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
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First Trust Senior Floating Rate Income Fund II
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(Exact name of registrant as specified in charter)
120 East Liberty Drive
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive
Wheaton, IL 60187
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(Name and address of agent for service)
registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: May 31
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Date of reporting period: November 30, 2015
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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, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
SEMI-ANNUAL
REPORT
FOR THE SIX MONTHS ENDED
NOVEMBER 30, 2015
FIRST TRUST
SENIOR FLOATING RATE
INCOME FUND II
(FCT)
FIRST TRUST
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TABLE OF CONTENTS
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FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
SEMI-ANNUAL REPORT
NOVEMBER 30, 2015
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
Additional Information...................................................... 27
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.
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SHAREHOLDER LETTER
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FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
NOVEMBER 30, 2015
Dear Shareholders:
Thank you for your investment in First Trust Senior Floating Rate Income Fund II
(the "Fund").
First Trust Advisors L.P. ("First Trust") is pleased to provide you with the
semi-annual report which contains detailed information about your investment for
the six months ended November 30, 2015, including a market overview and a
performance analysis for the period. We encourage you to read this report and
discuss it with your financial advisor.
U.S. markets, fueled by accelerating growth and an accommodating Federal
Reserve, enjoyed a prosperous year in 2014. However, most of 2015 has been
volatile. Economic and global factors, such as the continued conflict in the
Middle East, a sharp decline in oil prices and terrorism around the world, have
impacted U.S. and global markets. Another factor that has weighed upon U.S.
markets for most of the year is the fact that many economists had predicted that
the Federal Reserve would begin to raise interest rates in 2015, which has still
not happened as of November 30, 2015.
As I have written previously, First Trust believes investors should maintain
perspective about the markets and have realistic expectations about their
investments. Markets will always go up and down, but we believe that having a
long-term investment horizon and being invested in quality products can help you
reach your goals.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value the relationship and will continue to focus on our disciplined
investment approach and long-term perspective to help investors reach their
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 NOVEMBER 30, 2015 (UNAUDITED)
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FUND STATISTICS
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Symbol on New York Stock Exchange FCT
Common Share Price $12.42
Common Share Net Asset Value ("NAV") $13.77
Premium (Discount) to NAV (9.80)%
Net Assets Applicable to Common Shares $367,711,456
Current Monthly Distribution per Common Share (1) $0.0750
Current Annualized Distribution per Common Share$0.9000
Current Distribution Rate on Closing Common Share Price (2) 7.25%
Current Distribution Rate on NAV (2) 6.54%
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COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
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Common Share Price NAV
11/14 $13.11 $14.69
13.06 14.56
12.92 14.32
12.97 14.35
12/14 12.95 14.42
12.99 14.37
12.98 14.40
12.99 14.40
13.02 14.44
1/15 12.95 14.44
13.10 14.45
13.30 14.52
13.46 14.58
2/15 13.54 14.64
13.61 14.61
13.63 14.59
13.69 14.58
3/15 13.79 14.62
13.85 14.60
13.77 14.68
13.91 14.73
4/15 13.88 14.75
13.73 14.70
13.69 14.71
13.70 14.70
13.95 14.71
5/15 13.77 14.71
13.63 14.62
13.53 14.59
13.46 14.59
6/15 13.33 14.59
13.17 14.50
13.21 14.51
13.21 14.56
13.15 14.54
7/15 13.30 14.51
13.08 14.42
13.26 14.40
13.10 14.38
8/15 13.15 14.38
13.00 14.33
12.88 14.38
12.97 14.35
9/15 12.98 14.30
12.50 14.05
12.73 14.08
12.74 14.07
12.72 14.08
10/15 12.52 14.08
12.47 13.99
12.23 13.90
12.34 13.80
12.32 13.78
11/15 12.42 13.77
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PERFORMANCE
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Average Annual Total Return
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6 Months Ended 1 Year Ended 5 Years Ended 10 Years Ended Inception (5/25/2004)
11/30/2015 11/30/2015 11/30/2015 11/30/2015 11/30/2015
FUND PERFORMANCE (3)
NAV -3.09% 0.16% 5.54% 3.57% 3.78%
Market Value -6.63% 1.23% 4.57% 3.82% 2.44%
INDEX PERFORMANCE
S&P/LSTA Leveraged Loan Index -2.78% -0.89% 3.88% 4.48% 4.55%
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% OF TOTAL
SENIOR
FLOATING-RATE
LOAN INTERESTS AND
CORPORATE BONDS
CREDIT QUALITY (S&P RATINGS) (4) AND NOTES
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BBB 2.7%
BBB- 0.5
BB+ 2.0
BB 8.3
BB- 14.5
B+ 21.4
B 32.6
B- 9.2
CCC+ 4.0
CCC 1.9
CCC- 0.1
CC 0.1
NR 1.0
Privately rated securities (5) 1.7
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Total 100.0%
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% OF TOTAL
TOP 10 ISSUERS INVESTMENTS
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Portillo's Holdings LLC 2.7%
New HB Acquisition LLC 2.5
Albertsons LLC 2.3
BJ's Wholesale Club, Inc. 2.3
Caesars Growth Partners LLC 2.2
Amaya Holdings B.V. 2.1
BMC Software Finance, Inc. 2.1
Dell, Inc. 2.0
Numericable U.S. LLC (Altice
France S.A.) 2.0
Formula One (Delta 2 Lux S.A.R.L.) 1.9
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Total 22.1%
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% OF TOTAL
ASSET CLASSIFICATION INVESTMENTS
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Hotels, Restaurants & Leisure 12.5%
Health Care Providers & Services 9.1
Media 7.5
Software 5.9
Life Sciences Tools & Services 5.5
Food & Staples Retailing 4.5
Food Products 4.5
Pharmaceuticals 4.1
Diversified Telecommunication
Services 4.0
Insurance 3.8
Specialty Retail 3.6
Health Care Equipment & Supplies 3.2
Professional Services 2.7
Semiconductors & Semiconductor
Equipment 2.4
Diversified Consumer Services 2.2
Technology Hardware, Storage &
Peripherals 2.0
Diversified Financial Services 1.9
Road & Rail 1.8
Capital Markets 1.8
Health Care Technology 1.7
Commercial Services & Supplies 1.7
Real Estate Management &
Development 1.7
Containers & Packaging 1.5
IT Services 1.4
Chemicals 1.3
Aerospace & Defense 1.3
Real Estate Investment
Trusts (REITs) 1.0
Consumer Finance 0.9
Auto Components 0.9
Independent Power and Renewable
Electricity Producers 0.6
Building Products 0.6
Electronic Equipment & Instruments 0.5
Diversified Business Services 0.4
Oil, Gas & Consumable Fuels 0.4
Electric Utilities 0.4
Machinery 0.2
Beverages 0.2
Household Products 0.2
Construction Materials 0.1
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Total 100.0%
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(1) Most recent distribution paid or declared through November 30, 2015.
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 November 30, 2015. 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) Represents Senior Loans privately rated upon issuance. The rating agency
does not provide ongoing surveillance on the rating.
Page 2
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PORTFOLIO COMMENTARY (UNAUDITED)
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FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
SEMI-ANNUAL REPORT
NOVEMBER 30, 2015
INVESTMENT MANAGER
First Trust Advisors L.P. ("First Trust") was established in 1991 and is located
in Wheaton, Illinois. First Trust is a registered investment advisor which
offers customized portfolio management using its structured, quantitative
approach to security selection. As of November 30, 2015, First Trust managed or
supervised $113.48 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 11 experienced investment professionals specializing in below
investment grade securities. The team is comprised of portfolio management,
research, trading and operations. As of November 30, 2015, the First Trust
Leveraged Finance Investment Team managed or supervised approximately $1.79
billion in senior secured bank loans and high-yield bonds. These assets are
managed across various strategies, including a closed-end fund, an open-end
fund, four exchange-traded funds and a unit investment trust 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
FCT PORTFOLIO COMMENTARY FOR THE SIX-MONTH PERIOD ENDED NOVEMBER 30, 2015
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 investing primarily in a portfolio of senior 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 six months were generally soft for the senior loan and high-yield
markets, driven by the continued weakness in energy prices. The S&P/LSTA
Leveraged Loan Index (the "Index") generated negative returns for each of the
prior six months and returned -2.78% for the period. From a credit quality
perspective, higher credit-rated issues provided the strongest performance
during the period. Lower quality CCC-rated issues returned -9.28% in the period,
underperforming B-rated issues' -2.87% return and higher quality BB-rated
issues' -0.68% return. The average price of loans in the market began the period
at a peak price of $97.39 and ended the period at $92.63. (Source: S&P/LCD)
CREDIT QUALITY/DEFAULT RATES
The default rate of the Index entered the period at 1.26% and ended the period
at a six-month high of 1.47%, which is still well below the long-term average
for the asset class. The uptick in the corporate default rate was largely driven
by increased defaults in the energy, metals & mining sectors.
Despite the strength of corporate balance sheets today, the lack of near-term
debt maturities, and access to robust capital markets, we believe the default
rates for both senior loans and high-yield bonds could drift higher in 2016,
driven by lower commodity prices, principally oil, gas, coal and iron ore.
However, we believe that increasing corporate defaults will likely be contained
within these cyclical commodity sectors and not systemic to the overall market.
PERFORMANCE ANALYSIS
The Fund slightly underperformed the Index on a net asset value ("NAV") basis
for the six-month period ending November 30, 2015. The Fund generated an NAV
return of -3.09% and a market price return of -6.63%. The Fund's market price
return was impacted by the Fund's discount to NAV widening over the six-month
period. This discount widening was not specific to the Fund, but something seen
broadly across the closed-end fund market. At the start of the period, the
Fund's market price was at a 6.39% discount to NAV, and moved to a 9.80%
discount to NAV by the end of the period.
From an income perspective, the monthly announced distribution rate began the
period at $0.075 per share and remained unchanged at the end of the period. At
the $0.075 per share monthly distribution rate, the annualized distribution rate
as of November 30, 2015 was 6.54% at NAV and 7.25% at market price.
Page 3
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PORTFOLIO COMMENTARY (UNAUDITED) (CONTINUED)
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FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
SEMI-ANNUAL REPORT
NOVEMBER 30, 2015
Contributing to the Fund's underperformance relative to the S&P/LSTA Leveraged
Loan Index over the period was the Fund's use of leverage. Leverage as of
November 30, 2015 was approximately 29.1% of Managed Assets. Contributing
positively to returns relative to the Index in the period was the Fund's
underweight positions in the Oil, Gas & Consumable Fuels and Metals & Mining
sectors, as the sectors returned approximately -24% and -20%, respectively.
MARKET AND FUND OUTLOOK
While the turmoil in financial markets caused a great deal of concern recently,
we believe firmly that this is a correction rather than the beginning of a
recession in the U.S. However, we believe during the remainder of the fourth
quarter, there remains a healthy probability that this correction is not yet
over and we may indeed see further volatility. Prior to this recent bout of
volatility, the last time U.S. equities declined over 10% (as they did this
August) was in 2011. Such a prolonged period of relative stability can sometimes
lead to financial market complacency. Corrections are largely technical in
nature (rather than fundamental) and can reprice risk, akin to throwing the baby
out with the bath water, thereby creating potential opportunities. As such, we
view this current correction as a healthy opportunity for patient investors
willing to wait for fundamentals to drive returns again. Our outlook for U.S.
credit markets including senior bank loans and high-yield bonds is consistent
with our prior outlook. We believe the combination of strong technical tailwinds
created by global central bank policy, attractive valuations within the credit
markets, a below trend default rate environment, modest but healthy economic
growth and sound corporate fundamentals provide a firm backdrop for potential
returns in the periods ahead. We continue to believe that steadily improving
economic data (GDP growth of approximately 2.0%-2.5% and the improved
unemployment picture) will provide the Federal Reserve the motivation they
require to begin the process of raising interest rates in the near-term.
We believe today's high-yield bond yields (Yield-to-Worst) and spreads over U.S.
Treasuries remain attractive at 8.14%, and 640 basis points (bps), respectively,
as of November 30, 2015. While weak pricing in energy (oil & gas) and
metals/mining commodities (coal & iron ore) may lead to higher defaults within
the high-yield bond market, we believe those defaults will likely be contained
within those specific sectors, and hence, not necessarily systemic to other
areas of the market. We have maintained a significant underweight position in
energy and metals/mining, which has proven beneficial in the wake of the
commodity price declines. Importantly, energy-induced volatility is likely to
weigh on the high-yield bond benchmark, which we believe further supports the
rationale for active, rather than passive, decision making within the high-yield
credit market.
Retail investors have been reducing exposure to senior loans in the wake of
declining Treasury yields, while institutional investors have simultaneously
embraced senior loans. We believe that with a potential increase in the Federal
Funds rate on the horizon, we'll likely begin to see greater demand for senior
loans in the coming months from retail investors. Based on current valuations,
we believe senior loans, given their senior secured position in the capital
structure and floating interest rate, are well positioned as we move through the
remainder of 2015 and into 2016. The respite in retail demand has helped to
somewhat balance supply and demand within the senior loan market, given reduced
new senior loan issuance that resulted from new regulatory constraints that have
been placed on banks issuing senior loans. Moreover, as high-yield bond funds
suffered redemptions throughout the last few months, we believe they were
selling some of their senior loan positions, given how well loans held up
relative to the broad high-yield market. This supply has also supported a
balanced market.
In summary, we believe that both the high-yield bond and senior loan markets
offer compelling opportunities today, principally within an actively managed
framework where risk can be appropriately managed. As we evaluate new investment
opportunities, decisions will continue to be rooted in our rigorous bottom-up
credit analysis and will 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)
NOVEMBER 30, 2015 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS - 135.6%
AEROSPACE & DEFENSE - 1.8%
$ 1,889,148 DynCorp International, Inc., Term Loan.......................... 6.25% 07/07/16 $ 1,791,535
2,864,038 Transdigm, Inc., Term Loan C.................................... 3.75% 02/28/20 2,790,060
790,000 Transdigm, Inc., Tranche D Term Loan............................ 3.75% 06/04/21 769,065
1,481,818 Wencor Group LLC (Jazz Acquisition, Inc.), Term Loan
(First Lien)................................................. 4.50% 06/19/21 1,393,843
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6,744,503
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AGRICULTURAL PRODUCTS - 1.0%
3,841,768 Jimmy Sanders, Inc. (Pinnacle Operating Corp.), Term B Loan
Refinancing (First Lien)..................................... 4.75% 11/15/18 3,688,098
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ALTERNATIVE CARRIERS - 1.3%
1,480,000 Intelsat (Luxembourg) S.A., Tranche B-2 Term Loan............... 3.75% 06/30/19 1,381,950
1,000,000 Level 3 Financing, Inc., Tranche B 2020 Term Loan............... 4.00% 01/15/20 998,250
2,250,000 Level 3 Financing, Inc., Tranche B-II 2022 Term Loan............ 3.50% 05/31/22 2,226,375
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4,606,575
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APPAREL RETAIL - 0.8%
987,500 J.C. Penney Corp., Inc., Term Loan.............................. 5.00% 06/20/19 981,743
2,219,991 Neiman Marcus Group, Inc., The, Other Term Loan................. 4.25% 10/25/20 2,073,383
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3,055,126
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APPLICATION SOFTWARE - 3.1%
2,992,500 Epicor Software Corp., Term B Loan.............................. 4.75% 06/01/22 2,934,266
3,361,055 Infor (US), Inc., Tranche B-5 Term Loan......................... 3.75% 06/03/20 3,199,590
2,743,590 Informatica Corp. (Italic Merger Sub., Inc.), Dollar Term
Loan......................................................... 4.50% 08/05/22 2,663,724
1,622,674 Mitchell International, Inc., Initial Term Loan................. 4.50% 10/13/20 1,587,187
1,369,257 Triple Point Technologies, Inc., Term Loan B.................... 5.25% 07/10/20 924,248
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11,309,015
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ASSET MANAGEMENT & CUSTODY BANKS - 2.5%
798,000 American Beacon Advisors, Inc., Term Loan B..................... 5.50% 03/15/22 794,010
1,323,000 Guggenheim Partners Investment Management Holdings LLC,
Initial Term Loan............................................ 4.25% 07/22/20 1,315,975
1,500,000 Hamilton Lane Advisors LLC, Initial Term Loan................... 4.25% 07/08/22 1,498,125
929,816 Mondrian Investment Partners Ltd. (MIPL Group Ltd.),
Term Loan B.................................................. 4.00% 03/05/20 917,030
4,750,000 Victory Capital Holdings (VCH Holdings LLC), Initial Term
Loan......................................................... 7.00% 10/29/21 4,512,500
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9,037,640
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AUTO PARTS & EQUIPMENT - 1.0%
598,739 Affinia Group, Inc., Tranche B-2 Term Loan...................... 4.75% 04/27/20 595,746
888,750 Cooper Standard Holdings (CS Intermediate Holdco 2 LLC),
Term Loan.................................................... 4.00% 04/04/21 879,676
878,393 Gates Global LLC, Initial Dollar Term Loan...................... 4.25% 07/06/21 819,470
1,445,720 Tower Automotive Holdings USA LLC, Initial Term Loan (2014)..... 4.00% 04/23/20 1,418,613
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3,713,505
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BROADCASTING - 4.2%
4,986,742 Clear Channel Communications, Inc., Tranche D Term Loan......... 6.98% 01/30/19 3,597,386
1,750,000 Clear Channel Communications, Inc., Tranche E Term Loan......... 7.73% 07/30/19 1,263,500
2,798,370 Cumulus Media Holdings, Inc., Term Loan......................... 4.25% 12/23/20 2,046,308
1,993,063 Media General, Inc., Term Loan B................................ 4.00% 07/31/20 1,978,115
1,055,565 Mission Broadcasting, Inc. (Nexstar Broadcasting Group, Inc.),
Term B-2 Loan................................................ 3.75% 10/01/20 1,047,648
See Notes to Financial Statements Page 5
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
NOVEMBER 30, 2015 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
BROADCASTING (CONTINUED)
$ 1,197,027 Nexstar Broadcasting Group, Inc. (Mission Broadcasting, Inc.),
Term Loan B-2................................................ 3.75% 09/30/20 $ 1,188,050
753,405 Tribune Co., Term B Loan........................................ 3.75% 12/27/20 748,696
974,625 Univision Communications, Inc., 2013 Incremental Term Loan...... 4.00% 03/01/20 957,813
2,789,055 Univision Communications, Inc., Replacement First-Lien
Term Loan.................................................... 4.00% 03/01/20 2,743,732
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15,571,248
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BUILDING PRODUCTS - 0.8%
423,214 Hillman Group, Inc., The, Initial Term Loan..................... 4.50% 06/30/21 411,576
1,310,160 Quikrete Holdings, Inc., Initial Loan (First Lien).............. 4.00% 09/28/20 1,301,317
1,294,737 Quikrete Holdings, Inc., Initial Loan (Second Lien)............. 7.00% 03/26/21 1,293,118
-------------
3,006,011
-------------
CABLE & SATELLITE - 1.6%
3,271,739 Charter Communications Operating LLC, Bridge Loan -
Unsecured 1yr (d) (e)........................................ 3.75% 05/21/16 3,251,291
2,500,000 CSC Holdings, Inc. (Neptune Finco Corp.), Initial Term Loan..... 4.00% 10/09/22 2,491,075
-------------
5,742,366
-------------
CASINOS & GAMING - 6.8%
721,875 Amaya Holdings B.V., 2nd Lien TL................................ 8.00% 07/31/22 712,852
10,776,352 Amaya Holdings B.V., Initial Term B Loan (First Lien)........... 5.00% 08/01/21 10,315,016
8,037,886 Caesars Growth Partners LLC, Term B Loan (First Lien)........... 6.25% 05/08/21 7,173,813
2,883,477 CityCenter Holdings LLC, Term B Loan............................ 4.25% 10/16/20 2,862,572
1,744,554 ROC Finance LLC, Funded Term B Loan............................. 5.00% 06/20/19 1,637,159
2,413,663 Station Casinos, Inc., B Term Loan.............................. 4.25% 03/02/20 2,393,750
-------------
25,095,162
-------------
COAL & CONSUMABLE FUELS - 0.4%
2,674,703 Arch Coal, Inc., Term Loan...................................... 6.25% 05/16/18 1,300,574
-------------
COMMERCIAL PRINTING - 0.3%
1,229,351 Southern Graphic, Inc., Term Loan............................... 4.25% 10/17/19 1,213,468
-------------
COMPUTER HARDWARE - 2.8%
10,414,488 Dell, Inc., Term B-2 Loan....................................... 4.00% 04/29/20 10,353,146
-------------
CONSTRUCTION MATERIALS - 0.2%
648,375 Summit Materials, Inc., Restatement Effective Date Term Loans... 4.25% 07/15/22 641,353
-------------
CONSUMER FINANCE - 1.3%
2,541,103 Altisource Solutions S.A.R.L., Term B Loan...................... 4.50% 12/09/20 2,242,523
3,064,626 Walter Investment Management Corp., Tranche B Term Loan......... 4.75% 12/18/20 2,649,002
-------------
4,891,525
-------------
DATA PROCESSING & OUTSOURCED SERVICES - 1.9%
2,772,299 Harland Clarke Holdings Corp., Tranche B-2 Term Loan............ 5.58% 06/30/17 2,730,715
3,703,125 Interactive Data Corp., Term Loan............................... 4.75% 05/02/21 3,694,238
882,683 Sungard Availability Services Capital, Inc., Term Loan B........ 6.00% 03/29/19 751,163
-------------
7,176,116
-------------
DISTILLERS & VINTNERS - 0.3%
987,500 Winebow Holdings, Inc., Loan (First Lien)....................... 4.75% 07/01/21 948,000
-------------
DIVERSIFIED CHEMICALS - 0.1%
397,999 Ineos US Finance LLC, 2022 Dollar Term Loan..................... 4.25% 03/31/22 389,542
-------------
Page 6 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
NOVEMBER 30, 2015 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
DIVERSIFIED SUPPORT SERVICES - 0.5%
$ 1,983,389 SMG Holdings, Inc., Term Loan B................................. 4.50% 02/27/20 $ 1,961,076
-------------
EDUCATION SERVICES - 0.1%
248,750 Bright Horizons Family Solutions, Inc., Term B-1 Loan........... 3.25%-4.50% 01/30/20 248,907
-------------
ELECTRIC UTILITIES - 0.6%
4,241,410 TXU (Texas Competitive Electric Holdings Co. LLC), 2014 Term
Loan (Non-Extending) (f) (g)................................. 4.68% 10/10/14 1,373,920
2,250,000 TXU (Texas Competitive Electric Holdings Co. LLC), 2017 Term
Loan (Extending) (f) (g)..................................... 4.68% 10/10/17 762,750
-------------
2,136,670
-------------
ELECTRONIC EQUIPMENT & INSTRUMENTS - 0.7%
500,000 Linxens LLC (Lully Finance LLC), Initial Term B-1 Loan
(First Lien)................................................. 5.00% 10/17/22 492,190
2,003,409 Zebra Technologies Corp., Term Loan B........................... 4.75% 10/27/21 2,005,012
-------------
2,497,202
-------------
ENVIRONMENTAL & FACILITIES SERVICES - 1.0%
496,250 PSSI (Packers Holdings LLC), Term B Loan........................ 5.00% 12/02/21 493,769
1,685,487 ServiceMaster Co., Initial Term Loan............................ 4.25% 07/01/21 1,673,756
1,572,000 WTG Holdings III Corp. (EWT Holdings III Corp.), Term Loan
(First Lien)................................................. 4.75% 01/15/21 1,554,315
-------------
3,721,840
-------------
FOOD RETAIL - 3.2%
11,888,299 Albertsons LLC, Term B-4 Loan................................... 5.50% 08/25/21 11,864,523
-------------
HEALTH CARE EQUIPMENT - 2.8%
1,358,639 Alere, Inc., Term B Loan........................................ 4.25% 06/15/22 1,340,298
3,291,750 DJO Finance LLC (ReAble Therapeutics Finance LLC), Initial
Term Loan.................................................... 4.25% 06/08/20 3,212,188
6,032,202 Kinetic Concepts, Inc., Dollar Term E-1 Loan.................... 4.50% 05/04/18 5,867,825
-------------
10,420,311
-------------
HEALTH CARE FACILITIES - 2.6%
5,120,500 21st Century Oncology, Inc., Tranche B Term Loan................ 6.50% 04/30/22 4,288,419
1,095,172 Acadia Healthcare Co., Inc., Tranche B Term Loan................ 4.25% 02/11/22 1,097,001
2,401,637 CHS/Community Health Systems, Inc., Incremental 2021
Term H Loan.................................................. 4.00% 01/27/21 2,359,272
1,371,563 Concentra, Inc. (MJ Acquisition Corp.), Term Loan B............. 4.00%-5.25% 05/15/22 1,352,703
396,985 Kindred Healthcare, Inc., New Term Loan......................... 4.25% 04/09/21 377,136
-------------
9,474,531
-------------
HEALTH CARE SERVICES - 8.6%
3,491,250 Air Medical Group Holdings, Inc., Initial Term Loan............. 4.50% 04/28/22 3,411,824
4,037,397 CareCore National LLC, Term Loan................................ 5.50% 03/05/21 3,552,910
397,923 CHG Healthcare Services, Inc., Term Loan (First Lien)........... 4.25% 11/19/19 392,329
3,233,750 Curo Health Services Holdings, Inc., Term B Loan (First Lien)... 6.50% 02/07/22 3,219,619
4,144,736 Envision Healthcare Corp. (Emergency Medical Services Corp.),
Initial Term Loan............................................ 4.25% 05/25/18 4,133,504
250,000 Envision Healthcare Corp. (Emergency Medical Services Corp.),
Tranche B-2 Term Loan........................................ 4.50% 10/28/22 248,515
4,706,222 Healogics, Inc. (CDRH Parent, Inc.), Initial Term Loan
(First Lien)................................................. 5.25% 07/01/21 3,670,853
See Notes to Financial Statements Page 7
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
NOVEMBER 30, 2015 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
HEALTH CARE SERVICES (CONTINUED)
$ 1,896,720 Heartland Dental Care LLC, Incremental Term Loan................ 5.50% 12/21/18 $ 1,839,818
2,730,466 National Veterinary Associates (NVA Holdings, Inc.), Term Loan
(First Lien)................................................. 4.75% 08/14/21 2,722,493
1,493,737 Surgery Centers Holdings, Inc., Initial Term Loan (First Lien).. 5.25% 11/03/20 1,480,667
995,000 Surgical Care Affiliates LLC, Initial Term Loan................. 4.25% 03/17/22 987,537
1,767,241 Team Health, Inc., Term Loan B.................................. 4.50% 11/17/22 1,753,987
4,312,500 U.S. Renal Care, Inc., Term Loan B.............................. 5.25% 11/17/22 4,280,156
-------------
31,694,212
-------------
HEALTH CARE SUPPLIES - 1.3%
1,978,704 BSN Medical Luxembourg Holding S.A.R.L., Facility B1B........... 4.00% 08/28/19 1,968,810
458,311 ConvaTec, Inc., TLB............................................. 4.25% 06/30/20 451,816
2,201,440 Sage Products Holdings III LLC, Term Loan B..................... 4.25% 12/13/19 2,183,565
-------------
4,604,191
-------------
HEALTH CARE TECHNOLOGY - 2.4%
2,428,703 Connolly Holdings, Inc. (Cotiviti Corp.), Term Loan B........... 4.50% 05/14/21 2,391,252
1,246,048 Healthport Technologies LLC (CT Technologies Intermediate
Holdings, Inc.), Initial Term Loan........................... 5.25% 12/01/21 1,225,276
575,097 MedAssets, Inc., Term B Loan.................................... 4.00% 12/13/19 570,784
4,892,578 Truven Health Analytics, Inc. (VCPH Holding Corp.),
Term Loan B.................................................. 4.50% 05/31/19 4,782,495
-------------
8,969,807
-------------
HOMEFURNISHING RETAIL - 0.6%
2,125,511 Serta Simmons Holdings LLC, Term Loan B......................... 4.25% 10/01/19 2,111,568
-------------
HOTELS, RESORTS & CRUISE LINES - 1.3%
2,181,084 Extended Stay America (ESH Hospitality, Inc.), Term Loan........ 5.00% 06/24/19 2,189,263
665,540 La Quinta Intermediate Holdings LLC, Initial Term Loan.......... 3.75% 04/14/21 652,649
1,985,000 Norwegian Cruise Lines (NCL Corp.), Term B Loan................. 4.00% 11/19/21 1,975,909
-------------
4,817,821
-------------
HOUSEHOLD PRODUCTS - 0.2%
846,155 Spectrum Brands, Inc., USD Term Loan............................ 3.75%-5.25% 06/23/22 844,514
-------------
HYPERMARKETS & SUPER CENTERS - 3.2%
2,500,000 BJ's Wholesale Club, Inc., 2013 (November) Replacement Loan
(Second Lien)................................................ 8.50% 03/26/20 2,385,425
9,459,236 BJ's Wholesale Club, Inc., New 2013 (November) Replacement
Loan (First Lien)............................................ 4.50% 09/26/19 9,258,227
-------------
11,643,652
-------------
INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.9%
1,358,000 Calpine Corp., Term Loan........................................ 4.00% 10/09/19 1,347,530
1,995,000 Calpine Corp., Term Loan........................................ 3.50% 05/27/22 1,940,457
-------------
3,287,987
-------------
INDUSTRIAL MACHINERY - 0.3%
1,191,000 Douglas Dynamics LLC, Term Loan B............................... 5.25% 12/02/21 1,182,067
-------------
INSURANCE BROKERS - 5.0%
3,282,911 Amwins Group LLC, TLB........................................... 5.25% 09/06/19 3,285,373
3,903,405 Confie Seguros Holding II Co., Term B Loan (First Lien)......... 5.75% 11/09/18 3,903,405
1,177,750 Cooper Gay Swett & Crawford Ltd., Term Loan (First Lien)........ 5.00% 04/16/20 1,125,729
Page 8 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
NOVEMBER 30, 2015 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
INSURANCE BROKERS (CONTINUED)
$ 2,554,105 HUB International Ltd., Initial Term Loan (New)................. 4.00% 10/02/20 $ 2,472,169
398,000 Hyperion Finance S.A.R.L., Initial Term Loan.................... 5.50% 04/29/22 396,010
2,644,750 National Financial Partners Corp., 2014 Specified Refinancing
Term Loan.................................................... 4.50% 07/01/20 2,587,597
4,814,617 USI, Inc. (Compass Investors, Inc.), Initial Term Loan.......... 4.25% 12/27/19 4,706,289
-------------
18,476,572
-------------
INTEGRATED TELECOMMUNICATION SERVICES - 4.1%
2,940,000 Cincinnati Bell, Inc., Tranche B Term Loan...................... 4.00% 09/10/20 2,899,575
1,940,392 Hawaiian Telcom Communications, Inc., Term Loan................. 5.00% 06/06/19 1,924,229
4,076,855 Numericable U.S. LLC (Altice France S.A.), Dollar Denominated
Tranche B-1 Loan............................................. 4.50% 05/21/20 3,987,694
3,527,035 Numericable U.S. LLC (Altice France S.A.), Dollar Denominated
Tranche B-2 Loan............................................. 4.50% 05/21/20 3,449,899
2,800,000 Numericable U.S. LLC (Altice France S.A.), USD TLB-6............ 4.75% 02/10/23 2,738,764
-------------
15,000,161
-------------
LEISURE FACILITIES - 2.4%
5,563,303 ClubCorp Club Operations, Inc., Term B Loan..................... 4.25% 07/24/20 5,533,149
1,304,423 Life Time Fitness, Inc., Closing Date Term Loan................. 4.25% 06/10/22 1,272,634
1,930,901 Planet Fitness Holdings LLC, Term Loan.......................... 4.75% 03/31/21 1,906,765
-------------
8,712,548
-------------
LIFE SCIENCES TOOLS & SERVICES - 7.2%
5,367,671 Immucor, Inc., Term B-2 Loan.................................... 5.00% 08/19/18 5,166,383
529,164 InVentiv Health, Inc., Term B-3 Loan............................ 7.75% 05/15/18 523,433
7,626,842 InVentiv Health, Inc., Term B-4 Loan............................ 7.75% 05/15/18 7,569,640
1,580,000 Millennium Laboratories LLC, Tranche B Term Loan (f) (g)........ 6.50% 04/16/21 632,000
7,585,758 Ortho-Clinical Diagnostics, Inc., Initial Term Loan............. 4.75% 06/30/21 7,111,648
3,241,875 Pharmaceutical Product Development, Inc., Initial Term Loan..... 4.25% 08/18/22 3,152,724
2,200,000 Sterigenics International (STHI Intermediate Holding Corp.),
Initial Term Loan............................................ 4.25% 05/16/22 2,161,500
-------------
26,317,328
-------------
MANAGED HEALTH CARE - 0.3%
1,179,545 MultiPlan, Inc. (MPH Acquisition Holdings LLC), Initial
Term Loan.................................................... 3.75% 03/31/21 1,145,928
-------------
METAL & GLASS CONTAINERS - 1.0%
481,720 Anchor Glass Container Corp., Term B Loan....................... 4.50% 06/30/22 479,312
394,000 Ardagh Holdings USA, Inc. (Ardagh Packaging Finance S.A.),
New Term Loan................................................ 4.00% 12/17/19 390,430
2,132,308 Berlin Packaging LLC, Initial Term Loan (First Lien)............ 4.50% 10/01/21 2,106,997
706,974 PODS, Inc. (APLPD Bidco LLC), Term Loan B....................... 4.50% 02/02/22 701,672
-------------
3,678,411
-------------
MOVIES & ENTERTAINMENT - 3.5%
1,191,000 Creative Artists Agency LLC (CAA Holdings LLC), Incremental
Term Loan.................................................... 5.50% 12/17/21 1,187,522
9,932,949 Formula One (Delta 2 Lux S.A.R.L.), Facility B3 (USD)........... 4.75% 07/30/21 9,662,872
1,968,517 WME IMG Worldwide, Inc., Term Loan (First Lien)................. 5.25% 05/06/21 1,951,292
-------------
12,801,686
-------------
See Notes to Financial Statements Page 9
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
NOVEMBER 30, 2015 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
OIL & GAS EXPLORATION & PRODUCTION - 0.1%
$ 1,000,000 American Energy Marcellus Holdings LLC, Initial Loan
(First Lien)................................................. 5.25% 08/04/20 $ 336,000
1,888,889 American Energy Marcellus Holdings LLC, Initial Loan
(Second Lien)................................................ 8.50% 08/04/21 50,377
-------------
386,377
-------------
OIL & GAS STORAGE & TRANSPORTATION - 0.1%
1,000,000 Fieldwood Energy LLC, Closing Date Loan (Second Lien)........... 8.38% 09/30/20 294,170
-------------
OTHER DIVERSIFIED FINANCIAL SERVICES - 2.0%
4,683,538 First Data Corp., 2021 New Dollar Term Loan..................... 4.21% 03/24/21 4,664,523
2,780,000 iPayment, Inc., Term Loan....................................... 6.75% 05/08/17 2,701,242
-------------
7,365,765
-------------
PACKAGED FOODS & MEATS - 5.3%
800,000 B&G Foods, Inc., Tranche B Term Loan............................ 3.75% 11/02/22 798,200
4,043,524 Ferrara Candy Co. (Candy Intermediate Holdings, Inc.), Initial
Term Loan.................................................... 7.50% 06/18/18 4,033,415
1,851,563 Hearthside Food Solutions LLC, Term Loan........................ 4.50% 06/02/21 1,820,327
9,523,810 New HB Acquisition LLC, Term B Loan (First Lien)................ 4.50% 08/03/22 9,472,190
3,348,315 New HB Acquisition LLC, Term B Loan (Second Lien)............... 8.50% 08/03/23 3,327,388
-------------
19,451,520
-------------
PAPER PACKAGING - 1.1%
3,898,686 Reynolds Group Holdings, Inc., Incremental U.S. Term Loan....... 4.50% 12/01/18 3,879,192
-------------
PHARMACEUTICALS - 5.6%
2,092,500 Akorn, Inc., Loan............................................... 5.50% 04/16/21 2,000,953
833,333 AMAG Pharmaceuticals, Inc., Initial Term Loan................... 4.75% 08/17/21 783,333
2,969,165 Amneal Pharmaceuticals LLC, Term Loan B......................... 4.50% 11/01/19 2,909,781
2,304,171 Catalent Pharma Solutions, Inc., Dollar Term Loan............... 4.25% 05/20/21 2,277,419
4,066,667 Concordia Healthcare Corp., Initial Dollar Term Loan............ 5.25% 10/21/21 3,871,467
2,400,000 Endo Pharmaceuticals Holdings, Inc., 2015 Incremental Term B
Loan......................................................... 3.75% 06/27/22 2,358,000
1,037,400 Horizon Pharma, Inc., Term Loan B............................... 4.50% 04/30/21 910,319
1,382,500 Patheon, Inc. (JLL/Delta Dutch Newco B.V.), Initial Dollar
Term Loan.................................................... 4.25% 03/11/21 1,336,712
511,676 Valeant Pharmaceuticals International, Inc.,
Series C-2 Tranche B Term Loan............................... 3.75% 12/11/19 482,040
2,927,875 Valeant Pharmaceuticals International, Inc.,
Series F-1 Tranche B Term Loan............................... 4.00% 04/01/22 2,760,254
1,040,921 Valeant Pharmaceuticals International, Inc., Term Loan BD....... 3.50% 02/13/19 979,766
-------------
20,670,044
-------------
PROPERTY & CASUALTY INSURANCE - 0.9%
194,886 Cunningham Lindsey U.S., Inc., Initial Loan (Second Lien) (e)... 9.25% 06/10/20 125,702
2,824,315 Cunningham Lindsey U.S., Inc., Initial Term Loan (First
Lien) (e).................................................... 5.00% 12/10/19 2,202,965
1,200,000 Sedgwick Claims Management Services, Inc., Initial Loan
(Second Lien)................................................ 6.75% 02/28/22 1,101,996
-------------
3,430,663
-------------
Page 10 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
NOVEMBER 30, 2015 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
PUBLISHING - 0.7%
$ 2,020,165 Cengage Learning Acquisitions, Inc., Term Loan.................. 7.00% 03/15/20 $ 1,986,711
770,000 Mergermarket USA, Inc., 2014 Incremental Term Loan.............. 4.50% 02/04/21 744,975
-------------
2,731,686
-------------
REAL ESTATE SERVICES - 2.3%
8,678,250 DTZ Worldwide LTD., 2015-1 Additional Term Loan................. 4.25% 11/04/21 8,515,533
-------------
RESEARCH & CONSULTING SERVICES - 3.8%
3,088,878 Acosta, Inc., Term Loan B....................................... 4.25% 09/26/21 2,952,442
5,859,158 Advantage Sales & Marketing, Inc.,
Initial Term Loan (First Lien)............................... 4.25% 07/23/21 5,664,693
1,796,901 Information Resources, Inc., Term Loan.......................... 4.75% 09/30/20 1,796,146
3,619,875 TransUnion LLC, 2015 Term B-2 Loan.............................. 3.75% 04/09/21 3,523,949
-------------
13,937,230
-------------
RESTAURANTS - 6.0%
1,435,786 Burger King Corp., Term B-2 Loan................................ 3.75% 12/10/21 1,426,554
3,953,228 Focus Brands, Inc., Refinancing Term Loan (First Lien).......... 4.25% 02/21/18 3,938,404
1,450,000 Focus Brands, Inc., Term Loan (Second Lien)..................... 10.25% 08/21/18 1,446,375
7,591,454 Portillo's Holdings LLC, Second Lien Term Loan.................. 8.00% 08/15/22 7,211,881
7,029,585 Portillo's Holdings LLC, Term B Loan (First Lien)............... 4.75% 08/02/21 6,783,550
1,272,857 Red Lobster Management LLC, Initial Term Loan (First Lien)...... 6.25% 07/28/21 1,267,549
-------------
22,074,313
-------------
RETAIL REITS - 1.0%
1,050,000 Capital Automotive LLC, Term Loan (Second Lien)................. 6.00% 04/30/20 1,053,496
2,499,400 Capital Automotive LLC, Tranche B-1 Term Loan Facility.......... 4.00% 04/10/19 2,495,226
-------------
3,548,722
-------------
SECURITY & ALARM SERVICES - 0.2%
179,667 Garda World Security Corp., Term B Delayed Draw Loan............ 4.00%-5.25% 11/08/20 174,052
702,333 Garda World Security Corp., Term Loan B......................... 4.00%-5.25% 11/08/20 680,386
-------------
854,438
-------------
SEMICONDUCTORS - 3.4%
4,000,000 Avago Technologies Cayman Ltd., 2022 Tranche B Term Loan........ 4.25% 11/11/22 3,957,000
5,265,709 Freescale Semiconductor, Inc., Tranche B-4 Term Loan............ 4.25% 02/28/20 5,255,862
1,470,000 Freescale Semiconductor, Inc., Tranche B5 Term Loan............. 5.00% 01/15/21 1,468,295
1,666,667 NXP B.V., Term Loan B........................................... 3.75% 11/30/20 1,656,250
-------------
12,337,407
-------------
SPECIALIZED CONSUMER SERVICES - 2.7%
4,268,550 Asurion LLC, Incremental Tranche B-1 Term Loan.................. 5.00% 05/24/19 4,017,773
4,709,883 Asurion LLC, Incremental Tranche B-4 Term Loan.................. 5.00% 08/04/22 4,349,577
1,058,824 Asurion LLC, Term Loan (Second Lien)............................ 8.50% 03/03/21 931,235
660,321 Expert Global Solutions, Inc. (NCO Group, Inc.), Term B Advance
(First Lien)................................................. 8.50% 04/03/18 654,266
-------------
9,952,851
-------------
SPECIALIZED FINANCE - 1.0%
1,300,000 AlixPartners LLP, Initial Term Loan............................. 4.50% 07/15/22 1,289,444
2,275,525 Duff & Phelps Corp., Initial Term Loan.......................... 4.75% 04/23/20 2,238,548
-------------
3,527,992
-------------
SPECIALIZED REITS - 0.4%
1,745,625 Communication Sales & Leasing, Inc., Term Loan.................. 5.00% 10/24/22 1,610,339
-------------
See Notes to Financial Statements Page 11
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
NOVEMBER 30, 2015 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
SPECIALTY CHEMICALS - 1.6%
$ 990,000 Emerald Performance Materials LLC,
Initial Term Loan (First Lien)............................... 4.50% 07/30/21 $ 981,090
1,808,341 NuSil Technology LLC, Term Loan................................. 5.25% 04/07/17 1,787,545
984,456 Omnova Solutions, Inc., Term B-1 Loan........................... 4.25% 05/31/18 980,764
1,583,136 Platform Specialty Products Corp. (fka: Macdermid, Inc.),
Tranche B-2 Term Loan........................................ 4.75% 06/07/20 1,534,328
532,000 Trinseo Materials Operating S.C.A., Term Loan B................. 4.25% 10/13/21 524,020
-------------
5,807,747
-------------
SPECIALTY STORES - 3.7%
1,000,000 Party City Holdings, Inc., Term Loan............................ 4.25% 08/06/22 975,250
8,694,769 PetSmart, Inc., Tranche B-1 Loan................................ 4.25% 03/11/22 8,530,960
1,116,071 Toys "R" US-Delaware, Inc., Canadian FILO TL.................... 8.25% 10/24/19 1,106,306
1,383,929 Toys "R" US-Delaware, Inc., FILO Term Loan...................... 8.25% 10/24/19 1,371,819
137,236 Toys "R" US-Delaware, Inc., Term B-2 Loan....................... 5.25% 05/25/18 111,847
2,027,180 Toys "R" US-Delaware, Inc., Term B4 Loan........................ 9.75% 04/25/20 1,544,042
-------------
13,640,224
-------------
SYSTEMS SOFTWARE - 5.2%
554,342 Applied Systems, Inc., Initial Term Loan (First Lien)........... 4.25% 01/25/21 544,225
539,155 Applied Systems, Inc., Initial Term Loan (Second Lien).......... 7.50% 01/24/22 516,915
1,500,000 Blue Coat Systems, Inc., Initial Term Loan...................... 4.50% 05/20/22 1,455,945
12,456,398 BMC Software Finance, Inc., Initial US Term Loan................ 5.00% 09/10/20 10,769,552
1,925,000 Compuware Corp., Term Loan B.................................... 6.25% 12/31/19 1,798,682
4,016,677 Vertafore, Inc., Term Loan 2013................................. 4.25% 10/03/19 4,003,302
-------------
19,088,621
-------------
TRUCKING - 2.5%
2,222,857 Hertz Corp., The, Tranche B-1 Term Loan......................... 3.75% 03/11/18 2,217,300
258,511 Kenan Advantage Group, Inc., Delayed Draw Term 1 Loan (h)....... 1.50%(i) 07/29/22 256,572
590,426 Kenan Advantage Group, Inc., Term Loan B-2...................... 4.00% 07/31/22 585,997
1,851,064 Kenan Advantage Group, Inc., Term Loan B1....................... 4.00% 07/31/22 1,837,181
2,000,000 Navistar, Inc., Term Loan B..................................... 6.50% 08/06/20 1,822,500
2,562,642 SIRVA Worldwide, Inc., Loan..................................... 7.50% 03/27/19 2,466,543
-------------
9,186,093
-------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS.................................................... 498,387,413
(Cost $525,734,044) -------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
CORPORATE BONDS AND NOTES - 5.2%
ALTERNATIVE CARRIERS - 0.4%
2,000,000 Intelsat Luxembourg S.A. (Luxembourg)........................... 6.75% 06/01/18 1,320,000
-------------
AUTO PARTS & EQUIPMENT - 0.2%
250,000 American Axle & Manufacturing, Inc.............................. 6.25% 03/15/21 262,188
500,000 MPG Holdco I, Inc............................................... 7.38% 10/15/22 527,500
-------------
789,688
-------------
CABLE & SATELLITE - 0.6%
2,000,000 CCO Holdings LLC/CCO Holdings Capital Corp...................... 5.75% 01/15/24 2,059,380
-------------
Page 12 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
NOVEMBER 30, 2015 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
------------ ---------------------------------------------------------------- ----------- ------------ -------------
CORPORATE BONDS AND NOTES (CONTINUED)
CASINOS & GAMING - 1.1%
$ 4,900,000 Caesars Growth Properties Holdings LLC/Caesars Growth
Properties Finance, Inc...................................... 9.38% 05/01/22 $ 4,067,000
-------------
HEALTH CARE EQUIPMENT - 0.5%
1,800,000 Kinetic Concepts, Inc./KCI USA, Inc............................. 12.50% 11/01/19 1,746,000
-------------
HEALTH CARE FACILITIES - 1.3%
350,000 CHS/Community Health Systems, Inc............................... 6.88% 02/01/22 340,375
1,000,000 Select Medical Corp............................................. 6.38% 06/01/21 812,500
800,000 Tenet Healthcare Corp........................................... 6.00% 10/01/20 854,000
1,000,000 Tenet Healthcare Corp........................................... 6.75% 06/15/23 938,750
2,250,000 Vantage Oncology LLC/Vantage Oncology Finance Co. (j)........... 9.50% 06/15/17 1,968,750
-------------
4,914,375
-------------
LIFE SCIENCES TOOLS & SERVICES - 0.5%
2,500,000 Crimson Merger Sub, Inc. (j).................................... 6.63% 05/15/22 2,050,000
-------------
OIL & GAS EXPLORATION & PRODUCTION - 0.1%
500,000 American Energy-Permian Basin LLC / AEPB Finance
Corp. (j) (k)................................................ 6.83% 08/01/19 217,500
-------------
PHARMACEUTICALS - 0.1%
620,000 Valeant Pharmaceuticals International, Inc. (Canada) (j)........ 5.38% 03/15/20 558,000
-------------
SECURITY & ALARM SERVICES - 0.2%
1,000,000 Garda World Security Corp. (Canada) (j)......................... 7.25% 11/15/21 895,000
-------------
SPECIALTY CHEMICALS - 0.2%
850,000 Hexion, Inc..................................................... 6.63% 04/15/20 620,500
-------------
TOTAL CORPORATE BONDS AND NOTES.............................................................. 19,237,443
(Cost $22,467,985) -------------
SHARES DESCRIPTION VALUE
------------ --------------------------------------------------------------------------------------------- -------------
WARRANTS - 0.0%
BROADCASTING - 0.0%
1,449 Cumulus Media, Inc. (d) (l) (m).............................................................. 0
(Cost $0) -------------
COMMON STOCKS - 0.0%
DIVERSIFIED CHEMICALS - 0.0%
20 LyondellBasell Industries N.V., Class A...................................................... 1,916
(Cost $0) -------------
TOTAL INVESTMENTS - 140.8%................................................................... 517,626,772
(Cost $548,202,029) (n) -------------
OUTSTANDING LOAN - (41.1%)................................................................... (151,000,000)
NET OTHER ASSETS AND LIABILITIES - 0.3%...................................................... 1,084,684
-------------
NET ASSETS - 100.0%.......................................................................... $ 367,711,456
=============
See Notes to Financial Statements Page 13
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2015 (UNAUDITED)
-----------------------------
(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 Interbank 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 November 30, 2015. 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) This security is fair valued by the Pricing Committee of First Trust
Advisors L.P. (the "Advisor") in accordance with procedures adopted by the
Fund's Board of Trustees, and in accordance with provisions of the
Investment Company Act of 1940, as amended. At November 30, 2015,
investments noted as such are valued at $3,251,291 or 0.88% of net assets.
(e) Pursuant to procedures adopted by the Fund's Board of Trustees, this
security has been determined to be illiquid by the Advisor.
(f) This issuer has filed for protection in federal bankruptcy court.
(g) This issuer is in default but interest is still being accrued by the Fund
and paid by the issuer.
(h) Delayed Draw Loan (see Note 2C - Unfunded Loan Commitments in the Notes to
Financial Statements).
(i) Represents commitment fee rate on unfunded loan commitment. The commitment
fee rate steps up at predetermined time intervals.
(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, 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 November 30, 2015,
securities noted as such amounted to $5,689,250 or 1.55% of net assets.
(k) Floating rate security. The interest rate shown reflects the rate in
effect at November 30, 2015.
(l) This security is restricted and cannot be offered for public sale without
first being registered under the Securities Act of 1933, as amended. 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).
(m) Non-income producing security.
(n) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of November 30, 2015,
the aggregate gross unrealized appreciation for all securities in which
there was an excess of value over tax cost was $416,539 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $30,991,796.
Page 14 See Notes to Financial Statements
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
NOVEMBER 30, 2015 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of November 30,
2015 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 11/30/2015 PRICES INPUTS INPUTS
------------------------------------------------- ------------- ------------ ------------ ------------
Senior Floating-Rate Loan Interests:
Cable & Satellite $ 5,742,366 $ -- $ 2,491,075 $ 3,251,291
Property & Casualty Insurance 3,430,663 -- 1,101,996 2,328,667
Other Industry Categories* 489,214,384 -- 489,214,384 --
------------- ------------ ------------ ------------
Total Senior Floating-Rate Loan Interests 498,387,413 -- 492,807,455 5,579,958
Corporate Bonds and Notes* 19,237,443 -- 19,237,443 --
Warrants* --** -- --** --
Common Stocks* 1,916 1,916 -- --
------------- ------------ ------------ ------------
Total Investments $ 517,626,772 $ 1,916 $512,044,898 $ 5,579,958
============= ============ ============ ============
* 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. As of November
30, 2015, the Fund transferred Senior Floating-Rate Loan Interests valued at
$2,328,667 from Level 2 to Level 3 of the fair value hierarchy. The Senior
Floating-Rate Loan Interests that transferred from Level 2 to Level 3 did so
primarily as a result of a change in information obtained from an independent
third-party pricing service relating to the market activity of individual Senior
Floating-Rate Loan Interests and a lack of trading activity in certain Senior
Floating-Rate Loan Interests.
Level 3 Senior Floating-Rate Loan Interests 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 values are based on unobservable
and non-quantitative inputs. The Trust'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 pricing service prices by
comparing sales prices of the Fund's investments to prior day 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.
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, 2015
Senior Floating-Rate Loan Interests $ 3,412,500
Net Realized Gain (Loss) 16,072
Net Change in Unrealized Appreciation/Depreciation (8,179)
Purchases 3,259,470
Sales (3,428,572)
Transfers In 2,328,667
Transfers Out --
------------
ENDING BALANCE AT NOVEMBER 30, 2015
Senior Floating-Rate Loan Interests 5,579,958
------------
Total Level 3 holdings $ 5,579,958
============
There was a net change of $(8,179) in unrealized appreciation (depreciation)
from Level 3 investments held as of November 30, 2015.
See Notes to Financial Statements Page 15
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 2015 (UNAUDITED)
ASSETS:
Investments, at value
(Cost $548,202,029)......................................................................... $ 517,626,772
Cash........................................................................................... 1,929,517
Receivables:
Investment securities sold.................................................................. 21,060,069
Interest.................................................................................... 4,323,921
Miscellaneous............................................................................... 4,037
Dividends................................................................................... 16
Prepaid expenses............................................................................... 8,550
-------------
Total Assets................................................................................ 544,952,882
-------------
LIABILITIES:
Outstanding loan............................................................................... 151,000,000
Payables:
Investment securities purchased............................................................. 25,429,250
Investment advisory fees.................................................................... 320,964
Unfunded loan commitments................................................................... 256,572
Interest and fees on loan................................................................... 85,578
Administrative fees......................................................................... 77,267
Audit and tax fees.......................................................................... 36,634
Custodian fees.............................................................................. 12,477
Printing fees............................................................................... 8,204
Legal fees.................................................................................. 4,274
Trustees' fees and expenses................................................................. 3,623
Transfer agent fees......................................................................... 1,859
Financial reporting fees.................................................................... 771
Other liabilities.............................................................................. 3,953
-------------
Total Liabilities........................................................................... 177,241,426
-------------
NET ASSETS..................................................................................... $ 367,711,456
=============
NET ASSETS CONSIST OF:
Paid-in capital................................................................................ $ 501,164,162
Par value...................................................................................... 266,970
Accumulated net investment income (loss)....................................................... 573,894
Accumulated net realized gain (loss) on investments............................................ (103,718,313)
Net unrealized appreciation (depreciation) on investments...................................... (30,575,257)
-------------
NET ASSETS..................................................................................... $ 367,711,456
=============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)........................... $ 13.77
=============
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 SIX MONTHS ENDED NOVEMBER 30, 2015 (UNAUDITED)
INVESTMENT INCOME:
Interest....................................................................................... $ 14,474,014
Dividends ..................................................................................... 31
Other.......................................................................................... 510,228
-------------
Total investment income..................................................................... 14,984,273
-------------
EXPENSES:
Investment advisory fees....................................................................... 2,011,764
Interest and fees on loan...................................................................... 871,801
Administrative fees............................................................................ 202,670
Printing fees.................................................................................. 52,269
Audit and tax fees............................................................................. 37,634
Custodian fees................................................................................. 37,383
Transfer agent fees............................................................................ 15,800
Legal fees..................................................................................... 11,444
Trustees' fees and expenses.................................................................... 10,303
Financial reporting fees....................................................................... 4,625
Other.......................................................................................... 29,424
-------------
Total expenses.............................................................................. 3,285,117
-------------
NET INVESTMENT INCOME (LOSS)................................................................... 11,699,156
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on investments..................................................... (276,938)
Net change in unrealized appreciation (depreciation) on investments......................... (24,396,578)
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS)........................................................ (24,673,516)
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ (12,974,360)
=============
See Notes to Financial Statements Page 17
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS FOR THE
ENDED YEAR
11/30/2015 ENDED
(UNAUDITED) 5/31/2015
-------------- --------------
OPERATIONS:
Net investment income (loss)........................................................ $ 11,699,156 $ 23,335,452
Net realized gain (loss)............................................................ (276,938) (846,861)
Net change in unrealized appreciation (depreciation)................................ (24,396,578) (6,404,484)
-------------- --------------
Net increase (decrease) in net assets resulting from operations..................... (12,974,360) 16,084,107
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................... (12,013,642) (22,405,442)
-------------- --------------
Total distributions to shareholders................................................. (12,013,642) (22,405,442)
-------------- --------------
Total increase (decrease) in net assets............................................. (24,988,002) (6,321,335)
NET ASSETS:
Beginning of period................................................................. 392,699,458 399,020,793
-------------- --------------
End of period....................................................................... $ 367,711,456 $ 392,699,458
============== ==============
Accumulated net investment income (loss) at end of period........................... $ 573,894 $ 888,380
============== ==============
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 SIX MONTHS ENDED NOVEMBER 30, 2015 (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations................. $ (12,974,360)
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by operating activities:
Purchases of investments.................................................. (148,888,553)
Sales, maturities and paydowns of investments............................. 149,749,705
Net amortization/accretion of premiums/discounts on investments........... (362,229)
Net realized gain/loss on investments..................................... 276,938
Net change in unrealized appreciation/depreciation on investments......... 24,396,578
CHANGES IN ASSETS AND LIABILITIES:
Increase in interest receivable........................................... (632,807)
Increase in miscellaneous receivable...................................... (4,037)
Decrease in prepaid expenses.............................................. 12,241
Decrease in interest and fees on loan payable............................. (4,838)
Decrease in investment advisory fees payable.............................. (33,010)
Decrease in audit and tax fees payable.................................... (38,566)
Decrease in legal fees payable............................................ (4,726)
Decrease in printing fees payable......................................... (22,474)
Decrease in administrative fees payable................................... (1,415)
Decrease in custodian fees payable........................................ (10,686)
Decrease in transfer agent fees payable................................... (1,079)
Increase in Trustees' fees and expenses payable........................... 124
Increase in other liabilities payable..................................... 979
--------------
CASH PROVIDED BY OPERATING ACTIVITIES........................................... $ 11,457,785
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Common Shareholders ..................................... (12,013,642)
Proceeds from borrowing................................................... 45,000,000
Repayment of borrowing.................................................... (53,000,000)
--------------
CASH USED IN FINANCING ACTIVITIES............................................... (20,013,642)
--------------
Decrease in cash................................................................ (8,555,857)
Cash at beginning of period..................................................... 10,485,374
--------------
CASH AT END OF PERIOD........................................................... $ 1,929,517
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees............................... $ 876,639
==============
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
FOR THE
SIX MONTHS
ENDED YEAR ENDED MAY 31,
11/30/2015 --------------------------------------------------------------------
(UNAUDITED) 2015 2014 2013 2012 2011 (a)
----------- ----------- ----------- ----------- ------------ -----------
Net asset value, beginning of period............. $ 14.71 $ 14.95 $ 15.14 $ 14.49 $ 14.76 $ 13.96
--------- --------- --------- --------- ---------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)..................... 0.44 0.87 0.84 1.01 0.91 0.73
Net realized and unrealized gain (loss).......... (0.93) (0.27) (0.08) 0.64 (0.31) 0.77
--------- --------- --------- --------- ---------- ---------
Total from investment operations................. (0.49) 0.60 0.76 1.65 0.60 1.50
--------- --------- --------- --------- ---------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income............................ (0.45) (0.84) (0.95) (1.03) (0.87) (0.70)
--------- --------- --------- --------- ---------- ---------
Total distributions to Common Shareholders....... (0.45) (0.84) (0.95) (1.03) (0.87) (0.70)
--------- --------- --------- --------- ---------- ---------
Premium from shares sold in Common Share
offering...................................... -- -- 0.00 (b) 0.03 -- --
--------- --------- --------- --------- ---------- ---------
Net asset value, end of period................... $ 13.77 $ 14.71 $ 14.95 $ 15.14 $ 14.49 $ 14.76
========= ========= ========= ========= ========== =========
Market value, end of period...................... $ 12.42 $ 13.77 $ 14.00 $ 15.37 $ 14.34 $ 14.82
========= ========= ========= ========= ========== =========
TOTAL RETURN BASED ON NET ASSET VALUE (c)........ (3.09)% 4.68% 5.35% 11.92% (4.45)% 11.19%
========= ========= ========= ========= ========== =========
TOTAL RETURN BASED ON MARKET VALUE (c)........... (6.63)% 4.64% (2.82)% 14.80% (2.95)% 23.20%
========= ========= ========= ========= ========== =========
-----------------------------
RATIOS TO AVERAGE NET AVAILABLE TO COMMON SHAREHOLDERS:
Ratio of total expenses to average net assets.... 1.72% (d) 1.69% 1.80% 1.85% 1.88% 1.98%
Ratio of total expenses to average net assets
excluding interest expense.................... 1.26% (d) 1.28% 1.36% 1.38% 1.33% 1.31%
Ratio of net investment income (loss) to average
net assets.................................... 6.13% (d) 5.96% 5.60% 6.77% 6.38% 5.09%
Portfolio turnover rate.......................... 25% 63% 90% 125% 63% 95%
Net assets, end of period (in 000's)............. $ 367,711 $ 392,699 $ 399,021 $ 400,825 $ 367,172 $ 372,902
Ratio of total expenses to total average Managed
Assets (e).................................... 1.22% (d) 1.18% 1.25% 1.30% 1.31% 1.39%
Ratio of total expenses to total average Managed
Assets excluding interest expense (e)......... 0.90% (d) 0.89% 0.96% 0.97% 0.93% 0.92%
INDEBTEDNESS:
Total loan outstanding (in 000's)................ $ 151,000 $ 159,000 $ 174,000 $ 174,000 $ 158,000 $ 160,000
Asset coverage per $1,000 of indebtedness (f).... $ 3,435 $ 3,470 $ 3,293 $ 3,304 $ 3,324 $ 3,337
-----------------------------
(a) 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.
(b) Amount is less than $0.01.
(c) 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.
(d) Annualized.
(e) 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.
(f) 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)
NOVEMBER 30, 2015 (UNAUDITED)
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 investing primarily in a portfolio of senior
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, which is an investment company within the scope of Financial
Accounting Standards Board ("FASB") Accounting Standards Update 2013-08, follows
accounting and reporting guidance under FASB Accounting Standards Codification
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 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
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
NOVEMBER 30, 2015 (UNAUDITED)
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(R) 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.
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 an independent pricing service approved by the Fund's
Board of Trustees, which may use the following valuation inputs when
available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
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 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 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;
4) transactions in comparable securities;
5) price quotes from dealers and/or 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.
Page 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
NOVEMBER 30, 2015 (UNAUDITED)
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 November 30, 2015, 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 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
November 30, 2015.
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 of
$256,572 as of November 30, 2015.
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 November 30, 2015, 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.
% OF
NET ASSETS
APPLICABLE
ACQUISITION PRINCIPAL VALUE CURRENT TO COMMON
SECURITY DATE VALUE/SHARES PER SHARE CARRYING COST VALUE SHARES
-----------------------------------------------------------------------------------------------------------------
Cumulus Media, Inc. - Warrants 6/29/09 1,449 $ 0.00 $ -- $ -- 0.00%
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.
Page 23
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
NOVEMBER 30, 2015 (UNAUDITED)
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.
The tax character of distributions paid during the fiscal year ended May 31,
2015 is as follows:
Distributions paid from: 2015
Ordinary income................................... $ 22,405,442
As of May 31, 2015, the components of distributable earnings and net assets on a
tax basis were as follows:
Undistributed ordinary income..................... $ 1,091,262
Undistributed capital gains....................... --
------------
Total undistributed earnings...................... 1,091,262
Accumulated capital and other losses.............. (103,181,356)
Net unrealized appreciation (depreciation)........ (6,641,580)
------------
Total accumulated earnings (losses)............... (108,731,674)
Other............................................. --
Paid-in capital................................... 501,431,132
------------
Net assets........................................ $392,699,458
============
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 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, 2015, 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
2016 2017 2018 2019 (NO EXPIRATION) LOSS AVAILABLE
-------------------------------------------------------------------------------------------------------------
$ 422,155 $ 25,585,953 $ 68,278,827 $ 4,665,052 $ 3,397,798 $ 102,349,785
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.
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, 2015, the Fund incurred
and elected to defer net ordinary and capital losses as follows:
Qualified Late Year Losses:
Ordinary Losses $ --
Capital Losses 831,571
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 2012, 2013,
2014 and 2015 remain open to federal and state audit. As of November 30, 2015,
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.
Page 24
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
NOVEMBER 30, 2015 (UNAUDITED)
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
administrator, fund accountant and transfer agent in accordance with certain fee
arrangements. As administrator and fund accountant, BNYM IS 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 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 custodian in accordance with certain
fee arrangements. 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 pro rata among each fund in the First Trust Fund
Complex based on net assets. 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.
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
Cost of purchases and proceeds from sales of investments, excluding short-term
investments, for the six-months ended November 30, 2015, were $136,061,002 and
$139,392,281, respectively.
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 10, 2015, the Credit Facility was amended,
whereby the expiration date of the Credit Facility was extended until July 8,
2016 and the total commitment was reduced from $185,000,000 to $180,000,000. 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 six months ended November 30, 2015, the average amount outstanding under
the Credit Facility was $154,666,667. The high and low annual interest rates for
the loan under the Credit Facility funded by the conduit lender during the six
months ended November 30, 2015, were 0.407% and 0.245%, respectively, with a
weighted average interest rate of 0.327%. The annual interest rate in effect for
the loan at November 30, 2015, was 0.407%.
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.
Page 25
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
NOVEMBER 30, 2015 (UNAUDITED)
7. 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:
At a meeting on December 7, 2015, the Board accepted Mark Bradley's resignation
from his position as the President and Chief Executive Officer of the Fund,
effective December 31, 2015. At the same meeting, the Board elected James Dykas,
formerly Chief Financial Officer and Treasurer of the Fund, to serve as the
President and Chief Executive Officer and Donald Swade, formerly an Assistant
Treasurer of the Fund, to serve as the Treasurer, Chief Financial Officer and
Chief Accounting Officer of the Fund.
On December 21, 2015, the Fund declared a distribution of $0.075 per share to
Common Shareholders of record on January 6, 2016, payable January 15, 2016.
On January 20, 2016, the Fund declared a distribution of $0.070 per share to
Common Shareholders of record on February 3, 2016, payable February 16, 2016.
Effective January 1, 2016, the fixed annual retainer paid to the Independent
Trustees will be allocated equally among each of fund in the First Trust Fund
Complex and will no longer be allocated pro rata based on each fund's net
assets.
Page 26
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
NOVEMBER 30, 2015 (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 27
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
NOVEMBER 30, 2015 (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 Form N-Qs
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.
SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Annual Meeting of Shareholders for the Fund was held on September 14, 2015
(the "meeting"). At the meeting, Trustee Niel B. Nielson was elected as Class II
Trustee for a three-year term expiring at the Fund's annual meeting of
shareholders in 2018. The number of votes cast in favor of Mr. Nielson was
21,882,909, the number of votes against Mr. Nielson was 500,819, and the number
of broker non-votes was 4,313,254. Thomas R. Kadlec, Richard E. Erickson, James
A. Bowen and Robert F. Keith are current and continuing Trustees. Messrs. Bowen
and Keith are currently the Class III Trustees of the Fund for a term expiring
at the Fund's annual meeting of shareholders in 2016. Messrs Thomas R. Kadlec
and Richard E. Erickson are currently the Class I Trustees of the Fund for a
term expiring at the Fund's annual meeting of shareholders in 2017.
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.
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.
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
subordinated obligations 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. As of the fourth quarter of 2015, the market for high yield debt has
experienced decreased liquidity, and investor perception of increased risk has
caused yield spreads to widen.
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.
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
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
NOVEMBER 30, 2015 (UNAUDITED)
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.
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.
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.
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.
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.
INVESTMENT MANAGEMENT AGREEMENT
BOARD CONSIDERATIONS REGARDING APPROVAL OF CONTINUATION OF INVESTMENT MANAGEMENT
AGREEMENT
The Board of Trustees of First Trust Senior Floating Rate Income Fund II (the
"Fund"), including the Independent Trustees, unanimously approved the
continuation of the Investment Management Agreement (the "Agreement") between
the Fund and First Trust Advisors L.P. (the "Advisor") at a meeting held on June
16, 2015. The Board determined that the continuation of the Agreement is in the
best interests of the Fund in light of the extent and quality of the services
provided and such other matters as the Board considered to be relevant in the
exercise of its reasonable business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. At meetings held on April 20, 2015 and June 16, 2015, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor responding to requests for information from counsel to the Independent
Trustees that, among other things, outlined the services provided by the Advisor
(including the relevant personnel responsible for these services and their
experience); the advisory fees for the Fund as compared to fees charged to other
clients of the Advisor and as compared to fees charged to a peer group of funds
selected by Management Practice, Inc. ("MPI"), an independent source (the "MPI
Peer Group"); expenses of the Fund as compared to expense ratios of the funds in
the MPI Peer Group; performance information for the Fund; the nature of expenses
incurred in providing services to the Fund and the potential for economies of
scale, if any; financial data on the Advisor; any fall out benefits to the
Advisor; and information on the Advisor's compliance program. The Board reviewed
initial materials with the Advisor at a special meeting held on April 20, 2015,
at which the Independent Trustees and their counsel met separately to discuss
the information provided by the Advisor. Following the April meeting,
independent legal counsel on behalf of the Independent Trustees requested
certain clarifications and supplements to the materials provided, and those were
considered at an executive session of the Independent Trustees and independent
legal counsel held prior to the June 16, 2015 meeting, as well as at the
meeting. The Board applied its business judgment to determine whether the
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ADDITIONAL INFORMATION (CONTINUED)
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FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
NOVEMBER 30, 2015 (UNAUDITED)
arrangement between the Fund and the Advisor is a reasonable business
arrangement from the Fund's perspective as well as from the perspective of
shareholders. The Board considered that shareholders chose to invest or remain
invested in the Fund knowing that the Advisor manages the Fund.
In reviewing the Agreement, the Board considered the nature, extent and quality
of services provided by the Advisor under the Agreement. The Board considered
that the Advisor is responsible for the overall management and administration of
the Fund and reviewed the services provided by the Advisor to the Fund, noting
that the Advisor's Leveraged Finance Investment Team is responsible for the
day-to-day management of the Fund's investments. The Board considered the
Advisor's statement that it applies the same oversight model internally with its
Leveraged Finance Investment Team as it uses for overseeing external
sub-advisors. The Board considered the background and experience of the members
of the Leveraged Finance Investment Team. At the April 20, 2015 meeting, the
Board received a presentation from the senior portfolio manager of the Leveraged
Finance Investment Team, who discussed the services that the Team provides to
the Fund and how the Team manages the Fund's investments. The Board noted the
compliance program that had been developed by the Advisor and considered that it
includes a robust program for monitoring compliance with the 1940 Act and the
Fund's investment objectives and policies. The Board considered the significant
asset growth of the First Trust Fund Complex and the Advisor's concomitant
investment in infrastructure and personnel dedicated to the First Trust funds.
In light of the information presented and the considerations made, the Board
concluded that the nature, extent and quality of services provided to the Fund
by the Advisor under the Agreement have been and are expected to remain
satisfactory and that the Advisor has managed the Fund consistent with its
investment objectives and policies.
The Board considered the advisory fees paid under the Agreement. The Board
considered the advisory fees charged by the Advisor to similar funds and other
non-fund clients, noting that the Advisor does not provide advisory services to
other closed-end funds with investment objectives and policies similar to the
Fund's, but it does provide services to an actively managed exchange-traded fund
("ETF") with investment objectives and policies similar to the Fund's. The Board
noted that the Advisor charges a unitary fee to the actively managed ETF from
which it pays most of the ETF's expenses. In addition, the Board reviewed data
prepared by MPI showing the advisory fee and expense ratio of the Fund as
compared to the advisory fees and expense ratios of the MPI Peer Group. The
Board discussed with representatives of the Advisor the limitations in creating
a relevant peer group for the Fund, including that (i) the Fund is unique in its
composition, which makes assembling peers with similar strategies and asset mix
difficult, noting that some peer funds have significant holdings outside of
senior loans; (ii) peer funds may use different amounts and types of leverage
with different costs associated with them or may use no leverage; and (iii) some
of the peer funds are larger than the Fund, which causes the Fund's fixed
expenses to be higher on a percentage basis as compared to the larger peer
funds. The Board took these limitations into account in considering the peer
data. In reviewing the peer data, the Board noted that the Fund's advisory fee,
based on average net assets, was below the median of the MPI Peer Group.
The Board also considered performance information for the Fund, noting that the
performance information included the Fund's quarterly performance report, which
is part of the process that the Board has established for monitoring the Fund's
performance and portfolio risk on an ongoing basis. The Board determined that
this process continues to be effective for reviewing the Fund's performance. In
addition to the Board's ongoing review of performance, the Board also reviewed
data prepared by MPI comparing the Fund's performance for periods ended December
31, 2014 to the performance of the MPI Peer Group and to two benchmark indexes.
In reviewing the Fund's performance as compared to the performance of the MPI
Peer Group, the Board took into account the limitations described above with
respect to creating a relevant peer group for the Fund. The Board also
considered data from MPI on the Fund's annual distribution rate as of December
31, 2014 as compared to the MPI Peer Group and the Fund's leverage costs versus
the leverage costs of the funds in the MPI Peer Group. The Board considered
information provided by the Advisor on the Fund's leverage as well, including
that leverage was accretive to the Fund's total return in 2014. In addition, the
Board compared the Fund's premium/discount over the past eight quarters to the
average and median premium/discount over the same period of a peer group
selected by the Advisor, as well as data on the average premium/discount for
2014 for the funds in the MPI Peer Group, and considered factors that may impact
a fund's premium/discount.
On the basis of all the information provided on the fees, expenses and
performance of the Fund, the Board concluded that the advisory fees were
reasonable and appropriate in light of the nature, extent and quality of
services provided by the Advisor under the Agreement.
The Board noted that the Advisor has made and continues to make significant
investments in personnel and infrastructure and considered whether fee levels
reflect any economies of scale for the benefit of shareholders. The Board
determined that due to the Fund's closed-end structure, the potential for
realization of economies of scale as Fund assets grow was not a material factor
to be considered. The Board also considered the costs of the services provided
and profits realized by the Advisor from serving as investment advisor to the
Fund for the twelve months ended December 31, 2014, as well as product-line
profitability data for the same period, as set forth in the materials provided
to the Board. The Board noted the inherent limitations in the profitability
analysis, and concluded that the pre-tax profits estimated to have been realized
by the Advisor in connection with the management of the Fund were not
unreasonable. In addition, the Board considered fall-out benefits described by
the Advisor that may be realized from its relationship with the Fund, including
the Advisor's compensation for fund reporting services pursuant to a separate
Fund Reporting Services Agreement.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreement continue to be fair and reasonable and that the continuation of
the Agreement is in the best interests of the Fund. No single factor was
determinative in the Board's analysis.
Page 30
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FIRST TRUST
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
ADMINISTRATOR,
FUND ACCOUNTANT &
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
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.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
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.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable.
(b) There have been no changes, as of the date of filing, in any of the
Portfolio Managers identified in response to paragraph (a)(1) of this item
in the Registrant's most recent annual report on Form N-CSR.
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) Not applicable.
(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: January 21, 2016
-------------------
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: January 21, 2016
-------------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: January 21, 2016
-------------------
* Print the name and title of each signing officer under his or her signature.