Edgar Filing: FIRST TRUST/FIDAC MORTGAGE 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 811-21727

FIRST TRUST/FIDAC MORTGAGE INCOME FUND
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(Exact name of registrant as specified in charter)

1001 Warrenville Road, Suite 300
LISLE, IL 60532
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(Address of principal executive offices) (Zip code)

W. Scott Jardine, Esq.
First Trust Portfolios L.P.
1001 Warrenville Road, Suite 300
LISLE, IL 60532
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(Name and address of agent for service)

Registrant's telephone number, including area code: (630) 241-4141
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Date of fiscal year end: OCTOBER 31
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Date of reporting period: JULY 31, 2007
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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(s) of Investments is attached herewith.

FIRST TRUST/FIDAC MORTGAGE INCOME FUND
PORTFOLIO OF INVESTMENTS
JULY 31, 2007 (UNAUDITED)

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

U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 78.9%

FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) - 7.5%
$ 5,607,488 Gold, Pool A38042 ............................................ 6.00% 10/01/35 $ 5,574,264
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TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC) ............................. 5,574,264
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FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 71.4%
8,730,808 Pool 256182 .................................................. 6.00% 03/01/36 8,609,396
12,551,598 Pool 256328 .................................................. 6.50% 07/01/36 12,635,004
8,753,963 Pool 831145 .................................................. 6.00% 12/01/35 8,691,318
8,342,260 Pool 843971 .................................................. 6.00% 11/01/35 8,282,561
6,114,760 Pool 872303 .................................................. 6.00% 05/01/36 6,063,711
9,155,428 Pool 880203 .................................................. 6.00% 02/01/36 9,041,925
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TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) ............................... 53,323,915
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TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES .......................... 58,898,179
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(Cost $59,286,697)

COLLATERALIZED MORTGAGE OBLIGATIONS - 36.2%
523,159 Federal Home Loan Mortgage Corp.
Series 2716, Class CI, IO ................................. 5.00% 05/15/19 43,867
3,673,838 Federal Home Loan Mortgage Corp.
Series 2737, Class IG, IO ................................. 5.00% 08/15/27 439,220
2,460,562 Federal Home Loan Mortgage Corp.
Series 2747, Class IH, IO ................................. 5.00% 12/15/13 64,339
13,636,042 Federal Home Loan Mortgage Corp.
Series 2807, Class SB, IO (b) ............................. 2.13% 11/15/33 1,502,360
2,360,100 Federal Home Loan Mortgage Corp.
Series 2836, Class PI, IO ................................. 5.00% 09/15/22 119,442
4,739,600 Federal Home Loan Mortgage Corp.
Series 2870, Class JI, IO ................................. 5.00% 10/15/27 705,166
792,000 Federal Home Loan Mortgage Corp.
Series 2888, Class OI, IO ................................. 5.00% 01/15/27 122,006
1,774,808 Federal Home Loan Mortgage Corp.
Series 2921, Class IQ, IO ................................. 5.00% 01/15/29 318,922
1,892,740 Federal Home Loan Mortgage Corp.
Series 2938, Class PI, IO ................................. 5.00% 11/15/28 211,028
1,933,440 Federal Home Loan Mortgage Corp.
Series 2943, Class JI, IO ................................. 5.00% 01/15/24 156,082
1,342,365 Federal Home Loan Mortgage Corp.
Series 2961, Class IP, IO ................................. 5.50% 07/15/28 143,826
1,735,755 Federal Home Loan Mortgage Corp.
Series 3069, Class LI, IO ................................. 5.50% 08/15/32 258,465
714,224 Federal Home Loan Mortgage Corp.
Series 3171, Class CS (b) ................................. 7.38% 06/15/36 686,239
1,588,434 Federal Home Loan Mortgage Corp.
Series 3195, Class SX (b) ................................. 11.57% 07/15/36 1,758,468

See Notes to Quarterly Portfolio of Investments. Page 1

FIRST TRUST/FIDAC MORTGAGE INCOME FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2007 (UNAUDITED)

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

COLLATERALIZED MORTGAGE OBLIGATIONS - (CONTINUED)
$ 28,667,320 Federal Home Loan Mortgage Corp., STRIP
Series 227, Class IO, IO .................................. 5.00% 12/01/34 $ 7,426,241
5,735,502 Federal Home Loan Mortgage Corp., STRIP
Series 231, Class IO, IO .................................. 5.50% 08/01/35 1,521,886
10,821,989 Federal Home Loan Mortgage Corp., STRIP
Series 232, Class IO, IO .................................. 5.00% 08/01/35 2,811,805
3,074,434 Federal Home Loan Mortgage Corp., STRIP
Series 235, Class IO, IO .................................. 5.50% 02/01/36 839,619
4,624,475 Federal Home Loan Mortgage Corp., STRIP
Series 240, Class IO, IO .................................. 5.50% 07/15/36 1,266,814
3,838,719 Federal National Mortgage Association
Series 2005-122, Class SN (b) ............................. 7.32% 01/25/36 3,637,851
1,983,382 Federal National Mortgage Association
Series 2005-39, Class BI, IO .............................. 5.00% 06/25/28 207,047
10,845,809 Federal National Mortgage Association, STRIP
Series 360, Class 2, IO ................................... 5.00% 08/01/35 2,819,711
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TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS ........................................ 27,060,404
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(Cost $25,041,889)

ASSET-BACKED SECURITIES - 1.6%
2,122 Asset-Backed Securities Corporation Home Equity
Series 2005-HE1, Class A3 ................................. 5.61% 03/25/35 2,121
365,710 Asset-Backed Securities Corporation Home Equity
Series 2006-HE3, Class A3 ................................. 5.38% 03/25/36 365,715
19,753 Carrington Mortgage Loan Trust
Series 2005-OPT2, Class A1C ............................... 5.55% 05/25/35 19,756
146,549 Countrywide Asset-Backed Certificates
Series 2005-12, Class 1A1 ................................. 5.47% 02/25/36 146,555
438,364 Countrywide Asset-Backed Certificates
Series 2006-12, Class 2A1 ................................. 5.39% 12/25/36 438,141
101,848 Countrywide Asset-Backed Certificates
Series 2006-2, Class 2A1 .................................. 5.39% 06/25/36 101,850
819 First Franklin Mortgage Loan Asset-Backed Certificates
Series 2005-FF8, Class A2A ................................ 5.43% 09/25/35 819
102,151 HSI Asset Securitization Corporation Trust
Series 2006-OPT2, Class 2A1 ............................... 5.40% 01/25/36 102,085
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TOTAL ASSET - BACKED SECURITIES .................................................. 1,177,042
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(Cost $1,174,394)

U.S. GOVERNMENT AGENCY OBLIGATIONS - 10.4%
3,000,000 Federal Home Loan Mortgage Corp., Series 1 (a) ............... 7.00% 07/11/22 2,872,500
5,000,000 Federal Home Loan Mortgage Corp., Series 1 (a) ............... 7.50% 12/27/21 4,855,000
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TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $7,956,861) ................................................................ 7,727,500
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TOTAL INVESTMENTS - 127.1% ....................................................... 94,863,125
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(Cost $93,459,841) (c)

Page 2 See Notes to Quarterly Portfolio of Investments.

FIRST TRUST/FIDAC MORTGAGE INCOME FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
JULY 31, 2007 (UNAUDITED)

PRINCIPAL MARKET
VALUE DESCRIPTION VALUE
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REVERSE REPURCHASE AGREEMENT - (27.5%)
$ (20,531,000) With UBS Securities 5.35% dated 7/31/07, to be repurchased $ (20,531,000)
at $20,534,051 on 8/01/07, collateralized by $24,539,950
FHLMC 2.13% due 11/15/33, FNMA 6.00%, due 11/01/35,
FNMA 6.00% due 12/01/35 and FNMA 6.00% due 5/01/36.
(Cost $20,531,000)

NET OTHER ASSETS AND LIABILITIES - 0.4% .......................................... 324,679
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NET ASSETS - 100.0% .............................................................. $ 74,656,804
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(a) Variable rate security. The interest rate shown reflects the rate in
effect at July 31, 2007.

(b) Inverse floating rate instrument. The interest rate shown reflects the
rate in effect at July 31, 2007.

IO Interest Only

STRIP Separate trading of registered interest and principal of securities

See Notes to Quarterly Portfolio of Investments. Page 3

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NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS
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FIRST TRUST/FIDAC MORTGAGE INCOME FUND
JULY 31, 2007 (UNAUDITED)

1. VALUATION AND INVESTMENT PRACTICES

A. PORTFOLIO VALUATION:

The net asset value ("NAV") of the Common Shares of First Trust/FIDAC Mortgage
Income Fund (the "Fund") The NAV 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 subtracting the Fund's liabilities (including accrued expenses, dividends
payable and all borrowings of the Fund) from the Fund's Total Assets (the value
of the securities and other investments the Fund holds plus cash or other
assets, including interest accrued but not yet received) and dividing the result
by the total number of Common Shares outstanding.

The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value according
to procedures adopted by the Fund's Board of Trustees. Securities for which
market quotations are readily available are valued at market value, which is
currently determined using the last reported sale price or, if no sales are
reported (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 will value
mortgage-backed securities and other debt securities not traded in an organized
market on the basis of valuations provided by dealers 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. Debt securities having a remaining
maturity of less than sixty days when purchased and debt securities originally
purchased with maturities of sixty days or more but which currently have
maturities of less than sixty days 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 does not provide a valuation for a
particular security, or the valuations are deemed unreliable, or if events
occurring after the close of the principal markets for particular securities
(e.g., domestic debt and foreign securities), but before the Fund values its
assets, would materially affect NAV, First Trust Advisors L.P. may use a fair
value method to value the Fund's securities and investments. The use of fair
value pricing by the Fund is governed by valuation procedures adopted by the
Fund's Board of Trustees, and in accordance with the provisions of the
Investment Company Act of 1940, as amended.

B. SECURITIES TRANSACTIONS:

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

Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income on such securities
is not accrued until settlement date. The Fund maintains liquid assets with a
current value at least equal to the amount of its when-issued or
delayed-delivery purchase commitments. At July 31, 2007, the Fund had no
when-issued or delayed-delivery purchase commitments.

C. REVERSE REPURCHASE AGREEMENTS:

A reverse repurchase agreement, although structured as a sale and repurchase
obligation, acts as a financing under which the Fund will effectively pledge its
assets as collateral to secure a short-term loan. Generally, the other party to
the agreement makes the loan in an amount equal to a percentage of the market
value of the pledged collateral. At the maturity of the reverse repurchase
agreement, the Fund will be required to repay the loan and correspondingly
receive back its collateral. While used as collateral, the assets continue to
pay principal and interest which are for the benefit of the Fund.

Information for the nine months ended July 31, 2007:

Maximum amount outstanding during the period ............. $ 23,998,000
Average amount outstanding during the period* ............ $ 21,511,670
Average monthly shares outstanding during the period ..... 4,045,236
Average debt per share outstanding during the period ..... $ 5.32

* The average amount outstanding during the nine months was calculated by adding
the borrowings at the end of each day and dividing the sum by the number of days
in the nine months ended July 31, 2007.

Interest rates ranged from 5.23% to 5.45% during the nine months ended July 31,
2007, on borrowings by the Fund under reverse repurchase agreements.

Page 4

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NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
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FIRST TRUST/FIDAC MORTGAGE INCOME FUND
JULY 31, 2007 (UNAUDITED)

2. INVERSE FLOATING RATE INSTRUMENTS

An inverse floating rate security is one where the coupon is inversely indexed
to a short-term floating interest rate multiplied by a specific factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. The price of these securities may be more
volatile than the price of a comparable fixed-rate security. These instruments
are typically used to enhance the yield of the portfolio. The investments are
identified on the Portfolio of Investments.

3. UNREALIZED APPRECIATION (DEPRECIATION)

As of July 31, 2007, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $2,453,014
and the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $1,049,730.

Page 5

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/FIDAC MORTGAGE INCOME FUND

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

Date SEPTEMBER 24, 2007
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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 24, 2007
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By (Signature and Title)* /S/ MARK R. BRADLEY
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Mark R. Bradley, Treasurer, Controller, Chief Financial
Officer and Chief Accounting Officer
(principal financial officer)

Date SEPTEMBER 24, 2007
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* Print the name and title of each signing officer under his or her signature.