UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-21539
-----------
First Trust Senior Floating Rate Income Fund II
-------------------------------------------------------------------
(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: May 31
--------
Date of reporting period: May 31, 2017
-------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
FIRST TRUST
SENIOR FLOATING RATE INCOME FUND II (FCT)
ANNUAL REPORT
FOR THE YEAR ENDED
MAY 31, 2017
FIRST TRUST
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
ANNUAL REPORT
MAY 31, 2017
Shareholder Letter.......................................................... 1
At a Glance................................................................. 2
Portfolio Commentary........................................................ 3
Portfolio of Investments.................................................... 5
Statement of Assets and Liabilities......................................... 16
Statement of Operations..................................................... 17
Statements of Changes in Net Assets......................................... 18
Statement of Cash Flows..................................................... 19
Financial Highlights........................................................ 20
Notes to Financial Statements............................................... 21
Report of Independent Registered Public Accounting Firm..................... 27
Additional Information...................................................... 28
Board of Trustees and Officers.............................................. 32
Privacy Policy.............................................................. 34
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and its representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
First Trust Senior Floating Rate Income Fund II (the "Fund") to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. When evaluating the information
included in this report, you are cautioned not to place undue reliance on these
forward-looking statements, which reflect the judgment of the Advisor and its
representatives only as of the date hereof. We undertake no obligation to
publicly revise or update these forward-looking statements to reflect events and
circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money by investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and common share price will fluctuate and Fund shares,
when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at http://www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
By reading the portfolio commentary by the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of relevant market
benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Advisor are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
this report and other Fund regulatory filings.
--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
ANNUAL LETTER FROM THE CHAIRMAN AND CEO
MAY 31, 2017
Dear Shareholders:
First Trust Advisors L.P. ("First Trust") is pleased to provide you with this
annual report containing detailed information and the financial statements for
your investment in the First Trust Senior Floating Rate Income Fund II. We
encourage you to read this report and discuss it with your financial advisor.
Five months into the new year and under a new U.S. President, the stock market
has continued to rise. President Donald Trump's pro-growth, pro-U.S. policy
ideas have, in our opinion, created optimism about the U.S. economy. Indeed,
from Trump's election date (November 8, 2016) through May 31, 2017, the S&P
500(R) Index (the "Index") posted a total return of over 14%, according to
Bloomberg. While we are optimistic about the U.S. economy, we are also well
aware that no one can predict the future or know how a new administration will
affect markets and the economy. This is why we always stress the importance of
maintaining a long-term perspective, as we have done since First Trust's
inception over 25 years ago.
As of May 31, 2017, the Index was up 8.66% (calendar year-to-date). While the
current bull market (measuring from March 9, 2009 through May 31, 2017) is the
second longest in history, it is still behind (by just over 4 years) the longest
bull market, according to Bespoke Investment Group.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will continue our relentless focus
on bringing you the types of investments that we believe could help you reach
your financial goals.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
"AT A GLANCE"
AS OF MAY 31, 2017 (UNAUDITED)
-------------------------------------------------------------------
FUND STATISTICS
-------------------------------------------------------------------
Symbol on New York Stock Exchange FCT
Common Share Price $13.62
Common Share Net Asset Value ("NAV") $14.28
Premium (Discount) to NAV (4.62)%
Net Assets Applicable to Common Shares $381,297,725
Current Monthly Distribution per Common Share (1) $0.0663
Current Annualized Distribution per Common Share $0.7956
Current Distribution Rate on Common Share Price (2) 5.84%
Current Distribution Rate on NAV (2) 5.57%
-------------------------------------------------------------------
-------------------------------------------------------------------
COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
-------------------------------------------------------------------
Common Share Price NAV
5/16 $13.05 $14.05
13.02 14.00
13.10 14.02
13.10 13.95
6/16 13.13 13.89
12.88 13.86
13.10 13.93
13.18 14.05
13.25 14.13
7/16 13.39 14.12
13.42 14.07
13.67 14.12
13.49 14.12
8/16 13.54 14.15
13.49 14.12
13.51 14.16
13.52 14.14
13.57 14.20
9/16 13.67 14.22
13.53 14.21
13.54 14.23
13.51 14.28
10/16 13.67 14.28
13.35 14.12
13.44 14.11
13.57 14.14
11/16 13.80 14.17
13.75 14.16
13.87 14.24
13.84 14.30
13.77 14.33
12/16 13.83 14.35
13.82 14.34
13.85 14.36
13.72 14.35
1/17 13.83 14.35
13.89 14.26
13.89 14.28
13.86 14.31
2/17 13.91 14.36
13.88 14.34
13.94 14.33
13.84 14.26
13.82 14.19
3/17 13.83 14.24
13.53 14.20
13.64 14.23
13.56 14.24
4/17 13.68 14.25
13.55 14.20
13.69 14.24
13.61 14.26
13.64 14.28
5/17 13.62 14.28
----------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------
Average Annual Total Return
----------------------------------------------------------
1 Year Ended 5 Years Ended 10 Years Ended Inception (5/25/2004)
5/31/2017 5/31/2017 5/31/2017 to 5/31/2017
FUND PERFORMANCE (3)
NAV 7.99% 6.41% 3.72% 4.39%
Market Value 10.89% 5.63% 3.28% 3.64%
INDEX PERFORMANCE
S&P/LSTA Leveraged Loan Index 7.49% 4.73% 4.51% 4.86%
----------------------------------------------------------------------------------------------------------------
---------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
CREDIT QUALITY (S&P RATINGS) (4) DEBT SECURITIES (5)
---------------------------------------------------------
BBB- 5.8%
BB+ 4.4
BB 7.8
BB- 25.6
B+ 14.9
B 21.6
B- 8.5
CCC+ 5.5
CCC 3.5
CCC- 0.1
CC 0.1
C 0.0*
NR 1.9
Privately rated securities (6) 0.3
--------------------------------------------------
Total 100.0%
======
---------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
TOP 10 ISSUERS SECURITIES (5)
---------------------------------------------------------
Valeant Pharmaceuticals International,
Inc. 3.0%
Portillo's Holdings LLC 3.0
Caesars Entertainment Resort
Properties LLC 2.8
Caesars Growth Properties LLC 2.8
BMC Software Finance, Inc. 2.5
Vistra Energy Corp. 2.4
Dell, Inc. (Diamond 1 Finance Corp.) 2.2
Amaya Holdings B.V. 2.1
CHS/Community Health Systems, Inc. 2.1
Reynolds Group Holdings, Inc. 1.9
--------------------------------------------------
Total 24.8%
======
*Amount is less than 0.1%.
---------------------------------------------------------
% OF SENIOR LOANS
AND OTHER
ASSET CLASSIFICATION SECURITIES (5)
---------------------------------------------------------
Hotels, Restaurants & Leisure 14.3%
Health Care Providers & Services 13.9
Software 8.2
Pharmaceuticals 8.1
Life Sciences Tools & Services 5.0
Media 4.3
Electric Utilities 4.3
Professional Services 4.0
Food & Staples Retailing 3.8
Diversified Telecommunication Services 3.7
Insurance 3.1
Food Products 3.0
Containers & Packaging 2.5
Capital Markets 2.3
Specialty Retail 2.2
Technology Hardware, Storage &
Peripherals 2.2
Diversified Consumer Services 2.1
Industrial Conglomerates 1.7
Diversified Financial Services 1.4
Commercial Services & Supplies 1.2
Building Products 1.2
Real Estate Management & Development 1.0
Health Care Equipment & Supplies 1.0
Semiconductors & Semiconductor
Equipment 0.8
Aerospace & Defense 0.8
Oil, Gas & Consumable Fuels 0.6
Diversified Business Services 0.5
Chemicals 0.4
Consumer Finance 0.4
Health Care Technology 0.4
Auto Components 0.4
Independent Power and Renewable
Electricity Producers 0.4
Machinery 0.2
Equity Real Estate Investment Trusts
(REITs) 0.2
Distributors 0.2
Trading Companies & Distributors 0.1
Construction Materials 0.1
Personal Products 0.0*
--------------------------------------------------
Total 100.0%
======
(1) Most recent distribution paid or declared through May 31, 2017. Subject to
change in the future.
(2) Distribution rates are calculated by annualizing the most recent
distribution paid or declared through the report date and then dividing by
Common Share Price or NAV, as applicable, as of May 31, 2017. Subject to
change in the future.
(3) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan and changes in NAV per share for NAV
returns and changes in Common Share Price for market value returns. From
inception to October 12, 2010, Four Corners Capital Management, LLC served
as the Fund's sub-advisor. Effective October 12, 2010, the Leveraged
Finance Team of First Trust Advisors L.P. assumed the day-to-day
responsibility for management of the Fund's portfolio. Total returns do
not reflect sales load and are not annualized for periods of less than one
year. Past performance is not indicative of future results.
(4) The ratings are by Standard & Poor's except where otherwise indicated. A
credit rating is an assessment provided by a nationally recognized
statistical rating organization (NRSRO) of the creditworthiness of an
issuer with respect to debt obligations except for those debt obligations
that are only privately rated. Ratings are measured on a scale that
generally ranges from AAA (highest) to D (lowest). Investment grade is
defined as those issuers that have a long-term credit rating of BBB- or
higher. "NR" indicates no rating. The credit ratings shown relate to the
creditworthiness of the issuers of the underlying securities in the Fund,
and not to the Fund or its shares. Credit ratings are subject to change.
(5) Percentages are based on long-term positions. Money market funds are
excluded.
(6) Represents Senior Loans privately rated upon issuance. The rating agency
does not provide ongoing surveillance on the rating.
Page 2
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
ANNUAL REPORT
MAY 31, 2017 (UNAUDITED)
ADVISOR
First Trust Advisors L.P. ("First Trust") was established in 1991 and is located
in Wheaton, Illinois and Austin, Texas. First Trust is a registered investment
advisor which offers customized portfolio management using its structured,
quantitative approach to security selection. As of May 31, 2017, First Trust
managed or supervised $107.206 billion in assets.
The First Trust Leveraged Finance Investment Team began managing the First Trust
Senior Floating Rate Income Fund II on October 12, 2010. The First Trust
Leveraged Finance Investment Team is comprised of 15 experienced investment
professionals specializing in below investment grade securities. The team is
comprised of portfolio management, research, trading and operations. As of May
31, 2017, the First Trust Leveraged Finance Investment Team managed or
supervised approximately $3.971 billion in senior secured bank loans and
high-yield bonds. These assets are managed across various strategies, including
two closed-end funds, an open-end fund, four exchange-traded funds, one UCITS
fund and a series of unit investment trusts on behalf of retail and
institutional clients.
PORTFOLIO MANAGEMENT TEAM
WILLIAM HOUSEY, CFA - SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER
SCOTT D. FRIES, CFA - SENIOR VICE PRESIDENT, PORTFOLIO MANAGER
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II
The primary investment objective of First Trust Senior Floating Rate Income Fund
II ("FCT" or the "Fund") is to seek a high level of current income. As a
secondary objective, the Fund attempts to preserve capital. The Fund pursues its
objectives by primarily investing in a portfolio of senior secured floating-rate
loan interests ("senior loans"). There can be no assurance that the Fund's
investment objectives will be achieved. The Fund may not be appropriate for all
investors.
MARKET RECAP
The last twelve months ended May 31, 2017 (LTM) proved to be favorable within
the senior loan market, which experienced 12 consecutive months of positive
returns. The LTM total return for the S&P/LSTA Leveraged Loan Index (the
"Index") was 7.49%. This compares to 13.84% for the Bank of America Merrill
Lynch US High Yield Constrained Index and 17.47% for the S&P 500(R) Index over
the same time period. The resounding theme in the senior loan market has been
the strong demand for the asset class from investors, which in turn has resulted
in a wave of re-pricings and refinancings. In fact, of the $887.5 billion in
institutional loan issuance during the prior year period, 78.8%, or about $699.6
billion, was used for re-pricing and refinancing (JP Morgan). Investor demand
for the senior loan asset class has resulted in nearly $31.5 billion of inflows
over the prior year period (JP Morgan). The primary factor influencing this
demand has been the gradual increase in the Federal Funds Rate by the U.S.
Federal Reserve ("Fed"). More specifically, the Fed implemented two 25 basis
point ("bps") rate hikes in the Federal Funds Rate over the prior year to
100bps. This increase in the Federal Funds rate has also led to an increase in
3-month LIBOR (London Interbank Offered Rate) from 69bps to 121bps. This trend
in LIBOR has partially mitigated the spread/yield reduction that resulted from
the recent repricing wave.
Senior Loan Markets
The Index returned 7.49% for the twelve-month period ending May 31, 2017.
Returns were strong for all credit quality issues with lower rated issues
outperforming. Lower quality CCC rated issues returned 25.93% in the period,
outperforming the 7.72% return for higher quality B rated issues and the 4.78%
return for even higher quality BB rated issues. The average bid price of loans
in the market began the period at $93.41 and ended the period at $98.33, while
the percent of loans in the Index bid at par and above increased from
approximately 30% to just inside of 70%. The discounted spread to a 3-year life
for the senior loan market began the period at LIBOR+573 and ended the period at
LIBOR+413, a tightening of 160bps.
The default rate within the Index continues to fall and remains well below the
long term average for senior loans. The LTM default rate within the Index ended
the period at 1.29%, which compares favorably to the long-term average default
rate of 3.05% dating back to January 1999. We believe the default rate remains
below the long-term average because overall corporate fundamentals remain
healthy and commodity prices have stabilized. Given the lack of near-term debt
maturities and favorable access to capital markets that companies are enjoying,
we believe the default rate for both senior loans and high-yield bonds will
remain relatively benign for some time.
PERFORMANCE ANALYSIS
The Fund outperformed the Index on both a net asset value (NAV) and market value
basis for the trailing twelve-month period. The Fund generated a NAV return of
7.99% and a market price return of 10.89% while the Index generated a total
return of 7.49%. The Fund's discount to NAV ended the period 237bps tighter than
one year ago. At the start of the period, the Fund's market price was at a 6.99%
discount to NAV and narrowed to a 4.62% discount to NAV by the end of the
period.
Page 3
--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
ANNUAL REPORT
MAY 31, 2017 (UNAUDITED)
Contributing to the Fund's outperformance relative to the Index over the period
was the Fund's use of leverage and issuer selection. The use of leverage
contributed positively as the total return of senior loans exceeded the
borrowing cost of leverage. Leverage on May 31, 2017, was approximately 27.7% of
managed assets.
From an income perspective, the monthly announced distribution rate began the
period at $0.07 per share and ended at $0.0663 per share. At the $0.0663 per
share monthly distribution rate, the annualized distribution rate on May 31,
2017 was 5.57% at NAV and 5.84% at market price.
MARKET AND FUND OUTLOOK
In our view, the positive backdrop for the senior loan and high-yield bond asset
classes continues to be the fact that the U.S. economy is on solid ground. We
believe that the proposed economic agenda under the Trump administration, which
includes lowering individual and corporate income tax rates, infrastructure
spending, and reduced regulatory burden on businesses has the potential to
accelerate the U.S. growth rate. While both the timing and the implementation of
the agenda in its entirety remain uncertain, it has buoyed risk markets up to
this point.
Credit markets appear well positioned for the intermediate term. We believe the
combination of strong technical tailwinds created by global central bank policy,
attractive valuations within the credit markets given the below-average default
rate environment, modest but healthy economic growth and sound corporate
fundamentals provides a firm backdrop for returns in the periods ahead.
We believe there are a number of potential interest rate catalysts on the
horizon. First, we believe the market is not fully pricing in the potential for
reflation in the U.S. Wage growth has increased and commodity prices have
stabilized / improved from the trough in February of 2016. Second, the narrative
from the Fed has been that short-term rates will continue to increase, and
discussions have intensified concerning the size of the Fed balance sheet and
how they might begin to shrink it. In our view, a decision to begin slowing the
reinvestment on the Fed balance sheet, taken in isolation, may send interest
rates higher; notwithstanding the potential for a more hawkish stance on rates
should inflation begin to increase at an even greater rate. Finally, we believe
that we are likely to see an overt tapering of the Quantitative Easing (QE)
program underway via the European Central Bank (ECB). In December, Mario Draghi,
President of the ECB, announced a covert tapering whereby the ECB trimmed
monthly bond purchases from $80 billion to $60 billion, but extended the length
of time in which QE would be in force. The market interpreted this as additional
stimulus, however, we believe this sets the table for an additional cut to their
QE program later this year. We also believe that if and when the ECB does in
fact pull back its QE, that it will lead to higher rates in Europe and would
likely carry through to the U.S. given the high correlation between German Bunds
and U.S. Treasury yields.
Based on current valuations (average price of $98.33 and spread of LIBOR+413),
we believe senior loans, given their senior secured position in the capital
structure, floating interest rate, high income and limited commodity exposure
(energy, metals and mining only comprise 4.10% of the senior loan Index on a
market value basis), are well positioned to deliver attractive risk adjusted
returns. Retail investors have begun to increase exposure to senior loans in the
wake of increasing Treasury yields and hawkish Fed rhetoric. We believe that
with further increases in the Federal Funds rate that we anticipate are on the
horizon, even if they occur at a modest pace, investors in senior loans are
likely to benefit.
In summary, we believe that both the senior loan and high-yield bond markets
currently offer compelling opportunities, and specifically within actively
managed strategies where return opportunities can be realized and risk can be
appropriately managed. We believe that investors may benefit from moving up the
corporate capital structure into senior loans and high-yield bonds to take
advantage of the attractive valuations and lower volatility relative to
equities.
As we evaluate new investment opportunities, decisions will continue to be
rooted in our rigorous bottom-up credit analysis and focus on the opportunities
that we believe offer the best risk and reward balance. Despite the many
distractions that ebb and flow every quarter, we remain firmly focused on
finding value in the high-yield bond and senior loan markets.
Page 4
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a)
MAY 31, 2017
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS - 136.1%
AEROSPACE & DEFENSE - 1.1%
$ 4,328,595 Transdigm, Inc., Term Loan F - Extended......................... 4.04% 06/09/23 $ 4,335,088
-------------
AGRICULTURAL PRODUCTS - 0.1%
210,000 Dole Foods Co., Term Loan B..................................... 4.08% 04/06/24 210,825
-------------
ALTERNATIVE CARRIERS - 1.4%
5,412,772 Level 3 Financing, Inc., Tranche B 2024 Term Loan............... 3.26% 02/22/24 5,419,538
-------------
APPAREL RETAIL - 0.3%
1,528,028 Neiman Marcus Group, Inc., The, Other Term Loan................. 4.25% 10/25/20 1,186,452
-------------
APPLICATION SOFTWARE - 5.4%
1,645,714 CCC Information Resources, Inc., Term Loan B.................... 4.04% 03/31/24 1,640,777
4,593,834 Epicor Software Corp., Term B Loan.............................. 4.80% 06/01/22 4,596,728
784,000 Hyland Software, Term Loan B.................................... 4.46% 07/01/22 789,551
1,270,542 Infor (US), Inc., Term Loan B................................... 3.90% 02/02/22 1,267,365
2,664,966 Informatica Corp. (Ithacalux S.A.R.L), Dollar Term Loan......... 4.65% 08/05/22 2,662,461
993,470 JDA Software Group (RP Crown Parent, Inc.), Term Loan B......... 4.54% 10/12/23 1,001,666
2,681,280 Kronos, Inc., Term Loan B....................................... 4.71% 11/01/23 2,705,546
991,667 LANDesk Software, Inc., Term Loan B............................. 5.30% 01/18/24 992,906
128,978 Micro Focus International (MA Finance LLC), MA Finance TLB3..... 3.96% 04/18/24 128,898
871,022 Micro Focus International (MA Finance LLC), Seattle Spinco TLB.. 3.96% 04/18/24 870,482
2,514,552 Mitchell International, Inc., Initial Term Loan................. 4.54%-4.67% 10/13/20 2,529,640
800,000 Qlik Technologies (Project Alpha Intermediate Holdings, Inc.),
Term Loan B.................................................. 4.67% 04/26/24 796,336
500,000 Synchronoss Technologies, Inc., Term Loan B..................... 4.08% 01/19/24 460,750
-------------
20,443,106
-------------
ASSET MANAGEMENT & CUSTODY BANKS - 3.1%
756,487 American Beacon Advisors, Inc. (Resolute Investment Managers),
Term Loan B.................................................. 5.40% 04/30/22 757,750
800,000 First Eagle Investment Management, Term Loan B.................. 4.66% 12/01/22 810,000
1,302,953 Guggenheim Partners Investment Management Holdings LLC,
Term Loan B.................................................. 3.78% 07/22/23 1,312,073
496,731 Hamilton Lane Advisors LLC, Initial Term Loan................... 4.54% 07/08/22 496,731
420,792 Mondrian Investment Partners Ltd. (MIPL Group Ltd.), Term
Loan B....................................................... 4.15% 03/09/20 421,319
4,335,634 Victory Capital Holdings (VCH Holdings LLC), Initial Term Loan.. 8.65% 10/29/21 4,389,830
3,640,000 Virtus Investment Partners, Inc., Term Loan B................... 4.96% 03/02/24 3,694,600
-------------
11,882,303
-------------
AUTO PARTS & EQUIPMENT - 0.5%
792,680 Cooper Standard Holdings (CS Intermediate Holdco 2 LLC),
Term Loan B.................................................. 3.46% 11/02/23 796,152
1,249,797 Tower Automotive Holdings USA LLC, Term Loan B.................. 3.75% 03/06/24 1,246,672
-------------
2,042,824
-------------
AUTOMOTIVE RETAIL - 0.4%
1,611,628 KAR Auction Services, Inc., Term Loan B5........................ 3.71% 03/09/23 1,623,038
-------------
BROADCASTING - 3.3%
2,798,370 Cumulus Media Holdings, Inc., Term Loan......................... 4.46% 12/23/20 2,216,841
33,745 Nexstar Broadcasting, Inc., Mission Term Loan................... 4.00% 01/17/24 34,035
344,436 Nexstar Broadcasting, Inc., Nexstar Term Loan................... 4.00% 01/17/24 347,388
See Notes to Financial Statements Page 5
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MAY 31, 2017
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
BROADCASTING (CONTINUED)
$ 599,924 Tribune Media Co., Extended Term Loan C......................... 4.04% 01/31/24 $ 601,801
48,013 Tribune Media Co., Term B Loan.................................. 4.04% 12/27/20 48,208
9,464,991 Univision Communications, Inc., Term Loan C5.................... 3.79% 03/15/24 9,383,402
-------------
12,631,675
-------------
BUILDING PRODUCTS - 1.7%
192,066 Jeld-Wen, Inc., Term Loan B..................................... 4.15% 07/01/22 194,131
6,238,909 Quikrete Holdings, Inc., Term Loan B............................ 3.96% 11/15/23 6,213,954
-------------
6,408,085
-------------
CABLE & SATELLITE - 0.6%
328,125 Cablevision Systems Corp. (CSC Holdings, Inc.), Term Loan B..... 3.25% 06/15/25 327,387
412,500 Mediacom Broadband LLC, Term Loan K............................. 3.20% 02/19/24 414,220
1,200,000 UPC Financing Partnership, Term Loan AP......................... 3.74% 04/15/25 1,206,000
340,000 Virgin Media Finance PLC, Term Loan I........................... 3.74% 01/31/25 341,380
-------------
2,288,987
-------------
CASINOS & GAMING - 11.1%
721,875 Amaya Holdings B.V., 2nd Lien TL................................ 8.15% 07/31/22 722,554
10,614,301 Amaya Holdings B.V., Term Loan B................................ 4.65% 08/01/21 10,632,876
11,611,819 Caesars Entertainment Resort Properties LLC, Term Loan B........ 4.71% 10/04/20 11,672,781
9,910,663 Caesars Growth Partners LLC, 2017 Term Loan..................... 3.79% 05/08/21 9,967,649
4,305,678 CityCenter Holdings LLC, Term Loan B............................ 3.49% 04/15/24 4,321,825
840,000 Eldorado Resorts, Inc., TL B.................................... 3.24%-5.25% 03/16/24 837,379
380,769 MGM Growth Properties Operating Partnership L.P., Term
Loan B....................................................... 3.46% 04/25/23 382,913
333,333 Penn National Gaming, Inc., Term Loan B......................... 3.54% 01/19/24 335,297
3,543,741 Station Casinos, Inc., Term Loan B.............................. 3.45% 06/08/23 3,540,516
-------------
42,413,790
-------------
COAL & CONSUMABLE FUELS - 0.4%
800,000 Arch Coal, Inc., Initial Term Loan.............................. 5.04% 03/07/24 800,600
660,000 Peabody Energy Corp., Exit Term Loan............................ 5.50% 03/31/22 660,706
-------------
1,461,306
-------------
CONSTRUCTION MATERIALS - 0.2%
638,625 Summit Materials, Inc., Term Loan B............................. 3.79% 07/17/22 644,813
-------------
CONSUMER FINANCE - 0.6%
2,496,031 Altisource Solutions S.A.R.L., Term B Loan...................... 4.54% 12/09/20 2,100,834
-------------
DISTRIBUTORS - 0.3%
497,500 HD Supply, Inc., Term B-2 Loan.................................. 3.73% 10/17/23 500,301
533,636 HD Supply, Inc., Term Loan B.................................... 3.90% 08/13/21 536,971
-------------
1,037,272
-------------
DIVERSIFIED CHEMICALS - 0.1%
392,014 Ineos US Finance LLC, Term Loan B............................... 3.79% 03/31/22 395,640
-------------
DIVERSIFIED SUPPORT SERVICES - 0.9%
3,000,000 Brickman Group Holdings, Inc., Initial Term Loan (First Lien)... 4.00%-4.04% 12/18/21 3,001,680
382,270 Brickman Group Holdings, Inc., Second Lien Term Loan............ 7.50% 12/31/21 383,065
-------------
3,384,745
-------------
Page 6 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MAY 31, 2017
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
EDUCATION SERVICES - 0.1%
$ 245,011 Bright Horizons Family Solutions, Inc., Term Loan B............. 3.29% 11/07/23 $ 246,910
-------------
ELECTRIC UTILITIES - 5.6%
374,063 Dayton Power & Light Co., Term Loan B........................... 4.30% 08/31/22 377,803
9,700,000 Energy Future Intermediate Holding Co., DIP Term Loan........... 4.29% 06/30/17 9,740,449
4,591,579 Vistra Energy Corp. (TXU/TEX/TCEH), 2016 Incremental Term
Loan (e)..................................................... 4.25%-4.28% 12/31/23 4,593,324
5,497,410 Vistra Energy Corp. (TXU/TEX/TCEH), Term Loan B (e)............. 3.96% 08/04/23 5,456,894
1,256,938 Vistra Energy Corp. (TXU/TEX/TCEH), Term Loan C (e)............. 3.96% 08/04/23 1,247,674
-------------
21,416,144
-------------
ENVIRONMENTAL & FACILITIES SERVICES - 0.6%
619,715 PSSI (Packers Holdings LLC), PCKHLD TL B 1L USD................. 4.80% 12/01/21 624,363
1,548,000 WTG Holdings III Corp. (EWT Holdings III Corp.), Term Loan
(First Lien)................................................. 4.90% 01/15/21 1,553,805
-------------
2,178,168
-------------
FOOD DISTRIBUTORS - 0.5%
650,000 TKC Holdings, Inc., Term Loan B................................. 4.75% 01/31/23 652,711
1,191,000 US Foods, Inc., Term Loan B..................................... 3.79% 06/27/23 1,200,242
-------------
1,852,953
-------------
FOOD RETAIL - 2.6%
3,336,701 Albertsons LLC, Term Loan B6.................................... 4.21% 06/22/23 3,357,555
1,895,866 Albertsons LLC, Term Loan B5.................................... 4.40% 12/21/22 1,908,303
4,537,118 Albertsons LLC, Term Loan B4.................................... 4.04% 08/25/21 4,562,345
-------------
9,828,203
-------------
HEALTH CARE EQUIPMENT - 1.2%
1,338,209 Alere, Inc., Term B Loan........................................ 4.30% 06/15/22 1,343,227
3,242,250 DJO Finance LLC (ReAble Therapeutics Finance LLC), Initial
Term Loan.................................................... 4.25%-4.29% 06/08/20 3,204,964
200,000 Kinetic Concepts, Inc. (Acelity L.P., Inc.), Term Loan B........ 4.40% 01/31/24 197,188
-------------
4,745,379
-------------
HEALTH CARE FACILITIES - 6.4%
1,078,621 Acadia Healthcare Co., Inc., Term Loan B1....................... 3.96% 02/11/22 1,087,390
1,234,375 Acadia Healthcare Co., Inc., Term Loan B2....................... 3.96% 02/16/23 1,244,558
10,965,652 CHS/Community Health Systems, Inc., Incremental 2021 Term H
Loan......................................................... 4.04%-4.20% 01/27/21 10,967,297
1,305,735 Concentra, Inc. (MJ Acquisition Corp.), Term Loan B............. 4.00% 06/01/22 1,314,718
6,619,272 Kindred Healthcare, Inc., New Term Loan......................... 4.69% 04/09/21 6,644,094
252,915 National Veterinary Associates (NVA Holdings, Inc.), Incremental
Delayed Draw TL (f).......................................... 0.00% (g) 08/14/21 255,444
2,943,223 National Veterinary Associates (NVA Holdings, Inc.), Term
Loan B2...................................................... 4.50% 08/14/21 2,972,655
-------------
24,486,156
-------------
HEALTH CARE SERVICES - 10.0%
3,971,471 21st Century Oncology, Inc., Tranche B Term Loan (h)............ 7.28% 04/30/22 3,660,386
3,438,750 Air Medical Group Holdings, Inc., Initial Term Loan............. 4.29% 04/28/22 3,391,467
1,817,084 Air Methods Corp. (ASP AMC Intermediate Holdings, Inc.), Term
Loan B....................................................... 4.57% 04/30/24 1,805,727
See Notes to Financial Statements Page 7
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MAY 31, 2017
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
HEALTH CARE SERVICES (CONTINUED)
$ 3,848,499 CareCore National LLC, Term Loan B.............................. 5.05% 03/06/21 $ 3,877,362
1,566,339 CHG Healthcare Services, Inc., Term Loan B...................... 4.46% 06/07/23 1,580,045
3,185,020 Curo Health Services Holdings, Inc., Term Loan B................ 5.83% 02/05/22 3,216,870
4,338,676 Envision Healthcare Corp. (Emergency Medical Services Corp.),
Term Loan B.................................................. 4.15% 12/01/23 4,383,147
663,338 ExamWorks Group, Inc., Term Loan B.............................. 4.29% 07/27/23 667,901
4,634,915 Healogics, Inc. (CDRH Parent, Inc.), Initial Term Loan (First
Lien)........................................................ 5.32% 07/01/21 3,534,123
1,471,174 Surgery Centers Holdings, Inc., Term Loan B..................... 4.75% 11/03/20 1,474,852
5,280,000 Team Health, Inc., Term Loan B.................................. 3.79% 02/06/24 5,248,637
5,338,626 U.S. Renal Care, Inc., Term Loan B.............................. 5.40% 12/30/22 5,211,834
-------------
38,052,351
-------------
HEALTH CARE SUPPLIES - 0.1%
414,894 ConvaTec, Inc., Term Loan B..................................... 3.71% 10/31/23 416,968
-------------
HEALTH CARE TECHNOLOGY - 0.7%
600,000 Change Healthcare Holdings, Inc., Term Loan B................... 3.79% 03/01/24 601,800
2,051,655 Cotiviti Corp., Term Loan B..................................... 3.65% 09/28/23 2,054,220
-------------
2,656,020
-------------
HOTELS, RESORTS & CRUISE LINES - 0.5%
1,432,809 Extended Stay America (ESH Hospitality, Inc.), Term Loan B...... 3.54% 08/30/23 1,440,460
448,875 Four Seasons Holdings, Inc., Term Loan B........................ 3.71% 11/30/23 453,647
200,000 Hilton Worldwide Finance LLC, Term Loan B2...................... 2.99% 10/25/23 201,114
-------------
2,095,221
-------------
HUMAN RESOURCE & EMPLOYMENT SERVICES - 0.3%
1,000,000 Tempo Acquisition, Term Loan B.................................. 4.00% 05/01/24 1,003,210
-------------
HYPERMARKETS & SUPER CENTERS - 2.6%
8,380,211 BJ's Wholesale Club, Inc., 1st Lien Term Loan................... 4.75% 01/31/24 8,362,780
1,451,165 BJ's Wholesale Club, Inc., 2nd Lien Term Loan................... 8.50% 01/26/25 1,468,405
-------------
9,831,185
-------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.5%
1,965,000 Calpine Corp., Term Loan B5..................................... 3.75% 01/16/24 1,960,304
-------------
INDUSTRIAL CONGLOMERATES - 2.4%
8,883,198 Gardner Denver, Inc., Initial Dollar Term Loan.................. 4.57% 07/30/20 8,898,921
339,150 Rexnord (RBS Global, Inc.), Term Loan B......................... 3.75%-3.90% 08/21/23 340,422
-------------
9,239,343
-------------
INDUSTRIAL MACHINERY - 0.3%
1,173,060 Douglas Dynamics LLC, Term Loan B............................... 4.55% 12/31/21 1,192,122
-------------
INSURANCE BROKERS - 3.7%
1,197,000 Amwins Group LLC, Term Loan B (First Lien)...................... 3.79% 01/25/24 1,198,125
4,156,250 Confie Seguros Holding II Co., Term Loan B...................... 6.54% 04/19/22 4,103,424
2,714,696 HUB International Ltd., Initial Term Loan (New)................. 4.29% 10/02/20 2,728,704
1,745,625 National Financial Partners Corp., Term Loan B.................. 4.65% 01/08/24 1,755,802
4,337,143 USI, Inc. (Compass Investors, Inc.), Term Loan B................ 4.18% 05/15/24 4,329,553
-------------
14,115,608
-------------
Page 8 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MAY 31, 2017
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
INTEGRATED TELECOMMUNICATION SERVICES - 3.8%
$ 7,946,578 Century Link (Qwest), Term Loan B............................... 3.96% 01/31/25 $ 7,931,002
1,754,444 Cincinnati Bell, Inc., Tranche B Term Loan...................... 4.00% 09/10/20 1,768,340
4,676,607 Numericable U.S. LLC (Altice France S.A.), Term Loan B10........ 4.42% 01/14/25 4,677,776
-------------
14,377,118
-------------
INVESTMENT BANKING & BROKERAGE - 0.2%
826,000 LPL Holdings, Inc., Term Loan B................................. 3.61%-3.92% 03/11/24 829,618
-------------
LEISURE FACILITIES - 1.7%
3,664,780 ClubCorp Club Operations, Inc., Term Loan B..................... 3.96% 12/15/22 3,685,413
2,647,644 Planet Fitness Holdings LLC, Term Loan B........................ 4.21% 03/31/21 2,652,621
-------------
6,338,034
-------------
LIFE SCIENCES TOOLS & SERVICES - 6.6%
5,284,879 Immucor, Inc., Term B-2 Loan.................................... 5.00% 08/19/18 5,261,784
5,818,750 InVentiv Health, Inc., Term Loan B.............................. 4.95% 11/09/23 5,850,288
7,470,531 Ortho-Clinical Diagnostics, Inc. (Crimson Merger Sub, Inc.),
Initial Term Loan............................................ 4.78% 06/30/21 7,493,690
4,308,075 Pharmaceutical Product Development, Inc., 2017 Term Loan........ 3.79% 08/18/22 4,312,254
2,172,500 Sterigenics International (STHI Intermediate Holding Corp.),
Term Loan B.................................................. 4.15% 05/15/22 2,161,637
-------------
25,079,653
-------------
MANAGED HEALTH CARE - 1.5%
5,848,475 MultiPlan, Inc. (MPH Acquisition Holdings LLC), Term Loan B..... 4.90% 06/15/23 5,859,938
-------------
METAL & GLASS CONTAINERS - 0.7%
2,557,674 Berlin Packaging LLC, Term Loan B............................... 4.46% 10/01/21 2,566,472
173,913 Berry Plastics Corp., Term Loan J............................... 3.49% 01/19/24 175,017
-------------
2,741,489
-------------
MOVIES & ENTERTAINMENT - 1.9%
385,700 AMC Entertainment, Inc., 2016 Incremental Term Loan............. 3.46% 12/15/23 387,389
279,083 AMC Entertainment, Inc., Initial Term Loan...................... 3.46% 12/15/22 280,537
997,500 Creative Artists Agency LLC (CAA Holdings LLC), Term
Loan B....................................................... 4.50%-6.50% 02/15/24 1,009,969
4,350,283 Formula One (Delta 2 Lux S.A.R.L.), Facility B3 (USD) Loan...... 4.25% 02/01/24 4,353,763
1,154,200 Live Nation Entertainment, Inc., Term Loan B.................... 3.56% 11/15/23 1,162,857
-------------
7,194,515
-------------
OIL & GAS EXPLORATION & PRODUCTION - 0.4%
944,563 American Energy Marcellus Holdings LLC (Ascent Resources -
Marcellus LLC), Initial Loan (First Lien).................... 5.25% 08/04/20 651,749
1,888,889 American Energy Marcellus Holdings LLC (Ascent Resources -
Marcellus LLC), Initial Loan (Second Lien)................... 8.50% 08/04/21 198,333
1,000,000 Fieldwood Energy LLC, Closing Date Loan (Second Lien)........... 8.38% 09/30/20 735,000
-------------
1,585,082
-------------
OTHER DIVERSIFIED FINANCIAL SERVICES - 2.0%
4,186,319 First Data Corp., Term Loan 2024................................ 3.53% 04/26/24 4,207,921
400,000 iPayment, Inc., Term Loan....................................... 7.16% 04/11/23 402,000
3,176,000 Wex, Inc., Term Loan B.......................................... 4.54% 06/30/23 3,200,328
-------------
7,810,249
-------------
See Notes to Financial Statements Page 9
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MAY 31, 2017
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
PACKAGED FOODS & MEATS - 4.2%
$ 5,472,500 Amplify Snack Brands, Inc., Term Loan B......................... 6.50% 08/31/23 $ 5,435,999
300,000 Blue Buffalo Company, Ltd., Term Loan B......................... 3.21% 05/22/24 302,376
10,257,432 New HB Acquisition LLC, Term Loan B............................. 3.54% 08/03/22 10,328,824
-------------
16,067,199
-------------
PAPER PACKAGING - 2.7%
10,323,294 Reynolds Group Holdings, Inc., 2017 Incremental U.S. Term
Loan......................................................... 4.04% 02/05/23 10,371,606
-------------
PERSONAL PRODUCTS - 0.0%
109,080 Prestige Brands, Inc., Term Loan B4............................. 3.79% 01/19/24 109,944
-------------
PHARMACEUTICALS - 11.0%
1,682,692 Akorn, Inc., Loan............................................... 5.31% 04/16/21 1,701,623
3,564,246 Amneal Pharmaceuticals LLC, Term Loan B......................... 4.65%-6.50% 11/01/19 3,602,847
1,976,611 Catalent Pharma Solutions, Inc., Term Loan B.................... 3.79% 05/20/21 1,996,931
10,194,547 Concordia Healthcare Corp., Initial Dollar Term Loan............ 5.28% 10/21/21 7,364,541
5,249,210 Endo Pharmaceuticals Holdings, Inc., Term Loan B................ 5.31% 04/29/24 5,337,817
4,480,523 Horizon Pharma, Inc., Term Loan B............................... 4.75% 03/22/24 4,479,135
2,853,847 Patheon, Inc. (JLL/Delta Dutch Newco B.V.), Term Loan B......... 4.41% 04/20/24 2,865,262
14,371,370 Valeant Pharmaceuticals International, Inc., Series F-1
Tranche B Term Loan.......................................... 5.53% 04/01/22 14,622,869
-------------
41,971,025
-------------
PROPERTY & CASUALTY INSURANCE - 1.0%
194,886 Cunningham Lindsey U.S., Inc., Initial Loan (Second Lien) (i)... 9.32% 06/10/20 90,379
2,779,856 Cunningham Lindsey U.S., Inc., Initial Term Loan (First Lien)... 5.00%-5.07% 12/10/19 2,485,664
1,200,000 Sedgwick Claims Management Services, Inc., Initial Loan
(Second Lien)................................................ 6.79% 02/28/22 1,203,000
-------------
3,779,043
-------------
REAL ESTATE SERVICES - 1.4%
5,327,663 DTZ Worldwide LTD., 2015-1 Additional Term Loan................. 4.40%-4.45% 11/04/21 5,339,757
-------------
RESEARCH & CONSULTING SERVICES - 5.4%
4,995,907 Acosta, Inc., Term Loan B....................................... 4.29% 09/26/21 4,653,338
6,760,231 Advantage Sales & Marketing, Inc., Initial Term Loan
(First Lien).................................................. 4.29% 07/23/21 6,682,962
300,000 Information Resources, Inc., Second Lien Term Loan.............. 9.26% 01/20/25 298,875
4,650,000 Information Resources, Inc., Term Loan B........................ 5.26% 01/18/24 4,692,129
4,301,886 TransUnion LLC, Term Loan B-2................................... 3.54% 04/09/23 4,341,549
-------------
20,668,853
-------------
RESTAURANTS - 4.6%
8,341,454 Portillo's Holdings LLC, Second Lien Term Loan.................. 9.15% 08/15/22 8,424,869
7,915,442 Portillo's Holdings LLC, Term B Loan (First Lien)............... 5.65% 08/02/21 7,960,006
1,253,571 Red Lobster Management LLC, Initial Term Loan (First Lien)...... 6.29% 07/28/21 1,262,973
-------------
17,647,848
-------------
RETAIL REITS - 0.3%
1,162,500 Capital Automotive LLC, 1st Lien Term Loan...................... 4.03% 03/15/24 1,171,579
-------------
SECURITY & ALARM SERVICES - 0.3%
1,203,059 Garda World Security Corp., Term Loan B......................... 5.04% 05/15/24 1,205,561
-------------
Page 10 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MAY 31, 2017
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
SEMICONDUCTORS - 1.2%
$ 2,494,967 Micron Technology, Inc., Term Loan B............................ 3.55% 04/26/22 $ 2,519,093
2,024,726 Western Digital Corp., Term Loan B.............................. 3.78% 04/29/23 2,042,118
-------------
4,561,211
-------------
SPECIALIZED CONSUMER SERVICES - 2.5%
3,828,223 Asurion LLC, Replacement TL B-5................................. 4.21% 11/03/23 3,855,327
1,058,824 Asurion LLC, Term Loan (Second Lien)............................ 8.54% 03/03/21 1,068,882
4,517,282 Asurion LLC, TL- B4............................................. 4.29% 08/04/22 4,539,055
-------------
9,463,264
-------------
SPECIALIZED FINANCE - 0.7%
2,488,700 Duff & Phelps Corp., Initial Term Loan.......................... 4.90% 04/23/20 2,502,711
-------------
SPECIALTY CHEMICALS - 0.4%
1,174,194 Platform Specialty Products Corp. (fka: Macdermid, Inc.), Term
Loan B6...................................................... 4.04% 06/07/23 1,181,110
524,000 Trinseo Materials Operating S.C.A., Term Loan B................. 4.29% 11/05/21 528,915
-------------
1,710,025
-------------
SPECIALTY STORES - 2.4%
910,746 Party City Holdings, Inc., Term Loan B.......................... 4.05%-4.18% 08/19/22 910,909
3,725,603 PetSmart, Inc., Term Loan B..................................... 4.01% 03/10/22 3,576,951
2,969,594 Toys "R" US-Delaware, Inc., Term B-2 Loan....................... 5.25% 05/25/18 2,832,251
1,996,465 Toys "R" US-Delaware, Inc., Term B4 Loan........................ 9.95% 04/25/20 1,687,013
-------------
9,007,124
-------------
SYSTEMS SOFTWARE - 6.3%
666,696 Applied Systems, Inc., Initial Term Loan (First Lien)........... 4.40% 01/25/21 670,863
530,989 Applied Systems, Inc., Initial Term Loan (Second Lien).......... 7.65% 01/24/22 534,971
1,629,375 Avast Software B.V. (Sybil Software LLC), Initial Refinancing
Term Loan.................................................... 4.40% 09/30/23 1,650,150
13,236,639 BMC Software Finance, Inc., Term Loan B......................... 5.04% 09/10/22 13,295,277
2,126,886 Compuware Corp., Term Loan B3................................... 5.29% 12/15/21 2,142,837
800,000 Misys Financial Software Ltd., Term Loan B...................... 4.71% 05/15/24 801,536
673,429 Riverbed Technology, Inc., Term Loan B.......................... 4.30% 04/24/22 664,546
4,094,467 Vertafore, Inc., Term Loan B.................................... 4.29% 06/30/23 4,099,585
-------------
23,859,765
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 3.1%
11,747,450 Dell, Inc. (Diamond 1 Finance Corp.), Term Loan B............... 3.55% 09/07/23 11,813,941
-------------
TRADING COMPANIES & DISTRIBUTORS - 0.2%
720,000 Avolon Holding LTD., Term Loan B2............................... 3.76% 03/20/22 728,950
-------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 519,021,668
(Cost $524,930,764) -------------
See Notes to Financial Statements Page 11
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MAY 31, 2017
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
CORPORATE BONDS AND NOTES - 5.5%
CABLE & SATELLITE - 0.3%
$ 1,000,000 CCO Holdings LLC/CCO Holdings Capital Corp...................... 5.75% 01/15/24 $ 1,061,880
272,000 Ziggo Secured Finance B.V. (Netherlands) (j).................... 5.50% 01/15/27 276,904
-------------
1,338,784
-------------
CASINOS & GAMING - 2.4%
2,857,000 Caesars Entertainment Resort Properties LLC/Caesars Entertainment
Resort Properties Finance, Inc............................... 8.00% 10/01/20 2,965,923
630,000 Caesars Entertainment Resort Properties LLC/Caesars Entertainment
Resort Properties Finance, Inc............................... 11.00% 10/01/21 679,707
4,900,000 Caesars Growth Properties Holdings LLC/Caesars Growth
Properties Finance, Inc...................................... 9.38% 05/01/22 5,328,750
-------------
8,974,380
-------------
HEALTH CARE FACILITIES - 1.7%
350,000 CHS/Community Health Systems, Inc............................... 6.88% 02/01/22 312,375
1,000,000 Select Medical Corp............................................. 6.38% 06/01/21 1,027,500
3,000,000 Tenet Healthcare Corp........................................... 5.00% 03/01/19 3,073,140
800,000 Tenet Healthcare Corp........................................... 6.00% 10/01/20 859,000
1,000,000 Tenet Healthcare Corp........................................... 8.13% 04/01/22 1,057,500
-------------
6,329,515
-------------
LIFE SCIENCES TOOLS & SERVICES - 0.5%
1,916,000 Ortho-Clinical Diagnostics, Inc. / Ortho-Clinical
Diagnostics S.A. (j)......................................... 6.63% 05/15/22 1,834,570
-------------
METAL & GLASS CONTAINERS - 0.1%
504,000 Ardagh Packaging Finance PLC/Ardagh Holdings USA, Inc.
(Ireland) (j)................................................ 4.25% 09/15/22 514,710
-------------
PHARMACEUTICALS - 0.5%
1,248,000 Valeant Pharmaceuticals International, Inc. (Canada) (j)........ 6.75% 08/15/18 1,260,480
620,000 Valeant Pharmaceuticals International, Inc. (Canada) (j)........ 5.38% 03/15/20 579,731
-------------
1,840,211
-------------
TOTAL CORPORATE BONDS AND NOTES.............................................................. 20,832,170
(Cost $20,223,314) -------------
SHARES DESCRIPTION VALUE
------------ --------------------------------------------------------------------------------------------- -------------
COMMON STOCKS - 0.4%
COMMODITY CHEMICALS - 0.0%
20 LyondellBasell Industries N.V., Class A...................................................... 1,611
-------------
ELECTRIC UTILITIES - 0.4%
106,607 Vistra Energy Corp. (e) (k).................................................................. 1,574,585
-------------
TOTAL COMMON STOCKS.......................................................................... 1,576,196
(Cost $1,647,078) -------------
RIGHTS - 0.0%
ELECTRIC UTILITIES - 0.0%
112,741 Vistra Energy Corp. (e) (k).................................................................. 114,658
175,375 Vistra Energy Corp. Claim (e) (i) (k) (l).................................................... 0
-------------
114,658
-------------
Page 12 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MAY 31, 2017
SHARES DESCRIPTION VALUE
------------ --------------------------------------------------------------------------------------------- -------------
RIGHTS (CONTINUED)
LIFE SCIENCES TOOLS & SERVICES - 0.0%
1 New Millennium Holdco, Inc., Lender Claim Trust (i) (k) (l) (m).............................. $ 0
1 New Millennium Holdco, Inc., Corporate Claim Trust (i) (k) (l) (m)........................... 0
-------------
0
-------------
TOTAL RIGHTS................................................................................. 114,658
(Cost $195,888) -------------
WARRANTS - 0.0%
BROADCASTING - 0.0%
1,449 Cumulus Media, Inc. (i) (k) (l) (n).......................................................... 0
(Cost $0) -------------
MONEY MARKET FUNDS - 1.3%
4,889,384 Morgan Stanley Institutional Liquidity Fund - Treasury Portfolio - Institutional Class -
0.68% (o)................................................................................. 4,889,384
(Cost $4,889,384) -------------
TOTAL INVESTMENTS - 143.3%................................................................... 546,434,076
(Cost $551,886,428) (p)
OUTSTANDING LOAN - (38.3%)................................................................... (146,000,000)
NET OTHER ASSETS AND LIABILITIES - (5.0%).................................................... (19,136,351)
-------------
NET ASSETS - 100.0%.......................................................................... $ 381,297,725
=============
-----------------------------
(a) All or a portion of the securities are available to serve as collateral on
the outstanding loan.
(b) Senior Floating-Rate Loan Interests ("Senior Loans") in which the Fund
invests pay interest at rates which are periodically predetermined by
reference to a base lending rate plus a premium. These base lending rates
are generally (i) the lending rate offered by one or more major European
banks, such as the London Inter-Bank Offered Rate ("LIBOR"), (ii) the
prime rate offered by one or more United States banks or (iii) the
certificate of deposit rate. Certain Senior Loans are subject to a LIBOR
floor that establishes a minimum LIBOR rate. The interest rate shown
reflects the rate in effect at May 31, 2017. When a range of rates is
disclosed, the Fund holds more than one contract within the same tranche
at varying rates.
(c) Senior Loans generally are subject to mandatory and/or optional
prepayment. As a result, the actual remaining maturity of Senior Loans may
be substantially less than the stated maturities shown.
(d) On October 4, 2016, Arch Coal, Inc. completed a Bankruptcy Plan of
Reorganization. In connection with the Plan of Reorganization, each lender
received a portion of a new term loan equal to its closing date term loan
percentage pursuant to the new credit agreement and a pro rata share of
the newly issued common equity shares in the new company. The company also
made a cash distribution to the first lien creditors.
(e) On October 3, 2016, Texas Competitive Electric Holdings ("TCEH") completed
their reorganization in the form of a tax free spin off from the parent
company, Energy Future Holdings. As part of the reorganization, first lien
claim holders received equity in a new entity TCEH Corp., cash held by the
new entity, tax receivable rights and a beneficial interest in an
unsecured claim to the parent company, Energy Future Holdings. Effective
November 7, 2016, TCEH Corp. changed its name to Vistra Energy Corp.
(f) Delayed Draw Loan (see Note 2C - Unfunded Loan Commitments in the Notes to
Financial Statements).
(g) Represents Commitment fee rate on unfunded loan commitment. The commitment
fee rate steps up at predetermined time intervals.
(h) This issuer has filed for protection in federal bankruptcy court.
(i) Pursuant to procedures adopted by the Fund's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors L.P.
(the "Advisor").
(j) 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 the 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
May 31, 2017, securities noted as such amounted to $4,466,395 or 1.2% of
net assets.
(k) Non-income producing security.
See Notes to Financial Statements Page 13
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
MAY 31, 2017
(l) This security is fair valued by the Advisor's Pricing Committee in
accordance with procedures adopted by the Fund's Board of Trustees, and in
accordance with the provisions of the Investment Company Act of 1940, as
amended. At May 31, 2017, investments noted as such are valued at $0 or
0.0% of net assets.
(m) On December 21, 2015, Millennium Health, LLC completed a Bankruptcy Plan
of Reorganization. As part of the Bankruptcy Plan of Reorganization, the
holders of Millennium Laboratories LLC, Tranche B Term Loan received a
portion of a new term loan and a pro rata share of the newly issued common
equity shares in New Millennium Holdco, Inc., the new company. Each lender
was also issued a beneficial interest in the Corporate Claim Trust
entitling it, as holder of such beneficial interest, to receive Corporate
Claim Trust Distributions when and if net cash proceeds from the pursuit
of Retained Corporate Causes of Action are available to make such a
distribution. In addition, each lender was issued a beneficial interest in
the Lender Claim Trust entitling it, as holder of such beneficial
interest, to receive Lender Claim Trust Distributions when and if net cash
proceeds from the pursuit of Retained Lender Causes of Action are
available to make such a distribution.
(n) This security is restricted and cannot 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 (See Note 2D - Restricted Securities in the Notes to
Financial Statements).
(o) Interest rate shown reflects yield as of May 31, 2017.
(p) Aggregate cost for federal income tax purposes is $552,163,324. As of May
31, 2017, the aggregate gross unrealized appreciation for all securities
in which there was an excess of value over tax cost was $3,819,012 and the
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over value was $9,548,260.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of May 31, 2017
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
INVESTMENTS 5/31/2017 PRICES INPUTS INPUTS
------------------------------------------------- ------------- ------------- ------------- -------------
Senior Floating-Rate Loan Interests:
Property & Casualty Insurance $ 3,779,043 $ -- $ 3,688,664 $ 90,379
Other Industry Categories* 515,242,625 -- 515,242,625 --
------------- ------------- ------------- -------------
Total Senior Floating-Rate Loan Interests 519,021,668 -- 518,931,289 90,379
Corporate Bonds and Notes* 20,832,170 -- 20,832,170 --
Common Stocks* 1,576,196 1,576,196 -- --
Rights:
Electric Utilities 114,658 -- 114,658 --**
Life Sciences Tools & Services --** -- -- --**
------------- ------------- ------------- -------------
Total Rights 114,658 -- 114,658 --**
Warrants* --** -- --** --
Money Market Funds 4,889,384 4,889,384 -- --
------------- ------------- ------------- -------------
Total Investments $ 546,434,076 $ 6,465,580 $ 539,878,117 $ 90,379
============= ============= ============= =============
* See the Portfolio of Investments for the industry breakout. Industry
categories are only shown separately if they include holdings in two or
more levels or have holdings in only Level 3.
** Investment is valued at $0.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between Levels at May 31, 2017.
Level 3 Senior Floating-Rate Loan Interests and Rights that are fair valued by
the Advisor's Pricing Committee are footnoted in the Portfolio of Investments.
Level 3 Senior Floating-Rate Loan Interests are valued based on either
third-party pricing service prices obtained from dealer runs and indicative
sheets from brokers or are valued using broker quotes. The Level 3 Rights values
are based on unobservable and non-quantitative inputs. The Fund's Board of
Trustees has adopted valuation procedures that are utilized by the Advisor's
Pricing Committee to oversee the day-to-day valuation of the Fund's investments.
The Advisor's Pricing Committee, through the Fund's fund accounting agent,
monitors the daily pricing via tolerance checks and stale and unchanged price
reviews. The Advisor's Pricing Committee also reviews monthly back testing of
third-party pricing service prices by comparing sales prices of the Fund's
investments to prior day third-party pricing service prices. Additionally, the
Advisor's Pricing Committee reviews periodic information from the Fund's
third-party pricing service that compares secondary market trade prices to their
daily valuations.
Page 14 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
MAY 31, 2017
The following table presents the activity of the Fund's investments measured at
fair value on a recurring basis using significant unobservable inputs (Level 3)
for the period presented:
BEGINNING BALANCE AT MAY 31, 2016
Senior Floating-Rate Loan Interests $ 2,528,145
Rights -- **
Net Realized Gain (Loss)
Senior Floating-Rate Loan Interests (24,930)
Rights --
Net Change in Unrealized Appreciation/Depreciation
Senior Floating-Rate Loan Interests 124,521
Rights --
Purchases
Senior Floating-Rate Loan Interests --
Rights -- **
Sales
Senior Floating-Rate Loan Interests (2,537,357)
Rights --
Transfers In
Senior Floating-Rate Loan Interests --
Rights --
Transfers Out
Senior Floating-Rate Loan Interests --
Rights --
ENDING BALANCE AT MAY 31, 2017
Senior Floating-Rate Loan Interests 90,379
Rights -- **
-------------
Total Level 3 holdings $ 90,379
=============
** Investment is valued at $0.
There was a net change of $(9,667) in unrealized appreciation (depreciation)
from Level 3 investments held as of May 31, 2017.
See Notes to Financial Statements Page 15
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2017
ASSETS:
Investments, at value
(Cost $551,886,428)............................................................................ $ 546,434,076
Cash........................................................................................... 166,490
Receivables:
Investment securities sold.................................................................. 27,751,125
Interest.................................................................................... 1,999,960
Prepaid expenses............................................................................... 21,396
-------------
Total Assets................................................................................ 576,373,047
-------------
LIABILITIES:
Outstanding loan............................................................................... 146,000,000
Payables:
Investment securities purchased............................................................. 47,921,217
Investment advisory fees.................................................................... 338,259
Interest and fees on loan................................................................... 255,948
Unfunded loan commitments................................................................... 255,444
Administrative fees......................................................................... 110,626
Audit and tax fees.......................................................................... 75,200
Legal fees.................................................................................. 47,899
Printing fees............................................................................... 27,337
Custodian fees.............................................................................. 19,637
Transfer agent fees......................................................................... 16,903
Trustees' fees and expenses................................................................. 2,874
Financial reporting fees.................................................................... 771
Other liabilities.............................................................................. 3,207
-------------
Total Liabilities........................................................................... 195,075,322
-------------
NET ASSETS..................................................................................... $ 381,297,725
=============
NET ASSETS CONSIST OF:
Paid-in capital................................................................................ $ 473,585,523
Par value...................................................................................... 266,970
Accumulated net investment income (loss)....................................................... (151,020)
Accumulated net realized gain (loss) on investments............................................ (86,951,396)
Net unrealized appreciation (depreciation) on investments...................................... (5,452,352)
-------------
NET ASSETS..................................................................................... $ 381,297,725
=============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)........................... $ 14.28
=============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized).... 26,696,982
=============
Page 16 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MAY 31, 2017
INVESTMENT INCOME:
Interest....................................................................................... $ 27,763,090
Dividends...................................................................................... 247,379
Other.......................................................................................... 547,906
-------------
Total investment income..................................................................... 28,558,375
-------------
EXPENSES:
Investment advisory fees....................................................................... 4,026,477
Interest and fees on loan...................................................................... 2,767,008
Administrative fees............................................................................ 396,472
Legal fees..................................................................................... 295,711
Printing fees.................................................................................. 88,899
Audit and tax fees............................................................................. 75,227
Custodian fees................................................................................. 70,324
Transfer agent fees............................................................................ 30,714
Trustees' fees and expenses.................................................................... 17,290
Financial reporting fees....................................................................... 9,250
Other.......................................................................................... 42,461
-------------
Total expenses.............................................................................. 7,819,833
-------------
NET INVESTMENT INCOME (LOSS)................................................................... 20,738,542
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments..................................................... (3,792,004)
Net change in unrealized appreciation (depreciation) on investments......................... 11,725,535
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)........................................................ 7,933,531
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................ $ 28,672,073
=============
See Notes to Financial Statements Page 17
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
5/31/2017 5/31/2016
-------------- --------------
OPERATIONS:
Net investment income (loss)........................................................ $ 20,738,542 22,286,399
Net realized gain (loss)............................................................ (3,792,004) (5,807,937)
Net change in unrealized appreciation (depreciation)................................ 11,725,535 (10,999,208)
-------------- --------------
Net increase (decrease) in net assets resulting from operations..................... 28,672,073 5,479,254
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................... (20,842,660) (23,493,344)
Return of capital................................................................... (1,217,056) --
-------------- --------------
Total distributions to shareholders................................................. (22,059,716) (23,493,344)
-------------- --------------
Total increase (decrease) in net assets............................................. 6,612,357 (18,014,090)
NET ASSETS:
Beginning of period................................................................. 374,685,368 392,699,458
-------------- --------------
End of period....................................................................... $ 381,297,725 $ 374,685,368
============== ==============
Accumulated net investment income (loss) at end of period........................... $ (151,020) $ (251,040)
============== ==============
COMMON SHARES:
Common Shares at end of period...................................................... 26,696,982 26,696,982
============== ==============
Page 18 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED MAY 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations..................... $ 28,672,073
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by operating activities:
Purchases of investments...................................................... (633,874,345)
Sales, maturities and paydowns of investments................................. 621,850,222
Net amortization/accretion of premiums/discounts on investments............... (1,020,981)
Net realized gain/loss on investments......................................... 3,792,004
Net change in unrealized appreciation/depreciation on investments............. (11,725,535)
CHANGES IN ASSETS AND LIABILITIES:
Decrease in interest receivable............................................... 1,408,614
Decrease in dividends receivable.............................................. 17
Increase in prepaid expenses.................................................. (8,489)
Increase in interest and fees on loan payable................................. 74,916
Increase in investment advisory fees payable.................................. 14,885
Decrease in audit and tax fees payable........................................ (3,200)
Increase in legal fees payable................................................ 18,747
Decrease in printing fees payable............................................. (2,521)
Increase in administrative fees payable....................................... 39,828
Increase in custodian fees payable............................................ 8,365
Increase in transfer agent fees payable....................................... 12,389
Decrease in Trustees' fees and expenses payable............................... (423)
Increase in other liabilities payable......................................... 789
--------------
CASH PROVIDED BY OPERATING ACTIVITIES............................................... $ 9,257,355
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Common Shareholders from net investment income............... (20,842,660)
Distributions to Common Shareholders from return of capital................... (1,217,056)
Proceeds from borrowing....................................................... 83,000,000
Repayment of borrowing........................................................ (74,000,000)
--------------
Cash used in financing activities................................................... (13,059,716)
--------------
Decrease in cash.................................................................... (3,802,361)
Cash at beginning of period......................................................... 3,968,851
--------------
CASH AT END OF PERIOD............................................................... $ 166,490
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees................................... $ 2,692,092
==============
See Notes to Financial Statements Page 19
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED MAY 31,
--------------------------------------------------------------------
2017 2016 2015 2014 2013
----------- ----------- ----------- ----------- ------------
Net asset value, beginning of period............ $ 14.03 $ 14.71 $ 14.95 $ 15.14 $ 14.49
--------- --------- --------- --------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................... 0.78 0.83 0.87 0.84 1.01
Net realized and unrealized gain (loss)......... 0.30 (0.63) (0.27) (0.08) 0.64
--------- --------- --------- --------- ----------
Total from investment operations................ 1.08 0.20 0.60 0.76 1.65
--------- --------- --------- --------- ----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................... (0.78) (0.88) (0.84) (0.95) (1.03)
Return of capital............................... (0.05) -- -- -- --
--------- --------- --------- --------- ----------
Total distributions to Common Shareholders...... (0.83) (0.88) (0.84) (0.95) (1.03)
--------- --------- --------- --------- ----------
Premium from shares sold in at the market
offering..................................... -- -- -- 0.00 (a) 0.03
--------- --------- --------- --------- ----------
Net asset value, end of period.................. $ 14.28 $ 14.03 $ 14.71 $ 14.95 $ 15.14
========= ========= ========= ========= ==========
Market value, end of period..................... $ 13.62 $ 13.05 $ 13.77 $ 14.00 $ 15.37
========= ========= ========= ========= ==========
TOTAL RETURN BASED ON NET ASSET VALUE (b)....... 7.99% 2.36% 4.68% 5.35% 11.92%
========= ========= ========= ========= ==========
TOTAL RETURN BASED ON MARKET VALUE (b).......... 10.89% 1.56% 4.64% (2.82)% 14.80%
========= ========= ========= ========= ==========
-----------------------------
RATIOS AND SUPPLEMENTAL DATA:
Ratio of total expenses to average net assets... 2.06% 1.79% 1.69% 1.80% 1.85%
Ratio of total expenses to average net assets
excluding interest expense................... 1.33% 1.27% 1.28% 1.36% 1.38%
Ratio of net investment income (loss) to average
net assets................................... 5.47% 5.98% 5.96% 5.60% 6.77%
Portfolio turnover rate......................... 116% (c) 43% 63% 90% 125%
Net assets, end of period (in 000's)............ $ 381,298 $ 374,685 $ 392,699 $ 399,021 $ 400,825
Ratio of total expenses to total average Managed
Assets (d)................................... 1.46% 1.29% 1.18% 1.25% 1.30%
Ratio of total expenses to total average Managed
Assets excluding interest expense (d)........ 0.94% 0.91% 0.89% 0.96% 0.97%
INDEBTEDNESS:
Total loan outstanding (in 000's)............... $ 146,000 $ 137,000 $ 159,000 $ 174,000 $ 174,000
Asset coverage per $1,000 of indebtedness (e)... $ 3,612 $ 3,735 $ 3,470 $ 3,293 $ 3,304
-----------------------------
(a) Amount is less than $0.01.
(b) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan, and changes in net asset value per share
for net asset value returns and changes in Common Share Price for market
value returns. Total returns do not reflect sales load and are not
annualized for periods of less than one year. Past performance is not
indicative of future results.
(c) The variation in the portfolio turnover rate is due to a significant
increase in the refinancing of the Senior Floating-Rate Loan Interests
held by the Fund during the year ended May 31, 2017.
(d) Managed Assets are calculated by taking the Fund's total asset value,
including assets attributable to the principal amount of borrowings, minus
the sum of the Fund's liabilities, other than the principal amount of
borrowings.
(e) Calculated by taking the Fund's total assets less the Fund's total
liabilities, not including the loan outstanding, and dividing by the
outstanding loan balance in 000's.
Page 20 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017
1. ORGANIZATION
First Trust Senior Floating Rate Income Fund II (the "Fund") is a diversified,
closed-end management investment company organized as a Massachusetts business
trust on March 25, 2004, and is registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Fund trades under the ticker symbol FCT on the New York Stock
Exchange ("NYSE").
The Fund's primary investment objective is to seek a high level of current
income. As a secondary objective, the Fund attempts to preserve capital. The
Fund pursues these objectives by primarily investing in a portfolio of senior
secured floating-rate loan interests ("Senior Loans")(1). There can be no
assurance that the Fund will achieve its investment objectives. Investing in
Senior Loans involves credit risk and, during periods of generally declining
credit quality, it may be particularly difficult for the Fund to achieve its
secondary investment objective. The Fund may not be appropriate for all
investors.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 946, "Financial
Services-Investment Companies." The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. The preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP") requires management to make estimates and assumptions that affect the
reported amounts and disclosures in the financial statements. Actual results
could differ from those estimates.
A. PORTFOLIO VALUATION
The net asset value ("NAV") of the Common Shares of the Fund is determined daily
as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time,
on each day the NYSE is open for trading. If the NYSE closes early on a
valuation day, the NAV is determined as of that time. Domestic debt securities
and foreign securities are priced using data reflecting the earlier closing of
the principal markets for those securities. The Fund's 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. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Fund's Board of Trustees,
and in accordance with provisions of the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. The Fund's investments are valued as follows:
The Senior Loans in which the Fund invests are not listed on any
securities exchange or board of trade. Senior Loans are typically bought
and sold by institutional investors in individually negotiated private
transactions that function in many respects like an over-the-counter
secondary market, although typically no formal market-makers exist. This
market, while having grown substantially since its inception, generally
has fewer trades and less liquidity than the secondary market for other
types of securities. Some Senior Loans have few or no trades, or trade
infrequently, and information regarding a specific Senior Loan may not be
widely available or may be incomplete. Accordingly, determinations of the
fair market value of Senior Loans may be based on infrequent and dated
information. Because there is less reliable, objective data available,
elements of judgment may play a greater role in valuation of Senior Loans
than for other types of securities. Typically, Senior Loans are fair
valued using information provided by a third-party pricing service. The
third-party pricing service primarily uses over-the-counter pricing from
dealer runs and broker quotes from indicative sheets to value the Senior
Loans. If the third-party pricing service cannot or does not provide a
valuation for a particular Senior Loan or such valuation is deemed
unreliable, the Advisor's Pricing Committee may value such Senior Loan at
a fair value according to procedures adopted by the Fund's Board of
Trustees, and in accordance with the provisions of the 1940 Act. Fair
valuation of a Senior Loan is based on the consideration of all available
information, including, but not limited to the following:
1) the fundamental business data relating to the borrower/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 borrower/issuer;
5) the credit quality and cash flow of the borrower/issuer, based on
the Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
-----------------------------
(1) The terms "security" and "securities" used throughout the Notes to
Financial Statements include Senior Loans.
Page 21
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017
7) the price and extent of public trading in similar securities (or
equity securities) of the borrower/issuer, 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 borrower/issuer, including any ability
to obtain money or resources from a parent or affiliate and an
assessment of the borrower's/issuer's management;
11) the prospects for the borrower's/issuer's industry, and multiples
(of earnings and/or cash flows) being paid for similar businesses in
that industry;
12) borrower's/issuer's competitive position within the industry;
13) borrower's/issuer's ability to access additional liquidity through
public and/or private markets; and
14) other relevant factors.
Common stocks and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
Shares of open-end funds are valued at fair value which is based on NAV
per share.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Corporate bonds, corporate notes and other debt securities are valued on
the basis of valuations provided by dealers who make markets in such
securities or by a third-party 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.
Fixed-income and other debt securities having a remaining maturity of 60
days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes thereto;
2) the liquidity conditions in the relevant market and changes thereto;
3) the interest rate conditions in the relevant market and changes
thereto (such as significant changes in interest rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing Committee
may use last-obtained market-based data to assist it when valuing
portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Fund's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended (the "1933 Act")) for which a third-party pricing service is
unable to provide a market price; securities whose trading has been formally
suspended; a security whose market or fair value price is not available from a
pre-established pricing source; a security with respect to which an event has
occurred that is likely to materially affect the value of the security after the
market has closed but before the calculation of the Fund's NAV or make it
difficult or impossible to obtain a reliable market quotation; and a security
whose price, as provided by the third-party pricing service, does not reflect
the security's fair value. As a general principle, the current fair value of a
security would appear to be the amount which the owner might reasonably expect
to receive for the security upon its current sale. When fair value prices are
used, generally they will differ from market quotations or official closing
prices on the applicable exchanges. A variety of factors may be considered in
determining the fair value of such securities, including, but not limited to,
the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
Page 22
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017
4) transactions in comparable securities;
5) price quotes from dealers and/or third-party pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of May 31, 2017, is
included with the Fund's Portfolio of Investments.
B. SECURITY TRANSACTIONS AND INVESTMENT INCOME
Security 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 on the accrual basis. Market premiums and discounts
are amortized over the expected life of each respective borrowing.
Securities purchased or sold 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. Due
to the nature of the Senior Loan market, the actual settlement date may not be
certain at the time of the purchase or sale for some of the Senior Loans.
Interest income on such Senior Loans 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, delayed delivery or forward purchase commitments. The Fund
had no when-issued, delayed-delivery or forward purchase commitments as of May
31, 2017.
C. UNFUNDED LOAN COMMITMENTS
The Fund may enter into certain credit agreements, all or a portion of which may
be unfunded. The Fund is obligated to fund these loan commitments at the
borrower's discretion. The Fund had unfunded delayed draw loan commitments,
which are marked to market daily, of $255,444 as of May 31, 2017. In connection
with these commitments, the Fund earns a commitment fee typically set as a
percentage of the commitment amount.
D. 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 May 31, 2017, the Fund held restricted securities as
shown in the following table. 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 2A) and
are not expressed as a discount to the carrying value of a comparable
unrestricted investment. There are no unrestricted investments with the same
maturity date and yield for this issuer.
ACQUISITION PRINCIPAL VALUE CURRENT % OF
SECURITY DATE VALUE/SHARES PER SHARE CARRYING COST VALUE NET ASSETS
-----------------------------------------------------------------------------------------------------------------
Cumulus Media, Inc. - Warrants 6/29/09 1,449 $ -- $ -- $ -- 0.00%
Page 23
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
The Fund will distribute to holders of its Common Shares monthly dividends of
all or a portion of its net income after the payment of interest and dividends
in connection with leverage, if any. Distributions of any net long-term capital
gains earned by the Fund are distributed at least annually. Distributions will
automatically be reinvested into additional Common Shares pursuant to the Fund's
Dividend Reinvestment Plan unless cash distributions are elected by the
shareholder.
Distributions from net investment income and realized capital gains are
determined in accordance with income tax regulations, which may differ from U.S.
GAAP. Certain capital accounts in the financial statements are periodically
adjusted for permanent differences in order to reflect their tax character.
These permanent differences are primarily due to the varying treatment of income
and gain/loss on significantly modified portfolio securities held by the Fund
and have no impact on net assets or net asset value per share. Temporary
differences, which arise from recognizing certain items of income, expense and
gain/loss in different periods for financial statement and tax purposes, will
reverse at some time in the future. Permanent differences incurred during the
fiscal year ended May 31, 2017, resulting in book and tax accounting
differences, have been reclassified at year end to reflect an increase in
accumulated net investment income (loss) of $204,138, an increase in accumulated
net realized gain (loss) on investments of $25,372,255, and a decrease to
paid-in capital of $25,576,393. Net assets were not affected by these
reclassifications.
The tax character of distributions paid during the fiscal years ended May 31,
2017 and 2016 was as follows:
Distributions paid from: 2017 2016
------------ ------------
Ordinary income................................. $ 20,842,660 $ 23,493,344
Return of capital............................... 1,217,056 --
As of May 31, 2017, the components of distributable earnings and net assets on a
tax basis were as follows:
Undistributed ordinary income................... $ --
Undistributed capital gains..................... --
Total undistributed earnings.................... --
Accumulated capital and other losses............ (86,825,520)
Net unrealized appreciation (depreciation)...... (5,729,248)
------------
Total accumulated earnings (losses)............. (92,554,768)
Other........................................... --
Paid-in capital................................. 473,852,493
------------
Net assets...................................... $381,297,725
============
F. INCOME TAXES
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal and state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses arising in taxable years beginning after December 31, 2010,
may be carried forward indefinitely, and their character is retained as
short-term and/or long-term losses. Previously, net capital losses were carried
forward for up to eight years and treated as short-term losses. As a transition
rule, the Act requires that post-enactment net capital losses be used before
pre-enactment net capital losses. At May 31, 2017, for federal income tax
purposes, the Fund had capital loss carryforwards available that are shown in
the following table, to the extent provided by regulation, to offset future
capital gains through the years indicated. To the extent that these loss
carryforwards are used to offset future capital gains, it is probable that the
capital gains offset will not be distributed to the Fund shareholders.
CAPITAL LOSS AVAILABLE THROUGH
-------------------------------------
POST-EFFECTIVE TOTAL CAPITAL
2018 2019 (NO EXPIRATION) LOSS AVAILABLE
--------------------------------------------------------------------------------
$ 68,278,827 $ 4,665,052 $ 13,394,727 $ 86,338,606
At the taxable year ended May 31, 2017, the Fund had $25,585,953 of
pre-enactment capital loss carryforwards that expired.
The Fund is subject to certain limitations under the U.S. tax rules on the use
of capital loss carryforwards and net unrealized built-in losses. These
limitations apply when there has been a 50% change in ownership.
Page 24
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017
Certain losses realized during the current fiscal year may be deferred and
treated as occurring the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended May 31, 2017, the Fund incurred
and elected to defer net ordinary and capital losses as follows:
Qualified Late Year Losses:
Ordinary Losses $ --
Capital Losses 486,914
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ended 2014, 2015,
2016 and 2017 remain open to federal and state audit. As of May 31, 2017,
management has evaluated the application of these standards to the Fund and has
determined that no provision for income tax is required in the Fund's financial
statements for uncertain tax positions.
G. EXPENSES
The Fund will pay all expenses directly related to its operations.
H. NEW AND AMENDED FINANCIAL RULES AND FORMS
On October 13, 2016, the SEC adopted new rules and forms, and amended existing
rules and forms. The new and amended rules and forms are intended to modernize
the reporting of information provided by funds and to improve the quality and
type of information that funds provide to the SEC and investors. The new and
amended rules and forms will be effective for the First Trust funds, including
the Fund, for reporting periods beginning on and after June 1, 2018. Management
is evaluating the new and amended rules and forms to determine the impact to the
Fund.
I. NEW ACCOUNTING PRONOUNCEMENT
In December 2016, FASB released Accounting Standards Update ("ASU") 2016-19 that
makes technical changes to various sections of the ASC, including Topic 820,
Fair Value Measurement. The changes to Topic 820 are intended to clarify the
difference between a valuation approach and a valuation technique. The changes
to ASC 820-10-50-2 require a reporting entity to disclose, for Level 2 and Level
3 fair value measurements, a change in either or both a valuation approach and a
valuation technique and the reason(s) for the change. The changes to Topic 820
are effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2016. At this time, management is evaluating the
implications of the ASU and has not yet determined its impact on the financial
statements and disclosures.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the selection and ongoing monitoring of the Fund's
investment portfolio, managing the Fund's business affairs and providing certain
administrative services necessary for the management of the Fund. For these
investment management services, First Trust is entitled to a monthly fee
calculated at an annual rate of 0.75% of the Fund's Managed Assets (the average
daily total asset value of the Fund minus the sum of the Fund's liabilities
other than the principal amount of borrowings). First Trust also provides fund
reporting services to the Fund for a flat annual fee in the amount of $9,250.
BNY Mellon Investment Servicing (US) Inc. ("BNYM IS") serves as the Fund's
transfer agent in accordance with certain fee arrangements. As transfer agent,
BNYM IS is responsible for maintaining shareholder records for the Fund. The
Bank of New York Mellon ("BNYM") serves as the Fund's administrator, fund
accountant, and custodian in accordance with certain fee arrangements. As
administrator and fund accountant, BNYM is responsible for providing certain
administrative and accounting services to the Fund, including maintaining the
Fund's books of account, records of the Fund's securities transactions, and
certain other books and records. As custodian, BNYM is responsible for custody
of the Fund's assets. BNYM IS and BNYM are subsidiaries of The Bank of New York
Mellon Corporation, a financial holding company.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that
varies based on whether the fund is a closed-end or other actively managed fund,
or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Independent Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Fund for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
The cost of purchases and proceeds from sales of investments, excluding
short-term investments, for the year ended May 31, 2017, were $639,584,875 and
$623,279,625, respectively.
Page 25
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017
5. BORROWINGS
The Fund has a Revolving Credit and Security Agreement (the "Credit Facility")
with Liberty Street Funding LLC as conduit lender and The Bank of Nova Scotia as
secondary lender and agent for the secured parties under the agreement. The
Credit Facility provides for a secured line of credit for the Fund, where Fund
assets are pledged against advances made to the Fund. Under the terms of the
Credit Facility, the loans under the Credit Facility bear interest for each
settlement period at a rate per annum based on the commercial paper rate of the
conduit lender. Effective July 8, 2016, the Credit Facility was amended, whereby
the expiration date of the Credit Facility was extended until July 7, 2017 and
the total commitment was reduced from $180,000,000 to $170,000,000. The Credit
Facility may be renewed annually. Under the requirements of the 1940 Act, the
Fund, immediately after any such borrowings, must have "asset coverage" of at
least 300% (33-1/3% of the Fund's total assets after borrowings). The Fund pays
a utilization fee at a per annum rate of 0.3625% of the daily average of the
aggregate outstanding principal amount of the advances during the prior calendar
month, and a commitment fee at a per annum rate of the product of (i) 0.3625% of
the daily average of the total commitment in effect (or if terminated, the
aggregate outstanding principal amount of the advances funded or maintained)
during the preceding calendar month and (ii) 1.02.
For the year ended May 31, 2017, the average amount outstanding under the Credit
Facility was $158,013,699. As of May 31, 2017, the Fund had outstanding
borrowings of $146,000,000. The high and low annual interest rates for the loan
under the Credit Facility funded by the conduit lender during the year ended May
31, 2017, were 1.21% and 0.70%, respectively, with a weighted average interest
rate of 0.97%. The annual interest rate in effect for the loan at May 31, 2017,
was 1.21%.
6. INDEMNIFICATION
The Fund has a variety of indemnification obligations under contracts with its
service providers. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
7. LITIGATION
The Fund has been named as a defendant in litigation pending in the Bankruptcy
Court for the Southern District of New York as part of the General Motors
bankruptcy case. The plaintiff, the Motors Liquidation Company Avoidance Action
Trust, is an entity formed under the bankruptcy plan of reorganization to
prosecute "avoidance" actions such as preference actions. The lawsuit arises
from years of ancillary litigation concerning whether the former holders of a
term loan to General Motors ("GM"), for which JP Morgan acted as agent, lost
their lien on GM collateral when a Uniform Commercial Code release was
mistakenly filed terminating their interest in certain collateral securing the
term loan. On January 21, 2015, the federal appeals court in New York ruled that
the term lenders' collateral interest was, indeed, terminated.
By virtue of the federal appellate court's decision, all of the former holders
of the term loan, including the Fund, are now being sued in the bankruptcy court
in New York for the avoidance and return of certain payments they received both
before and after the GM bankruptcy filing. The bankruptcy court lawsuit is
premised on the assertion that the term lenders received payments on account of
their status as fully secured creditors when in fact they should not have
received the payments because they were not in fact secured.
The Fund was first served following the filing of the First Amended Complaint on
May 20, 2015. The payments which were received by the Fund in 2009 and which the
plaintiff seeks to recover from the Fund total $8,057,298.44. The Fund has
engaged counsel to assist with its defense of this matter. Based on the current
status of the litigation, the Fund cannot predict the outcome of the litigation
at this time or the impact to Fund net assets, if any.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events to the Fund through
the date the financial statements were issued, and has determined that there
were the following subsequent events:
On July 7, 2017, the Fund's existing leverage facility expired and was replaced
with a leverage facility provided by The Bank of Nova Scotia. The new leverage
facility has a maximum commitment amount of $170,000,000 and a rolling 179-day
maturity.
On June 20, 2017, the Fund declared a distribution of $0.0663 per share to
Common Shareholders of record on July 6, 2017, payable July 17, 2017.
Page 26
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FIRST TRUST SENIOR FLOATING RATE
INCOME FUND II:
We have audited the accompanying statement of assets and liabilities of First
Trust Senior Floating Rate Income Fund II (the "Fund"), including the portfolio
of investments, as of May 31, 2017, and the related statements of operations and
cash flows for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of May 31, 2017 by correspondence with the Fund's
custodian, brokers, and agent banks; when replies were not received, we
performed other auditing procedures. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of First
Trust Senior Floating Rate Income Fund II as of May 31, 2017, the results of its
operations and its cash flows for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Chicago, Illinois
July 25, 2017
Page 27
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017 (UNAUDITED)
DIVIDEND REINVESTMENT PLAN
If your Common Shares are registered directly with the Fund or if you hold your
Common Shares with a brokerage firm that participates in the Fund's Dividend
Reinvestment Plan (the "Plan"), unless you elect, by written notice to the Fund,
to receive cash distributions, all dividends, including any capital gain
distributions, on your Common Shares will be automatically reinvested by BNY
Mellon Investment Servicing (US) Inc. (the "Plan Agent"), in additional Common
Shares under the Plan. If you elect to receive cash distributions, you will
receive all distributions in cash paid by check mailed directly to you by the
Plan Agent, as the dividend paying agent.
If you decide to participate in the Plan, the number of Common Shares you will
receive will be determined as follows:
(1) If Common Shares are trading at or above net asset value ("NAV") at
the time of valuation, the Fund will issue new shares at a price
equal to the greater of (i) NAV per Common Share on that date or
(ii) 95% of the market price on that date.
(2) If Common Shares are trading below NAV at the time of valuation, the
Plan Agent will receive the dividend or distribution in cash and
will purchase Common Shares in the open market, on the NYSE or
elsewhere, for the participants' accounts. It is possible that the
market price for the Common Shares may increase before the Plan
Agent has completed its purchases. Therefore, the average purchase
price per share paid by the Plan Agent may exceed the market price
at the time of valuation, resulting in the purchase of fewer shares
than if the dividend or distribution had been paid in Common Shares
issued by the Fund. The Plan Agent will use all dividends and
distributions received in cash to purchase Common Shares in the open
market within 30 days of the valuation date except where temporary
curtailment or suspension of purchases is necessary to comply with
federal securities laws. Interest will not be paid on any uninvested
cash payments.
You may elect to opt-out of or withdraw from the Plan at any time by giving
written notice to the Plan Agent, or by telephone at (866) 340-1104, in
accordance with such reasonable requirements as the Plan Agent and the Fund may
agree upon. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan, and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions.
The Plan Agent maintains all Common Shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. The Plan Agent will forward to each
participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund. Any proxy you receive will
include all Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.
Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
Capital gains and income are realized although cash is not received by you.
Consult your financial advisor for more information.
If you hold your Common Shares with a brokerage firm that does not participate
in the Plan, you will not be able to participate in the Plan and any dividend
reinvestment may be effected on different terms than those described above.
The Fund reserves the right to amend or terminate the Plan if in the judgment of
the Board of Trustees the change is warranted. There is no direct service charge
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable by the participants. Additional
information about the Plan may be obtained by writing BNY Mellon Investment
Servicing (US) Inc., 301 Bellevue Parkway, Wilmington, Delaware 19809.
--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies and information on how the Fund voted proxies relating to
portfolio investments during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website located at
http://www.sec.gov.
Page 28
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017 (UNAUDITED)
PORTFOLIO HOLDINGS
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available (1) by calling (800) 988-5891; (2) on the Fund's website located
at http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov;
and (4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.
NYSE CERTIFICATION INFORMATION
In accordance with Section 303A-12 of the New York Stock Exchange ("NYSE")
Listed Company Manual, the Fund's President has certified to the NYSE that, as
of September 15, 2016, he was not aware of any violation by the Fund of NYSE
corporate governance listing standards. In addition, the Fund's reports to the
SEC on Forms N-CSR, N-CSRS, and N-Q contain certifications by the Fund's
principal executive officer and principal financial officer that relate to the
Fund's public disclosure in such reports and are required by Rule 30a-2 under
the 1940 Act.
SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Fund held its Annual Meeting of Shareholders ("Annual Meeting") on September
12, 2016. At the Annual Meeting, Trustees James A. Bowen and Robert F. Keith
were elected as Class III Trustees for a three-year term expiring at the Fund's
annual meeting of shareholders in 2019. The number of votes cast in favor of Mr.
Bowen was 23,097,106, the number of votes against Mr. Bowen was 371,960, and the
number of broker non-votes was 3,227,916. The number of votes cast in favor of
Mr. Keith was 23,110,582, the number of votes against Mr. Keith was 358,484, and
the number of broker non-votes was 3,227,916. Thomas R. Kadlec, Richard E.
Erickson, and Niel B. Nielson are current and continuing Trustees. Messrs Kadlec
and Erickson are currently the Class I Trustees of the Fund for a term expiring
at the Fund's annual meeting of shareholders in 2017. Mr. Nielson is currently
the Class II Trustee of the Fund for a term expiring at the Fund's annual
meeting of shareholders in 2018.
TAX INFORMATION
Of the ordinary income (including short-term capital gain) distributions made by
the Fund during the year ended May 31, 2017, none qualify for the corporate
dividends received deduction available to corporate shareholders or as qualified
dividend income.
Distributions paid to foreign shareholders during the Fund's fiscal year ended
May 31, 2017, that were properly designated by the Fund as "interest-related
dividends" or "short-term capital from dividends," may not be subject to federal
income tax provided that the income was earned directly by such foreign
shareholders.
RISK CONSIDERATIONS
Risks are inherent in all investing. The following summarizes some, but not all,
of the risks that should be considered for the Fund. For additional information
about the risks associated with investing in the Fund, please see the Fund's
prospectus and statement of additional information, as well as other Fund
regulatory filings.
CREDIT RISK: Credit risk is the risk that an issuer of a security held by the
Fund will be unable or unwilling to make dividend, interest and/or principal
payments when due and the related risk that the value of a security may decline
because of concerns about the issuer's ability to make such payments. Credit
risk may be heightened for the Fund because it invests a substantial portion of
its net assets in "high yield" or "junk" debt; such securities involve greater
risks, including the possibility of dividend or interest deferral, default or
bankruptcy, and are regarded as predominantly speculative with respect to the
issuer's capacity to pay dividends or interest and repay principal. Credit risk
is heightened for loans in which the Fund invests because companies that issue
such loans tend to be highly leveraged and thus are more susceptible to the
risks of interest deferral, default and/or bankruptcy.
HIGH-YIELD SECURITIES RISK: The Fund may invest up to 100% of its Managed Assets
in lower grade debt securities, which may also be referred to as below
investment grade debt securities. The Senior Loans in which the Fund invests are
generally rated below investment grade by one or more rating agencies and are
considered to be "high-yield" securities. High-yield securities should be
considered speculative as their low ratings indicate a quality of less than
investment grade, and therefore carry an increased risk of default as compared
to investment grade issues. Because high-yield securities are generally lower
rated and are perceived by investors to be riskier than higher rated securities,
their prices tend to fluctuate more than higher rated securities and are
affected by short-term credit developments to a greater degree. High yield
securities are subject to greater market fluctuations and risk of loss than
securities with higher ratings. A reduction in an issuer's creditworthiness may
result in the bankruptcy of an issuer or the default by an issuer on the
interest and principal payments. The high yield securities in which the Fund
invests are not listed on a national securities exchange. Due to the smaller,
less liquid market for the high yield securities, the bid-offer spread on such
securities is generally greater than it is for investment grade securities and
the purchase or sale of such securities may take longer to complete. In general,
high-yield securities may have a greater risk of default than other types of
securities.
Page 29
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017 (UNAUDITED)
INTEREST RATE RISK: The Fund's portfolio is also subject to interest rate risk.
Interest rate risk is the risk that fixed-income securities will decline in
value because of changes in market interest rates. Investments in debt
securities with long-term maturities may experience significant price declines
if long-term interest rates increase.
INVESTMENT AND MARKET RISK: An investment in the Fund's Common Shares is subject
to investment risk, including the possible loss of the entire principal
invested. An investment in Common Shares represents an indirect investment in
the securities owned by the Fund. The value of these securities, like other
market investments, may move up or down, sometimes rapidly and unpredictably.
Common Shares at any point in time may be worth less than the original
investment, even after taking into account the reinvestment of Fund dividends
and distributions. Security prices can fluctuate for several reasons including
the general condition of the securities markets, or when political or economic
events affecting the issuers occur. When the Advisor or Sub-Advisor determines
that it is temporarily unable to follow the Fund's investment strategy or that
it is impractical to do so (such as when a market disruption event has occurred
and trading in the securities is extremely limited or absent), the Fund may take
temporary defensive positions.
LIQUIDITY RISK: The Fund invests a substantial portion of its assets in
lower-quality debt issued by companies that are highly leveraged. Lower-quality
debt tends to be less liquid than higher-quality debt. Moreover, smaller debt
issues tend to be less liquid than larger debt issues. Although the resale, or
secondary market for Senior Loans is growing, it is currently limited. There is
no organized exchange or board of trade on which Senior Loans are traded.
Instead, the secondary market for Senior Loans is an unregulated inter-dealer or
inter-bank resale market. In addition, Senior Loans in which the Fund invests
may require the consent of the borrower and/or agent prior to the settlement of
the sale or assignment. These consent requirements can delay or impede the
Fund's ability to settle the sale of Senior Loans. If the economy experiences a
sudden downturn, or if the market for the Senior Loans in which the Fund invests
becomes distressed, the Fund may have difficulty disposing of Senior Loans if it
needs cash to repay debt, to pay dividends, to pay expenses or to take advantage
of new investment opportunities.
LEVERAGE RISK: The use of leverage results in additional risks and can magnify
the effect of any losses. If the income and gains from the securities and
investments purchased with such proceeds do not cover the cost of leverage, the
Common Shares' return will be less than if leverage had not been used. The Fund
borrowed pursuant to a leverage borrowing program, which constitutes a
substantial lien and burden by reason of their prior claim against the income of
the Fund and against the net assets of the Fund in liquidation. The rights of
lenders to receive payments of interest on and repayments of principal on any
borrowings made by the Fund under a leverage borrowing program are senior to the
rights of holders of Common Shares, with respect to the payment of dividends or
upon liquidation. If the Fund is not in compliance with certain Credit Facility
provisions, the Fund may not be permitted to declare dividends or other
distributions, including dividends and distributions with respect to Common
Shares or purchase Common Shares. The use of leverage by the Fund increases the
likelihood of greater volatility of NAV and market price of the Common Shares.
Leverage also increases the risk that fluctuations in interest rates on
borrowings and short-term debt that the Fund may pay will reduce the return to
the Common Shareholders or will result in fluctuations in the dividends paid on
the Common Shares.
PRE-PAYMENT RISK: Loans are subject to pre-payment risk. The degree to which
borrowers prepay loans, whether as a contractual requirement or at their
election, may be affected by general business conditions, the financial
condition of the borrower and competitive conditions among loan investors, among
others. As such, prepayments cannot be predicted with accuracy. Upon a
prepayment, either in part or in full, the actual outstanding debt on which the
Fund derives interest income will be reduced. The Fund may not be able to
reinvest the proceeds received on terms as favorable as the prepaid loan.
RESTRICTED SECURITIES RISK: Investments in restricted securities could have the
effect of increasing the amount of the Fund's assets invested in illiquid
securities if qualified institutional buyers are willing to purchase these
securities. Illiquid and restricted securities may be difficult to dispose of at
the price at which the Fund has valued the securities and at the times when the
Fund believes it is desirable to do so. The market price of illiquid and
restricted securities generally is more volatile than that of more liquid
securities, which may adversely affect the price that the Fund recovers upon the
sale of such securities. Investment of the Fund's assets in illiquid and
restricted securities may restrict the Fund's ability to take advantage of
market opportunities.
SECOND LIEN LOAN RISK: A second lien loan may have a claim on the same
collateral pool as the first lien or it may be secured by a separate set of
assets. Second lien loans are typically secured by a second priority security
interest or lien to or on specified collateral securing the Borrower's
obligation under the interest. Because second lien loans are second to first
lien loans, they present a greater degree of investment risk. Specifically,
these loans are subject to the additional risk that the cash flow of the
Borrower and property securing the loan may be insufficient to meet scheduled
payments after giving effect to those loans with a higher priority. In addition,
loans that have a lower than first lien priority on collateral of the Borrower
generally have greater price volatility than those loans with a higher priority
and may be less liquid. However, second lien loans often pay interest at higher
rates than first lien loans reflecting such additional risks.
Second lien loans generally give investors priority over general unsecured
creditors in the event of an asset sale. The priority of the collateral claims
of third or lower lien loans ranks below holders of second lien loans and so on.
Such junior loans are subject to the same general risks inherent to any loan
investment, including credit risk, market and liquidity risk, and interest rate
risk. Due to their lower place in the borrower's capital structure and possible
unsecured or partially secured status, such loans involve a higher degree of
Page 30
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017 (UNAUDITED)
overall risk than first lien loans, since cash flow of the Borrower and property
securing the loan, if any, may be insufficient to meet scheduled payments after
giving effect to higher priority secured obligations of the Borrower. Second
lien loans also share the same risks of other below investment grade debt
instruments (which are commonly referred to as "junk" or "high yield"
securities). See "Risks -- Credit Risk."
SENIOR LOAN RISK: In the event a borrower fails to pay scheduled interest or
principal payments on a Senior Loan held by the Fund, the Fund will experience a
reduction in its income and a decline in the market value of the Senior Loan,
which will likely reduce dividends and lead to a decline in the net asset value
of the Fund's Common Shares. If the Fund acquires a Senior Loan from another
lender, for example, by acquiring a participation, the Fund may also be subject
to credit risks with respect to that lender. Although Senior Loans may be
secured by specific collateral, the value of the collateral may not equal the
Fund's investment when the Senior Loan is acquired or may decline below the
principal amount of the Senior Loan subsequent to the Fund's investment. Also,
to the extent that collateral consists of stock of the borrower or its
subsidiaries or affiliates, the Fund bears the risk that the stock may decline
in value, be relatively illiquid, and/or may lose all or substantially all of
its value, causing the Senior Loan to be under collateralized. Therefore, the
liquidation of the collateral underlying a Senior Loan may not satisfy the
issuer's obligation to the Fund in the event of non-payment of scheduled
interest or principal, and the collateral may not be readily liquidated.
Page 31
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017 (UNAUDITED)
NUMBER OF OTHER
PORTFOLIOS IN THE TRUSTEESHIPS OR
FIRST TRUST DIRECTORSHIPS
NAME, ADDRESS TERM OF OFFICE FUND COMPLEX HELD BY
DATE OF BIRTH AND AND LENGTH OF PRINCIPAL OCCUPATIONS OVERSEEN BY TRUSTEE DURING
POSITION WITH THE FUND SERVICE(1) DURING PAST 5 YEARS TRUSTEE PAST 5 YEARS
----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
----------------------------------------------------------------------------------------------------------------------------------
Richard E. Erickson, Trustee o Three Year Term Physician, Officer, Wheaton Orthopedics; 141 None
c/o First Trust Advisors L.P. Limited Partner, Gundersen Real Estate
120 E. Liberty Drive, o Since Fund Limited Partnership (June 1992 to
Suite 400 Inception December 2016); Member, Sportsmed
Wheaton, IL 60187 LLC (April 2007 to November 2015)
D.O.B.: 04/51
Thomas R. Kadlec, Trustee o Three Year Term President, ADM Investor Services, Inc. 141 Director of
c/o First Trust Advisors L.P. (Futures Commission Merchant) ADM Investor
120 E. Liberty Drive, o Since Fund Services, Inc.,
Suite 400 Inception ADM Investor
Wheaton, IL 60187 Services
D.O.B.: 11/57 International, and
Futures Industry
Association
Robert F. Keith, Trustee o Three Year Term President (2003 to present), Hibs 141 Director of Trust
c/o First Trust Advisors L.P. Enterprises (Financial and Management Company of
120 E. Liberty Drive, o Since June 2006 Consulting) Illinois
Suite 400
Wheaton, IL 60187
D.O.B.: 11/56
Niel B. Nielson, Trustee o Three Year Term Managing Director and Chief Operating 141 Director of
c/o First Trust Advisors L.P. Officer (January 2015 to Present), Pelita Covenant
120 E. Liberty Drive, o Since Fund Harapan Education Foundation (Education Transport, Inc.
Suite 400 Inception Products and Services); President and (May 2003 to
Wheaton, IL 60187 Chief Executive Officer (June 2012 to May 2014)
D.O.B.: 03/54 September 2014), Servant Interactive LLC
(Educational Products and Services);
President and Chief Executive Officer
(June 2012 to September 2014), Dew
Learning LLC (Educational Products and
Services); President (June 2002 to June
2012), Covenant College
----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
----------------------------------------------------------------------------------------------------------------------------------
James A. Bowen(2), Trustee and o Three Year Term Chief Executive Officer, First Trust 141 None
Chairman of the Board Advisors L.P. and First Trust Portfolios
120 E. Liberty Drive, o Since Fund L.P.; Chairman of the Board of Directors,
Suite 400 Inception BondWave LLC (Software Development
Wheaton, IL 60187 Company) and Stonebridge Advisors LLC
D.O.B.: 09/55 (Investment Advisor)
-----------------------------
(1) Currently, Thomas R. Kadlec and Richard E. Erickson, as Class I Trustees,
are serving as trustees until the Fund's 2017 annual meeting of
shareholders. Niel B. Nielson, as Class II Trustee, is serving as trustee
until the Fund's 2018 annual meeting of shareholders. James A. Bowen and
Robert F. Keith, as Class III Trustees, are serving as trustees until the
Fund's 2019 annual meeting of shareholders.
(2) Mr. Bowen is deemed an "interested person" of the Fund due to his position
of Chief Executive Officer of First Trust Advisors L.P., investment
advisor of the Fund.
Page 32
--------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017 (UNAUDITED)
NAME, ADDRESS POSITION AND OFFICES TERM OF OFFICE AND PRINCIPAL OCCUPATIONS
AND DATE OF BIRTH WITH FUND LENGTH OF SERVICE DURING PAST 5 YEARS
----------------------------------------------------------------------------------------------------------------------------------
OFFICERS(3)
----------------------------------------------------------------------------------------------------------------------------------
James M. Dykas President and Chief o Indefinite term Managing Director and Chief Financial
120 E. Liberty Drive, Executive Officer Officer (January 2016 to Present), Controller
Suite 400 o Since January 2016 (January 2011 to January 2016), Senior Vice
Wheaton, IL 60187 President (April 2007 to January 2016), First
D.O.B.: 01/66 Trust Advisors L.P. and First Trust Portfolios
L.P.; Chief Financial Officer (January 2016
to Present), BondWave LLC (Software
Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
Donald P. Swade Treasurer, Chief o Indefinite term Senior Vice President (July 2016 to Present),
120 E. Liberty Drive, Financial Officer and Vice President (April 2012 to July 2016),
Suite 400 Chief Accounting Officer o Since January 2016 First Trust Advisors L.P. and First Trust
Wheaton, IL 60187 Portfolios L.P.; Vice President (September
D.O.B.: 08/72 2006 to April 2012), Guggenheim Funds
Investment Advisors, LLC/Claymore
Securities, Inc.
W. Scott Jardine Secretary and Chief o Indefinite term General Counsel, First Trust Advisors L.P.
120 E. Liberty Drive, Legal Officer and First Trust Portfolios L.P.; Secretary
Suite 400 o Since Fund Inception and General Counsel, BondWave LLC;
Wheaton, IL 60187 Secretary of Stonebridge Advisors LLC
D.O.B.: 05/60
Daniel J. Lindquist Vice President o Indefinite term Managing Director (July 2012 to Present),
120 E. Liberty Drive, Senior Vice President (September 2005 to
Suite 400 o Since September 2005 July 2012), First Trust Advisors L.P. and First
Wheaton, IL 60187 Trust Portfolios L.P.
D.O.B: 02/70
Kristi A. Maher Chief Compliance Officer o Indefinite term Deputy General Counsel, First Trust
120 E. Liberty Drive, and Assistant Secretary Advisors L.P. and First Trust Portfolios L.P.
Suite 400 o Chief Compliance
Wheaton, IL 60187 Officer Since
D.O.B.: 12/66 January 2011
o Assistant Secretary
Since Fund Inception
-----------------------------
(3) Officers of the Fund have an indefinite term. The term "officer" means the
president, vice president, secretary, treasurer, controller or any other
officer who performs a policy making function.
Page 33
--------------------------------------------------------------------------------
PRIVACY POLICY
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
MAY 31, 2017 (UNAUDITED)
PRIVACY POLICY
First Trust values our relationship with you and considers your privacy an
important priority in maintaining that relationship. We are committed to
protecting the security and confidentiality of your personal information.
SOURCES OF INFORMATION
We collect nonpublic personal information about you from the following sources:
o Information we receive from you and your broker-dealer, investment
advisor or financial representative through interviews,
applications, agreements or other forms;
o Information about your transactions with us, our affiliates or
others;
o Information we receive from your inquiries by mail, e-mail or
telephone; and
o Information we collect on our website through the use of "cookies".
For example, we may identify the pages on our website that your
browser requests or visits.
INFORMATION COLLECTED
The type of data we collect may include your name, address, social security
number, age, financial status, assets, income, tax information, retirement and
estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal
information.
DISCLOSURE OF INFORMATION
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. In addition to using
this information to verify your identity (as required under law), the permitted
uses may also include the disclosure of such information to unaffiliated
companies for the following reasons:
o In order to provide you with products and services and to effect
transactions that you request or authorize, we may disclose your
personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or
other services on our behalf, such as transfer agents, custodians
and trustees, or that assist us in the distribution of investor
materials such as trustees, banks, financial representatives, proxy
services, solicitors and printers.
o We may release information we have about you if you direct us to do
so, if we are compelled by law to do so, or in other legally limited
circumstances (for example to protect your account from fraud).
In addition, in order to alert you to our other financial products and services,
we may share your personal information within First Trust.
PRIVACY ONLINE
We allow third-party companies, including AddThis (a social media sharing
service), to collect certain anonymous information when you visit our website.
These companies may use non-personally identifiable information during your
visits to this and other websites in order to provide advertisements about goods
and services likely to be of greater interest to you. These companies typically
use a cookie, third party web beacon or pixel tags, to collect this information.
To learn more about this behavioral advertising practice, you can visit
www.networkadvertising.org.
CONFIDENTIALITY AND SECURITY
With regard to our internal security procedures, First Trust restricts access to
your nonpublic personal information to those First Trust employees who need to
know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic
personal information.
POLICY UPDATES AND INQUIRIES
As required by federal law, we will notify you of our privacy policy annually.
We reserve the right to modify this policy at any time, however, if we do change
it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at
1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust
Advisors).
March 2016
Page 34
This Page Left Blank Intentionally.
This Page Left Blank Intentionally.
FIRST TRUST
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
ADMINISTRATOR,
FUND ACCOUNTANT,
AND CUSTODIAN
The Bank of New York Mellon
101 Barclay Street, 20th Floor
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless
of whether these individuals are employed by the registrant or a third
party.
(c) There have been no amendments, during the period covered by this report,
to a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, and that relates to any element of the code of ethics
description.
(d) The registrant has not granted any waivers, including an implicit waiver,
from a provision of the code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or
a third party, that relates to one or more of the items set forth in
paragraph (b) of this item's instructions.
(e) Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
As of the end of the period covered by the report, the registrant's Board of
Trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as audit committee financial experts serving on its audit committee and
that each of them is "independent," as defined by Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES (REGISTRANT) -- The aggregate fees billed for each of the
last two fiscal years for professional services rendered by the principal
accountant for the audit of the registrant's annual financial statements or
services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements were $70,000 for 2016 and
$70,000 for 2017.
(b) AUDIT-RELATED FEES (REGISTRANT) -- The aggregate fees billed in each
of the last two fiscal years, for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under paragraph
(a) of this Item were $0 for 2016 and $92 for 2017.
AUDIT-RELATED FEES (INVESTMENT ADVISER) -- The aggregate fees billed in
each of the last two fiscal years of the registrant for assurance and related
services by the principal accountant that are reasonably related to the
performance of the audit of the Registrant's financial statements and are not
reported under paragraph (a) of this Item were $0 for 2016 and $0 for 2017.
(c) TAX FEES (REGISTRANT) -- The aggregate fees billed in each of the last
two fiscal years for professional services rendered by the principal accountant
for tax compliance, tax advice, and tax planning to the registrant were $5,200
for 2016 and $5,200 for 2017. These fees were for tax consultation and tax
preparation.
TAX FEES (INVESTMENT ADVISER) -- The aggregate fees billed in each of the
last two fiscal years of the registrant for professional services rendered by
the principal accountant for tax compliance, tax advice, and tax planning to the
registrant's adviser were $0 for 2016 and $0 for 2017.
(d) ALL OTHER FEES (REGISTRANT) -- The aggregate fees billed in each of
the last two fiscal years for products and services provided by the principal
accountant to the registrant, other than the services reported in paragraphs (a)
through (c) of this Item were $0 for 2016 and $0 for 2017.
ALL OTHER FEES (INVESTMENT ADVISER) -- The aggregate fees billed in each
of the last two fiscal years for products and services provided by the principal
accountant to the Registrant's investment adviser, other than services reported
in paragraphs (a) through (c) of this Item were $0 for 2016 and $0 for 2017.
(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval
Policy, the Audit Committee (the "Committee") is responsible for the
pre-approval of all audit services and permitted non-audit services (including
the fees and terms thereof) to be performed for the Registrant by its
independent auditors. The Chairman of the Committee is authorized to give such
pre-approvals on behalf of the Committee up to $25,000 and report any such
pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent
auditor's engagements for non-audit services with the Registrant's adviser (not
including a sub-adviser whose role is primarily portfolio management and is
sub-contracted or overseen by another investment adviser) and any entity
controlling, controlled by or under common control with the investment adviser
that provides ongoing services to the Registrant, if the engagement relates
directly to the operations and financial reporting of the Registrant, subject to
the de minimis exceptions for non-audit services described in Rule 2-01 of
Regulation S-X. If the independent auditor has provided non-audit services to
the Registrant's adviser (other than any sub-adviser whose role is primarily
portfolio management and is sub-contracted with or overseen by another
investment adviser) and any entity controlling, controlled by or under common
control with the investment adviser that provides ongoing services to the
Registrant that were not pre-approved pursuant to its policies, the Committee
will consider whether the provision of such non-audit services is compatible
with the auditor's independence.
(e)(2) The percentage of services described in each of paragraphs (b)
through (d) for the Registrant and the Registrant's investment adviser of this
Item that were approved by the audit committee pursuant to the pre-approval
exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X are as follows:
(b) 0%
(c) 0%
(d) 0%
(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most recent
fiscal year that were attributed to work performed by persons other than the
principal accountant's full-time, permanent employees was less than fifty
percent.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's investment
adviser (not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common control with the
adviser that provides ongoing services to the Registrant for the fiscal year
ended May 31, 2016 were $5,200 for the Registrant and $14,300 for the
Registrant's investment adviser and for the fiscal year ended May 31, 2017 were
$5,200 for the Registrant and $44,400 for the Registrant's investment adviser.
(h) The Registrant's audit committee of its Board of Trustees determined
that the provision of non-audit services that were rendered to the Registrant's
investment adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common control
with the investment adviser that provides ongoing services to the Registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of
Regulation S-X is compatible with maintaining the principal accountant's
independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) The registrant has a separately designated standing audit committee
consisting of all the independent trustees of the registrant. The members
of the audit committee are: Thomas R. Kadlec, Niel B. Nielson, Richard E.
Erickson and Robert F. Keith.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Proxy Voting Policies are attached herewith.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(A)(1) IDENTIFICATION OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS AND
DESCRIPTION OF ROLE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS
INFORMATION PROVIDED AS OF MAY 31, 2016
The First Trust Advisors Leveraged Finance Investment team manages a portfolio
comprised primarily of U.S. dollar denominated, senior secured floating-rate
loans. The Portfolio Managers are responsible for directing the investment
activities within the Fund. William Housey is the Senior Portfolio Manager and
has primary responsibility for investment decisions. Scott Fries assists Mr.
Housey and is also a Senior Credit Analyst assigned to certain industries. The
Portfolio Managers are supported in their portfolio management activities by the
First Trust Advisors Leveraged Finance investment staff, including a team of
credit analysts, a designated trader and operations personnel. Senior Credit
Analysts are assigned industries and Associate Credit Analysts support the
Senior Credit Analysts. All credit analysts, operations personnel and portfolio
managers report to Mr. Housey.
William Housey, CFA
Senior Vice President, Senior Portfolio Manager
Mr. Housey joined First Trust in June 2010 as the Senior Portfolio Manager for
the Leveraged Finance Investment Team and has 20 years of investment experience.
Mr. Housey is a Senior Vice President of First Trust. Prior to joining First
Trust, Mr. Housey was at Morgan Stanley/Van Kampen Funds, Inc. for 11 years and
served as Executive Director and Co-Portfolio Manager. Mr. Housey has extensive
experience in portfolio management of both leveraged and unleveraged credit
products, including bank loans, high yield bonds, credit derivatives and
corporate restructurings. Mr. Housey received a BS in Finance from Eastern
Illinois University and an MBA in Finance and Management and Strategy from
Northwestern University's Kellogg School of Business. He holds the FINRA Series
7, Series 52 and Series 63 licenses and the Chartered Financial Analyst
designation. He is a member of the CFA Institute and the CFA Society of Chicago.
Scott D. Fries, CFA
Vice President, Portfolio Manager
Mr. Fries, CFA, joined First Trust in June 2010 as a Portfolio Manager in the
Leveraged Finance Investment Team and has 22 years of investment industry
experience. Mr. Fries is a Senior Vice President of First Trust. Prior to
joining First Trust, Mr. Fries spent 15 years at Morgan Stanley/Van Kampen
Funds, Inc, where he most recently served as Executive Director and Co-Portfolio
Manager of Institutional Separately Managed Accounts. Mr. Fries received a BA in
International Business from Illinois Wesleyan University and an MBA in Finance
from DePaul University. Mr. Fries holds the Chartered Financial Analyst
designation. He is a member of the CFA Institute and the CFA Society of Chicago.
(A)(2) Other Accounts Managed by Portfolio Manager(s) or Management Team Member
and Potential Conflicts of Interest
INFORMATION PROVIDED AS OF MAY 31, 2016
Total Assets
# of Accounts for which
Name of Portfolio Total Managed for which Advisory Fee
Manager or Team # of Accounts Total Advisory Fee is Based is Based on
Member Type of Accounts Managed* Assets on Performance Performance
--------------------- ----------------- ------------- ------------ --------------------- ------------
1. William Housey, CFA Registered 7 $3.427B 0 $0
Investment
Companies:
Other Pooled 0 $0 0 $0
Investment
Vehicles:
Other Accounts: 0 $0 0 $0
2. Scott Fries, CFA Registered 7 $3.427B 0 $0
Investment
Companies:
Other Pooled 0 $0 0 $0
Investment
Vehicles:
Other Accounts: 0 $0 0 $0
* Information excludes the registrant.
POTENTIAL CONFLICTS OF INTERESTS
Potential conflicts of interest may arise when a portfolio manager of the
Registrant has day-to-day management responsibilities with respect to one or
more other funds or other accounts. The First Trust Leveraged Finance Team
adheres to its trade allocation policy utilizing a pro-rata methodology to
address this conflict.
First Trust and its affiliate, First Trust Portfolios L.P. ("FTP"), have in
place a joint Code of Ethics and Insider Trading Policies and Procedures that
are designed to (a) prevent First Trust personnel from trading securities based
upon material inside information in the possession of such personnel and (b)
ensure that First Trust personnel avoid actual or potential conflicts of
interest or abuse of their positions of trust and responsibility that could
occur through such activities as front running securities trades for the
Registrant. Personnel are required to have duplicate confirmations and account
statements delivered to First Trust and FTP compliance personnel who then
compare such trades to trading activity to detect any potential conflict
situations.
In addition to the personal trading restrictions specified in the Code of Ethics
and Insider Trading Policies and Procedures, employees in the Leveraged Finance
Team currently are prohibited from buying or selling equity securities
(including derivative instruments such as options, warrants and futures) and
corporate bonds for their personal account and in any accounts over which they
exercise control. Employees in the Leveraged Finance Team are also prohibited
from engaging in any personal transaction while in possession of material
non-public information regarding the security or the issuer of the security.
First Trust and FTP also maintain a restricted list of all issuers for which the
First Trust Advisors L.P. Leveraged Finance Team has material non-public
information in its possession and all transactions executed for a product
advised or supervised by First Trust or FTP are compared daily against the
restricted list.
(A)(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS
INFORMATION PROVIDED AS OF MAY 31, 2016
The compensation structure for the Leveraged Finance Investment Team of First
Trust is based upon a fixed salary as well as a discretionary bonus determined
by the management of First Trust.
Salaries are determined by management and are based upon an individual's
position and overall value to the firm. Bonuses are also determined by
management and are based upon an individual's overall contribution to the
success of the firm and the profitability of the firm. Salaries and bonuses for
members of the First Trust Advisors L.P. Leveraged Finance Team are not based
upon criteria such as performance of the Registrant and are not directly tied to
the value of assets of the Fund.
(A)(4) DISCLOSURE OF SECURITIES OWNERSHIP AS OF MAY 31, 2016
--------------------------------- --------------------------------------------------
Name of Portfolio Manager or Dollar ($) Range of Fund Shares Beneficially
Team Member Owned
----------- -----
--------------------------------- --------------------------------------------------
William Housey $10,001 - $50,000
--------------------------------- --------------------------------------------------
Scott Fries $0 (0 shares)
--------------------------------- --------------------------------------------------
(B) Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's Board of Trustees, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 of the Sarbanes- Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) First Trust Senior Floating Rate Income Fund II
----------------------------------------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: July 11, 2017
---------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: July 11, 2017
---------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: July 11, 2017
---------------
*Print the name and title of each signing officer under his or her signature.