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

FIRST TRUST STRATEGIC HIGH INCOME FUND
(Exact name of registrant as specified in charter)

120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(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
(Name and address of agent for service)

Registrant's telephone number, including area code:
630-765-8000

Date of fiscal year end: OCTOBER 31

Date of reporting period: JANUARY 31, 2009

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

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

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

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a)
JANUARY 31, 2009 (UNAUDITED)

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

ASSET-BACKED SECURITIES - 44.5%
ABCLO, Ltd.
$ 1,750,000 Series 2007-1A, Class D (c) (d) ............................... 4.99% 04/15/21 $ 173,092
ACE Securities Corp., Home Equity Loan Trust
504,354 Series 2003-OP1, Class B ...................................... 6.00% 12/25/33 45,530
914,328 Series 2005-HE5, Class M10 (c) ................................ 3.39% 08/25/35 2,076
Aircraft Finance Trust
860,501 Series 1999-1A, Class A2 (b) (c) .............................. 0.83% 05/15/24 387,225
Atherton Franchisee Loan Funding
407,728 Series 1999-A, Class A2 (b) ................................... 7.23% 03/15/21 380,363
Bear Stearns Asset Backed Security Trust
4,000,000 Series 2007-HE3, Class M9 (c) ................................. 2.64% 04/25/37 51,160
BNC Mortgage Loan Trust
5,750,000 Series 2007-2, Class B1 (b) (c) ............................... 2.89% 05/25/37 188,198
1,400,000 Series 2007-2, Class B2 (b) (c) ............................... 2.89% 05/25/37 27,748
1,766,000 Series 2007-3, Class B2 (b) (c) ............................... 2.89% 07/25/37 42,896
Bombardier Capital Mortgage Securitization Corp.
335,349 Series 1999-B, Class A1B ...................................... 6.61% 09/15/10 154,408
858,582 Series 1999-B, Class A3 ....................................... 7.18% 12/15/15 428,665
Conseco Finance Securitizations Corp.
3,654,109 Series 2000-6, Class M1 ....................................... 7.72% 09/01/31 754,802
EMAC Owner Trust, LLC
1,175,573 Series 1998-1, Class A3 (b) ................................... 6.63% 01/15/25 775,878
1,014,804 Series 2000-1, Class A1 (b) ................................... 6.96% 01/15/27 366,263
1,299,960 Series 2000-1, Class A2 (b) ................................... 6.96% 01/15/27 469,182
Falcon Franchise Loan Trust
4,905,000 Series 2000-1, Class E (b) .................................... 6.50% 04/05/16 1,102,693
4,231,000 Series 2003-1, Class E (b) .................................... 6.00% 01/05/25 211,550
FFCA Secured Lending Corp.
5,000,000 Series 1999-2, Class B1 (b) ................................... 8.27% 05/18/26 500,997
FMAC Loan Receivables Trust
873,138 Series 1997-B, Class A (b) .................................... 6.85% 09/15/19 742,167
Green Tree Financial Corp.
353,502 Series 1997-4, Class B1 ....................................... 7.23% 02/15/29 85,288
981,503 Series 1998-4, Class M1 ....................................... 6.83% 04/01/30 276,717
3,000,000 Series 1998-8, Class M1 ....................................... 6.98% 09/01/30 1,246,702
6,016,268 Series 1999-3, Class M1 ....................................... 6.96% 02/01/31 1,110,393
GSAMP Trust
695,439 Series 2004-AR2, Class B4 (d) ................................. 5.00% 08/25/34 3,818
991,846 Series 2006-S3, Class A2 ...................................... 5.77% 05/25/36 103,652
867,967 Series 2006-S5, Class A1 (c) .................................. 0.48% 09/25/36 32,644
Halyard Multi Asset CBO I, Ltd.
1,630,322 Series 1A, Class B (c) (d) .................................... 4.88% 03/24/10 576,074
Helios Series I Multi Asset CBO, Ltd.
3,000,000 Series 1A, Class B (b) (c) .................................... 3.17% 12/13/36 149,160
Independence lll CDO, Ltd.
5,000,000 Series 3A, Class C1 (b) (c) ................................... 3.93% 10/03/37 433,450
Indymac Residential Asset Backed Trust
2,375,000 Series 2005-B, Class M10 (c) .................................. 3.89% 08/25/35 55,576
Long Beach Mortgage Loan Trust
1,955,472 Series 2006-A, Class A2 ....................................... 5.55% 05/25/36 156,438

See Notes to Quarterly Portfolio of Investments

Page 1

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JANUARY 31, 2009 (UNAUDITED)

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

ASSET-BACKED SECURITIES - (CONTINUED)
Longhorn CDO, Ltd.
$ 2,807,626 Series 1, Class C (b) (c) ..................................... 8.49% 05/10/12 $ 135,103
Merit Securities Corp.
2,813,069 Series 13, Class B1 (d) ....................................... 8.00% 12/28/33 121,759
2,602,000 Series 13, Class M2 ........................................... 8.00% 12/28/33 844,857
North Street Referenced Linked Notes
4,500,000 Series 2000-1A, Class C (c) (d) ............................... 2.92% 04/28/11 1,637,010
7,000,000 Series 2000-1A, Class D1 (b) (c) .............................. 3.77% 04/28/11 2,220,330
Park Place Securities, Inc.
3,689,895 Series 2004-WCW1, Class M8 (c) ................................ 3.89% 09/25/34 61,333
1,301,976 Series 2004-WCW2, Class M10 (b) (c) ........................... 3.14% 10/25/34 15,698
4,954,263 Series 2005-WCW3, Class M11 (c) (d) ........................... 2.89% 08/25/35 109,142
Rosedale CLO, Ltd.
3,500,000 Series I-A, Class II (b) ...................................... (f) 07/24/21 105,000
Signature 5, Ltd.
1,000,000 Series 5A, Class C (b) ........................................ 12.56% 10/27/12 48,920
Soundview Home Equity Loan Trust
1,634,000 Series 2007-OPT3, Class M10 (c) (d) ........................... 2.89% 08/25/37 50,572
Structured Asset Securities Corp.
3,000,000 Series 2007-BC3, Class B1 (b) (c) ............................. 2.89% 05/25/47 75,420
2,000,000 Series 2007-OSI, Class M10 (c) ................................ 2.89% 06/25/37 15,140
Summit CBO I, Ltd.
4,705,734 Series 1A, Class B (c) (d) .................................... 3.54% 05/23/11 179,806
Wells Fargo Home Equity Trust
3,019,132 Series 2007-2, Class B2 (b) (c) ............................... 2.89% 04/25/37 28,259
-----------
TOTAL ASSET-BACKED SECURITIES
(Cost $66,555,408) ............................................ 16,683,154
-----------
COLLATERALIZED MORTGAGE OBLIGATIONS- 5.5%
Bear Stearns Alt-A Trust
2,090,296 Series 2006-8, Class 2A2 ...................................... 5.43% 08/25/46 628,938
Countrywide Alternative Loan Trust
3,331,936 Series 2005-56, Class M4 (c) .................................. 1.31% 11/25/35 199,616
Credit Suisse Mortgage Capital Certificates
2,398,378 Series 2006-1, Class DB5 (d) .................................. 5.71% 02/25/36 21,970
2,324,170 Series 2006-2, Class DB5 (d) .................................. 5.87% 03/25/36 42,779
Deutsche Alt-A Securities, Inc. Mortgage Loan Trust
3,691,244 Series 2007-OA4, Class M10 (c) ................................ 3.39% 08/25/47 172,935
HarborView Mortgage Loan Trust
3,970,059 Series 2005-9, Class B10 (c) .................................. 2.08% 06/20/35 1,000,494
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $10,970,537) ............................................ 2,066,732
-----------

See Notes to Quarterly Portfolio of Investments

Page 2

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JANUARY 31, 2009 (UNAUDITED)

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

COMMERCIAL MORTGAGE-BACKED SECURITIES - 18.4%
Banc of America Commercial Mortgage Inc.
$ 1,171,422 Series 2000-1, Class M (b) .................................... 6.00% 11/15/31 $ 85,212
Banc of America Large Loan, Inc.
2,000,000 Series 2005-MIB1, Class L (b) (c) ............................. 3.33% 03/15/22 837,025
Banc of America Structural Securities Trust
2,878,166 Series 2002-X1, Class O (b) ................................... 7.00% 10/11/33 1,700,945
2,878,166 Series 2002-X1, Class P (b) ................................... 7.00% 10/11/33 1,124,614
Bear Stearns Commercial Mortgage Securities
1,776,400 Series 2000-WF1, Class K ...................................... 6.50% 02/15/32 268,294
GE Capital Commercial Mortgage Corp.
700,000 Series 2000-1, Class G (d) . ......................... 6.13% 01/15/33 271,831
GMAC Commercial Mortgage Securities, Inc.
1,000,000 Series 1999-C3, Class G (d) ................................... 6.97% 08/15/36 859,227
GS Mortgage Securities Corp. II
7,000,000 Series 1998-C1, Class H (b) ................................... 6.00% 10/18/30 339,076
LB-UBS Commercial Mortgage Trust
3,025,000 Series 2001-C7, Class Q (d) ................................... 5.87% 11/15/33 772,205
2,083,703 Series 2001-C7, Class S (d) ................................... 5.87% 11/15/33 247,231
Morgan Stanley Capital I, Inc.
968,400 Series 1999-WF1, Class M (b) .................................. 5.91% 11/15/31 149,645
2,787,919 Series 2003-IQ5, Class O (d) .................................. 5.24% 04/15/38 216,593
-----------
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(Cost $21,730,776) ............................................ 6,871,898
-----------
CORPORATE BONDS AND NOTES - 3.5%
1,500,000 Lexington Precision Corp., Units (e) ............................. (f) 08/01/09 1,305,000
-----------
TOTAL CORPORATE BONDS AND NOTES
(Cost $1,200,000) ............................................. 1,305,000
-----------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 19.3%
FannieMae-ACES
7,721,305 Series 1998-M7, Class N, IO ................................... 0.54% 05/25/36 141,311
Government National Mortgage Association
92,129,994 Series 2003-47, Class XA, IO .................................. 1.26% 06/16/43 5,228,368
23,433,555 Series 2003-59, Class XA, IO .................................. 1.95% 06/16/34 1,872,906
-----------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
(Cost $6,855,059) ............................................. 7,242,585
-----------
STRUCTURED NOTES- 2.2%
Bacchus Ltd.
1,225,000 Series 2006-1I, Subordinated Bond (b). ........................ (f) 01/20/19 588,000
InCaps Funding II Ltd./InCaps Funding II Corp.
2,000,000 Subordinated Note (b) ......................................... (f) 01/15/34 240,000
3,750,000 Preferred Term Securities XXV, Ltd. (b) .......................... (f) 06/22/37 375
-----------
TOTAL STRUCTURED NOTES
(Cost $3,387,594) ............................................. 828,375
-----------

See Notes to Quarterly Portfolio of Investments

Page 3

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JANUARY 31, 2009 (UNAUDITED)

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

PREFERRED SECURITIES - 1.3%
1,450 Ajax Two Ltd., Series 2A (b) (f) ................................. $ 145,000
2,000 Ajax Two Ltd., Series 2X (b) (f) ................................. 100,000
4,000 Pro Rata Funding, Ltd., Inc. (b) (f) ............................. 200,000
2,000 Soloso CDO, Ltd., Series 2005-1 (b) (f) .......................... 20,000
3,000 White Marlin CDO, Ltd., Series AI (b) (f) (e) .................... 15,000
-----------
TOTAL PREFERRED SECURITIES
(Cost $3,663,120) ............................................. 480,000
-----------
TOTAL INVESTMENTS - 94.7%
(Cost $114,362,494) (g) ....................................... 35,477,744
NET OTHER ASSETS AND LIABILITIES - 5.3% .......................... 2,003,978
-----------
NET ASSETS - 100.0% .............................................. $37,481,722
===========

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

(b) This security, sold within the terms of a private placement memorandum, is
exempt from registration under Rule 144A of 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 Valhalla Capital Partners, LLC, the Fund's
investment sub-advisor. Although recent instability in the markets has
resulted 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 January 31, 2009,
securities noted as such amounted to $13,951,392 or 37.2% of net assets.

(d) This security, sold within the terms of a private placement memorandum, is
exempt from registration under Rule 144A of 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).

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

(f) Zero coupon.

(g) Aggregate cost for federal income tax and financial reporting purposes. As
of January 31, 2009, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $844,201
and the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $79,728,951.

ACES Alternative Credit Enhancement Securities

CBO Collateralized Bond Obligation

CDO Collateralized Debt Obligation

CLO Collateralized Loan Obligation

IO Interest Only - represents the interest only portion of a mortgage-backed
security, which allows the holder to receive interest only payments on the
amount of notional principal outstanding.

See Notes to Quarterly Portfolio of Investments

Page 4

FIRST TRUST STRATEGIC HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JANUARY 31, 2009 (UNAUDITED)

SECURITY VALUATION INPUTS

A summary of the inputs used to value the Fund's investments as of January 31,
2009 is as follows (See Note 1A - Portfolio Valuation in the Notes to Quarterly
Portfolio of Investments):

VALUATION INPUTS INVESTMENTS
---------------- -----------

Level 1 - Quoted Prices ...................................... $ --
Level 2 - Other Significant Observable Inputs ................ 26,629,146
Level 3 - Significant Unobservable Inputs .................... 8,848,598
-----------
TOTAL ........................................................ $35,477,744
===========

The following table presents 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 VALUE USING
SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) INVESTMENTS
----------------------------------------- ------------

Balance as of October 31, 2008 ............................... $23,044,686
Transfers in (out) of Level 3 ................................ (3,780,541)
Net realized gains (losses) .................................. (1,480,960)
Net unrealized appreciation (depreciation) ................... (7,410,862)
Net purchases (sales) ........................................ (1,523,725)
-----------
Balance as of January 31, 2009 ............................... $ 8,848,598
===========

Net unrealized depreciation from Level 3 investments held as of January 31, 2009
was $15,929,307.

See Notes to Quarterly Portfolio of Investments

Page 5

NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS

FIRST TRUST STRATEGIC HIGH INCOME FUND
JANUARY 31, 2009 (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. 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 at market value or, in the absence of
market value with respect to any portfolio securities, at fair value according
to procedures adopted by the Fund's Board of Trustees. Securities for which
market quotations are readily available are valued at market value, which is
currently determined using the last reported sale price on the business day as
of which such value is being determined or, if no sales are reported on such day
(as in the case of some securities traded over-the-counter), the last reported
bid price, except that certain U.S. Government securities are valued at the mean
between the last reported bid and asked prices. The Fund values mortgage-backed
securities and other debt securities not traded in an organized market on the
basis of valuations provided by dealers who make markets in such securities or
by an independent pricing service approved by the Board of Trustees which uses
information with respect to transactions in such securities, quotations from
dealers, market transactions for comparable securities, various relationships
between securities and yield to maturity in determining value. The Fund's
Portfolio of Investments includes investments with a value of $4,991,258 (14.1%
of total investments) as of January 31, 2009, whose values have been determined
based on prices supplied by dealers and investments with a value of $30,486,486
(85.9% of total investments), whose values have been determined based on prices
supplied by independent pricing services. 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 less than sixty days 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 for a particular security, or the
valuations 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 and investments. Additionally, if events occur after the
close of the principal markets for particular securities (e.g., domestic debt
and foreign securities), but before the Fund values its assets, that could
materially affect NAV, First Trust may use a fair value method to value the
Fund's securities and other investments. 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. A variety of factors may be considered
in determining the fair value of such securities including 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) type
of holding; 4) financial statements of the issuer; 5) cost at date of purchase;
6) credit quality and cash flow of the issuer based on external analysis; 7)
information as to any transactions in or offers for the holding; 8) price and
extent of public trading in similar securities of the issuer/borrower, or
comparable companies; and 9) other relevant factors. The use of fair value
pricing by the Fund is governed by valuation procedures adopted by the Fund's
Board of Trustees, and in accordance with the provisions of the Investment
Company Act of 1940, as amended. When fair value pricing of securities is
employed, the prices of securities used by the Fund to calculate its NAV may
differ from market quotations or official closing prices. 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.

The Fund invests a significant portion of its assets in below-investment grade
debt securities, including mortgage-backed securities, asset-backed securities,
corporate bonds and collateralized debt obligations. The value and related
income of these securities is sensitive to changes in economic conditions,
including delinquencies and/or defaults. Recent 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.

Page 6

NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)

FIRST TRUST STRATEGIC HIGH INCOME FUND
JANUARY 31, 2009 (UNAUDITED)

In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 157 Fair Value Measurements
("FAS 157"), effective for fiscal years beginning after November 15, 2007. This
standard clarifies the definition of fair value for financial reporting,
establishes a framework for measuring fair value and requires additional
disclosures about the use of fair value measurements. FAS 157 became effective
for the Fund as of November 1, 2008, the beginning of its current fiscal year.
The three levels of the fair value hierarchy under FAS 157 are described as
follows:

- Level 1 - quoted prices in active markets for identical securities

- Level 2 - other significant observable inputs (including quoted prices
for similar securities, interest rates, prepayment speeds, credit
risk, etc.)

- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)

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 January 31, 2009 is
included with the Fund's Portfolio of Investments.

B. SECURITIES TRANSACTIONS:

Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.

Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income on such securities
is not accrued until settlement date. The Fund maintains liquid assets of the
Fund with a current value at least equal to the amount of its when-issued or
delayed-delivery purchase commitments. At January 31, 2009, the Fund had no
when-issued or delayed-delivery 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 of the 1933 Act, normally to qualified
institutional buyers. As of January 31, 2009, the Fund held restricted
securities as shown in the table below that the sub-advisor, Valhalla Capital
Partners, LLC, has deemed illiquid pursuant to procedures adopted by the Fund's
Board of Trustees. Although recent instability in the markets has resulted in
periods of increased overall market illiquidity, liquidity for each security is
determined based on security specific factors and assumptions, which require
subjective judgement. 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 footnote (Note 1A) and are not
expressed as a discount to the carrying value of a comparable unrestricted
security. There are no unrestricted securities with the same maturity dates and
yields for these issuers.

CARRYING % OF
ACQUISITION PRINCIPAL VALUE CARRYING NET
SECURITY DATE VALUE PER SHARE COST VALUE ASSETS
-------- ----------- ---------- --------- ---------- --------- ------

ABCLO, Ltd.
Series 2007-1A, Class D, 4.99%, 04/15/21 04/25/07 $1,750,000 $ 9.89 $1,726,282 $ 173,092 0.46%
Credit Suisse Mortgage Capital Certificates
Series 2006-1, Class DB5, 5.71%, 02/25/36 12/15/06 2,398,378 0.92 794,135 21,970 0.06
Series 2006-2, Class DB5, 5.87%, 03/25/36 12/15/06 2,324,170 1.84 778,314 42,779 0.11
GE Capital Commercial Mortgage Corp.
Series 2000-1, Class G, 6.13%, 01/15/33 06/06/06 700,000 38.83 686,127 271,831 0.73
GMAC Commercial Mortgage Securities, Inc.
Series 1999-C3, Class G, 6.97%, 08/15/36 08/24/05 1,000,000 85.92 984,540 859,227 2.29
GSMAP Trust
Series 2004-AR2, Class B4, 5.00%, 08/25/34 08/22/05 695,439 0.55 77,135 3,818 0.01
Halyard Multi Asset CBO I, Ltd.
Series 1A, Class B, 4.88%, 03/24/10 03/27/06 1,630,322 35.34 684,644 576,074 1.54
LB-UBS Commercial Mortgage Trust
Series 2001-C7, Class Q, 5.87%, 11/15/33 09/19/05 3,025,000 25.53 2,619,515 772,205 2.06
Series 2001-C7, Class S, 5.87%, 11/15/33 09/29/05 2,083,703 11.87 1,589,837 247,231 0.66
Merit Securities Corp.
Series 13, Class B1, 8.00%, 12/28/33 02/20/07 2,813,069 11.87 28,556 121,759 0.32

Page 7

NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)

FIRST TRUST STRATEGIC HIGH INCOME FUND
JANUARY 31, 2009 (UNAUDITED)

CARRYING % OF
ACQUISITION PRINCIPAL VALUE CARRYING NET
SECURITY DATE VALUE PER SHARE COST VALUE ASSETS
-------- ----------- ----------- --------- ----------- ---------- ------

Morgan Stanley Capital I, Inc.
Series 2003-IQ5, Class O, 5.24%, 04/15/38 10/19/06 $ 2,787,919 $ 7.77 $ 1,606,949 $ 216,593 0.58%
North Street Referenced Linked Notes
Series 2000-1A, Class C, 2.92%, 04/28/11 03/27/06 4,500,000 36.38 3,708,975 1,637,010 4.37
Park Place Securities, Inc.
Series 2005-WCW3, Class M11, 2.89%, 08/25/35 12/26/07 4,954,263 2.20 374,756 109,142 0.29
Soundview Home Equity Loan Trust
Series 2007-OPT3, Class M10, 2.89%, 08/25/37 06/21/07 1,634,000 3.10 1,441,352 50,572 0.14
Summit CBO I, Ltd
Series 1A, Class B, 3.54%, 05/23/11 08/03/05 4,705,734 3.82 647,667 179,806 0.48
----------- ----------- ---------- ----
$37,001,997 $17,748,784 $5,283,109 14.1%
=========== =========== ========== ====

D. INTEREST ONLY SECURITIES:

An interest only security is the interest only portion of a mortgage-backed
security ("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. IOs 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 investments are identified on the Portfolio of
Investments.

Page 8

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 MARCH 26, 2009
----------------------------------------------------------------------------

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 MARCH 26, 2009
----------------------------------------------------------------------------

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

Date MARCH 26, 2009
----------------------------------------------------------------------------

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