185 --
Commercial Mortgage-Backed Securities.......... 2,354,060 -- 2,354,060 --
Asset-Backed Securities............................ 10,692,944 -- 10,692,944 --
Foreign Corporate Bonds and Notes*................. 10,673,538 -- 10,673,538 --
Senior Floating-Rate Loan Interests*............... 537,158 -- 537,158 --
Structured Notes................................... 825 -- 825 --
Preferred Securities .............................. 88,500 -- -- 88,500
------------- ------------- ------------- -------------
Total Investments.................................. $ 190,221,859 $ -- $ 190,133,359 $ 88,500
============= ============= ============= =============

* See Portfolio of Investments for industry breakout.

All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at October 31, 2012.

The following table presents the activity of the Fund's investments measured at
fair value on a recurring basis using significant unobservable inputs (Level 3)
for the period presented.

Beginning Balance at October 31, 2011
Preferred Securities $ 88,500
Net Realized Gain (Loss) --
Net Change in Unrealized Appreciation/Depreciation --
Purchases --
Sales --
Transfers In --
Transfers Out --
Ending Balance at October 31, 2012
Preferred Securities 88,500
------------
Total Level 3 holdings $ 88,500
============

There was no net change in unrealized appreciation (depreciation) from Level 3
investments held as of October 31, 2012.

See Notes to Financial Statements Page 13

FIRST TRUST STRATEGIC HIGH INCOME FUND II
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2012

ASSETS:

Investments, at value
(Cost $180,718,058)......................................................................... $ 190,221,859
Cash........................................................................................... 4,925,929
Prepaid expenses............................................................................... 126,751
Interest receivable............................................................................ 3,704,763
-------------
Total Assets............................................................................. 198,979,302
-------------

LIABILITIES:
Outstanding loan............................................................................... 54,400,000
Payables:
Investment advisory fees.................................................................... 151,219
Audit and tax fees.......................................................................... 70,835
Interest and fees on loan................................................................... 68,967
Printing fees............................................................................... 26,239
Administrative fees......................................................................... 15,129
Legal fees.................................................................................. 11,565
Custodian fees.............................................................................. 6,170
Transfer agent fees......................................................................... 4,303
Trustees' fees and expenses................................................................. 1,957
Financial reporting fees.................................................................... 771
Other liabilities.............................................................................. 17,522
-------------
Total Liabilities........................................................................ 54,774,677
-------------
NET ASSETS..................................................................................... $ 144,204,625
=============
NET ASSETS consist of:
Paid-in capital................................................................................ $ 204,162,000
Par value...................................................................................... 84,524
Accumulated net investment income (loss)....................................................... 2,222,720
Accumulated net realized gain (loss) on investments............................................ (71,768,420)
Net unrealized appreciation (depreciation) on investments...................................... 9,503,801
-------------
NET ASSETS..................................................................................... $ 144,204,625
=============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)........................... $ 17.06
=============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized).... 8,452,416
=============

Page 14 See Notes to Financial Statements

FIRST TRUST STRATEGIC HIGH INCOME FUND II
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 2012

INVESTMENT INCOME:

Interest....................................................................................... $ 16,210,072
-------------
Total investment income..................................................................... 16,210,072
-------------
EXPENSES:
Investment advisory fees....................................................................... 1,701,983
Interest and fees on loan...................................................................... 793,875
Administrative fees............................................................................ 169,654
Legal fees..................................................................................... 142,164
Printing fees.................................................................................. 93,327
Audit and tax fees............................................................................. 81,319
At the market offering costs................................................................... 75,288
Reorganization fees............................................................................ 52,033
Transfer agent fees............................................................................ 41,368
Custodian fees................................................................................. 31,810
Trustees' fees and expenses.................................................................... 25,319
Financial reporting fees....................................................................... 9,250
Other.......................................................................................... 171,615
-------------
Total expenses.............................................................................. 3,389,005
-------------
NET INVESTMENT INCOME (LOSS)................................................................... 12,821,067
-------------

NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments..................................................... (204,326)
Net change in unrealized appreciation (depreciation) on investments......................... 7,275,057
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)........................................................ 7,070,731
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 19,891,798
=============

See Notes to Financial Statements Page 15

FIRST TRUST STRATEGIC HIGH INCOME FUND II
STATEMENTS OF CHANGES IN NET ASSETS

YEAR YEAR
ENDED ENDED
10/31/2012 10/31/2011
-------------- --------------
OPERATIONS:

Net investment income (loss)....................................................... $ 12,821,067 $ 5,613,623
Net realized gain (loss)........................................................... (204,326) 2,082,983
Net change in unrealized appreciation (depreciation)............................... 7,275,057 4,136,138
-------------- --------------
Net increase (decrease) in net assets resulting from operations.................... 19,891,798 11,832,744
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................................................. (5,019,769) (4,945,284)
Net realized gain.................................................................. -- --
Return of capital.................................................................. (7,678,703) (651,423)
-------------- --------------
Total distributions to shareholders................................................ (12,698,472) (5,596,707)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from Common Shares acquired through reorganization........................ -- 74,405,197
Proceeds from Common Shares sold through at the market offerings................... 5,582,406 --
Proceeds from Common Shares reinvested............................................. 319,447 --
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions.......... 5,901,853 74,405,197
-------------- --------------
Total increase (decrease) in net assets............................................ 13,095,179 80,641,234
NET ASSETS:
Beginning of period................................................................ 131,109,446 50,468,212
-------------- --------------
End of period...................................................................... $ 144,204,625 $ 131,109,446
============== ==============
Accumulated net investment income (loss) at end of period.......................... $ 2,222,720 $ 1,890,330
============== ==============
CAPITAL TRANSACTIONS WERE AS FOLLOWS:
Common Shares at beginning of period............................................... 8,106,875 3,177,925
Common Shares issued through reorganization........................................ -- 4,928,950
Common Shares sold through at the market offerings................................. 326,295 --
Common Shares issued as reinvestment under the Dividend Reinvestment Plan.......... 19,246 --
-------------- --------------
Common Shares at end of period..................................................... 8,452,416 8,106,875
============== ==============

Page 16 See Notes to Financial Statements

FIRST TRUST STRATEGIC HIGH INCOME FUND II
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED OCTOBER 31, 2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net increase (decrease) in net assets resulting from operations................. $ 19,891,798
Adjustments to reconcile net increase (decrease) in net assets resulting
from operations to net cash provided by operating activities:
Purchases of investments.................................................. (65,381,305)
Sales, maturities and paydowns of investments............................. 61,528,497
Net amortization/accretion of premiums/discounts on investments........... (450,438)
Net realized gain/loss on investments..................................... 204,326
Net change in unrealized appreciation/depreciation on investments......... (7,275,057)
CHANGES IN ASSETS AND LIABILITIES:
Increase in interest receivable........................................... (290,485)
Increase in prepaid expenses.............................................. (115,701)
Increase in interest and fees on loan payable............................. 4,617
Increase in investment advisory fees payable.............................. 14,737
Decrease in reorganization fees payable................................... (48,407)
Increase in audit and tax fees payable.................................... 15,335
Increase in legal fees payable............................................ 10,550
Increase in printing fees payable......................................... 9,946
Increase in administrative fees payable................................... 1,556
Decrease in custodian fees payable........................................ (1,849)
Decrease in transfer agent fees payable................................... (1,148)
Decrease in Trustees' fees and expenses payable........................... (1,555)
Increase in other liabilities payable..................................... 14,410
--------------
CASH PROVIDED BY OPERATING ACTIVITIES........................................... $ 8,129,827

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Common Shares sold.......................................... 5,582,406
Proceeds from Common Shares reinvested.................................... 319,447
Distributions to Common Shareholders from net investment income........... (5,019,769)
Distributions to Common Shareholders from return of capital............... (7,678,703)
--------------
CASH USED IN FINANCING ACTIVITIES............................................... (6,796,619)
--------------
Increase in cash................................................................ 1,333,208
Cash at beginning of period..................................................... 3,592,721
--------------
CASH AT END OF PERIOD........................................................... $ 4,925,929
==============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees............................... $ 789,258
==============

See Notes to Financial Statements Page 17

FIRST TRUST STRATEGIC HIGH INCOME FUND II
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD

YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
10/31/2012 10/31/2011 10/31/2010 (a)(f) 10/31/2009 (b)(f) 10/31/2008 (f)
-------------- -------------- ---------------- ---------------- --------------

Net asset value, beginning of period ....... $ 16.17 $ 15.87 $ 14.22 $ 25.56 $ 48.93
---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) ............... 1.52 0.59 1.86 3.87 6.12
Net realized and unrealized gain (loss) .... 0.90 0.32 1.17 (11.31) (23.49)
---------- ---------- ---------- ---------- ----------
Total from investment operations ........... 2.42 0.91 3.03 (7.44) (17.37)
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income ...................... (0.61) (0.54) -- (0.27) (5.13)
Net realized gain .......................... -- -- -- -- --
Return of capital .......................... (0.94) (0.07) (1.38) (3.63) (0.87)
---------- ---------- ---------- ---------- ----------
Total from distributions ................... (1.55) (0.61) (1.38) (3.90) (6.00)
Premiums from shares sold in at the market
offerings................................ 0.02 -- -- -- --
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ............. $ 17.06 $ 16.17 $ 15.87 $ 14.22 $ 25.56
========== ========== ========== ========== ==========
Market value, end of period ................ $ 17.69 $ 14.51 $ 14.49 $ 13.17 $ 21.45
========== ========== ========== ========== ==========
TOTAL RETURN BASED ON NET ASSET VALUE (c)... 16.11% 13.60% 23.46% (28.92)% (37.09)%
========== ========== ========== ========== ==========
TOTAL RETURN BASED ON MARKET VALUE (c)...... 34.16% 11.64% 21.71% (22.00)% (42.84)%
========== ========== ========== ========== ==========

-----------------------

RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ....... $ 144,205 $ 131,109 $ 50,468 $ 45,159 $ 80,740
Ratio of total expenses to average
net assets .............................. 2.52% 2.35% 2.29% 1.77% 4.09%
Ratio of total expenses to average net
assets excluding interest expense ....... 1.93% 1.93% 2.21% 1.77% 2.45%
Ratio of net investment income (loss) to
average net assets ...................... 9.52% 9.65% 12.54% 22.79% 16.48%
Portfolio turnover rate .................... 33% 49% 332% (d) 147% (d) 4%
INDEBTEDNESS:
Total loan outstanding (in 000's) .......... $ 54,400 $ 54,400 N/A N/A N/A
Asset coverage per $1,000 of
indebtedness (e) ........................ $ 3,651 $ 3,410 N/A N/A N/A

-----------------------

(a) On September 20, 2010, the Fund's Board of Trustees approved a new
investment management agreement with First Trust Advisors L.P. and a new
sub-advisory agreement with Brookfield Investment Management Inc.
(formerly known as Hyperion Brookfield Asset Management, Inc.)
("Brookfield"), and on December 20, 2010, the Shareholders voted to
approve both agreements.

(b) On June 29, 2009, the Fund's Board of Trustees approved a new sub-advisory
agreement with Brookfield, and on October 14, 2009, the Shareholders voted
to approve the new sub-advisory agreement with Brookfield.

(c) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan, and changes in net asset value per share
for net asset value returns and changes in Common Share price for market
value returns. Total returns do not reflect sales load and are not
annualized for periods less than one year. Past performance is not
indicative of future results.

(d) For the fiscal years ended October 31, 2010 and 2009, the Fund's portfolio
turnover rate reflects mortgage pool forward commitments as purchases and
sales. This caused the reported portfolio turnover rate to be higher than
in previous and subsequent fiscal years. The turnover rate may vary
greatly from year to year as well as within a year.

(e) Calculated by subtracting the Fund's total liabilities (not including the
loan outstanding) from the Fund's total assets, and dividing by the
outstanding loan balance in 000's.

(f) All share amounts, net asset values and market values have been adjusted
as a result of the 1-for-3 reverse share split on September 30, 2011.

N/A Not applicable.

Page 18 See Notes to Financial Statements

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012

1. FUND DESCRIPTION

First Trust Strategic High Income Fund II (the "Fund") is a diversified,
closed-end management investment company organized as a Massachusetts business
trust on January 18, 2006, and is registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Fund trades under the ticker symbol FHY on the New York Stock
Exchange ("NYSE").

The Fund's primary investment objective is to seek a high level of current
income. The Fund seeks capital growth as a secondary objective. The Fund seeks
to achieve its investment objectives by investing in a diversified portfolio of
below-investment grade and investment grade debt securities, and equity
securities that Brookfield Investment Management Inc. ("Brookfield" or the
"Sub-Advisor") believes offer attractive yield and/or capital appreciation
potential. The Fund may invest up to 100% of its Managed Assets in
below-investment grade debt securities (commonly referred to as "high-yield" or
"junk" bonds). Managed Assets means the average daily total asset value of the
Fund minus the sum of the Fund's liabilities other than the principal amount of
borrowings or reverse repurchase agreements, if any. There can be no assurance
that the Fund will achieve its investment objectives. The Fund may not be
appropriate for all investors.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP") requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.

A. PORTFOLIO VALUATION:

The net asset value ("NAV") of the Common Shares of the Fund is determined
daily, as of the close of regular trading on the NYSE, normally 4:00 p.m.
Eastern time, on each day the NYSE is open for trading. If the NYSE closes early
on a valuation day, the NAV is determined as of that time. 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 dividing the value of all assets of the Fund (including accrued
interest and dividends), less all liabilities (including accrued expenses,
dividends declared but unpaid and any borrowings of the Fund), by the total
number of Common Shares outstanding.

The Fund's investments are valued daily in accordance with valuation procedures
adopted by the Fund's Board of Trustees and in accordance with provisions of the
1940 Act. The Fund's securities will be valued as follows:

Corporate bonds, notes, U.S. government securities, mortgage-backed
securities, asset-backed securities and other debt securities are valued
on the basis of valuations provided by dealers who make markets in such
securities or by an independent pricing service approved by the Fund's
Board of Trustees, which may use the following valuation inputs when
available:

1) benchmark yields;

2) reported trades;

3) broker/dealer quotes;

4) issuer spreads;

5) benchmark securities;

6) bids and offers; and

7) reference data including market research publications.

A ready market does not exist for some of these investments. As such,
these values may differ from the values that would have been used had a
ready market for these investments existed, and the differences could be
material.

Common stocks and other equity securities listed on any national or
foreign exchange (excluding the NASDAQ(R) Stock Market LLC ("NASDAQ") and
the London Stock Exchange Alternative Investment Market ("AIM")) are
valued at the last sale price on the exchange on which they are
principally traded or, for NASDAQ and AIM securities, the official closing
price. Securities traded on more than one securities exchange are valued
at the last sale price or official closing price, as applicable, at the
close of the securities exchange representing the principal market for
such securities.

Securities traded in the over-the-counter market are valued at their
closing bid prices.

Credit default swaps, if any, are valued using a pricing service or, if
the pricing service does not provide a value, by quotes provided by the
selling dealer or financial institution.

Debt securities having a remaining maturity of sixty days or less when
purchased are valued at cost adjusted for amortization of premiums and
accretion of discounts.

Page 19

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
--------------------------------------------------------------------------------

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012

In the event that the pricing service or dealer does not provide a valuation, or
the valuations received are deemed unreliable, the Fund's Board of Trustees has
designated First Trust Advisors L.P. ("First Trust") to use a fair value method
to value the Fund's securities. Additionally, if events occur after the close of
the principal markets for certain securities (e.g., domestic debt and foreign
securities) that could materially affect the Fund's NAV, First Trust may use a
fair value method to value the Fund's securities. The use of fair value pricing
is governed by valuation procedures adopted by the Fund's Board of Trustees, and
in accordance with the provisions of the 1940 Act. As a general principle, the
fair value of a security is the amount which the Fund might reasonably expect to
receive for the security upon its current sale. In light of the judgment
involved in fair valuations, there can be no assurance that a fair value
assigned to a particular security will be the amount which the Fund might be
able to receive upon its current sale. Fair valuation of a security is based on
the consideration of all available information, including, but not limited to,
the following:

1) the fundamental business data relating to the issuer;

2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;

3) the type, size and cost of a security;

4) the financial statements of the issuer;

5) the credit quality and cash flow of the issuer, based on the
Sub-Advisor's or external analysis;

6) the information as to any transactions in or offers for the
security;

7) the price and extent of public trading in similar securities (or
equity securities) of the issuer/borrower, or comparable companies;

8) the coupon payments;

9) the quality, value and salability of collateral, if any, securing
the security;

10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management;

11) the prospects for the issuer's industry, and multiples (of earnings
and/or cash flows) being paid for similar businesses in that
industry; and

12) other relevant factors.

The Fund invests a significant portion of its assets in below-investment grade
debt securities, including structured finance securities and corporate bonds.
Structured finance securities include: asset-backed securities, including home
equity, manufactured housing, etc.; commercial mortgage-backed securities;
residential mortgage-backed or private-label collateralized mortgage
obligations; and collateralized debt obligations. The value and related income
of these securities is sensitive to changes in economic conditions, including
delinquencies and/or defaults.

The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:

o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.

o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:

o Quoted prices for similar investments in active markets.

o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.

o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).

o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.

o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.

The inputs or methodology used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of October 31, 2012, is
included with the Fund's Portfolio of Investments.

B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME:

Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Interest income is recorded daily on the accrual basis. Amortization of premiums
and accretion of discounts are recorded using the effective interest method.

Page 20

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012

The Fund invests in certain lower credit quality securitized assets (for
example, asset-backed securities, collateralized mortgage obligations and
commercial mortgage-backed securities), as well as interest-only securities,
that have contractual cash flows. For these securities, if there is a change in
the estimated cash flows, based on an evaluation of current information, then
the estimated yield is adjusted. Additionally, if the evaluation of current
information indicates a permanent impairment of the security, the cost basis of
the security is written down and a loss is recognized. Debt obligations may be
placed on non-accrual status, and related interest income may be reduced by
ceasing current accruals and amortization/accretion and writing off interest
receivables when the collection of all or a portion of interest has become
doubtful based on consistently applied procedures. A debt obligation is removed
from non-accrual status when the issuer resumes interest payments or when
collectability of interest is reasonably assured.

Securities purchased on a when-issued, delayed-delivery or forward purchase
commitment basis may have extended settlement periods. The value of the security
so purchased is subject to market fluctuations during this period. The Fund
maintains liquid assets with a current value at least equal to the amount of its
when-issued, delayed-delivery or forward purchase commitments until payment is
made. At October 31, 2012, the Fund had no when-issued, delayed-delivery or
forward purchase commitments.

C. RESTRICTED SECURITIES:

The Fund invests in restricted securities, which are securities that may not be
offered for public sale without first being registered under the Securities Act
of 1933, as amended (the "1933 Act"). Prior to registration, restricted
securities may only be resold in transactions exempt from registration under
Rule 144A under the 1933 Act, normally to qualified institutional buyers. As of
October 31, 2012, the Fund held restricted securities as shown in the following
table that the Sub-Advisor has deemed illiquid pursuant to procedures adopted by
the Fund's Board of Trustees. Although market instability can result in periods
of increased overall market illiquidity, liquidity for each security is
determined based on security-specific factors and assumptions, which require
subjective judgment. The Fund does not have the right to demand that such
securities be registered. These securities are valued according to the valuation
procedures as stated in the Portfolio Valuation note (Note 2A) and are not
expressed as a discount to the carrying value of a comparable unrestricted
security. There are no unrestricted securities with the same maturity dates and
yields for these issuers.

% OF
ACQUISITION PRINCIPAL CARRYING NET
SECURITY DATE VALUE/SHARES PRICE COST VALUE ASSETS
------------------------------------------------------------------------------------------------------------------------

Banc of America Large Loan, Inc.
Series 2005-MIB1, Class L, 3.21%, 03/15/22 06/26/06 $ 2,620,406 $ 10.89 $1,033,920 $ 285,290 0.20%

Independence III CDO, Ltd.
Series 3A, Class C1, 2.86%, 10/03/37 12/27/06 $ 7,000,000 0.00* -- 19,810 0.02
Series 3A, Class PS 04/11/06 3,500 0.00* -- 3,500 0.00**

Park Place Securities, Inc.
Series 2004-WCW2, Class M10, 2.96%, 10/25/34 03/24/06 $ 488,581 1.12 3,197 5,476 0.00**

Preferred Term Securities XXV, Ltd.
Zero Coupon, 06/22/37 03/27/07 $ 5,750,000 0.00* -- 575 0.00**

Preferred Term Securities XXVI, Ltd.
Subordinated Note, Zero Coupon, 09/22/37 06/06/07 $ 2,500,000 0.00* -- 250 0.00**

Soloso CDO, Ltd., Series 2005-1 04/24/06 4,000 10.00 -- 40,000 0.03

White Marlin CDO, Ltd., Series AI 06/01/07 9,000 5.00 -- 45,000 0.03
---------- ------------ ------
$ 1,037,117 $ 399,901 0.28%
========== ============ ======

* Amount is less than $0.01.
** Amount is less than 0.01%.

D. INTEREST-ONLY SECURITIES:

An interest-only security ("IO Security") is the interest-only portion of a
mortgage-backed security that receives some or all of the interest portion of
the underlying mortgage-backed security and little or no principal. A reference
principal value called a notional value is used to calculate the amount of
interest due to the IO Security. IO Securities are sold at a deep discount to
their notional principal amount. Generally speaking, when interest rates are
falling and prepayment rates are increasing, the value of an IO Security will
fall. Conversely, when interest rates are rising and prepayment rates are
decreasing, generally the value of an IO Security will rise. These securities,
if any, are identified on the Portfolio of Investments.

E. COLLATERALIZED DEBT OBLIGATIONS:

A collateralized debt obligation ("CDO") is an asset-backed security whose
underlying collateral is typically a portfolio of bonds or bank loans. Where the
underlying collateral is a portfolio of bonds, a CDO is referred to as a
collateralized bond obligation ("CBO"). Where the underlying collateral is a
portfolio of bank loans, a CDO is referred to as a collateralized loan
obligation ("CLO"). Investors in CDOs bear

Page 21

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012

the credit risk of the underlying collateral. Multiple tranches of securities
are issued by the CDO, offering investors various maturity and credit risk
characteristics. Tranches are categorized as senior, mezzanine, and
subordinated/equity, according to their degree of risk. If there are defaults or
the CDO's collateral otherwise underperforms, scheduled payments to senior
tranches take precedence over those of mezzanine tranches, and scheduled
payments to mezzanine tranches take precedence over those to subordinated/equity
tranches. CDOs, similar to other asset-backed securities, are subject to
prepayment risk.

F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

The Fund will distribute to holders of its Common Shares monthly dividends of
all or a portion of its net income after the payment of interest and dividends
in connection with leverage, if any. Distributions will automatically be
reinvested into additional Common Shares pursuant to the Fund's Dividend
Reinvestment Plan unless cash distributions are elected by the shareholder.

Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from U.S. GAAP. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These permanent differences
are primarily due to the varying treatment of income and gain/loss on portfolio
securities held by the Fund and have no impact on net assets or NAV per share.
Temporary differences, which arise from recognizing certain items of income,
expense and gain/loss in different periods for financial statement and tax
purposes, will reverse at some point in the future. Permanent differences
incurred during the fiscal year ended October 31, 2012, primarily as a result of
differing book/tax treatment on recognition of amortization/ accretion on
portfolio holdings, have been reclassified at year end to reflect a decrease in
accumulated net investment income (loss) by $7,468,908, an increase in
accumulated net realized gain (loss) on investments by $8,003,661 and a decrease
to paid-in capital of $534,753. Net assets were not affected by this
reclassification.

The tax character of distributions paid during the fiscal year ended October 31,
2012 and October 31, 2011 was as follows:

Distributions paid from: 2012 2011
Ordinary income................................. $ 5,019,769 $ 4,945,284
Capital gain.................................... -- --
Return of capital............................... 7,678,703 651,423

As of October 31, 2012, the distributable earnings and net assets on a tax basis
were as follows:

Undistributed ordinary income................... $ --
Undistributed capital gains..................... --
------------
Total undistributed earnings.................... --
Accumulated capital and other losses............ (30,225,671)
Net unrealized appreciation (depreciation)...... (29,131,334)
------------
Total accumulated earnings (losses)............. (59,357,005)
Other........................................... (684,894)
Paid-in capital................................. 204,246,524
------------
Net assets...................................... $144,204,625
============

G. INCOME TAXES:

The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal or state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.

Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years after December 22, 2010, may be
carried forward indefinitely, and their character is retained as short-term
and/or long-term losses. Previously, net capital losses were carried forward for
up to eight years and treated as short-term losses. As a transition rule, the
Act requires that post-enactment net capital losses be used before pre-enactment
net capital losses. At October 31, 2012, the Fund had pre-enactment net capital
losses for federal income tax purposes of $30,225,671 expiring as follows:

EXPIRATION DATE AMOUNT
October 31, 2016 $ 153,970
October 31, 2017 7,674,875
October 31, 2018 15,342,938
October 31, 2019 7,053,888

Page 22

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012

Of these losses, $30,191,056 are subject to loss limitation resulting from
reorganization activity. These limitations generally reduce the utilization of
these losses to a maximum of $4,318,194 per year.

During the taxable year ended October 31, 2012, the Fund utilized pre-enactment
capital loss carryforwards in the amount of $705,151.

The Fund is subject to certain limitations under the U.S. tax rules on the use
of capital loss carryforwards and net unrealized built-in losses. These
limitations apply when there has been a 50% change in ownership.

The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ending 2009, 2010,
2011 and 2012 remain open to federal and state audit. As of October 31, 2012,
management has evaluated the application of these standards to the Fund and has
determined that no provision for income tax is required in the Fund's financial
statements for uncertain tax positions.

H. EXPENSES:

The Fund will pay all expenses directly related to its operations.

I. ACCOUNTING PRONOUNCEMENT:

In May 2011, the Financial Accounting Standards Board ("FASB") issued ASU
2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure
Requirements in U.S. GAAP and IFRSs," modifying Topic 820, "Fair Value
Measurements and Disclosures." At the same time, the International Accounting
Standards Board ("IASB") issued International Financial Reporting Standard
("IFRS") 13, "Fair Value Measurement." The objective of the FASB and IASB is
convergence of their guidance on fair value measurements and disclosures.
Specifically, the ASU requires reporting entities to disclose (i) the amounts of
any transfers between Level 1 and Level 2, and the reasons for the transfers,
(ii) for Level 3 fair value measurements, quantitative information about
significant unobservable inputs used, (iii) a description of the valuation
processes used by the reporting entity, and (iv) a narrative description of the
sensitivity of the fair value measurement to changes in unobservable inputs if a
change in those inputs might result in a significantly higher or lower fair
value measurement. The effective date of the ASU is for interim and annual
periods beginning after December 15, 2011, and it is therefore not effective for
the current fiscal year. Management is in the process of assessing the impact of
the updated standards on the Fund's financial statements, if any.

3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS

First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the ongoing monitoring of the Fund's investment
portfolio, managing the Fund's business affairs and providing certain
administrative services necessary for the management of the Fund. For these
investment management services, First Trust is entitled to a monthly fee
calculated at an annual rate of 0.90% of the Fund's Managed Assets. First Trust
also provides fund reporting services to the Fund for a flat annual fee in the
amount of $9,250.

Brookfield serves as the Fund's sub-advisor and manages the Fund's portfolio
subject to First Trust's supervision. The Sub-Advisor receives a portfolio
management fee at an annual rate of 0.45% of Managed Assets that is paid by
First Trust from its investment advisory fee.

BNY Mellon Investment Servicing (US) Inc. serves as the Fund's Administrator,
Fund Accountant and Transfer Agent in accordance with certain fee arrangements.
The Bank of New York Mellon serves as the Fund's Custodian in accordance with
certain fee arrangements.

Effective January 23, 2012, James A. Bowen resigned from his position as the
President and Chief Executive Officer of the Fund. He will continue as a
Trustee, the Chairman of the Board of Trustees and a member of the Executive
Committee. The Board elected Mark R. Bradley to serve as the President and Chief
Executive Officer of the Fund and James M. Dykas to serve as the Treasurer,
Chief Financial Officer and Chief Accounting Officer of the Fund.

Effective January 1, 2012, each Trustee who is not an officer or employee of
First Trust, any sub-advisor or any of their affiliates ("Independent Trustees")
is paid a fixed annual retainer of $125,000 per year and an annual per fund fee
of $4,000 for each closed-end fund or other actively managed fund and $1,000 for
each index fund in the First Trust Fund Complex. The fixed annual retainer is
allocated pro rata among each fund in the First Trust Fund Complex based on net
assets. Prior to January 1, 2012, each Independent Trustee received an annual
retainer of $10,000 per trust for the first 14 trusts of the First Trust Fund
Complex and an annual retainer of $7,500 per trust for each additional trust in
the First Trust Fund Complex. The annual retainer was allocated equally among
each of the trusts.

Additionally, the Lead Independent Trustee is paid $15,000 annually, the
Chairman of the Audit Committee is paid $10,000 annually, and each of the
Chairmen of the Nominating and Governance Committee and the Valuation Committee
is paid $5,000 annually to serve in such capacities, with such compensation
allocated pro rata among each fund in the First Trust Fund Complex based on net
assets. Prior to January 1, 2012, the annual amounts paid were $10,000, $5,000
and $2,500, respectively. Trustees are reimbursed for travel and out-of-

Page 23

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012

pocket expenses in connection with all meetings. The Lead Independent Trustee
and each Committee chairman will serve two-year terms until December 31, 2013
before rotating to serve as chairman of another committee or as Lead Independent
Trustee. After December 31, 2013, the Lead Independent Trustee and Committee
chairmen will rotate every three years. The officers and "Interested" Trustee
receive no compensation from the funds for acting in such capacities.

4. REORGANIZATION AND REVERSE STOCK SPLIT

On April 18, 2011, the Board of Trustees of the Fund approved the reorganization
of the Fund ("FHY"), with the First Trust Strategic High Income Fund ("FHI") and
the First Trust Strategic High Income Fund III ("FHO"). FHY was the surviving
fund.

Under the terms of the reorganizations, which were tax-free, the assets of FHI
and FHO were transferred to, and the liabilities of FHI and FHO were assumed by,
FHY in exchange for shares of FHY. The cost of the investments received from FHI
and FHO were carried forward to FHY for U.S. GAAP and tax purposes. The FHY
shares were then distributed to FHI and FHO shareholders and the separate
existence of FHI and FHO ceased. The reorganizations were subject to certain
conditions, including that each reorganization was approved on August 8, 2011,
by the shareholders of FHI and FHO, respectively, and that the shareholders of
FHY approved the issuance of additional FHY shares in connection with the
reorganizations. When the reorganization occurred, each transaction was based on
the relative net asset values of FHI, FHO and FHY.

The reorganizations concluded subsequent to the close of business on September
30, 2011.

ACQUIRING (SURVIVING FUND) ACQUIRED FUNDS
-------------------------- --------------
FHY FHI
FHO

The following table summarizes the asset transfers and conversion ratios for
each fund.

ACCUMULATED SHARE ACQUIRING
ACQUIRED SHARES NET ASSETS UNREALIZED NET REALIZED CONVERSION (SURVIVING) SHARES NET ASSETS
FUND REDEEMED ON 9/30/11 APPR (DEPR) LOSSES RATIO FUND ISSUED ON 9/30/11*
-------- ---------- ----------- ------------ ------------- ---------- --------- ---------- -----------

FHI 9,150,594 $34,305,393 $(2,806,920) $(79,046,404) 0.745047 FHY 6,817,582 $47,972,682
FHO 9,156,182 40,099,804 (2,401,021) (35,818,175) 0.870347 FHY 7,969,118

*Amounts reflect net assets of FHY prior to reorganization.

The Board of Trustees of FHY approved a 1-for-3 reverse stock split, which was
completed upon the consummation of the reorganizations. FHY's shares are trading
on a split-adjusted basis under a new CUSIP number. The reverse stock split
resulted in every three outstanding shares being converted into one share,
thereby reducing the number of FHY shares outstanding. Fractional shares were
issued in the reverse stock split.

5. PURCHASES AND SALES OF SECURITIES

Cost of purchases and proceeds from sales of securities, excluding short-term
investments, for the year ended October 31, 2012 were $64,986,616 and
$61,528,497, respectively.

6. BORROWINGS

The Fund entered into a committed facility agreement with BNP Paribas Prime
Brokerage Inc. ("BNP") that has a maximum commitment amount of $66,000,000.
Absent certain events of default or failure to maintain certain collateral
requirements, BNP may not terminate the committed facility agreement except upon
180 calendar days' prior notice. The borrowing rate under the facility is equal
to the 3-month LIBOR plus 80 basis points. In addition, under the facility, the
Fund pays a commitment fee of 0.80% on the undrawn amount of such facility.

The average amount outstanding for the year ended October 31, 2012 was
$54,400,000, with a weighted average interest rate of 1.26%. As of October 31,
2012, the Fund had outstanding borrowings of $54,400,000 under this committed
facility agreement. The high and low annual interest rates for the year ended
October 31, 2012 were 1.38% and 1.11%, respectively. The interest rate at
October 31, 2012 was 1.11%.

Page 24

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012

7. COMMON SHARE OFFERINGS

On June 8, 2012, the Fund, Advisor and Sub-Advisor entered into a sales
agreement with JonesTrading Institutional Services, LLC ("JonesTrading") whereby
the Fund may offer and sell up to 1,000,000 Common Shares from time to time
through JonesTrading as agent for the offer and sale of the Common Shares. Sales
of Common Shares pursuant to the sales agreement may be made in negotiated
transactions or transactions that are deemed to be "at the market" as defined in
Rule 415 under the 1933 Act, including sales made directly on the NYSE or sales
made through a market maker other than on an exchange, at an offering price
equal to or in excess of the net asset value per share of the Fund's Common
Shares at the time such Common Shares are initially sold. The Fund intends to
use the net proceeds from the sale of the Common Shares in accordance with its
investment objectives and policies. Transactions for the year ended October 31,
2012 related to offerings under such sales agreement are as follows:

COMMON NET PROCEEDS
SHARES NET PROCEEDS NET ASSET VALUE RECEIVED IN
SOLD RECEIVED OF SHARES SOLD EXCESS OF NET ASSET VALUE
---------- -------------- --------------- -------------------------
326,295 $ 5,582,406 $ 5,436,347 $ 146,059

Additionally, estimated offering costs of $192,169 related to this offering were
recorded as a prepaid asset and are being amortized to expense by the Fund on a
straight line basis over the lesser of one year or until the Fund sells
1,000,000 Common Shares related to this offering.

8. INDEMNIFICATION

The Fund has a variety of indemnification obligations under contracts with its
service providers. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.

9. LITIGATION

Lehman Brothers Special Finance, Inc. ("LBSF") is maintaining a certain class
action in the United States Bankruptcy Court for the Southern District of New
York (the "Class Litigation"), seeking to recover funds that it alleges were
inappropriately distributed to counter-parties upon the termination of credit
swap agreements based on Lehman Brothers' bankruptcy. The Class Litigation was
filed September 14, 2010. The Class Litigation names the issuers of certain
asset-backed securities (the "Issuer Defendants"), the trustees for such
securities (the "Trustee Defendants") and certain of the investors in the
securities (the "Named Noteholder Defendants"). On July 11, 2012, special
counsel for LBSF filed a motion in the United States Bankruptcy Court for the
Southern District of New York to add additional Named Noteholder Defendants,
including the Fund and two funds (First Trust Strategic High Income Fund and
First Trust Strategic High Income Fund III) subsequently reorganized into the
Fund, in the Class Litigation. On July 18, 2012, the court granted the motion to
add the Named Noteholder Defendants, including the Fund.

The Fund has been advised that it, First Trust Strategic High Income Fund and
First Trust Strategic High Income Fund III received, in the aggregate,
$6,750,000 from one Issuer Defendant. Based on the current status of the Class
Litigation, the Fund cannot predict the outcome of the Class Litigation at this
time.

10. RISK CONSIDERATIONS

Risks are inherent in all investing. The following summarizes some of the risks
that should be considered for the Fund. For additional information about the
risks associated with investing in the Fund, please see the Fund's prospectus
and statement of additional information, as well as other Fund regulatory
filings.

INVESTMENT AND MARKET RISK: An investment in the Fund's Common Shares is subject
to investment risk, including the possible loss of the entire principal
invested. An investment in Common Shares represents an indirect investment in
the securities owned by the Fund. The value of these securities, like other
market investments, may move up or down, sometimes rapidly and unpredictably.
Common Shares at any point in time may be worth less than the original
investment, even after taking into account the reinvestment of Fund dividends
and distributions. Security prices can fluctuate for several reasons including
the general condition of the securities markets, or when political or economic
events affecting the issuers occur, including the risk that borrowers do not pay
their mortgages. When the Advisor or Sub-Advisor determines that it is
temporarily unable to follow the Fund's investment strategy or that it is
impractical to do so (such as when a market disruption event has occurred and
trading in the securities is extremely limited or absent), the Advisor or
Sub-Advisor may take temporary defensive positions.

RESIDENTIAL MORTGAGE-BACKED SECURITIES RISK: MBS's may have less potential for
capital appreciation than comparable fixed-income securities due to the
likelihood of increased prepayments of mortgages as interest rates decline. If
the Fund buys MBS's at a premium, mortgage foreclosures and prepayments of
principal by mortgagors (which usually may be made at any time without penalty)
may result in

Page 25

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012

some loss of the Fund's principal investment to the extent of the premium paid.
Alternatively, in a rising interest rate environment, the value of MBS's may be
adversely affected when payments on underlying mortgages do not occur as
anticipated, resulting in the extension of the security's effective maturity and
the related increase in interest rate sensitivity of a longer-term instrument.
The value of MBS's may also change due to shifts in the market's perception of
issuers and regulatory or tax changes adversely affecting the markets as a
whole. In addition, MBS's are subject to the credit risk associated with the
performance of the underlying mortgage properties. In certain instances,
third-party guarantees or other forms of credit support can reduce the credit
risk. The Fund may also invest in MBS's which are interest-only securities
("IO") and principal-only ("PO") securities. Generally speaking, when interest
rates are falling and prepayment rates are increasing, the value of a PO
security will rise and the value of an IO security will fall. Conversely, when
interest rates are rising and prepayment rates are decreasing, generally the
value of a PO will fall and the value of an IO security will rise. In addition
to the foregoing, residential MBS's are subject to additional risks, including,
but not limited to: (i) the United States residential mortgage market has
recently encountered various difficulties and changed economic conditions. In
addition, recently, residential property values in various states have declined
or remained stable after extended periods of appreciation. A continued decline
or an extended flattening in those values may result in additional increases in
delinquencies and losses on residential mortgage loans generally; (ii) if a
residential mortgage obligation is secured by a junior lien it will be
subordinate to the rights of the mortgagees or beneficiaries under the related
senior mortgages or deeds of trust; and (iii) depending on the length of a
residential mortgage obligation underling a residential MBS, unscheduled or
early payments of principal and interest may shorten the security's effective
maturity and prevailing interest rates may be higher or lower than the current
yield of the Fund's portfolio at the time the Fund receives the payments for
reinvestment.

VALUE INVESTING RISK: The Sub-Advisor focuses the Fund's investments on
securities that they believe are undervalued or inexpensive relative to other
investments. Such securities are subject to the risk of misestimating certain
fundamental factors. Disciplined adherence to a "value" investment mandate
during periods in which that style is "out of favor" can result in significant
underperformance relative to overall market indices and other managed investment
vehicles that pursue growth style investments and/or flexible style mandates.

BELOW-INVESTMENT GRADE SECURITIES RISK: The Fund invests in below-investment
grade securities. The market values for high-yield securities tend to be very
volatile, and these securities are less liquid than investment grade debt
securities. For these reasons, an investment in the Fund is subject to the
following specific risks: (a) increased price sensitivity to changing interest
rates and to a deteriorating economic environment; (b) greater risk of loss due
to default or declining credit quality; (c) adverse issuer specific events are
more likely to render the issuer unable to make interest and/or principal
payments; and (d) a negative perception of the high-yield market may depress the
price and liquidity of high-yield securities.

DISTRESSED SECURITIES RISK: The Fund may invest in securities issued by
companies in a bankruptcy reorganization proceeding, subject to some other form
of a public or private debt restructuring or otherwise in default or in
significant risk of default in the payment of interest or repayment of principal
or trading at prices substantially below other below-investment grade debt
securities of companies in similar industries. Distressed securities frequently
do not produce income while they are outstanding. The Fund may be required to
incur certain extraordinary expenses in order to protect and recover its
investment. Therefore, to the extent the Sub-Advisor seeks capital appreciation
through investment in distressed securities; the ability to achieve current
income may be diminished.

ECONOMIC CONDITIONS RISK: Adverse changes in economic conditions are more likely
to lead to a weakened capacity of a high-yield issuer to make principal payments
and interest payments than an investment grade issuer. An economic downturn
could severely affect the ability of highly leveraged issuers to service their
debt obligations or to repay their obligations upon maturity. Under adverse
market or economic conditions, the secondary market for high-yield securities
could contract further, independent of any specific adverse changes in the
condition of a particular issuer and these securities may become illiquid. As a
result, the Sub-Advisor could find it more difficult to sell these securities or
may be able to sell the securities only at prices lower than if such securities
were widely traded.

FIXED-INCOME SECURITIES RISK: Debt securities, including high yield securities,
are subject to certain risks, including: (i) issuer risk, which is the risk that
the value of fixed-income securities may decline for a number of reasons which
directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer's goods and services or, in the case
of asset-backed issuers, a decline in the value and/or cash flows of the
underlying assets; (ii) reinvestment risk, which is the risk that income from
the Fund's portfolio will decline if the proceeds from matured, traded or called
bonds are reinvested at market interest rates that are below the portfolio's
current earnings rate; (iii) prepayment risk, which is the risk that during
periods of declining interest rates, the issuer of a security may exercise its
option to prepay principal earlier than scheduled, forcing the reinvestment in
lower yielding securities; and (iv) credit risk, which is the risk that a
security in the Fund's portfolio will decline in price or the issuer fails to
make interest payments when due because the issuer of the security experiences a
decline in its financial status.

INTEREST RATE RISK: The Fund's portfolio is also subject to interest rate risk.
Interest rate risk is the risk that fixed-income securities will decline in
value because of changes in market interest rates. Investments in debt
securities with long-term maturities may experience significant price declines
if long-term interest rates increase.

Page 26

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012

LEVERAGE RISK: The Fund may borrow an amount up to 33-1/3% (or such other
percentage as permitted by law) of its assets (including the amount borrowed)
less liabilities other than borrowings. The Fund may use leverage for investment
purposes and to meet cash requirements. Its leveraged capital structure creates
special risks not associated with unleveraged funds having similar investment
objectives and policies. These include the possibility of higher volatility of
the NAV of the Fund. The Fund previously leveraged its assets through the use of
reverse repurchase agreements. Reverse repurchase agreements are subject to the
risks that the market value of the securities sold by the Fund may decline below
the price of the securities the Fund is obligated to repurchase, and that the
securities may not be returned to the Fund. The Fund may from time to time
consider changing the amount of the leverage in response to actual or
anticipated changes in interest rates or the value of the Fund's investment
portfolio. There can be no assurance that the leverage strategies will be
successful.

FOREIGN SECURITIES RISK: The Fund may invest in securities (equity or debt) of
foreign issuers. Investing in securities of foreign issuers, which are generally
denominated in foreign currencies, may involve certain risks not typically
associated with investing in securities of U.S. issuers. These risks include:
(i) there may be less publicly available information about foreign issuers or
markets due to less rigorous disclosure or accounting standards or regulatory
practices; (ii) foreign markets may be smaller, less liquid and more volatile
than the U.S. market; (iii) potential adverse effects of fluctuations in
currency exchange rates or controls on the value of the Fund's investments; (iv)
the economies of foreign countries may grow at slower rates than expected or may
experience a downturn or recession; (v) the impact of economic, political,
social or diplomatic events; (vi) certain foreign countries may impose
restrictions on the ability of foreign issuers to make payments of principal and
interest to investors located in the United States due to blockage of foreign
currency exchanges or otherwise; and (vii) withholding and other foreign taxes
may decrease the Fund's return. These risks may be more pronounced to the extent
that the Fund invests a significant amount of its assets in companies located in
one region and to the extent that the Fund invests in securities of issuers in
emerging markets.

11. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events to the Fund through
the date the financial statements were issued, and has determined that there
were the following subsequent events:

On November 20, 2012, the Fund declared a dividend of $0.1200 per share to
Common Shareholders of record on December 5, 2012, payable December 10, 2012.
This was a decrease from the prior month's distribution paid on November 15,
2012 of $0.1325 per share.

On December 20, 2012, the Fund declared a dividend of $0.1200 per share to
Common Shareholders of record on January 4, 2013, payable January 15, 2013.

Page 27

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FIRST TRUST STRATEGIC HIGH INCOME
FUND II:

We have audited the accompanying statement of assets and liabilities of First
Trust Strategic High Income Fund II (the "Fund"), including the portfolio of
investments, as of October 31, 2012, and the related statements of operations
and cash flows for the year then ended, the statements of changes in net assets
for each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
The Fund is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of October 31, 2012 by correspondence with the Fund's
custodian, agent banks, and brokers; where replies were not received, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
First Trust Strategic High Income Fund II as of October 31, 2012, the results of
its operations and its cash flows for the year then ended, the changes in its
net assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Chicago, Illinois
December 24, 2012

Page 28

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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012 (UNAUDITED)

DIVIDEND REINVESTMENT PLAN

If your Common Shares are registered directly with the Fund or if you hold your
Common Shares with a brokerage firm that participates in the Fund's Dividend
Reinvestment Plan (the "Plan"), unless you elect, by written notice to the Fund,
to receive cash distributions, all dividends, including any capital gain
distributions, on your Common Shares will be automatically reinvested by BNY
Mellon Investment Servicing (US) Inc. (the "Plan Agent"), in additional Common
Shares under the Plan. If you elect to receive cash distributions, you will
receive all distributions in cash paid by check mailed directly to you by the
Plan Agent, as the dividend paying agent.

If you decide to participate in the Plan, the number of Common Shares you will
receive will be determined as follows:

(1) If Common Shares are trading at or above net asset value ("NAV") at
the time of valuation, the Fund will issue new shares at a price
equal to the greater of (i) NAV per Common Share on that date or
(ii) 95% of the market price on that date.

(2) If Common Shares are trading below NAV at the time of valuation, the
Plan Agent will receive the dividend or distribution in cash and
will purchase Common Shares in the open market, on the NYSE or
elsewhere, for the participants' accounts. It is possible that the
market price for the Common Shares may increase before the Plan
Agent has completed its purchases. Therefore, the average purchase
price per share paid by the Plan Agent may exceed the market price
at the time of valuation, resulting in the purchase of fewer shares
than if the dividend or distribution had been paid in Common Shares
issued by the Fund. The Plan Agent will use all dividends and
distributions received in cash to purchase Common Shares in the open
market within 30 days of the valuation date except where temporary
curtailment or suspension of purchases is necessary to comply with
federal securities laws. Interest will not be paid on any uninvested
cash payments.

You may elect to opt-out of or withdraw from the Plan at any time by giving
written notice to the Plan Agent, or by telephone at (866) 340-1104, in
accordance with such reasonable requirements as the Plan Agent and the Fund may
agree upon. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan, and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions.

The Plan Agent maintains all Common Shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. The Plan Agent will forward to each
participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund. Any proxy you receive will
include all Common Shares you have received under the Plan.

There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.

Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
Capital gains and income are realized although cash is not received by you.
Consult your financial advisor for more information.

If you hold your Common Shares with a brokerage firm that does not participate
in the Plan, you will not be able to participate in the Plan and any dividend
reinvestment may be effected on different terms than those described above.

The Fund reserves the right to amend or terminate the Plan if in the judgment of
the Board of Trustees the change is warranted. There is no direct service charge
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable by the participants. Additional
information about the Plan may be obtained by writing BNY Mellon Investment
Servicing (US) Inc., 301 Bellevue Parkway, Wilmington, Delaware 19809.

--------------------------------------------------------------------------------

PROXY VOTING POLICIES AND PROCEDURES

A description of the policies and procedures that the Fund uses to determine how
to vote proxies and information on how the Fund voted proxies relating to
portfolio investments during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website located at
http://www.sec.gov.

Page 29

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ADDITIONAL INFORMATION - (CONTINUED)
--------------------------------------------------------------------------------

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012 (UNAUDITED)

PORTFOLIO HOLDINGS

The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available (1) by calling (800) 988-5891; (2) on the Fund's website located
at http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov;
and (4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.

TAX INFORMATION

Of the ordinary income (including short-term capital gain) distributions made by
the Fund during the year ended October 31, 2012, none qualify for the corporate
dividends received deduction available to corporate shareholders or as qualified
dividend income.

NYSE CERTIFICATION INFORMATION

In accordance with Section 303A-12 of the New York Stock Exchange ("NYSE")
Listed Company Manual, the Fund's President has certified to the NYSE that, as
of May 8, 2012, he was not aware of any violation by the Fund of NYSE corporate
governance listing standards. In addition, the Fund's reports to the SEC on
Forms N-CSR, N-CSRS and N-Q contain certifications by the Fund's principal
executive officer and principal financial officer that relate to the Fund's
public disclosure in such reports and are required by Rule 30a-2 under the 1940
Act.

SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

The Joint Annual Meeting of Shareholders of the Common Shares of First Trust
Energy Infrastructure Fund, Macquarie/First Trust Global
Infrastructure/Utilities Dividend & Income

Fund, First Trust Energy Income and Growth Fund, First Trust Enhanced Equity
Income Fund, First Trust/Aberdeen Global Opportunity Income Fund, First Trust
Mortgage Income Fund, First Trust Strategic High Income Fund II, First
Trust/Aberdeen Emerging Opportunity Fund, First Trust Specialty Finance and
Financial Opportunities Fund, First Trust Active Dividend Income Fund and First
Trust High Income Long/Short Fund was held on April 18, 2012 (the "Annual
Meeting"). At the Annual Meeting, Richard E. Erickson and Thomas R. Kadlec were
elected by the Common Shareholders of the First Trust Strategic High Income Fund
II as Class II Trustees for three-year terms expiring at the Fund's annual
meeting of shareholders in 2015. The number of votes cast in favor of Mr. Kadlec
was 7,059,086, and the number of votes against was 175,641 and the number of
abstentions was 872,148. The number of votes cast in favor of Mr. Erickson was
7,060,729, and the number of votes against was 173,998 and the number of
abstentions was 872,148. James A. Bowen, Niel B. Nielson and Robert F. Keith are
the other current and continuing Trustees.

ADVISORY AND SUB-ADVISORY AGREEMENTS

BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT
AGREEMENT AND SUB-ADVISORY AGREEMENT

The Board of Trustees of First Trust Strategic High Income Fund II (the "Fund"),
including the Independent Trustees, approved the continuation of the Investment
Management Agreement (the "Advisory Agreement") between the Fund and First Trust
Advisors L.P. (the "Advisor") and the Investment Sub Advisory Agreement (the
"Sub Advisory Agreement" and together with the Advisory Agreement, the
"Agreements") among the Fund, the Advisor and Brookfield Investment Management
Inc. (the "Sub-Advisor"), at a meeting held on June 10-11, 2012. The Board
determined that the continuation of the Agreements is in the best interests of
the Fund in light of the extent and quality of the services provided and such
other matters as the Board considered to be relevant in the exercise of its
reasonable business judgment.

To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreements, the
Independent Trustees received a separate report from each of the Advisor and the
Sub-Advisor in advance of the Board meeting responding to a request for
information from counsel to the Independent Trustees. The reports, among other
things, outlined the services provided by the Advisor and the Sub-Advisor
(including the relevant personnel responsible for these services and their
experience); the advisory and sub-advisory fees for the Fund as compared to fees
charged to other clients of the Advisor and the Sub-Advisor and as compared to
fees charged by investment advisors and sub-advisors to comparable funds;
expenses of the Fund as compared to expense ratios of comparable funds; the
nature of expenses incurred in providing services to the Fund and the potential
for economies of scale, if any; financial data on the Advisor and the
Sub-Advisor; any fall out benefits to the Advisor and the Sub-Advisor; and
information on the Advisor's and the Sub-Advisor's compliance programs.
Following receipt of this information, counsel to the Independent Trustees posed
follow-up questions, and the Independent Trustees and their counsel

Page 30

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ADDITIONAL INFORMATION - (CONTINUED)
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FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012 (UNAUDITED)

then met separately to discuss the information provided by the Advisor and the
Sub-Advisor, including the supplemental responses. The Board applied its
business judgment to determine whether the arrangements between the Fund and the
Advisor and among the Fund, the Advisor and the Sub-Advisor are reasonable
business arrangements from the Fund's perspective as well as from the
perspective of shareholders. The Board considered that shareholders chose to
invest or remain invested in the Fund knowing that the Advisor and the
Sub-Advisor manage the Fund. The Board also considered that the Agreements were
approved by shareholders of the Fund at a meeting held in December 2010.

In reviewing the Agreements, the Board considered the nature, extent and quality
of services provided by the Advisor and the Sub-Advisor under the Agreements.
The Board considered the Advisor's statements regarding the incremental benefits
associated with the Fund's advisor/sub-advisor management structure. With
respect to the Advisory Agreement, the Board considered that the Advisor is
responsible for the overall management and administration of the Fund and
reviewed the services provided by the Advisor to the Fund, including the
oversight of the Sub-Advisor. The Board noted the compliance program that had
been developed by the Advisor and considered that it includes a robust program
for monitoring the Sub-Advisor's compliance with the 1940 Act and the Fund's
investment objectives and policies. With respect to the Sub-Advisory Agreement,
the Board received a presentation from representatives of the Sub Advisor
discussing the services that the Sub-Advisor provides to the Fund and how the
Sub-Advisor manages the Fund's investments. In light of the information
presented and the considerations made, the Board concluded that the nature,
extent and quality of services provided to the Fund by the Advisor and the
Sub-Advisor under the Agreements have been and are expected to remain
satisfactory and that the Sub-Advisor, under the oversight of the Advisor, has
managed the Fund consistent with its investment objectives and policies.

The Board considered the advisory and sub-advisory fees paid under the
Agreements. The Board considered the advisory fees charged by the Advisor to
similar funds and other non-fund clients, noting that the Advisor does not
provide advisory services to other funds with investment objectives and policies
similar to the Fund's, but does provide services to certain separately managed
accounts with investment objectives and policies similar to the Fund's. The
Board noted that the Advisor charges a lower advisory fee rate to the separately
managed accounts, as well as the Advisor's statement that the nature of the
services provided to the separately managed accounts is not comparable to those
provided to the Fund. The Board considered the sub-advisory fee and how it
relates to the Fund's overall advisory fee structure and noted that the
sub-advisory fee is paid by the Advisor from its advisory fee. The Board also
considered information provided by the Sub-Advisor as to the fees it charges to
other closed-end funds it manages, noting that the sub-advisory fee rate is
lower than the fees charged by the Sub-Advisor to the other funds it manages. In
addition, the Board received data prepared by Lipper Inc. ("Lipper"), an
independent source, showing the advisory fees and expense ratios of the Fund as
compared to the management fees and expense ratios of a peer group selected by
Lipper and similar data for a separate peer group selected by the Advisor. The
Board also received advisory fee and expense ratio data for a peer group of
funds compiled by Morningstar Associates, LLC ("Morningstar"), an independent
source. The Board noted that the Lipper, Advisor and Morningstar peer groups did
not include any overlapping peer funds. The Board discussed with representatives
of the Advisor the limitations in creating a relevant peer group for the Fund,
including that (i) the Fund is unique in its composition, which makes assembling
peers with similar strategies and asset mix difficult; (ii) peer funds may use
different types of leverage which have different costs associated with them or
may use no leverage; (iii) most peer funds do not employ an advisor/sub-advisor
management structure; and (iv) many of the peer funds are larger than the Fund,
which causes the Fund's fixed expenses to be higher on a percentage basis as
compared to the larger peer funds. The Board took these limitations into account
in considering the peer data. In reviewing the peer data, the Board noted that
the Fund's contractual advisory fee was above the median of each of the Lipper,
Advisor and Morningstar peer groups.

The Board also considered performance information for the Fund, noting that the
performance information included the Fund's quarterly performance report, which
is part of the process that the Board has established for monitoring the Fund's
performance and portfolio risk on an ongoing basis. The Board determined that
this process continues to be effective for reviewing the Fund's performance. In
addition to the Board's ongoing review of performance, the Board also received
data prepared by Lipper comparing the Fund's performance to the Lipper peer
group, as well as to a larger peer universe and to two benchmarks. In reviewing
the Fund's performance as compared to the performance of the Lipper peer group
and Lipper peer universe, the Board took into account the limitations described
above with respect to creating a relevant peer group for the Fund. The Board
also considered the Fund's dividend yield as of March 30, 2012 and an analysis
prepared by the Advisor on the continued benefits provided by the Fund's
leverage. The Board noted that the Fund entered into a new credit facility with
a commercial bank in 2011 to replace its leverage using reverse repurchase
agreements. In addition, the Board compared the Fund's premium/discount over the
past eight quarters to the average and median premium/discount of the Advisor
peer group over the same period, noting that the Fund's premium/discount was
generally indicative of the asset class and market events.

On the basis of all the information provided on the fees, expenses and
performance of the Fund, the Board concluded that the advisory and sub-advisory
fees were reasonable and appropriate in light of the nature, extent and quality
of services provided by the Advisor and Sub-Advisor under the Agreements.

Page 31

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ADDITIONAL INFORMATION - (CONTINUED)
--------------------------------------------------------------------------------

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012 (UNAUDITED)

The Board noted that the Advisor has continued to invest in personnel and
infrastructure and considered whether fee levels reflect any economies of scale
for the benefit of shareholders. The Board noted the Advisor's statement that
economies of scale in providing services to the Fund are not available at
current asset levels. The Board determined that due to the Fund's close-end
structure, the potential for realization of economies of scale as Fund assets
grow was not a material factor to be considered. The Board also considered the
costs of the services provided and profits realized by the Advisor from serving
as investment advisor to the Fund for the twelve months ended December 31, 2011,
as set forth in the materials provided to the Board. The Board noted the
inherent limitations in the profitability analysis, and concluded that the
Advisor's estimated profitability appeared to be not excessive in light of the
services provided to the Fund. In addition, the Board considered fall-out
benefits described by the Advisor that may be realized from its relationship
with the Fund, including the Advisor's compensation for fund reporting services
pursuant to a separate Fund Reporting Services Agreement.

The Board noted the Sub-Advisor's expenses in providing investment services to
the Fund and considered the Sub-Advisor's statement that it does not expect
economies of scale to be present in connection with its provision of services to
the Fund. The Board noted that the Sub-Advisor did not provide information with
respect to the profitability of the Sub Advisory Agreement to the Sub-Advisor;
however, the Board considered that the sub advisory fee rate was negotiated at
arm's length between the Advisor and the Sub-Advisor, an unaffiliated third
party. The Board considered that the profitability analysis for the Advisor was
more relevant. The Board noted that the Sub-Advisor does not maintain any
soft-dollar arrangements and that the Sub-Advisor indicated that it does not
anticipate any material fall out benefits from its relationship to the Fund.

Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreements continue to be fair and reasonable and that the continuation
of the Agreements is in the best interests of the Fund. No single factor was
determinative in the Board's analysis.

Page 32

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BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012 (UNAUDITED)

The Fund's statement of additional information includes additional information
about the Trustees and is available, -without charge, upon request, by calling
(800) 988-5891.

NUMBER OF
PORTFOLIOS IN
THE FIRST TRUST OTHER
NAME, ADDRESS, TERM OF OFFICE FUND COMPLEX TRUSTEESHIPS OR
DATE OF BIRTH AND AND LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN BY DIRECTORSHIPS
POSITION WITH THE FUND SERVICE (2) DURING PAST 5 YEARS TRUSTEE HELD BY TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
------------------------------------------------------------------------------------------------------------------------------------

Richard E. Erickson, Trustee o Three Year Term Physician; President, Wheaton Orthopedics; 96 None
c/o First Trust Advisors L.P. Co-Owner and Co-Director (January 1996
120 East Liberty Drive, o Since Fund to May 2007), Sports Med Center for
Suite 400 Inception Fitness; Limited Partner, Gundersen Real
Wheaton, IL 60187 Estate Limited Partnership; Member,
D.O.B.: 04/51 Sportsmed LLC

Thomas R. Kadlec, Trustee o Three Year Term President (March 2010 to Present), Senior 96 Director of ADM
c/o First Trust Advisors L.P. Vice President and Chief Financial Officer Investor Services,
120 East Liberty Drive, o Since Fund (May 2007 to March 2010), Vice President Inc. and ADM
Suite 400 Inception and Chief Financial Officer (1990 to May Investor Services,
Wheaton, IL 60187 2007), ADM Investor Services, Inc. (Futures International
D.O.B.: 11/57 Commission Merchant)

Robert F. Keith, Trustee o Three Year Term President (2003 to Present), Hibs 96 Director of
c/o First Trust Advisors L.P. Enterprises (Financial and Management Trust Company
120 East Liberty Drive, o Since Fund Consulting) of Illinois
Suite 400 Inception
Wheaton, IL 60187
D.O.B.: 11/56

Niel B. Nielson, Trustee o Three Year Term President and Chief Executive Officer (June 96 Director of
c/o First Trust Advisors L.P. 2012 to Present), Dew Learning LLC Covenant
120 East Liberty Drive, o Since Fund (Educational Products and Services); President Transport Inc.
Suite 400 Inception (June 2002 to June 2012), Covenant College
Wheaton, IL 60187
D.O.B.: 03/54

------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(1), Trustee and o Three Year Term Chief Executive Officer (December 2010 96 None
Chairman of the Board to Present), President (until December
120 East Liberty Drive, o Since Fund 2010), First Trust Advisors L.P. and First
Suite 400 Inception Trust Portfolios L.P.; Chairman of the
Wheaton, IL 60187 Board of Directors, BondWave LLC
D.O.B.: 09/55 (Software Development Company/
Investment Advisor) and Stonebridge
Advisors LLC (Investment Advisor)

(1) Mr. Bowen is deemed an "interested person" of the Fund due to his position
as CEO of First Trust Advisors L.P., investment advisor of the Fund.

(2) Currently, Robert F. Keith, as a Class I Trustee, is serving as a trustee
until the Fund's 2014 annual meeting of shareholders. Richard E. Erickson
and Thomas R. Kadlec, as Class II Trustees, are serving as trustees until
the Fund's 2015 annual meeting of shareholders. James A. Bowen and Niel B.
Nielson, as Class III Trustees, are serving as trustees until the Fund's
2013 annual meeting of shareholders.

Page 33

--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS - (CONTINUED)
--------------------------------------------------------------------------------

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012 (UNAUDITED)

NAME, ADDRESS POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS
AND DATE OF BIRTH WITH FUND LENGTH OF SERVICE DURING PAST 5 YEARS
------------------------------------------------------------------------------------------------------------------------------------
OFFICERS (3)
------------------------------------------------------------------------------------------------------------------------------------

Mark R. Bradley President and Chief o Indefinite Term Chief Operating Officer (December 2010 to Present)
120 East Liberty Drive, Executive Officer and Chief Financial Officer, First Trust Advisors
Suite 400 o Since January 2012 L.P. and First Trust Portfolios L.P.; Chief Financial
Wheaton, IL 60187 Officer, BondWave LLC (Software Development
D.O.B.: 11/57 Company/Investment Advisor) and Stonebridge
Advisors LLC (Investment Advisor)

James M. Dykas Treasurer, Chief Financial o Indefinite Term Controller (January 2011 to Present), Senior Vice
120 East Liberty Drive, Officer and Chief President (April 2007 to January 2011), Vice
Suite 400 Accounting Officer o Since January 2012 President (January 2005 to April 2007), First Trust
Wheaton, IL 60187 Advisors L.P. and First Trust Portfolios L.P.
D.O.B.: 01/66

W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P., First
120 East Liberty Drive, Legal Officer Trust Portfolios L.P. and BondWave LLC
Suite 400 o Since Fund Inception (Software Development Company/Investment
Wheaton, IL 60187 Advisor); Secretary of Stonebridge Advisors LLC
D.O.B.: 05/60 (Investment Advisor)

Daniel J. Lindquist Vice President o Indefinite Term Senior Vice President (September 2005 to
120 East Liberty Drive, Present), First Trust Advisors L.P. and
Suite 400 o Since Fund Inception First Trust Portfolios L.P.
Wheaton, IL 60187
D.O.B.: 02/70

Kristi A. Maher Assistant Secretary and o Indefinite Term Deputy General Counsel (May 2007 to Present)
120 East Liberty Drive, Chief Compliance Officer o Assistant Secretary
Suite 400 Since Fund Inception
Wheaton, IL 60187 o Chief Compliance
D.O.B.: 12/66 Officer Since
January 2011

(3) Officers of the Fund have an indefinite term. The term "officer" means the
president, vice president, secretary, treasurer, controller or any other
officer who performs a policy making function.

Page 34

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PRIVACY POLICY
--------------------------------------------------------------------------------

FIRST TRUST STRATEGIC HIGH INCOME FUND II
OCTOBER 31, 2012 (UNAUDITED)

First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.

Sources of Information

We collect nonpublic personal information about you from the following sources:

o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;

o Information about your transactions with us, our affiliates or
others;

o Information we receive from your inquiries by mail, e-mail or
telephone; and

o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.

INFORMATION COLLECTED

The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.

DISCLOSURE OF INFORMATION

We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:

o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.

o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).

In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.

PRIVACY ONLINE

We allow third-party companies, including AddThis (a social media sharing
service), to collect certain anonymous information when you visit our website.
These companies may use non-personally identifiable information during your
visits to this and other websites in order to provide advertisements about goods
and services likely to be of greater interest to you. These companies typically
use a cookie, third party web beacon or pixel tags, to collect this information.
To learn more about this behavioral advertising practice, you can visit
www.networkadvertising.org.

CONFIDENTIALITY AND SECURITY

With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.

POLICY UPDATES AND INQUIRIES

As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).

Page 35

This Page Left Blank Intentionally.

FIRST TRUST

INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187

INVESTMENT SUB-ADVISOR
Brookfield Investment Management Inc.
3 World Financial Center
200 Vesey Street, 10th Floor
New York, NY 10281

ADMINISTRATOR,
FUND ACCOUNTANT &
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809

CUSTODIAN
The Bank of New York Mellon
101 Barclay Street, 20th Floor
New York, NY 10286

INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606

LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603

[BLANK BACK COVER]

ITEM 2. CODE OF ETHICS.

(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party.

(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, and that relates to any element of the code
of ethics description.

(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party, that relates to one or more of the items set
forth in paragraph (b) of this item's instructions.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

As of the end of the period covered by the report, the Registrant's board of
trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as audit committee financial experts serving on its audit committee and
that each of them is "independent," as defined by Item 3 of Form N-CSR.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) Audit Fees (Registrant) -- The aggregate fees billed for each of the last
two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial statements
or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for those fiscal
years were $64,479 for the fiscal year ended October 31, 2011 and $90,500
for the fiscal year ended October 31, 2012.

(b) Audit-Related Fees (Registrant) -- The aggregate fees billed in each of
the last two fiscal years for assurance and related services by the
principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported
under paragraph (a) of this Item were $0 for the fiscal year ended
October 31, 2011 and $0 for the fiscal year ended October 31, 2012.

Audit-Related Fees (Investment Advisor) -- The aggregate fees billed in
each of the last two fiscal years for assurance and related services by
the principal accountant that are reasonably related to the performance
of the audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item were $0 for the fiscal year
ended October 31, 2011 and $0 for the fiscal year ended October 31, 2012.

(c) Tax Fees (Registrant) -- The aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning were $5,200
for the fiscal year ended October 31, 2011 and $0 for the fiscal year
ended October 31, 2012. These fees were for tax return preparation.

Tax Fees (Investment Advisor) -- The aggregate fees billed in each of the
last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning were $0 for
the fiscal year ended October 31, 2011 and $0 for the fiscal year ended
October 31, 2012.

(d) All Other Fees (Registrant) -- The aggregate fees billed in each of the
last two fiscal years for products and services provided by the principal
accountant to the Registrant, other than the services reported in
paragraphs (a) through (c) of this Item were $0 for the fiscal year ended
October 31, 2011 and $0 for the fiscal year ended October 31, 2012.

All Other Fees (Investment Adviser) The aggregate fees billed in each of
the last two fiscal years for products and services provided by the
principal accountant to the Registrant, other than the services reported
in paragraphs (a) through (c) of this Item were $0 for the fiscal year
ended October 31, 2011 and $0 for the fiscal year ended October 31, 2012.

(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.

Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval
Policy, the Audit Committee (the "Committee") is responsible for the
pre-approval of all audit services and permitted non-audit services (including
the fees and terms thereof) to be performed for the registrant by its
independent auditors. The Chairman of the Committee is authorized to give such
pre-approvals on behalf of the Committee up to $25,000 and report any such
pre-approval to the full Committee.

The Committee is also responsible for the pre-approval of the independent
auditor's engagements for non-audit services with the registrant's adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and any entity
controlling, controlled by or under common control with the investment adviser
that provides ongoing services to the registrant, if the engagement relates
directly to the operations and financial reporting of the registrant, subject to
the de minimis exceptions for non-audit services described in Rule 2-01 of
Regulation S-X. If the independent auditor has provided non-audit services to
the registrant's adviser (other than any sub-adviser whose role is primarily
portfolio management and is sub-contracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to its policies, the Committee
will consider whether the provision of such non-audit services is compatible
with the auditor's independence.

(e)(2) The percentage of services described in each of paragraphs (b) through
(d) for the Registrant and the Registrant's investment adviser of this
Item that were approved by the audit committee pursuant to the
pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:

(b) 0%

(d) 0%

(f) The percentage of hours expended on the principal accountant's engagement
to audit the registrant's financial statements for the most recent fiscal
year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.

(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the
registrant for the Registrant's fiscal year ended October 31, 2011, were
$5,200 for the Registrant and $3,720 for the Registrant's investment
adviser and for the Registrant's fiscal year ended October 31, 2012 were
$0 for the Registrant and $4,120 for the Registrant's investment adviser.

(h) The registrant's audit committee of the board of directors has considered
whether the provision of non-audit services that were rendered to the
registrant's investment adviser (not including any sub-adviser whose role
is primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides
ongoing services to the registrant that were not pre-approved pursuant to
paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with
maintaining the principal accountant's independence.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

(a) The Registrant has a separately designated audit committee consisting of
all the independent directors of the Registrant. The members of the audit
committee are: Thomas R. Kadlec, Niel B. Nielson, Richard E. Erickson and
Robert F. Keith.

ITEM 6. INVESTMENTS.

(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.

(b) Not applicable.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

The Proxy Voting Policies are attached herewith.

BROOKFIELD INVESTMENT MANAGEMENT INC.
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES
JULY 2010

BROOKFIELD INVESTMENT MANAGEMENT INC. PORTFOLIO PROXY VOTING
POLICIES AND PROCEDURES JULY 2010

The Portfolio Proxy Voting Policies and Procedures (the "Policies and
Procedures") set forth the proxy voting policies, procedures and guidelines to
be followed by Brookfield Investment Management Inc. and its subsidiaries
(collectively, "BIM") in voting portfolio proxies relating to securities that
are held in the portfolios of the investment companies or other clients
("Clients") for which BIM has been delegated such proxy voting authority.

A. PROXY VOTING COMMITTEE

BIM's internal proxy voting committee (the "Committee") is responsible for
overseeing the proxy voting process and ensuring that BIM meets its regulatory
and corporate governance obligations in voting of portfolio proxies.

The Committee shall oversee the proxy voting agent's compliance with these
Policies and Procedures, including any deviations by the proxy voting agent from
the proxy voting guidelines ("Guidelines").

B. ADMINISTRATION AND VOTING OF PORTFOLIO PROXIES

1. FIDUCIARY DUTY AND OBJECTIVE

As an investment adviser that has been granted the authority to vote on
portfolio proxies, BIM owes a fiduciary duty to its Clients to monitor corporate
events and to vote portfolio proxies consistent with the best interests of its
Clients. In this regard, BIM seeks to ensure that all votes are free from
unwarranted and inappropriate influences. Accordingly, BIM generally votes
portfolio proxies in a uniform manner for its Clients and in accordance with
these Policies and Procedures and the Guidelines.

In meeting its fiduciary duty, BIM generally view proxy voting as a way to
enhance the value of the company's stock held by the Clients. Similarly, when
voting on matters for which the Guidelines dictate a vote be decided on a
case-by-case basis, BIM's primary consideration is the economic interests its
Clients.

2. PROXY VOTING AGENT

BIM may retain an independent third party proxy voting agent to assist BIM in
its proxy voting responsibilities in accordance with these Policies and
Procedures and in particular, with the Guidelines. As discussed above, the
Committee is responsible for monitoring the proxy voting agent.

In general, BIM may consider the proxy voting agent's research and analysis as
part of BIM's own review of a proxy proposal in which the Guidelines recommend
that the vote be considered on a case-by-case basis. BIM bears ultimate
responsibility for how portfolio proxies are voted. Unless instructed otherwise
by BIM, the proxy voting agent, when retained, will vote each

portfolio proxy in accordance with the Guidelines. The proxy voting agent also
will assist BIM in maintaining records of BIM's portfolio proxy votes, including
the appropriate records necessary for registered investment companies to meet
their regulatory obligations regarding the annual filing of proxy voting records
on Form N-PX with the Securities and Exchange Commission ("SEC").

3. MATERIAL CONFLICTS OF INTEREST

BIM votes portfolio proxies without regard to any other business relationship
between BIM and the company to which the portfolio proxy relates. To this end,
BIM must identify material conflicts of interest that may arise between a Client
and BIM, such as the following relationships:

o BIM provides significant investment advisory or other services to a
portfolio company or its affiliates (the "Company") whose management
is soliciting proxies or BIM is seeking to provide such services;

o BIM serves as an investment adviser to the pension or other
investment account of the Company or BIM is seeking to serve in that
capacity; or

o BIM and the Company have a lending or other financial-related
relationship.

In each of these situations, voting against the Company management's
recommendation may cause BIM a loss of revenue or other benefit.

BIM generally seeks to avoid such material conflicts of interest by maintaining
separate investment decision-making and proxy voting decision-making processes.
To further minimize possible conflicts of interest, BIM and the Committee employ
the following procedures, as long as BIM determines that the course of action is
consistent with the best interests of the Clients:

o If the proposal that gives rise to a material conflict is
specifically addressed in the Guidelines, BIM will vote the
portfolio proxy in accordance with the Guidelines, provided that the
Guidelines do not provide discretion to BIM on how to vote on the
matter (i.e., case-by-case); or

o If the previous procedure does not provide an appropriate voting
recommendation, BIM may retain an independent fiduciary for advice
on how to vote the proposal or the Committee may direct BIM to
abstain from voting because voting on the particular proposal is
impracticable and/or is outweighed by the cost of voting.

4. CERTAIN FOREIGN SECURITIES

Portfolio proxies relating to foreign securities held by Clients are subject to
these Policies and Procedures. In certain foreign jurisdictions, however, the
voting of portfolio proxies can result in additional restrictions that have an
economic impact to the security, such as "share-blocking." If BIM votes on the
portfolio proxy, share-blocking may prevent BIM from selling the shares of the
foreign security for a period of time. In determining whether to vote portfolio
proxies subject to such restrictions, BIM, in consultation with the Committee,
considers whether the vote, either in

itself or together with the votes of other shareholders, is expected to affect
the value of the security that outweighs the cost of voting. If BIM votes on a
portfolio proxy and during the "share-blocking period," BIM would like to sell
the affected foreign security, BIM, in consultation with the Committee, will
attempt to recall the shares (as allowable within the market time-frame and
practices).

C. FUND BOARD REPORTING AND RECORDKEEPING

BIM will prepare periodic reports for submission to the Boards of Directors of
its affiliated funds (the "Helios Funds") describing:

o any issues arising under these Policies and Procedures since the
last report to the Helios Funds' Boards of Directors and the
resolution of such issues, including but not limited to, information
about conflicts of interest not addressed in the Policies and
Procedures; and

o any proxy votes taken by BIM on behalf of the Helios Funds since the
last report to the Helios Funds' Boards of Directors that deviated
from these Policies and Procedures, with reasons for any such
deviations.

In addition, no less frequently than annually, BIM will provide the Boards of
Directors of the Helios Funds with a written report of any recommended changes
based upon BIM's experience under these Policies and Procedures, evolving
industry practices and developments in the applicable laws or regulations.

BIM will maintain all records that are required under, and in accordance with,
the Investment Company Act of 1940, as amended, and the Investment Advisers Act
of 1940, which include, but not limited to:

o these Policies and Procedures, as amended from time to time;

o records of votes cast with respect to portfolio proxies, reflecting
the information required to be included in Form N-PX;

o records of written client requests for proxy voting information and
any written responses of BIM to such requests; and

o any written materials prepared by BIM that were material to making a
decision in how to vote, or that memorialized the basis for the
decision.

D. AMENDMENTS TO THESE PROCEDURES

The Committee shall periodically review and update these Policies and Procedures
as necessary. Any amendments to these Procedures and Policies (including the
Guidelines) shall be provided to the Board of Directors of BIM and to the Boards
of Directors of the Helios Funds for review and approval.

E. PROXY VOTING GUIDELINES

Guidelines are available upon request.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

(A)(1) IDENTIFICATION OF PORTFOLIO MANAGERS OR MANAGEMENT TEAM MEMBERS AND
DESCRIPTION OF ROLE OF PORTFOLIO MANAGERS OR MANAGEMENT TEAM MEMBERS

Information provided as of January 3, 2013.

Through their registered investment advisor, Brookfield Investment Management,
their public market activities complement the firm's core competencies as a
direct investor. These activities encompass global listed real estate and
infrastructure equities, corporate high yield investments, opportunistic credit
strategies and a dedicated insurance asset management division. Headquartered in
New York, NY, Brookfield maintains offices and investment teams in Toronto,
Chicago, Boston and London.

Dana E. Erikson, CFA, Managing Director

Mr. Erikson, Portfolio Manager and the Head of the Global High Yield Team, is
responsible for the firm's corporate high yield exposures and the establishment
of portfolio objectives and strategies. Mr. Erikson has 26 years of investment
experience. Prior to joining the firm in 2006, he was with Evergreen Investments
or one of its predecessor firms since 1996. He was a senior portfolio manager
and the Head of the High Yield team. Prior to that, he was Head of High Yield
Research. Mr. Erikson received a BA in Economics from Brown University and an
MBA, with honors, from Northeastern University. Mr. Erikson holds the Chartered
Financial Analyst designation and he is a member of the Boston Security Analysts
Society.

Anthony Breaks, CFA, Director

Mr. Breaks is a Portfolio Manager on the Securitized Products Investments team
and has worked for the firm since May 2002. Mr. Breaks is one of four team
leaders in mortgage-backed securities ("MBS") and asset-backed securities
("ABS") and is a member of the team's securities analysis committee. In his
role, Mr. Breaks is one of the team's portfolio managers. Mr. Breaks also has
managed securitized product vehicles, such as SIV, ABCP and CDOs, for Brookfield
and has experience in insurance company asset management. Mr. Breaks earned a
Bachelor of Science degree in Electrical Engineering from the Massachusetts
Institute of Technology. He holds the Chartered Financial Analyst designation.

(A)(2) OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS OR MANAGEMENT TEAM MEMBER
AND POTENTIAL CONFLICTS OF INTEREST

Information provided as of October 31, 2012.

# of Accounts Total Assets
Total Managed for which for which
Advisory Fee is Advisory Fee
Name of Portfolio Manager or # of Accounts Based on is Based on
Team Member Type of Accounts* Managed Total Assets Performance Performance
---------------------------- ----------------- ------- ------------ ----------- -----------

1. Dana Erikson Registered Investment Companies: 7 $563M 0 $0
Other Pooled Investment Vehicles: 4 $233M 1 $126M
Other Accounts: 1 $63M 0 $0

2. Anthony Breaks Registered Investment Companies: 1 $72M 0 $0
Other Pooled Investment Vehicles: 0 $0 0 $0
Other Accounts: 2 $447M 0 $0

PORTFOLIO MANAGER POTENTIAL CONFLICTS OF INTERESTS

Potential conflicts of interest may arise when a fund's portfolio manager has
day-to-day management responsibilities with respect to one or more other funds
or other accounts, as is the case for the portfolio managers of the Fund. These
potential conflicts may include:

Allocation of Limited Time and Attention. A portfolio manager who is responsible
for managing multiple funds and/or accounts may devote unequal time and
attention to the management of those funds and/or accounts. As a result, the
portfolio manager may not be able to formulate as complete a strategy or
identify equally attractive investment opportunities for each of those accounts
as the case may be if he or she were to devote substantially more attention to
the management of a single fund. The effects of this potential conflict may be
more pronounced where funds and/or accounts overseen by a particular portfolio
manager have different investment strategies.

Allocation of Limited Investment Opportunities. If a portfolio manager
identifies a limited investment opportunity that may be suitable for multiple
funds and/or accounts, the opportunity may be allocated among these several
funds or accounts, which may limit a client's ability to take full advantage of
the investment opportunity.

Pursuit of Differing Strategies. At times, a portfolio manager may determine
that an investment opportunity may be appropriate for only some of the funds
and/or accounts for which he or she exercises investment responsibility, or may
decide that certain of the funds and/or accounts should take differing positions
with respect to a particular security. In these cases, the portfolio manager may
place separate transactions for one or more funds or accounts which may affect
the market price of the security or the execution of the transaction, or both,
to the detriment or benefit of one or more other funds and/or accounts.

Variation in Compensation. A conflict of interest may arise where the financial
or other benefits available to the portfolio manager differ among the funds
and/or accounts that he or she manages. If the structure of the investment
adviser's management fee and/or the portfolio manager's compensation differs
among funds and/or accounts (such as where certain funds or accounts pay higher
management fees or performance-based management fees), the portfolio manager
might be motivated to help certain funds and/or accounts over others. The
portfolio manager might be motivated to favor funds and/or accounts in which he
or she has an interest or in which the investment advisor and/or its affiliates
have interests. Similarly, the desire to maintain or raise assets under
management or to enhance the portfolio manager's performance record or to derive
other rewards, financial or otherwise, could influence the portfolio manager to
lend preferential treatment to those funds and/or accounts that could most
significantly benefit the portfolio manager.

Related Business Opportunities. The investment adviser or its affiliates may
provide more services (such as distribution or recordkeeping) for some types of
funds or accounts than for others. In such cases, a portfolio manager may
benefit, either directly or indirectly, by devoting disproportionate attention
to the management of fund and/or accounts that provide greater overall returns
to the investment manager and its affiliates.

Brookfield Investment Management Inc. ("Brookfield") has adopted compliance
policies and procedures that are designed to address the various conflicts of
interest that may arise for it and the individuals that it employs. For example,
Brookfield seeks to minimize the effects of competing interests for the time and
attention of portfolio managers by assigning portfolio managers to manage funds
and accounts that share a similar investment style. Brookfield also has adopted
trade allocation procedures that are designed to facilitate the fair allocation
of limited investment opportunities among multiple funds and accounts.

(A)(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGERS OR MANAGEMENT TEAM MEMBERS
PORTFOLIO MANAGER COMPENSATION

Information provided as of October 31, 2012.

The Fund's portfolio managers are compensated by the sub-advisor. Brookfield
compensates its portfolio managers based on the scale and complexity of their
portfolio responsibilities, the total return performance of funds and accounts
managed by the portfolio manager on an absolute basis and versus appropriate
peer groups of similar size and strategy, as well as the management skills
displayed in managing their subordinates and the teamwork displayed in working
with other members of the firm. Since the portfolio managers are responsible for
multiple funds and accounts, investment performance is evaluated on an aggregate
basis almost equally weighted among performance, management and teamwork. Base
compensation for Brookfield's portfolio managers varies in line with a portfolio
manager's seniority and position. The compensation of portfolio managers with
other job responsibilities (such as acting as an executive officer of Brookfield
or supervising various departments) includes consideration of the scope of such
responsibilities and the portfolio manager's performance in meeting them.
Brookfield seeks to compensate portfolio managers commensurate with their
responsibilities and performance, and competitive with other firms within the
investment management industry. Salaries, bonuses and stock-based compensation
also are influenced by the operating performance of Brookfield and its parent
company, Brookfield Asset Management Inc. While the salaries of Brookfield's
portfolio managers are comparatively fixed, cash bonuses and stock-based
compensation may fluctuate significantly from year to year. Bonuses are
determined on a discretionary basis by the senior executives of Brookfield and
measured by individual and team-oriented performance guidelines. The amount of
the Long Term Incentive Plan (LTIP) is approved by the board of directors
annually and there is a rolling vesting schedule to aid in retention of key
people. A key component of this program is achievement of client objectives in
order to properly align interests with our clients. Further, the incentive
compensation of all investment personnel who work on each strategy is directly
tied to the relative performance of the strategy and its clients.

(A)(4) DISCLOSURE OF SECURITIES OWNERSHIP

Information provided as of October 31, 2012.

Dollar Range of Fund Shares
Name Beneficially Owned

Dana Erikson $0
Anthony Breaks $0

(B) Not applicable.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.

ITEM 11. 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 second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.

ITEM 12. EXHIBITS.

(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.

(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.

(a)(3) Not applicable.

(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 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 Strategic High Income Fund II
-----------------------------------------------------

By (Signature and Title)* /s/ Mark R. Bradley
------------------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)

Date December 24, 2012
-----------------------

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/ Mark R. Bradley
------------------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)

Date December 24, 2012
-----------------------

By (Signature and Title)* /s/ James M. Dykas
------------------------------------------------
James M. Dykas, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)

Date December 24, 2012
-----------------------

* Print the name and title of each signing officer under his or her signature.