Edgar Filing: FIRST TRUST STRATEGIC HIGH INCOME FUND

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

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT
INVESTMENT COMPANY

Investment Company Act file number 811-21756
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First Trust Strategic High Income Fund
---------------------------------------------------------
(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: July 31, 2011
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Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of
this chapter), to file reports with the Commission, not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use
the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. ss. 3507.

ITEM 1. SCHEDULE OF INVESTMENTS. The Schedule of Investments is attached
herewith.

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a)
JULY 31, 2011 (UNAUDITED)

PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- ------------ -------------- --------------

CORPORATE BONDS AND NOTES - 93.3%

AUTOMOTIVE - 5.0%

$ 425,000 American Axle & Manufacturing, Inc. ... 7.88% 03/01/17 $ 436,156
400,000 Ford Motor Co. ........................ 6.50% 08/01/18 428,955
550,000 Pittsburgh Glass Works LLC (b) (c)..... 8.50% 04/15/16 573,375
425,000 Tenneco, Inc. ......................... 6.88% 12/15/20 442,000
70,000 Visteon Corp. (b)...................... 6.75% 04/15/19 68,950
--------------
1,949,436
--------------

BASIC INDUSTRY - 13.7%
455,000 AK Steel Corp. (c)..................... 7.63% 05/15/20 467,512
425,000 Arch Coal, Inc. (c).................... 8.75% 08/01/16 473,875
215,000 Georgia-Pacific LLC ................... 7.38% 12/01/25 253,688
185,000 Georgia-Pacific LLC ................... 7.25% 06/01/28 214,824
275,000 Hexion U.S. Finance Corp./Hexion Nova
Scotia Finance ULC (c)............. 8.88% 02/01/18 292,875
425,000 Huntsman International LLC ............ 8.63% 03/15/21 475,469
425,000 Mercer International, Inc. (c)......... 9.50% 12/01/17 455,813
550,000 Ply Gem Industries, Inc. (b)........... 8.25% 02/15/18 528,000
425,000 Polymer Group, Inc. (b)................ 7.75% 02/01/19 442,531
325,000 Steel Dynamics, Inc. .................. 7.63% 03/15/20 350,188
600,000 United States Steel Corp. (c).......... 7.00% 02/01/18 606,000
400,000 Westlake Chemical Corp. (c)............ 6.63% 01/15/16 414,000
355,000 Xerium Technologies, Inc. (b).......... 8.88% 06/15/18 359,430
--------------
5,334,205
--------------

CAPITAL GOODS - 8.6%
550,000 Berry Plastics Corp. (c)............... 9.50% 05/15/18 554,125
245,000 Coleman Cable, Inc. (c)................ 9.00% 02/15/18 255,412
425,000 Crown Cork & Seal Co., Inc. ........... 7.38% 12/15/26 427,125
825,000 Owens-Illinois, Inc. (c)............... 7.80% 05/15/18 885,844
400,000 Terex Corp. (c)........................ 8.00% 11/15/17 409,500
275,000 Trimas Corp. (c)....................... 9.75% 12/15/17 303,875
550,000 USG Corp. (c) (d)...................... 9.75% 01/15/18 532,125
--------------
3,368,006
--------------

CONSUMER CYCLICAL - 7.6%
425,000 ACCO Brands Corp. (c).................. 10.63% 03/15/15 476,531
400,000 Easton-Bell Sports, Inc. (c)........... 9.75% 12/01/16 443,500
550,000 Levi Strauss & Co. (c)................. 7.63% 05/15/20 556,187
425,000 Limited Brands, Inc. (c)............... 7.60% 07/15/37 426,063
220,000 Neiman Marcus Group, Inc. (c).......... 10.38% 10/15/15 231,550
250,000 Phillips-Van Heusen Corp. ............. 7.38% 05/15/20 270,625
550,000 Reynolds Group Issuer, Inc./Reynolds
Group Issuer LLC (b) (c)........... 9.00% 04/15/19 550,000
--------------
2,954,456
--------------

CONSUMER NON-CYCLICAL - 4.9%
425,000 B&G Foods, Inc. (c).................... 7.63% 01/15/18 456,875
500,000 C&S Group Enterprises LLC (b) (c)...... 8.38% 05/01/17 522,500
425,000 Cott Beverages, Inc. (c)............... 8.13% 09/01/18 452,094
275,000 Rite Aid Corp. (c)..................... 8.63% 03/01/15 262,625

See Notes to Quarterly Portfolio of Investments Page 1

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (Continued)
JULY 31, 2011 (UNAUDITED)

PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- ------------ -------------- --------------

CORPORATE BONDS AND NOTES - (Continued)

CONSUMER NON-CYCLICAL - (Continued)
$ 200,000 Rite Aid Corp. (c)..................... 9.75% 06/12/16 $ 222,500
--------------
1,916,594
--------------

ENERGY - 16.6%
425,000 Breitburn Energy Partners LP/Breitburn
Finance Corp. ..................... 8.63% 10/15/20 456,875
425,000 Calfrac Holdings LP (b)................ 7.50% 12/01/20 438,812
550,000 Calumet Specialty Products Partners
LP/Calumet Finance Corp. (b) (c)... 9.38% 05/01/19 566,500
200,000 Chaparral Energy, Inc. (c)............. 8.88% 02/01/17 207,000
425,000 Crosstex Energy LP/Crosstex Energy
Finance Corp. (c).................. 8.88% 02/15/18 464,312
140,000 EV Energy Partners LP/EV Energy Finance
Corp. (b).......................... 8.00% 04/15/19 145,250
275,000 GMX Resources, Inc. (b) (c)............ 11.38% 02/15/19 263,313
275,000 Hercules Offshore LLC (b) (c).......... 10.50% 10/15/17 288,750
425,000 Hilcorp Energy I LP/Hilcorp Finance Co.
(b) (c)............................ 8.00% 02/15/20 461,125
425,000 Key Energy Services, Inc. ............. 6.75% 03/01/21 439,875
120,000 Linn Energy LLC/Linn Energy Finance Corp. 8.63% 04/15/20 133,500
400,000 McJunkin Red Man Corp. (b)............. 9.50% 12/15/16 418,000
495,000 Niska Gas Storage US LLC/Niska Gas
Storage Canada ULC (c)............. 8.88% 03/15/18 530,269
425,000 Pioneer Natural Resources Co. (c)...... 6.65% 03/15/17 470,057
425,000 Plains Exploration & Production Co. (c) 7.63% 06/01/18 459,000
550,000 Venoco, Inc. .......................... 8.88% 02/15/19 572,000
165,000 W&T Offshore, Inc. (b)................. 8.50% 06/15/19 171,806
--------------
6,486,444
--------------

HEALTHCARE - 0.5%
195,000 Inventiv Health, Inc. (b).............. 10.00% 08/15/18 191,100
--------------

MEDIA - 9.2%
425,000 American Reprographics Co. ............ 10.50% 12/15/16 432,438
425,000 Cablevision Systems Corp. (c).......... 8.63% 09/15/17 471,750
425,000 CCO Holdings LLC/CCO Holdings Capital
Corp. (c).......................... 8.13% 04/30/20 468,562
425,000 Clear Channel Communications, Inc. (b). 9.00% 03/01/21 403,750
425,000 Deluxe Corp. (c)....................... 7.38% 06/01/15 439,875
425,000 Insight Communications Co., Inc. (b) (c) 9.38% 07/15/18 462,719
425,000 Lamar Media Corp. (c).................. 7.88% 04/15/18 453,687
425,000 Mediacom LLC/Mediacom Capital Corp. (c) 9.13% 08/15/19 454,750
--------------
3,587,531
--------------

SERVICES - 17.0%
400,000 AMC Entertainment, Inc. (c)............ 8.75% 06/01/19 427,000
425,000 Avis Budget Car Rental LLC/Avis Budget
Finance, Inc. (c).................. 9.63% 03/15/18 462,719

Page 2 See Notes to Quarterly Portfolio of Investments

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (Continued)
JULY 31, 2011 (UNAUDITED)

PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- ------------ -------------- --------------

CORPORATE BONDS AND NOTES - (Continued)

SERVICES - (Continued)
$ 200,000 Beazer Homes USA, Inc. (c)............. 9.13% 06/15/18 $ 169,000
425,000 Citycenter Holdings LLC/Citycenter
Finance Corp (b) (c)............... 7.63% 01/15/16 446,250
400,000 Harrah's Operating Co., Inc. (c)....... 11.25% 06/01/17 442,500
400,000 Iron Mountain, Inc. (c)................ 8.75% 07/15/18 419,000
425,000 K Hovnanian Enterprises, Inc. ......... 10.63% 10/15/16 396,312
550,000 Marina District Finance Co., Inc. ..... 9.88% 08/15/18 565,125
300,000 Maxim Crane Works LP (b) (c)........... 12.25% 04/15/15 298,500
225,000 MGM Resorts International (c).......... 5.88% 02/27/14 221,625
225,000 MGM Resorts International (c).......... 10.38% 05/15/14 258,188
140,000 MTR Gaming Group, Inc. (b)............. 11.50% 08/01/19 132,650
550,000 Palace Entertainment Holdings LLC/Palace
Entertainment Holdings Corp. (b) (c) 8.88% 04/15/17 563,062
550,000 Pulte Group, Inc. (c).................. 6.38% 05/15/33 451,000
225,000 RSC Equipment Rental, Inc./RSC Holdings
III LLC (c)........................ 10.25% 11/15/19 252,563
550,000 Standard Pacific Corp. (c)............. 8.38% 05/15/18 556,875
550,000 United Rentals North America, Inc. (c). 8.38% 09/15/20 574,750
--------------
6,637,119
--------------

TECHNOLOGY & ELECTRONICS - 2.8%
22,000 First Data Corp. ...................... 9.88% 09/24/15 22,440
550,000 First Data Corp. (b)................... 8.25% 01/15/21 541,750
500,000 Freescale Semiconductor, Inc. (b) (c).. 9.25% 04/15/18 547,500
--------------
1,111,690
--------------

TELECOMMUNICATIONS - 5.8%
215,000 Cincinnati Bell, Inc. (c).............. 8.25% 10/15/17 219,300
275,000 Cincinnati Bell, Inc. (c).............. 8.38% 10/15/20 278,438
400,000 Frontier Communications (c)............ 7.13% 03/15/19 417,500
200,000 PAETEC Holding Corp. (c)............... 9.50% 07/15/15 209,500
300,000 PAETEC Holding Corp. .................. 9.88% 12/01/18 323,250
400,000 Qwest Corp. ........................... 6.88% 09/15/33 398,000
425,000 Windstream Corp. ...................... 7.00% 03/15/19 434,562
--------------
2,280,550
--------------

UTILITY - 1.6%
425,000 Calpine Corp. (b) (c).................. 7.25% 10/15/17 437,750
225,000 Edison Mission Energy ................. 7.00% 05/15/17 172,125
--------------
609,875
--------------
TOTAL CORPORATE BONDS AND NOTES .................................... 36,427,006
(Cost $35,270,730) --------------

MORTGAGE-BACKED SECURITIES - 16.6%

COLLATERALIZED MORTGAGE OBLIGATIONS - 9.1%
Banc of America Mortgage Securities, Inc.,
123,000 Series 2007-1, Class 1A26 ......... 6.00% 03/25/37 110,811
Chase Mortgage Finance Corp.
118,962 Series 2007-S2, Class 1A8 ......... 6.00% 03/25/37 107,601

See Notes to Quarterly Portfolio of Investments Page 3

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (Continued)
JULY 31, 2011 (UNAUDITED)

PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- ------------ -------------- --------------

MORTGAGE-BACKED SECURITIES - (Continued)

COLLATERALIZED MORTGAGE OBLIGATIONS - (Continued)
Citicorp Mortgage Securities, Inc.
$ 660,000 Series 2007-2, Class 1A3 .......... 6.00% 02/25/37 $ 644,124
Citigroup Mortgage Loan Trust, Inc.
250,501 Series 2006-AR6, Class 1A1 (e)..... 5.91% 08/25/36 219,398
265,714 Series 2007-AR4, Class 1A1A (e).... 5.79% 03/25/37 235,482
Countrywide Alternative Loan Trust
82,444 Series 2006-41CB, Class 2A14 ...... 6.00% 01/25/37 66,201
Countrywide Home Loan Mortgage Pass
Through Trust
429,869 Series 2005-27, Class 2A1 ......... 5.50% 12/25/35 386,879
314,000 Series 2007-10, Class A5 .......... 6.00% 07/25/37 259,089
HarborView Mortgage Loan Trust
3,615,995 Series 2005-9, Class B10 (e)....... 1.94% 06/20/35 280,887
JP Morgan Mortgage Trust
67,857 Series 2006-S3, Class 1A30 ........ 6.50% 08/25/36 62,993
Residential Asset Securitization Trust
377,718 Series 2005-A8CB, Class A11 ....... 6.00% 07/25/35 329,427
Structured Asset Securities Corp.
58,214 Series 2003-10, Class A ........... 6.00% 04/25/33 61,086
Wells Fargo Mortgage Backed Securities
Trust
306,668 Series 2006-8, Class A15 .......... 6.00% 07/25/36 287,816
350,000 Series 2007-3, Class 1A10 ......... 5.50% 04/25/37 321,394
181,683 Series 2007-7, Class A38 .......... 6.00% 06/25/37 172,522
25,737 Series 2007-8, Class 1A16 ......... 6.00% 07/25/37 25,039
--------------
3,570,749
--------------

COMMERCIAL MORTGAGE-BACKED SECURITIES - 7.5%
Banc of America Large Loan, Inc.
2,000,000 Series 2005-MIB1, Class L (e) (f) (g) 3.19% 03/15/22 1,012,654
Citigroup Commercial Mortgage Trust
170,000 Series 2007-C6, Class AM (e)....... 5.89% 12/10/49 169,992
Citigroup/Deutsche Bank Commercial
Mortgage Trust
310,000 Series 2007-CD4, Class A4 ......... 5.32% 12/11/49 327,707
Commercial Mortgage Pass Through
Certificates
330,000 Series 2007-C9, Class A4 (e)....... 6.01% 12/10/49 365,984
Credit Suisse Mortgage Capital
Certificates
30,000 Series 2006-C5, Class AJ .......... 5.37% 12/15/39 24,849
Greenwich Capital Commercial Funding
Corp.
290,000 Series 2007-GG9, Class AM ......... 5.48% 03/10/39 283,115
200,000 Series 2007-GG11, Class A4 ........ 5.74% 12/10/49 215,217
330,000 Series 2007-GG11, Class AJ (e)..... 6.20% 12/10/49 219,704

Page 4 See Notes to Quarterly Portfolio of Investments

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (Continued)
JULY 31, 2011 (UNAUDITED)

PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- ------------ -------------- --------------

MORTGAGE-BACKED SECURITIES - (Continued)

COMMERCIAL MORTGAGE-BACKED SECURITIES - (Continued)
GS Mortgage Securities Corp II
$ 390,000 Series 2006-GG8, Class AJ ......... 5.62% 11/10/39 $ 301,345
--------------
2,920,567
--------------
TOTAL MORTGAGE-BACKED SECURITIES ................................... 6,491,316
(Cost $7,187,130) --------------

ASSET-BACKED SECURITIES - 8.0%
Ace Securities Corp.
322,000 Series 2003-MH1, Class A4 (b)...... 6.50% 08/15/30 354,210
Bombardier Capital Mortgage
Securitization Corp.
303,472 Series 1999-B, Class A1B .......... 6.61% 12/15/29 185,933
1,087,758 Series 1999-B, Class A3 ........... 7.18% 12/15/29 688,038
Conseco Finance Securitizations Corp.
2,545,430 Series 2000-6, Class M1 ........... 7.72% 09/01/31 641,808
Countrywide Asset-Backed Certificates
224,512 Series 2006-13, Class 3AV2 (e)..... 0.34% 01/25/37 163,009
Credit Suisse First Boston Mortgage
Securities Corp.
94,380 Series 2002-MH3, Class A .......... 6.70% 12/25/31 100,391
Falcon Franchise Loan Trust
912,276 Series 2003-1, Class E (f) (h)..... 6.00% 01/05/25 1,186
Green Tree Financial Corp.
174,750 Series 1997-4, Class B1 ........... 7.23% 02/15/29 17,151
810,293 Series 1998-4, Class M1 ........... 6.83% 04/01/30 376,539
3,373,269 Series 1999-3, Class M1 ........... 6.96% 02/01/31 417,925
GSAMP Trust
440,199 Series 2004-AR2, Class B4 (e) (f).. 5.10% 08/25/34 7,746
964,138 Series 2006-S3, Class A2 (e) (g)... 6.27% 05/25/36 51,684
845,179 Series 2006-S5, Class A1 (e)....... 0.28% 09/25/36 20,289
Independence III CDO, Ltd.
5,000,000 Series 3A, Class C1 (e) (f) (i).... 2.75% 10/03/37 14,300
Park Place Securities, Inc.
1,465,491 Series 2004-WCW1, Class M8 (e)..... 3.69% 09/25/34 32,335
1,301,976 Series 2004-WCW2, Class M10 (e) (f) 2.94% 10/25/34 49,715
Summit CBO I, Ltd.
4,250,309 Series 1A, Class B (e) (f) (h)..... 1.41% 05/23/11 42
--------------
TOTAL ASSET-BACKED SECURITIES ...................................... 3,122,301
(Cost $3,073,599) --------------

FOREIGN CORPORATE BONDS AND NOTES - 6.7%

BASIC INDUSTRY - 3.8%
425,000 Cascades, Inc. (c)..................... 7.88% 01/15/20 439,875
550,000 Masonite International Corp. (b)....... 8.25% 04/15/21 556,875
450,000 Tembec Industries, Inc. (c)............ 11.25% 12/15/18 481,500
--------------
1,478,250
--------------

See Notes to Quarterly Portfolio of Investments Page 5

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (Continued)
JULY 31, 2011 (UNAUDITED)

PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- --------------------------------------- ------------ -------------- --------------

FOREIGN CORPORATE BONDS AND NOTES - (Continued)

CAPITAL GOODS - 1.2%
$ 425,000 Bombardier, Inc. (b) (c)............... 7.75% 03/15/20 $ 480,250
--------------

ENERGY - 0.5%
170,000 Precision Drilling Corp. .............. 6.63% 11/15/20 176,375
--------------

TELECOMMUNICATIONS - 1.2%
400,000 Global Crossing Ltd. (c)............... 12.00% 09/15/15 466,000
--------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES ............................ 2,600,875
(Cost $2,514,323) --------------

SENIOR FLOATING-RATE LOAN INTERESTS - 0.4%

UTILITY - 0.4%
214,649 Texas Competitive Electric Holdings Co.,
LLC Tranche B2 (e)................. 4.69%-4.77% 10/10/14 159,779
--------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS .......................... 159,779
(Cost $191,986) --------------

STRUCTURED NOTES - 0.0%
3,750,000 Preferred Term Securities XXV, Ltd. (f) (j) 06/22/37 375
--------------
TOTAL STRUCTURED NOTES ............................................. 375
(Cost $0) --------------

U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 0.0%

COMMERCIAL MORTGAGE-BACKED SECURITIES - 0.0%
FannieMae-ACES
76,708 Series 1998-M7, Class N, IO (e).... 0.32% 05/25/36 15
--------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES ............ 15
(Cost $106,509) --------------

SHARES DESCRIPTION VALUE
---------------- --------------------------------------------------------------------- --------------

PREFERRED SECURITIES - 0.1%
2,000 Soloso CDO, Ltd., Series 2005-1 (f) (j)............................. 20,000
3,000 White Marlin CDO, Ltd., Series AI (f) (i) (j)....................... 15,000
--------------
TOTAL PREFERRED SECURITIES ......................................... 35,000
(Cost $0) --------------

TOTAL INVESTMENTS - 125.1% ......................................... 48,836,667
(Cost $48,344,277) (k)

OUTSTANDING LOAN - (34.1%) ......................................... (13,300,000)

NET OTHER ASSETS AND LIABILITIES - 9.0% ............................ 3,510,259
--------------
NET ASSETS - 100.0% ................................................ $ 39,046,926
==============

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

(a) All percentages shown in the Portfolio of Investments are based on net
assets.

Page 6 See Notes to Quarterly Portfolio of Investments

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (Continued)
JULY 31, 2011 (UNAUDITED)

(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 July 31, 2011,
securities noted as such amounted to $11,214,708 or 28.72% of net assets.

(d) 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 July 31, 2011.

(e) Floating rate security. The interest rate shown reflects the rate in
effect at July 31, 2011.

(f) 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 1C - Restricted Securities in the
Notes to Quarterly Portfolio of Investments).

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

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

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

(j) Zero coupon security.

(k) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of July 31, 2011, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $2,587,758 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $2,095,368.

ACES Alternative Credit Enhancement Securities

CBO Collateralized Bond Obligation

CDO Collateralized Debt Obligation

IO Interest-Only Security - Principal amount shown represents par value on
which interest payments are based.

See Notes to Quarterly Portfolio of Investments Page 7

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (Continued)
JULY 31, 2011 (UNAUDITED)

---------------------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of July 31, 2011
is as follows (see Note 1A - Portfolio Valuation in the Notes to Quarterly
Portfolio of Investments):

LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
7/31/2011 PRICES INPUTS INPUTS
--------------- ------------- --------------- ---------------

Corporate Bonds and Notes*.................... $ 36,427,006 $ -- $ 36,427,006 $ --
Mortgage-Backed Securities:
Collateralized Mortgage Obligations....... 3,570,749 -- 3,570,749 --
Commercial Mortgage-Backed Securities..... 2,920,567 -- 2,920,567 --
Asset-Backed Securities....................... 3,122,301 -- 3,121,115 1,186
Foreign Corporate Bonds and Notes*............ 2,600,875 -- 2,600,875 --
Senior Floating-Rate Loan Interests*.......... 159,779 -- 159,779 --
Structured Notes.............................. 375 -- 375 --
U.S. Government Agency Mortgage-Backed
Securities.................................. 15 -- 15 --
Preferred Securities.......................... 35,000 -- -- 35,000
--------------- ------------- --------------- ---------------
TOTAL INVESTMENTS............................. $ 48,836,667 $ -- $ 48,800,481 $ 36,186
=============== ============= =============== ===============

* See the Portfolio of Investments for industry breakout.

All transfers in and out of Level 3 during the period are assumed to be
transferred on the last day of the period at their current value. 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.

INVESTMENTS AT FAIR CHANGE IN NET BALANCE
VALUE USING SIGNIFICANT BALANCE AS OF TRANSFERS IN NET REALIZED UNREALIZED AS OF
UNOBSERVABLE INPUTS OCTOBER 31, (OUT) OF GAINS APPRECIATION NET PURCHASES JULY 31,
(LEVEL 3) 2010 LEVEL 3 (LOSSES) (DEPRECIATION) (SALES) 2011
---------------------------------------------------------------------------------------------------------------------

Asset-Backed Securities $ 87,636 $ (42) $ 1,961,863 $ (40,353) $ (2,007,918) $ 1,186
Preferred Securities 35,000 -- -- -- -- 35,000
----------------------------------------------------------------------------------------
TOTAL $ 122,636 $ (42) $ 1,961,863 $ (40,353) $ (2,007,918) $36,186
========================================================================================

Page 8 See Notes to Quarterly Portfolio of Investments

NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS

FIRST TRUST STRATEGIC HIGH INCOME FUND
JULY 31, 2011 (UNAUDITED)

1. VALUATION AND INVESTMENT PRACTICES

A. PORTFOLIO VALUATION:

The net asset value ("NAV") of the Common Shares of First Trust Strategic High
Income Fund (the "Fund") is determined daily as of the close of regular trading
on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on
each day the NYSE is open for trading. 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 Investment Company Act of 1940, as amended (the "1940 Act"). Securities for
which market quotations are readily available are valued using the last reported
sale price on the business day as of which such value is being determined. If no
sales are reported on such business day (as in the case of some securities
traded over-the-counter), the last reported bid price is used, except that
certain U.S. Government securities are valued at the mean between the last
reported bid and asked prices. Mortgage-backed securities ("MBS") and other debt
securities not traded in an organized market 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.

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.

In the event that market quotations are not readily available, 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. However, 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.

Page 9

NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (Continued)

FIRST TRUST STRATEGIC HIGH INCOME FUND
JULY 31, 2011 (UNAUDITED)

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, auto, equipment lease, credit card, aircraft, franchise, manufactured
housing, etc.; commercial mortgage-backed securities; residential
mortgage-backed or private-label collateralized mortgage obligations;
collateralized debt obligations and collateralized loan obligations. The value
and related income of these securities is sensitive to changes in economic
conditions, including delinquencies and/or defaults. Instability in the markets
for fixed-income securities, particularly mortgage-backed and asset-backed
securities, has resulted in increased volatility and periods of illiquidity that
have adversely impacted the valuation of certain securities held by the Fund.

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 securities. An active market is a market in which
transactions for the security 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 securities in active markets.

o Quoted prices for identical or similar securities in markets
that are non-active. A non-active market is a market where
there are few transactions for the security, 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
security (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
security.

The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. A summary
of the inputs used to value the Fund's investments as of July 31, 2011, 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.

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 on a prospective basis over the remaining life
of the security. 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 July 31, 2011, 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 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 July 31, 2011, the Fund held restricted securities
as shown in the following table that Brookfield Investment Mangement Inc. 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

Page 10

NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (Continued)

FIRST TRUST STRATEGIC HIGH INCOME FUND
JULY 31, 2011 (UNAUDITED)

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 1A) and are not expressed as a discount to
the carrying value of a comparable unrestricted security. There are no
unrestricted securities with the same maturity dates and yields for these
issuers.

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

Banc of America Large Loan, Inc.
Series 2005-MIB1, Class L, 3.19%,
03/15/22 08/26/06 $ 2,000,000 $50.63 $ 537,865 $ 1,012,654 2.59%
Falcon Franchise Loan Trust
Series 2003-1, Class E, 6.00%,
01/05/25 08/09/05 $ 912,276 0.13 -- 1,186 -- **
GSAMP Trust
Series 2004-AR2, Class B4, 4.76%,
08/25/34 08/17/05 $ 440,199 1.76 -- 7,746 0.02
Independence III CDO, Ltd.
Series 3A, Class C1, 2.75%, 10/03/37 12/27/06 $ 5,000,000 0.29 -- 14,300 0.04
Park Place Securities, Inc.
Series 2004-WCW2, Class M10, 2.94%,
10/25/34 03/24/06 $ 1,301,976 3.82 183,786 49,715 0.13
Preferred Term Securities XXV, Ltd.
Zero Coupon, 06/22/37 03/22/07 $ 3,750,000 0.00 * -- 375 -- **
Soloso CDO, Ltd., Series 2005-1 11/30/05 2,000 10.00 -- 20,000 0.05
Summit CBO I, Ltd
Series 1A, Class B, 1.41%, 05/23/11 08/03/05 $ 4,250,309 0.00 * 91,513 42 -- **
White Marlin CDO, Ltd., Series AI 06/01/07 3,000 5.00 -- 15,000 0.04
------------ ------------- --------
$ 813,164 $ 1,121,018 2.87%
============ ============= ========

* 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 MBS
that receives some or all of the interest portion of the underlying MBS 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 held in the Fund, 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 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.

Page 11

NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (Continued)

FIRST TRUST STRATEGIC HIGH INCOME FUND
JULY 31, 2011 (UNAUDITED)

2. SUBSEQUENT EVENTS

On August 8, 2011, shareholders of First Trust Strategic High Income Fund (NYSE:
FHI) and First Trust Strategic High Income Fund III (NYSE: FHO) approved the
reorganizations of each of FHI and FHO into First Trust Strategic High Income
Fund II (NYSE: FHY) (collectively, the "Funds") and shareholders of FHY approved
the issuance of additional common shares of FHY in connection with the
reorganizations. In connection with the reorganizations, FHY will acquire all of
the assets and liabilities of FHI and FHO in separate tax-free transactions for
common shares of FHY. Each reorganization, if completed, will occur based on the
relative net asset values of FHY, FHI and FHO as of September 30, 2011. It is
currently expected that the reorganizations will be effective on October 3,
2011, subject to all regulatory requirements and customary closing conditions
being satisfied.

Page 12

ITEM 2. CONTROLS AND PROCEDURES.

(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the "1940
Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days
of the filing date of the report that includes the disclosure required by
this paragraph, based on their evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal quarter
that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.

ITEM 3. EXHIBITS.

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) First Trust Strategic High Income Fund
--------------------------------------------------------------------

By (Signature and Title)* /s/ James A. Bowen
--------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)

Date September 21, 2011
-------------------------

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.

Date September 21, 2011
-------------------------

By (Signature and Title)* /s/ Mark R. Bradley
--------------------------------------------------------
Mark R. Bradley, Treasurer, Chief Financial Officer and
Chief Accounting Officer (principal financial officer)

Date September 21, 2011
-------------------------

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