Ann: Change in substantial holding, page-4

Excuse my naivety, my simple understanding of short selling is where stock is borrowed by a lender and then sold shortly afterwards by a borrower then purchased back by the same borrower at a lower price. The borrower then returns the stock to the lender plus fees and a box of cubans with the remaining profit pocketed by the borrower.

How is the reduction of shares by FIL related to the closing out of the short position? If the stock was reduced for shorting purpose wouldn't this indicate an increase in shorts?

Why would FIL sell stock if short positions are reducing? Wouldn't closed out shorts indicate that the stock price will get stronger?