UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21539
First Trust Senior Floating Rate Income Fund II
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address of agent for service)
Registrant’s telephone number, including area code: 630-765-8000
Date of fiscal year end: May 31
Date of reporting period: May 31, 2021
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) | The Report to Shareholders is attached herewith. |
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Fund Statistics | |
Symbol on New York Stock Exchange | FCT |
Common Share Price | $12.60 |
Common Share Net Asset Value (“NAV”) | $12.70 |
Premium (Discount) to NAV | (0.79)% |
Net Assets Applicable to Common Shares | $329,618,642 |
Current Monthly Distribution per Common Share(1) | $0.0976 |
Current Annualized Distribution per Common Share | $1.1712 |
Current Distribution Rate on Common Share Price(2) | 9.30% |
Current Distribution Rate on NAV(2) | 9.22% |
Performance | ||||
Average Annual Total Returns | ||||
1 Year Ended 5/31/21 | 5 Years Ended 5/31/21 | 10 Years Ended 5/31/21 | Inception (5/25/04) to 5/31/21 | |
Fund Performance(3) | ||||
NAV | 13.51% | 5.44% | 5.57% | 4.49% |
Market Value | 26.18% | 6.84% | 5.45% | 4.16% |
Index Performance | ||||
S&P/LSTA Leveraged Loan Index | 12.51% | 4.91% | 4.31% | 4.72% |
Credit Quality (S&P Ratings)(4) | % of Senior Loans and other Debt Securities(5) |
BBB- | 1.0% |
BB | 2.5 |
BB- | 5.1 |
B+ | 22.4 |
B | 40.7 |
B- | 20.5 |
CCC+ | 2.1 |
CCC | 2.8 |
D | 2.4 |
Not Rated | 0.5 |
Total | 100.0% |
Top 10 Issuers | % of Senior Loans and other Securities(5) |
HUB International Limited | 3.1% |
Alliant Holdings I, LLC | 3.1 |
Internet Brands, Inc. (Web MD / MH Sub I, LLC) | 2.9 |
Multiplan, Inc. (MPH) | 2.6 |
iHeartCommunications, Inc. | 2.5 |
CHG Healthcare Services, Inc. | 2.4 |
Mallinckrodt International Finance S.A. | 2.3 |
Graham Packaging Company, L.P. | 2.3 |
Asurion, LLC | 2.2 |
Bausch Health Companies, Inc. (Valeant) | 2.1 |
Total | 25.5% |
(1) | Most recent distribution paid or declared through 5/31/2021. 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 5/31/2021. 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. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change. |
(5) | Percentages are based on long-term positions. Money market funds are excluded. |
Industry Classification | % of Senior Loans and other Securities(5) |
Software | 20.2% |
Health Care Providers & Services | 15.7 |
Pharmaceuticals | 9.8 |
Hotels, Restaurants & Leisure | 9.3 |
Insurance | 9.0 |
Health Care Technology | 6.0 |
Diversified Telecommunication Services | 4.1 |
Media | 3.9 |
Containers & Packaging | 2.7 |
Machinery | 2.6 |
Commercial Services & Supplies | 2.2 |
Diversified Consumer Services | 2.2 |
Entertainment | 1.8 |
Professional Services | 1.8 |
Electric Utilities | 1.7 |
Specialty Retail | 1.3 |
Airlines | 0.8 |
Diversified Financial Services | 0.8 |
Aerospace & Defense | 0.7 |
Electrical Equipment | 0.6 |
Trading Companies & Distributors | 0.6 |
Communications Equipment | 0.5 |
Auto Components | 0.4 |
Household Durables | 0.3 |
Oil, Gas & Consumable Fuels | 0.3 |
Food Products | 0.3 |
Construction & Engineering | 0.2 |
Building Products | 0.1 |
Textiles, Apparel & Luxury Goods | 0.1 |
Life Sciences Tools & Services | 0.0* |
Total | 100.0% |
* | Amount is less than 0.1%. |
1 | Bloomberg: High-Yield Bonds are represented by the ICE BofA US High Yield Constrained Index, Investment Grade Corporate Bonds are represented by the ICE BofA US Corporate Index, the US Aggregate Index is represented by the Bloomberg Barclays US Aggregate Bond Index, and Senior Loans are represented by the S&P/LSTA Leveraged Loan Index. |
2 | JP Morgan Leverage Loan Market Monitor. |
3 | The outflows began in the fourth quarter of 2018 due to a general concern for the sustainability of growth in the economy which was fueled by the ongoing trade dispute with China and the potential implications of the Fed’s tightening cycle which began in December 2016 and resulted in a 200 bps increase in the target Federal Funds rate to 2.50%. Since then the Federal Funds target rate was cut to 0.25% to combat the current economic conditions due to the COVID-19 pandemic. |
4 | Total return is based on the combination of reinvested dividends, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per Common Share for NAV 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. |
Principal Value | Description | Rate (a) | Stated Maturity (b) | Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) – 135.6% | ||||||||
Aerospace & Defense – 0.9% | ||||||||
$639,345 | BBA Aviation (Signature Aviation US Holdings, Inc. / Brown Group), Term Loan B, 3 Mo. LIBOR + 2.75%, 0.50% Floor | 3.25% | 04/30/28 | $638,227 | ||||
1,411,765 | Peraton Corp., Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 02/28/28 | 1,413,134 | ||||
950,220 | Spirit Aerosystems, Inc., Term Loan B, 1 Mo. LIBOR + 5.25%, 0.75% Floor | 6.00% | 01/15/25 | 956,159 | ||||
3,007,520 | ||||||||
Airlines – 1.0% | ||||||||
1,665,888 | American Airlines, Inc., Initial Term Loan, 3 Mo. LIBOR + 4.75%, 0.75% Floor | 5.50% | 03/24/28 | 1,715,865 | ||||
1,574,633 | American Airlines, Inc., Term Loan B-1, 1 Mo. LIBOR + 2.00%, 0.00% Floor | 2.09% | 04/28/23 | 1,522,481 | ||||
3,238,346 | ||||||||
Apparel, Accessories & Luxury Goods – 0.1% | ||||||||
463,837 | Careismatic Brands / New Trojan, Inc. (fka Strategic Partners), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50% Floor | 3.75% | 01/31/28 | 462,677 | ||||
Application Software – 21.0% | ||||||||
1,914,575 | CCC Information Services, Inc. (Cypress), Term Loan B, 1 Mo. LIBOR + 3.00%, 1.00% Floor | 4.00% | 04/26/24 | 1,914,403 | ||||
3,186,372 | Epicor Software Corp., New Term Loan B, 1 Mo. LIBOR + 3.25%, 0.75% Floor | 4.00% | 07/30/27 | 3,182,708 | ||||
1,062,092 | Flexera Software, LLC, 2020 Term Loan B, 6 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 01/26/28 | 1,062,920 | ||||
3,226,169 | Gainwell Acquisition Corp. (fka Milano), Term Loan B, 3 Mo. LIBOR + 4.00%, 0.75% Floor | 4.75% | 10/01/27 | 3,227,782 | ||||
4,722,855 | Greeneden U.S. Holdings II, LLC (Genesys Telecommunications Laboratories, Inc.), Initial Dollar Term Loan, 1 Mo. LIBOR + 4.00%, 0.75% Floor | 4.75% | 12/01/27 | 4,729,608 | ||||
330,422 | Hyland Software, Inc., 2ND Lien TL, 1 Mo. LIBOR + 6.25%, 0.75% Floor | 7.00% | 07/10/25 | 331,799 | ||||
9,356,502 | Hyland Software, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.75% Floor | 4.25% | 07/01/24 | 9,375,028 | ||||
2,101,008 | Imprivata, Inc., Term Loan B, 1 Mo. LIBOR + 3.75%, 0.50% Floor | 4.25% | 11/30/27 | 2,101,596 | ||||
1,616,917 | Inmar, Inc., Term Loan B, 3 Mo. LIBOR + 4.00%, 1.00% Floor | 5.00% | 05/01/24 | 1,610,854 | ||||
5,945,343 | Internet Brands, Inc. (Web MD / MH Sub I, LLC), 2020 June New Term Loan, 1 Mo. LIBOR + 3.75%, 1.00% Floor | 4.75% | 09/15/24 | 5,961,454 | ||||
765,863 | Internet Brands, Inc. (Web MD / MH Sub I, LLC), 2nd Lien Term Loan, 1 Mo. LIBOR + 6.25%, 0.00% Floor | 6.34% | 02/15/29 | 774,801 | ||||
6,600,273 | Internet Brands, Inc. (Web MD / MH Sub I, LLC), Initial Term Loan, 1 Mo. LIBOR + 3.50%, 0.00% Floor | 3.59% | 09/13/24 | 6,568,196 | ||||
5,444,720 | LogMeIn, Inc. (Logan), Term Loan B, 1 Mo. LIBOR + 4.75%, 0.00% Floor | 4.85% | 08/31/27 | 5,443,849 | ||||
8,314,378 | McAfee, LLC, Term Loan B, 1 Mo. LIBOR + 3.75%, 0.00% Floor | 3.84% | 09/30/24 | 8,316,456 | ||||
1,435,439 | Micro Focus International (MA Financeco, LLC), Term Loan B4, 3 Mo. LIBOR + 4.25%, 1.00% Floor | 5.25% | 06/05/25 | 1,446,205 | ||||
733,329 | N-Able, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.50% Floor | 3.50% | 06/30/28 | 730,579 | ||||
1,600,000 | RealPage, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.50% Floor | 3.75% | 04/24/28 | 1,597,600 | ||||
7,894,095 | SolarWinds Holdings, Inc., Initial Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor | 2.84% | 02/05/24 | 7,775,684 | ||||
2,637,173 | Solera Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor | 2.84% | 03/03/23 | 2,633,112 | ||||
218,423 | TIBCO Software, Inc., Term Loan B-3, 1 Mo. LIBOR + 3.75%, 0.00% Floor | 3.85% | 06/30/26 | 217,176 |
Principal Value | Description | Rate (a) | Stated Maturity (b) | Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Application Software (Continued) | ||||||||
$235,489 | Ultimate Kronos Group (UKG, Inc.), New Term Loan, 6 Mo. LIBOR + 3.25%, 0.75% Floor | 4.00% | 05/03/26 | $235,784 | ||||
69,237,594 | ||||||||
Auto Parts & Equipment – 0.5% | ||||||||
618,350 | Clarios Global L.P. (Power Solutions), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor | 3.34% | 04/30/26 | 615,067 | ||||
1,200,294 | Truck Hero, Inc., Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 01/31/28 | 1,200,293 | ||||
1,815,360 | ||||||||
Automotive Retail – 0.3% | ||||||||
997,500 | Les Schwab Tire Centers (LS Group OpCo Acq., LLC), Term Loan B, 3 Mo. LIBOR + 3.50%, 0.75% Floor | 4.25% | 10/31/27 | 997,500 | ||||
Broadcasting – 3.8% | ||||||||
420,750 | E.W. Scripps Company, Incremental Term Loan, 1 Mo. LIBOR + 3.00%, 0.75% Floor | 3.75% | 12/31/27 | 420,868 | ||||
4,792,099 | iHeartCommunications, Inc., Incremental Term Loan B, 1 Mo. LIBOR + 4.00%, 0.75% Floor | 4.75% | 05/01/26 | 4,798,089 | ||||
6,900,687 | iHeartCommunications, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor | 3.09% | 04/29/26 | 6,824,504 | ||||
526,119 | Univision Communications, Inc., Extended Term Loan B, 1 Mo. LIBOR + 3.75%, 1.00% Floor | 4.75% | 03/24/26 | 527,360 | ||||
12,570,821 | ||||||||
Building Products – 0.2% | ||||||||
109,595 | Hillman (The) Group, Inc., Delayed Draw Term Loan, 1 Mo. LIBOR + 2.75%, 0.50% Floor | 3.25% | 05/31/28 | 109,390 | ||||
539,755 | Hillman (The) Group, Inc., Term Loan B1, 1 Mo. LIBOR + 2.75%, 0.50% Floor | 3.25% | 05/31/28 | 538,745 | ||||
648,135 | ||||||||
Casinos & Gaming – 8.3% | ||||||||
728,426 | Bally’s Corp. (fka Twin River), Term Loan B, 3 Mo. LIBOR + 2.75%, 0.00% Floor | 2.95% | 05/10/26 | 721,687 | ||||
983,550 | Boyd Gaming Corporation, Term Loan B, 1 Mo. LIBOR + 2.25%, 0.00% Floor | 2.31% | 09/15/23 | 981,750 | ||||
447,066 | Caesars Resort Collection, LLC, Term B-1 Loans, 1 Mo. LIBOR + 4.50%, 0.00% Floor | 4.59% | 06/30/25 | 448,269 | ||||
7,190,100 | Caesars Resort Collection, LLC, Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor | 2.84% | 12/22/24 | 7,129,775 | ||||
3,904,087 | CityCenter Holdings, LLC, Term Loan B, 1 Mo. LIBOR + 2.25%, 0.75% Floor | 3.00% | 04/18/24 | 3,872,972 | ||||
6,673,682 | Golden Nugget, Inc., Term Loan B, 6 Mo. LIBOR + 2.50%, 0.75% Floor | 3.25% | 10/04/23 | 6,617,823 | ||||
2,979,875 | Scientific Games International, Inc., Term Loan B5, 1 Mo. LIBOR + 2.75%, 0.00% Floor | 2.84% | 08/14/24 | 2,948,825 | ||||
4,716,682 | Stars Group Holdings B.V. (Flutter Entertainment PLC), Term Loan B, 3 Mo. LIBOR + 3.50%, 0.00% Floor | 3.70% | 07/10/25 | 4,731,446 | ||||
27,452,547 | ||||||||
Coal & Consumable Fuels – 0.3% | ||||||||
1,005,046 | Arch Coal, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 1.00% Floor | 3.75% | 03/07/24 | 934,693 |
Principal Value | Description | Rate (a) | Stated Maturity (b) | Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Communications Equipment – 0.7% | ||||||||
$2,369,421 | Commscope, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor | 3.34% | 04/06/26 | $2,358,072 | ||||
Construction & Engineering – 0.3% | ||||||||
1,034,228 | USIC, Inc., 1st Lien Term Loan, 1 Mo. LIBOR + 3.50%, 0.75% Floor | 4.25% | 05/15/28 | 1,031,643 | ||||
Electric Utilities – 1.8% | ||||||||
5,858,648 | PG&E Corp., Term Loan B, 3 Mo. LIBOR + 3.00%, 0.50% Floor | 3.50% | 06/23/25 | 5,807,385 | ||||
Electrical Components & Equipment – 0.8% | ||||||||
2,815,071 | Array Technologies, Inc., Term Loan B, 3 Mo. LIBOR + 3.25%, 0.50% Floor | 3.75% | 10/14/27 | 2,774,619 | ||||
Environmental & Facilities Services – 2.4% | ||||||||
702,514 | Allied Universal Holdco, LLC, Incremental Term Loan B, 1 Mo. LIBOR + 3.75%, 0.50% Floor | 4.25% | 05/15/28 | 704,010 | ||||
5,154,438 | Packers Holdings, LLC (PSSI), Term Loan B, 6 Mo. LIBOR + 3.25%, 0.75% Floor | 4.00% | 03/15/28 | 5,126,089 | ||||
2,073,639 | TruGreen L.P., Second Refinancing Term Loan B, 1 Mo. LIBOR + 4.00%, 0.75% Floor | 4.75% | 11/02/27 | 2,076,874 | ||||
7,906,973 | ||||||||
Health Care Distributors – 0.5% | ||||||||
1,558,618 | Radiology Partners, Inc., Term Loan B, 1 Mo. LIBOR + 4.25%, 0.00% Floor | 4.35% | 07/09/25 | 1,557,231 | ||||
Health Care Services – 18.6% | ||||||||
1,787 | AccentCare (Pluto Acquisition I, Inc.), Incremental Term Loan, 1 Mo. LIBOR + 5.00%, 0.50% Floor | 5.50% | 06/20/26 | 1,789 | ||||
711,094 | AccentCare (Pluto Acquisition I, Inc.), Incremental Term Loan, 3 Mo. LIBOR + 5.00%, 0.50% Floor | 5.50% | 06/20/26 | 711,983 | ||||
2,545,866 | ADMI Corp. (Aspen Dental), Amendment No. 4 Term Loan B2, 1 Mo. LIBOR + 2.75%, 0.50% Floor | 3.25% | 12/23/27 | 2,526,364 | ||||
2,424,973 | Air Methods Corp. (a/k/a ASP AMC Intermediate Holdings, Inc.), Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor | 4.50% | 04/21/24 | 2,392,551 | ||||
19,858 | athenahealth, Inc (VVC Holding Corp.), Term Loan B-1, 1 Mo. LIBOR + 4.25%, 0.00% Floor | 4.35% | 02/11/26 | 19,912 | ||||
7,923,241 | athenahealth, Inc (VVC Holding Corp.), Term Loan B-1, 3 Mo. LIBOR + 4.25%, 0.00% Floor | 4.41% | 02/11/26 | 7,945,030 | ||||
1,895,308 | Aveanna Healthcare, LLC, Term Loan B, 3 Mo. LIBOR + 4.25%, 1.00% Floor | 5.25% | 03/16/24 | 1,896,730 | ||||
1,082,249 | Brightspring Health (Phoenix Guarantor, Inc.), Incremental Term Loan B-3, 1 Mo. LIBOR + 3.50%, 0.00% Floor | 3.60% | 03/05/26 | 1,074,133 | ||||
11,106,568 | CHG Healthcare Services, Inc., Term Loan, 6 Mo. LIBOR + 3.00%, 1.00% Floor | 4.00% | 06/07/23 | 11,092,685 | ||||
953,608 | Civitas Solutions (National Mentor Holdings, Inc.), Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 03/31/28 | 954,209 | ||||
962,721 | Civitas Solutions (National Mentor Holdings, Inc.), Term Loan B, 3 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 03/31/28 | 963,327 | ||||
60,213 | Civitas Solutions (National Mentor Holdings, Inc.), Term Loan C, 3 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 03/31/28 | 60,251 | ||||
662,980 | DuPage Medical Group (Midwest Physician Admin. Services, LLC), Incremental Term Loan B, 3 Mo. LIBOR + 3.25%, 0.75% Floor | 4.00% | 03/15/28 | 661,839 | ||||
5,495,427 | Envision Healthcare Corporation, Initial Term Loan, 1 Mo. LIBOR + 3.75%, 0.00% Floor | 3.84% | 10/10/25 | 4,679,686 |
Principal Value | Description | Rate (a) | Stated Maturity (b) | Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Health Care Services (Continued) | ||||||||
$4,046,061 | Global Medical Response, Inc. (fka Air Medical), 2020 Refinancing Term Loan, 3 Mo. LIBOR + 4.75%, 1.00% Floor | 5.75% | 10/02/25 | $4,062,246 | ||||
2,011,936 | Help at Home (HAH Group Holding Company, LLC), Initial Term Loan, 6 Mo. LIBOR + 5.00%, 1.00% Floor | 6.00% | 10/29/27 | 2,013,203 | ||||
2,255,225 | Packaging Coordinators, Inc. (PCI Pharma), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.75% Floor | 4.25% | 11/30/27 | 2,258,743 | ||||
1,466,739 | Radnet Management, Inc., Term Loan B, 3 Mo. LIBOR + 3.25%, 0.75% Floor | 4.00% | 04/22/28 | 1,464,906 | ||||
676,416 | SCP Health (Onex TSG Intermediate Corp.), Term Loan B, 3 Mo. LIBOR + 4.75%, 0.75% Floor | 5.50% | 02/28/28 | 674,894 | ||||
2,000,000 | Sound Inpatient Physicians, Inc., Incremental Term Loan B, 1 Mo. LIBOR + 3.00%, 0.50% Floor | 3.50% | 06/28/25 | 1,995,000 | ||||
4,530,848 | Surgery Centers Holdings, Inc., 2021 Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 08/31/26 | 4,536,511 | ||||
3,335,776 | Team Health, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 1.00% Floor | 3.75% | 02/06/24 | 3,210,685 | ||||
5,888,782 | U.S. Renal Care, Inc., Term Loan B, 1 Mo. LIBOR + 5.00%, 0.00% Floor | 5.13% | 06/28/26 | 5,853,214 | ||||
249,865 | US Radiology Specialists, Inc., Term Loan B, 3 Mo. LIBOR + 5.50%, 0.75% Floor | 6.25% | 12/31/27 | 250,739 | ||||
61,300,630 | ||||||||
Health Care Technology – 8.4% | ||||||||
188,870 | Change Healthcare Holdings, LLC, Closing Date Term Loan, 1 Mo. LIBOR + 2.50%, 1.00% Floor | 3.50% | 03/01/24 | 188,698 | ||||
6,408,831 | Change Healthcare Holdings, LLC, Closing Date Term Loan, 6 Mo. LIBOR + 2.50%, 1.00% Floor | 3.50% | 03/01/24 | 6,402,999 | ||||
2,370,944 | Ciox Health (Healthport / CT Technologies Intermediate Holdings, Inc.), Initial Term Loan, 1 Mo. LIBOR + 5.00%, 1.00% Floor | 6.00% | 12/31/25 | 2,379,835 | ||||
2,253,373 | Ensemble RCM, LLC (Ensemble Health), Term Loan B, 3 Mo. LIBOR + 3.75%, 0.00% Floor | 3.94% | 08/01/26 | 2,255,626 | ||||
167,271 | eResearch Technology, Inc. (ERT), Incremental Term Loan B, 1 Mo. LIBOR + 4.50%, 1.00% Floor | 5.50% | 02/04/27 | 168,061 | ||||
399,085 | Mediware (Wellsky / Project Ruby Ultimate Parent Corp.), Term Loan B, 1 Mo. LIBOR + 3.25%, 0.75% Floor | 4.00% | 03/15/28 | 398,151 | ||||
6,846 | Press Ganey (Azalea TopCo, Inc.), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor | 3.59% | 07/25/26 | 6,803 | ||||
2,690,370 | Press Ganey (Azalea TopCo, Inc.), Term Loan B, 3 Mo. LIBOR + 3.50%, 0.00% Floor | 3.69% | 07/25/26 | 2,673,555 | ||||
8,661,237 | Verscend Technologies, Inc. (Cotiviti), New Term Loan B, 1 Mo. LIBOR + 4.00%, 0.00% Floor | 4.09% | 08/27/25 | 8,662,796 | ||||
4,572,275 | Zelis Payments Buyer, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor | 3.61% | 09/30/26 | 4,560,845 | ||||
27,697,369 | ||||||||
Homefurnishing Retail – 0.4% | ||||||||
1,340,833 | Rent-A-Center, Inc., Term Loan B, 1 Mo. LIBOR + 4.00%, 0.75% Floor | 4.75% | 02/15/28 | 1,348,100 | ||||
Household Appliances – 0.4% | ||||||||
1,432,371 | Traeger Grills (TGP Holdings III, LLC), 2018 Refinancing Term Loan, 3 Mo. LIBOR + 4.00%, 1.00% Floor | 5.00% | 09/25/24 | 1,431,025 | ||||
Human Resource & Employment Services – 1.3% | ||||||||
4,151,738 | Alight, Inc. (fka Tempo Acq.), Non Extended Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor | 2.84% | 05/01/24 | 4,143,974 |
Principal Value | Description | Rate (a) | Stated Maturity (b) | Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Industrial Machinery – 3.7% | ||||||||
$8,185,802 | Gates Global, LLC, Term Loan B-3, 1 Mo. LIBOR + 2.75%, 0.75% Floor | 3.50% | 03/31/27 | $8,156,005 | ||||
3,959,946 | Thyssenkrupp Elevator (Vertical U.S. Newco, Inc.), Term Loan B, 6 Mo. LIBOR + 4.25%, 0.00% Floor | 4.48% | 07/31/27 | 3,972,579 | ||||
12,128,584 | ||||||||
Insurance Brokers – 12.7% | ||||||||
4,579,870 | Alliant Holdings I, LLC, 2019 New Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor | 3.34% | 05/10/25 | 4,537,736 | ||||
6,553,267 | Alliant Holdings I, LLC, Initial Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor | 3.34% | 05/09/25 | 6,492,649 | ||||
3,311,538 | Alliant Holdings I, LLC, Term Loan B3, 1 Mo. LIBOR + 3.75%, 0.50% Floor | 4.25% | 11/05/27 | 3,314,022 | ||||
6,239,881 | AssuredPartners, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor | 3.59% | 02/12/27 | 6,194,829 | ||||
2,829,504 | BroadStreet Partners, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor | 3.34% | 01/27/27 | 2,801,605 | ||||
1,182,980 | Cross Financial Corp., Term Loan B, 1 Mo. LIBOR + 4.00%, 0.75% Floor | 4.75% | 09/15/27 | 1,182,980 | ||||
4,110,985 | HUB International Limited, Initial Term Loan B, 2 Mo. LIBOR + 2.75%, 0.00% Floor | 2.90% | 04/25/25 | 4,069,464 | ||||
9,844,300 | HUB International Limited, Initial Term Loan B, 3 Mo. LIBOR + 2.75%, 0.00% Floor | 2.93% | 04/25/25 | 9,744,872 | ||||
776,478 | HUB International Limited, New Term Loan B-3, 3 Mo. LIBOR + 3.25%, 0.75% Floor | 4.00% | 04/25/25 | 776,703 | ||||
460,696 | Ryan Specialty Group, LLC, Term Loan B, 1 Mo. LIBOR + 3.00%, 0.75% Floor | 3.75% | 09/01/27 | 460,410 | ||||
2,215,364 | USI, Inc. (fka Compass Investors, Inc.), Term Loan B, 3 Mo. LIBOR + 3.00%, 0.00% Floor | 3.20% | 05/15/24 | 2,196,666 | ||||
41,771,936 | ||||||||
Integrated Telecommunication Services – 5.0% | ||||||||
6,218,866 | Frontier Communications Corp., Term Loan B, 1 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 05/01/28 | 6,207,983 | ||||
3,432,462 | Numericable (Altice France SA or SFR), Term Loan B-11, 3 Mo. LIBOR + 2.75%, 0.00% Floor | 2.94% | 07/31/25 | 3,377,749 | ||||
5,350,369 | Numericable (Altice France SA or SFR), Term Loan B-13, 3 Mo. LIBOR + 4.00%, 0.00% Floor | 4.16% | 08/14/26 | 5,341,006 | ||||
1,588,638 | Zayo Group Holdings, Inc., Initial Dollar Term Loan, 1 Mo. LIBOR + 3.00%, 0.00% Floor | 3.09% | 03/09/27 | 1,575,976 | ||||
16,502,714 | ||||||||
Managed Health Care – 3.7% | ||||||||
12,141,153 | Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 2.75%, 1.00% Floor | 3.75% | 06/07/23 | 12,121,849 | ||||
Metal & Glass Containers – 0.6% | ||||||||
944,639 | Altium Packaging, LLC (FKA Consolidated Container), Term Loan B, 1 Mo. LIBOR + 2.75%, 0.50% Floor | 3.25% | 02/15/28 | 937,998 | ||||
964,747 | PODS, LLC, Term Loan B, 1 Mo. LIBOR + 3.00%, 0.75% Floor | 3.75% | 03/31/28 | 962,682 | ||||
1,900,680 | ||||||||
Movies & Entertainment – 2.5% | ||||||||
1,013,855 | Cineworld Group PLC (Crown), Priority Term Loan B-1, Fixed Rate at 15.25% (d) | 15.25% | 05/23/24 | 1,273,656 |
Principal Value | Description | Rate (a) | Stated Maturity (b) | Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Movies & Entertainment (Continued) | ||||||||
$7,402,587 | Cineworld Group PLC (Crown), Term Loan B, 3 Mo. LIBOR + 2.50%, 1.00% Floor | 3.50% | 02/28/25 | $6,416,192 | ||||
568,049 | PUG, LLC (Stubhub), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor | 3.59% | 02/12/27 | 553,137 | ||||
8,242,985 | ||||||||
Office Services & Supplies – 0.4% | ||||||||
1,311,240 | Dun & Bradstreet Corp., Refinancing Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor | 3.34% | 02/08/26 | 1,306,795 | ||||
Other Diversified Financial Services – 1.2% | ||||||||
3,882,573 | AlixPartners, LLP, Term Loan B, 1 Mo. LIBOR + 2.75%, 0.50% Floor | 3.25% | 02/04/28 | 3,866,382 | ||||
Packaged Foods & Meats – 0.3% | ||||||||
372,779 | BellRing Brands, LLC, New Term Loan B, 1 Mo. LIBOR + 4.00%, 0.75% Floor | 4.75% | 10/21/24 | 375,243 | ||||
180,176 | Simply Good Foods (Atkins Nutritionals, Inc.), Term Loan B, 1 Mo. LIBOR + 3.75%, 1.00% Floor | 4.75% | 07/07/24 | 180,776 | ||||
423,944 | Simply Good Foods (Atkins Nutritionals, Inc.), Term Loan B, 3 Mo. LIBOR + 3.75%, 1.00% Floor | 4.75% | 07/07/24 | 425,355 | ||||
195,441 | Weight Watchers International, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor | 4.00% | 04/13/28 | 195,768 | ||||
1,177,142 | ||||||||
Paper Packaging – 3.2% | ||||||||
10,681,305 | Graham Packaging Company, L.P., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.75% Floor | 3.75% | 08/04/27 | 10,674,042 | ||||
Pharmaceuticals – 12.3% | ||||||||
1,766,509 | Akorn, Inc., Exit Take Back Term Loan, 3 Mo. LIBOR + 7.50%, 1.00% Floor (e) (f) | 8.50% | 09/30/25 | 1,806,256 | ||||
9,882,680 | Bausch Health Companies, Inc. (Valeant), Initial Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor | 3.09% | 06/01/25 | 9,840,679 | ||||
9,600,000 | Endo, LLC, 2021 Term Loan B, 1 Mo. LIBOR + 5.00%, 0.75% Floor | 5.75% | 03/11/28 | 9,361,344 | ||||
1,826,702 | Jazz Pharmaceuticals, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor | 4.00% | 05/05/28 | 1,834,209 | ||||
9,902,495 | Mallinckrodt International Finance S.A., 2017 Term Loan B, 6 Mo. LIBOR + 5.25%, 0.75% Floor (g) | 6.00% | 09/24/24 | 9,513,227 | ||||
1,371,417 | Mallinckrodt International Finance S.A., 2018 Incremental Term Loan, 1 Mo. LIBOR + 5.50%, 0.75% Floor (g) | 6.25% | 02/24/25 | 1,318,850 | ||||
3,145,925 | Nestle Skin Health (Sunshine Lux VII SARL / Galderma), 2021 Term Loan B-3, 3 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 10/02/26 | 3,154,765 | ||||
3,668,106 | Parexel International Corp., Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor | 2.84% | 09/27/24 | 3,637,038 | ||||
40,466,368 | ||||||||
Publishing – 0.2% | ||||||||
600,078 | Meredith Corp., Tranche B-3 Term Loan, 3 Mo. LIBOR + 4.25%, 1.00% Floor | 5.25% | 01/31/25 | 612,644 | ||||
Research & Consulting Services – 1.3% | ||||||||
1,171,024 | Clarivate Analytics PLC (Camelot), Amendment No. 2 Incremental Term Loan, 1 Mo. LIBOR + 3.00%, 1.00% Floor | 4.00% | 10/31/26 | 1,171,996 | ||||
923,569 | Corelogic, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.50% Floor | 4.00% | 06/30/28 | 918,951 |
Principal Value | Description | Rate (a) | Stated Maturity (b) | Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Research & Consulting Services (Continued) | ||||||||
$2,265,864 | Nielsen Consumer, Inc. (Indy US Holdco, LLC), Term Loan B-1, 1 Mo. LIBOR + 4.00%, 0.00% Floor | 4.11% | 03/05/28 | $2,272,095 | ||||
4,363,042 | ||||||||
Restaurants – 3.9% | ||||||||
1,995,000 | IRB Holding Corp. (Arby’s / Inspire Brands), Fourth Amendment Incremental Term Loan B, 3 Mo. LIBOR + 3.25%, 1.00% Floor | 4.25% | 12/31/27 | 1,993,583 | ||||
5,429,463 | IRB Holding Corp. (Arby’s / Inspire Brands), Term Loan B, 3 Mo. LIBOR + 2.75%, 1.00% Floor | 3.75% | 02/05/25 | 5,403,564 | ||||
3,940,000 | Portillo’s Holdings, LLC, Term Loan B-3, 3 Mo. LIBOR + 5.50%, 1.00% Floor | 6.50% | 08/30/24 | 3,944,925 | ||||
1,422,579 | Zaxby’s Operating Company, L.P., 1st Lien Term Loan, 1 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 12/30/27 | 1,422,878 | ||||
12,764,950 | ||||||||
Security & Alarm Services – 0.2% | ||||||||
549,406 | Garda World Security Corp., Term Loan B, 1 Mo. LIBOR + 4.25%, 0.00% Floor | 4.35% | 10/30/26 | 550,005 | ||||
Specialized Consumer Services – 3.1% | ||||||||
1,995,116 | Asurion, LLC, New B-8 Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor | 3.34% | 12/23/26 | 1,984,522 | ||||
1,698,479 | Asurion, LLC, Second Lien Term Loan B-3, 1 Mo. LIBOR + 5.25%, 0.00% Floor | 5.34% | 01/31/28 | 1,716,177 | ||||
4,245,524 | Asurion, LLC, Term Loan B6, 1 Mo. LIBOR + 3.00%, 0.00% Floor | 3.09% | 11/03/23 | 4,234,018 | ||||
2,162,545 | Asurion, LLC, Term Loan B7, 1 Mo. LIBOR + 3.00%, 0.00% Floor | 3.09% | 11/03/24 | 2,152,749 | ||||
10,087,466 | ||||||||
Specialty Stores – 1.1% | ||||||||
1,345,215 | Bass Pro Group, LLC (Great Outdoors Group, LLC), Term Loan B, 6 Mo. LIBOR + 4.25%, 0.75% Floor | 5.00% | 03/15/28 | 1,354,295 | ||||
1,236,385 | Petco Animal Supplies, Inc., Initial Term Loan B, 3 Mo. LIBOR + 3.25%, 0.75% Floor | 4.00% | 03/03/28 | 1,235,507 | ||||
1,088,231 | Petsmart, Inc., Initial Term Loan B, 6 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 02/15/28 | 1,091,496 | ||||
3,681,298 | ||||||||
Systems Software – 7.4% | ||||||||
6,794,535 | Applied Systems, Inc., 1st Lien Term Loan, 3 Mo. LIBOR + 3.25%, 0.50% Floor | 3.75% | 09/19/24 | 6,784,343 | ||||
94,620 | Applied Systems, Inc., 1st Lien Term Loan, Prime Rate + 2.25%, 3.25% Floor | 5.50% | 09/19/24 | 94,478 | ||||
1,483,019 | Applied Systems, Inc., 2nd Lien Term Loan, 3 Mo. LIBOR + 5.50%, 0.75% Floor | 6.25% | 09/19/25 | 1,493,608 | ||||
8,230,420 | BMC Software Finance, Inc. (Boxer Parent), Term Loan B, 1 Mo. LIBOR + 3.75%, 0.00% Floor | 3.84% | 10/02/25 | 8,184,494 | ||||
1,348,473 | Idera, Inc., Initial Term Loan, 6 Mo. LIBOR + 3.75%, 0.75% Floor | 4.50% | 02/15/28 | 1,341,447 | ||||
1,335,804 | Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor | 4.50% | 06/13/24 | 1,318,038 | ||||
852,131 | Riverbed Technology, Inc., New Term Loan B, 3 Mo. LIBOR + 6.00%, 1.00% Floor | 7.00% | 12/30/25 | 809,124 | ||||
3,132,738 | Sophos Group PLC (Surf), Term Loan B, 6 Mo. LIBOR + 3.50%, 0.00% Floor | 3.68% | 03/05/27 | 3,112,000 |
Principal Value | Description | Rate (a) | Stated Maturity (b) | Value | ||||
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued) | ||||||||
Systems Software (Continued) | ||||||||
$1,302,500 | SUSE (Marcel Lux IV SARL), Facility B1 USD, 1 Mo. LIBOR + 3.25%, 0.00% Floor | 3.36% | 03/15/26 | $1,299,244 | ||||
24,436,776 | ||||||||
Trading Companies & Distributors – 0.8% | ||||||||
2,666,762 | SRS Distribution, Inc., Term Loan B, 1 Mo. LIBOR + 3.75%, 0.50% Floor | 4.25% | 06/04/28 | 2,660,096 | ||||
Total Senior Floating-Rate Loan Interests | 447,037,968 | |||||||
(Cost $446,535,543) | ||||||||
Principal Value | Description | Stated Coupon | Stated Maturity | Value | ||||
CORPORATE BONDS AND NOTES (c) – 3.3% | ||||||||
Airlines – 0.2% | ||||||||
605,000 | Mileage Plus Holdings, LLC / Mileage Plus Intellectual Property Assets Ltd. (h) | 6.50% | 06/20/27 | 663,047 | ||||
Broadcasting – 1.3% | ||||||||
1,119,000 | Cumulus Media New Holdings, Inc. (h) | 6.75% | 07/01/26 | 1,168,807 | ||||
2,269,000 | Diamond Sports Group, LLC / Diamond Sports Finance Co. (h) | 5.38% | 08/15/26 | 1,681,896 | ||||
464,000 | Univision Communications, Inc. (h) | 5.13% | 02/15/25 | 471,830 | ||||
1,000,000 | Univision Communications, Inc. (h) | 9.50% | 05/01/25 | 1,103,905 | ||||
4,426,438 | ||||||||
Casinos & Gaming – 0.8% | ||||||||
2,462,000 | Caesars Entertainment, Inc. (h) | 6.25% | 07/01/25 | 2,600,487 | ||||
Coal & Consumable Fuels – 0.1% | ||||||||
301,000 | Peabody Energy Corp. (h) | 6.38% | 03/31/25 | 173,075 | ||||
Health Care Services – 0.1% | ||||||||
306,000 | Global Medical Response, Inc. (h) | 6.50% | 10/01/25 | 314,807 | ||||
Integrated Telecommunication Services – 0.7% | ||||||||
2,445,000 | Zayo Group Holdings, Inc. (h) | 4.00% | 03/01/27 | 2,399,156 | ||||
Pharmaceuticals – 0.1% | ||||||||
396,000 | Organon Finance 1, LLC (h) | 4.13% | 04/30/28 | 400,455 | ||||
Total Corporate Bonds and Notes | 10,977,465 | |||||||
(Cost $10,717,192) | ||||||||
FOREIGN CORPORATE BONDS AND NOTES (c) – 0.2% | ||||||||
Environmental & Facilities Services – 0.2% | ||||||||
305,000 | Allied Universal Holdco, LLC / Allied Universal Finance Corp. / Atlas Luxco 4 Sarl (h) | 4.63% | 06/01/28 | 305,778 | ||||
203,000 | Allied Universal Holdco, LLC / Allied Universal Finance Corp. / Atlas Luxco 4 Sarl (h) | 4.63% | 06/01/28 | 201,772 | ||||
Total Foreign Corporate Bonds and Notes | 507,550 | |||||||
(Cost $508,000) |
Shares | Description | Value | ||
COMMON STOCKS (c) – 1.4% | ||||
Broadcasting – 0.1% | ||||
25,815 | Cumulus Media, Inc., Class A (i) | 283,449 |
Shares | Description | Value | ||
COMMON STOCKS (c) (Continued) | ||||
Electric Utilities – 0.5% | ||||
106,607 | Vistra Energy Corp. | $1,723,835 | ||
Oil & Gas Exploration & Production – 0.1% | ||||
119,734 | Ascent Resources - Marcellus, LLC Class A Common Shares (i) (j) | 101,774 | ||
3,699 | Fieldwood Energy, LLC (g) (i) (j) | 464 | ||
102,238 | ||||
Pharmaceuticals – 0.7% | ||||
150,392 | Akorn, Inc. (e) (i) (j) | 2,343,634 | ||
Total Common Stocks | 4,453,156 | |||
(Cost $5,081,424) | ||||
WARRANTS (c) – 0.1% | ||||
Movies & Entertainment – 0.1% | ||||
315,514 | Cineworld Group PLC, expiring 11/23/25 (i) (k) | 264,179 | ||
Oil & Gas Exploration & Production – 0.0% | ||||
31,000 | Ascent Resources - Marcellus, LLC First Lien Warrants, expiring 3/30/23 (i) (k) | 775 | ||
Total Warrants | 264,954 | |||
(Cost $3,100) | ||||
RIGHTS (c) – 0.0% | ||||
Electric Utilities – 0.0% | ||||
106,607 | Vistra Energy Corp., no expiration date (i) (k) | 123,931 | ||
Life Sciences Tools & Services – 0.0% | ||||
1 | New Millennium Holdco, Inc., Corporate Claim Trust, no expiration date (i) (k) (l) (m) | 0 | ||
1 | New Millennium Holdco, Inc., Lender Claim Trust, no expiration date (i) (k) (l) (m) | 0 | ||
0 | ||||
Total Rights | 123,931 | |||
(Cost $174,207) | ||||
MONEY MARKET FUNDS (c) – 1.0% | ||||
3,440,905 | Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 0.01% (n) | 3,440,905 | ||
(Cost $3,440,905) | ||||
Total Investments – 141.6% | 466,805,929 | |||
(Cost $466,460,371) (o) | ||||
Outstanding Loans – (41.3)% | (136,000,000) | |||
Net Other Assets and Liabilities – (0.3)% | (1,187,287) | |||
Net Assets – 100.0% | $329,618,642 |
(a) | 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 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. When a range of rates is disclosed, the Fund holds more than one contract within the same tranche with identical LIBOR period, spread and floor, but different LIBOR reset dates. |
(b) | 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. |
(c) | All of these securities are available to serve as collateral for the outstanding loans. |
(d) | The issuer may pay interest on the loans in cash and in Payment-In-Kind (“PIK”) interest. Interest paid in cash will accrue at the rate of 7.00% per annum (“Cash Interest Rate”) and PIK interest will accrue on the loan at the rate of 8.25% per annum. For the fiscal year ended May 31, 2021, the Fund received a portion of the interest in cash and PIK interest with a principal value of $29,064 for Cineworld Group PLC (Crown). |
(e) | On October 1, 2020, Akorn Holding Company LLC completed a Bankruptcy Plan of Reorganization. In connection with the Plan of Reorganization, the Fund received a portion of a new exit term loan and a share of the newly issued common equity shares in the re-organized company. |
(f) | The issuer may pay interest on the loans (1) entirely in cash or (2) in the event that both the PIK Toggle Condition has been satisfied and the issuer elects to exercise the PIK interest, 2.50% payable in cash and 7.00% payable as PIK interest. For the fiscal year ended May 31, 2021, this security paid all of its interest in cash. |
(g) | This issuer has filed for protection in bankruptcy court. |
(h) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be liquid by First Trust Advisors L.P. (the “Advisor”). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At May 31, 2021, securities noted as such amounted to $11,485,015 or 3.5% of net assets. |
(i) | Non-income producing security. |
(j) | Security received in a transaction exempt from registration under the 1933 Act. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by the Advisor. Although market instability can result in periods of increased overall market illiquidity, liquidity for the security is determined based on security-specific factors and assumptions, which require subjective judgment. At May 31, 2021, securities noted as such amounted to $2,445,872 or 0.8% of net assets. |
(k) | Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be illiquid by the Advisor. |
(l) | This security is fair valued by the Advisor’s Pricing Committee in accordance with procedures adopted by the Fund’s Board of Trustees, and in accordance with the provisions of the Investment Company Act of 1940, as amended. At May 31, 2021, securities noted as such are valued at $0 or 0.0% of net assets. |
(m) | This security’s value was determined using significant unobservable inputs (see Note 2A – Portfolio Valuation in the Notes to Financial Statements). |
(n) | Rate shown reflects yield as of May 31, 2021. |
(o) | Aggregate cost for federal income tax purposes was $466,312,152. As of May 31, 2021, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $4,879,140 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $4,385,363. The net unrealized appreciation was $493,777. |
LIBOR | London Interbank Offered Rate |
Total Value at 5/31/2021 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Senior Floating-Rate Loan Interests* | $ 447,037,968 | $ — | $ 447,037,968 | $ — |
Corporate Bonds and Notes* | 10,977,465 | — | 10,977,465 | — |
Foreign Corporate Bonds and Notes* | 507,550 | — | 507,550 | — |
Common Stocks: | ||||
Oil & Gas Exploration & Production | 102,238 | — | 102,238 | — |
Pharmaceuticals | 2,343,634 | — | 2,343,634 | — |
Other industry categories* | 2,007,284 | 2,007,284 | — | — |
Warrants* | 264,954 | — | 264,954 | — |
Rights: | ||||
Electric Utilities | 123,931 | — | 123,931 | — |
Life Sciences Tools & Services | —** | — | — | —** |
Money Market Funds | 3,440,905 | 3,440,905 | — | — |
Total Investments | $ 466,805,929 | $ 5,448,189 | $ 461,357,740 | $— |
* | See Portfolio of Investments for industry breakout. |
** | Investment is valued at $0. |
ASSETS: | |
Investments, at value (Cost $466,460,371) | $ 466,805,929 |
Cash | 696,581 |
Receivables: | |
Investment securities sold | 13,813,403 |
Interest | 1,486,664 |
Prepaid expenses | 19,951 |
Unrealized appreciation on unfunded loan commitments | 1,715 |
Total Assets | 482,824,243 |
LIABILITIES: | |
Outstanding loans | 136,000,000 |
Payables: | |
Investment securities purchased | 16,666,973 |
Investment advisory fees | 295,416 |
Audit and tax fees | 78,502 |
Interest and fees on loans | 62,792 |
Legal fees | 37,819 |
Administrative fees | 25,130 |
Shareholder reporting fees | 19,391 |
Custodian fees | 6,720 |
Transfer agent fees | 4,804 |
Trustees’ fees and expenses | 2,584 |
Financial reporting fees | 771 |
Other liabilities | 4,699 |
Total Liabilities | 153,205,601 |
NET ASSETS | $329,618,642 |
NET ASSETS consist of: | |
Paid-in capital | $ 365,431,236 |
Par value | 259,534 |
Accumulated distributable earnings (loss) | (36,072,128) |
NET ASSETS | $329,618,642 |
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) | $12.70 |
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized) | 25,953,421 |
INVESTMENT INCOME: | ||
Interest | $ 19,580,775 | |
Dividends | 59,233 | |
Other | 420,038 | |
Total investment income | 20,060,046 | |
EXPENSES: | ||
Investment advisory fees | 3,474,696 | |
Interest and fees on loans | 1,324,250 | |
Legal fees | 306,847 | |
Administrative fees | 232,027 | |
Audit and tax fees | 80,868 | |
Shareholder reporting fees | 74,621 | |
Transfer agent fees | 28,380 | |
Listing expense | 22,274 | |
Trustees’ fees and expenses | 15,616 | |
Custodian fees | 10,754 | |
Financial reporting fees | 9,250 | |
Other | 43,493 | |
Total expenses | 5,623,076 | |
NET INVESTMENT INCOME (LOSS) | 14,436,970 | |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on investments | (2,412,935) | |
Net change in unrealized appreciation (depreciation) on: | ||
Investments | 25,730,551 | |
Unfunded loan commitments | 1,715 | |
Net change in unrealized appreciation (depreciation) | 25,732,266 | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | 23,319,331 | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ 37,756,301 |
Year Ended 5/31/2021 | Year Ended 5/31/2020 | ||
OPERATIONS: | |||
Net investment income (loss) | $ 14,436,970 | $ 17,565,000 | |
Net realized gain (loss) | (2,412,935) | (9,549,702) | |
Net change in unrealized appreciation (depreciation) | 25,732,266 | (16,261,384) | |
Net increase (decrease) in net assets resulting from operations | 37,756,301 | (8,246,086) | |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
Investment operations | (14,583,268) | (18,222,769) | |
Return of capital | (17,948,187) | (6,758,932) | |
Total distributions to shareholders | (32,531,455) | (24,981,701) | |
CAPITAL TRANSACTIONS: | |||
Repurchase of Common Shares (a) | (7,872,791) | (310,074) | |
Net increase (decrease) in net assets resulting from capital transactions | (7,872,791) | (310,074) | |
Total increase (decrease) in net assets | (2,647,945) | (33,537,861) | |
NET ASSETS: | |||
Beginning of period | 332,266,587 | 365,804,448 | |
End of period | $ 329,618,642 | $ 332,266,587 | |
CAPITAL TRANSACTIONS were as follows: | |||
Common Shares at beginning of period | 26,666,989 | 26,696,982 | |
Common Shares repurchased (a) | (713,568) | (29,993) | |
Common Shares at end of period | 25,953,421 | 26,666,989 |
(a) | On May 12, 2020, the Fund commenced a share repurchase program. For the fiscal years ended May 31, 2021, and May 31, 2020, the Fund repurchased 713,568 and 29,993 Common Shares, respectively, at a weighted-average discount of 12.09% and 13.78%, respectively, from net asset value per share. The Fund’s Share repurchase program ended on March 15, 2021. |
Cash flows from operating activities: | ||
Net increase (decrease) in net assets resulting from operations | $37,756,301 | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities: | ||
Purchases of investments | (493,603,779) | |
Sales, maturities and paydown of investments | 504,922,948 | |
Net amortization/accretion of premiums/discounts on investments | (1,313,721) | |
Net realized gain/loss on investments | 2,412,935 | |
Net change in unrealized appreciation/depreciation on investments and unfunded loan commitments | (25,732,266) | |
Changes in assets and liabilities: | ||
Increase in interest receivable | (323,559) | |
Increase in prepaid expenses | (2,544) | |
Decrease in interest and fees payable on loans | (36,997) | |
Increase in investment advisory fees payable | 15,564 | |
Increase in audit and tax fees payable | 19,481 | |
Increase in legal fees payable | 26,602 | |
Decrease in shareholder reporting fees payable | (1,776) | |
Decrease in administrative fees payable | (67,123) | |
Decrease in custodian fees payable | (16,635) | |
Decrease in transfer agent fees payable | (1,902) | |
Decrease in trustees’ fees and expenses payable | (160) | |
Increase in other liabilities payable | 1,013 | |
Cash provided by operating activities | $24,054,382 | |
Cash flows from financing activities: | ||
Repurchase of Common Shares | (7,872,791) | |
Distributions to Common Shareholders from investment operations | (14,583,268) | |
Distributions to Common Shareholders from return of capital | (17,948,187) | |
Repayment of borrowings | (96,000,000) | |
Proceeds from borrowings | 113,000,000 | |
Cash used in financing activities | (23,404,246) | |
Increase in cash | 650,136 | |
Cash at beginning of period | 46,445 | |
Cash at end of period | $696,581 | |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest and fees | $1,361,247 |
Year Ended May 31, | |||||||||
2021 | 2020 | 2019 | 2018 | 2017 | |||||
Net asset value, beginning of period | $ 12.46 | $ 13.70 | $ 14.05 | $ 14.28 | $ 14.03 | ||||
Income from investment operations: | |||||||||
Net investment income (loss) | 0.55 | 0.67 | 0.74 | 0.70 | 0.78 | ||||
Net realized and unrealized gain (loss) | 0.90 | (0.97) | (0.36) | (0.17) | 0.30 | ||||
Total from investment operations | 1.45 | (0.30) | 0.38 | 0.53 | 1.08 | ||||
Distributions paid to shareholders from: | |||||||||
Net investment income | (0.56) | (0.69) | (0.73) | (0.70) | (0.78) | ||||
Return of capital | (0.69) | (0.25) | — | (0.06) | (0.05) | ||||
Total distributions paid to Common Shareholders | (1.25) | (0.94) | (0.73) | (0.76) | (0.83) | ||||
Common Share repurchases | 0.04 | — | — | — | — | ||||
Net asset value, end of period | $12.70 | $12.46 | $13.70 | $14.05 | $14.28 | ||||
Market value, end of period | $12.60 | $11.12 | $11.98 | $12.99 | $13.62 | ||||
Total return based on net asset value (a) | 13.51% | (1.38)% | 3.44% | 4.24% | 7.99% | ||||
Total return based on market value (a) | 26.18% | 0.65% | (2.17)% | 1.05% | 10.89% | ||||
Ratios to average net assets/supplemental data: | |||||||||
Net assets, end of period (in 000’s) | $ 329,619 | $ 332,267 | $ 365,804 | $ 375,015 | $ 381,298 | ||||
Ratio of total expenses to average net assets | 1.70% | 2.35% | 2.53% | 2.17% | 2.06% | ||||
Ratio of total expenses to average net assets excluding interest expense | 1.30% | 1.26% | 1.24% | 1.26% | 1.33% | ||||
Ratio of net investment income (loss) to average net assets | 4.37% | 4.98% | 5.34% | 4.94% | 5.47% | ||||
Portfolio turnover rate | 78% | 64% | 58% | 101% | 116% (b) | ||||
Indebtedness: | |||||||||
Total loans outstanding (in 000’s) | $ 136,000 | $ 119,000 | $ 163,000 | $ 155,000 | $ 146,000 | ||||
Asset coverage per $1,000 of indebtedness (c) | $ 3,424 | $ 3,792 | $ 3,244 | $ 3,419 | $ 3,612 |
(a) | 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. |
(b) | The variation in portfolio turnover rate is due to a significant increase in the refinancing of the Senior Floating-Rate Loan Interests held by the Fund during the year ended May 31, 2017. |
(c) | Calculated by subtracting the Fund’s total liabilities (not including the loans outstanding) from the Fund’s total assets, and dividing by the outstanding loans balance in 000’s. |
1) | the fundamental business data relating to the borrower; |
2) | an evaluation of the forces which influence the market in which these securities are purchased and sold; |
(1) | The terms “security” and “securities” used throughout the Notes to Financial Statements include Senior Loans. |
3) | the type, size and cost of the security; |
4) | the financial statements of the borrower; |
5) | the credit quality and cash flow of the borrower, based on the Advisor’s or external analysis; |
6) | the information as to any transactions in or offers for the security; |
7) | the price and extent of public trading in similar securities (or equity securities) of the borrower, 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, including any ability to obtain money or resources from a parent or affiliate and an assessment of the borrower’s management; |
11) | the prospects for the borrower’s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry; |
12) | the borrower’s competitive position within the industry; |
13) | the borrower’s ability to access additional liquidity through public and/or private markets; and |
14) | other relevant factors. |
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. |
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 third-party pricing services; |
6) | relationships among various securities; |
7) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
8) | an analysis of the issuer’s financial statements; and |
9) | the existence of merger proposals or tender offers that might affect the value of the security. |
• | 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. |
• | 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. |
• | 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. |
Borrower | Principal Value | Commitment Amount | Value | Unrealized Appreciation (Depreciation) | ||||
Civitas Solutions (National Mentor Holdings, Inc.), Term Loan | $ 88,753 | $ 88,914 | $ 88,809 | $ (105) | ||||
Help at Home (HAH Group Holding Company, LLC), Term Loan | 253,934 | 252,274 | 254,094 | 1,820 | ||||
$341,188 | $342,903 | $1,715 |
Distributions paid from: | 2021 | 2020 |
Ordinary income | $14,583,268 | $18,222,769 |
Return of capital | 17,948,187 | 6,758,932 |
Undistributed ordinary income | $— |
Undistributed capital gains | — |
Total undistributed earnings | — |
Accumulated capital and other losses | (36,567,620) |
Net unrealized appreciation (depreciation) | 495,492 |
Total accumulated earnings (losses) | (36,072,128) |
Other | — |
Paid-in capital | 365,690,770 |
Total net assets | $329,618,642 |
(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. |
• | Invest up to 10% of its Managed Assets through purchasing revolving credit facilities, investment grade debtor-in-possession financing, unsecured loans, other floating rate debt securities, such as notes, bonds, and asset-backed securities (such as collateralized loan obligations (“CLOs”)), investment grade loans and fixed income debt obligations of any maturity, money market instruments, such as commercial paper, and publicly-traded high yield debt securities. |
• | Invest up to 10% of its Managed Assets in securities of: |
o | Firms that, at the time of acquisition, have defaulted on their debt obligations and/or filed for protection under Chapter 11 of the U.S. Bankruptcy Code or have entered into a voluntary reorganization in conjunction with their creditors and stakeholders in order to avoid a bankruptcy filing; or |
o | Firms prior to an event of default whose acute operating and/or financial problems have resulted in the markets valuing their respective securities and debt at sufficiently discounted prices so as to be yielding, should they not default, a significant premium over comparable duration U.S. Treasury bonds. |
• | Invest up to 15% of its Managed Assets in U.S. dollar-denominated foreign investments, exclusively in developed countries and territories of those countries, but in no case will the Fund invest in securities of issuers located in emerging markets. |
Assumed Portfolio Total Return (Net of Expenses) | -10% | -5% | 0% | 5% | 10% |
Common Share Total Return | -14.52% | -7.46% | -0.40% | 6.67% | 13.73% |
Name, Year of Birth and Position with the Fund | Term of Office and Year First Elected or Appointed(1) | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
INDEPENDENT TRUSTEES | ||||
Richard E. Erickson, Trustee (1951) | • Three Year Term • Since Fund Inception | Physician; Officer, Wheaton Orthopedics; Limited Partner, Gundersen Real Estate Limited Partnership (June 1992 to December 2016) | 206 | None |
Thomas R. Kadlec, Trustee (1957) | • Three Year Term • Since Fund Inception | President, ADM Investor Services, Inc. (Futures Commission Merchant) | 206 | Director of ADM Investor Services, Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association |
Robert F. Keith, Trustee (1956) | • Three Year Term • Since June 2006 | President, Hibs Enterprises (Financial and Management Consulting) | 206 | Director of Trust Company of Illinois |
Niel B. Nielson, Trustee (1954) | • Three Year Term • Since Fund Inception | Senior Advisor (August 2018 to Present), Managing Director and Chief Operating Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation (Educational Products and Services) | 206 | None |
INTERESTED TRUSTEE | ||||
James A. Bowen(2), Trustee and Chairman of the Board (1955) | • Three Year Term• Since Fund Inception | Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) | 206 | None |
(1) | Currently, Niel B. Nielson, as Class II Trustee, is serving as a trustee until the Fund’s 2021 annual meeting of shareholders. James A. Bowen and Robert F. Keith, as Class III Trustees, are serving as trustees until the Fund’s 2022 annual meeting of shareholders. Thomas R. Kadlec and Richard E. Erickson, as Class I Trustees, are serving as trustees until the Fund’s 2023 annual meeting of shareholders. |
(2) | Mr. Bowen is deemed an “interested person” of the Fund due to his position as CEO of First Trust Advisors L.P., investment advisor of the Fund. |
Name and Year of Birth | Position and Offices with Fund | Term of Office and Length of Service | Principal Occupations During Past 5 Years |
OFFICERS(3) | |||
James M. Dykas (1966) | President and Chief Executive Officer | • Indefinite Term • Since January 2016 | Managing Director and Chief Financial Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) |
Donald P. Swade (1972) | Treasurer, Chief Financial Officer and Chief Accounting Officer | • Indefinite Term • Since January 2016 | Senior Vice President (July 2016 to Present), Vice President (April 2012 to July 2016), First Trust Advisors L.P. and First Trust Portfolios L.P. |
W. Scott Jardine (1960) | Secretary and Chief Legal Officer | • Indefinite Term • Since Fund Inception | General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC |
Daniel J. Lindquist (1970) | Vice President | • Indefinite Term • Since September 2005 | Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Kristi A. Maher (1966) | Chief Compliance Officer and Assistant Secretary | • Indefinite Term • Assistant Secretary Since Fund Inception | Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P. |
(3) | The term “officer” means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. |
• | Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; |
• | Information about your transactions with us, our affiliates or others; |
• | Information we receive from your inquiries by mail, e-mail or telephone; and |
• | Information we collect on our website through the use of “cookies”. For example, we may identify the pages on our website that your browser requests or visits. |
• | In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. |
• | We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). |
FUND ACCOUNTANT, AND
CUSTODIAN
PUBLIC ACCOUNTING FIRM
(b) | Not applicable. |
Item 2. Code of Ethics.
(a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
(c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
(d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
(e) | Not applicable. |
(f) | A copy of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1). |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s Board of Trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) AUDIT FEES (REGISTRANT) -- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $57,000 for 2020 and $57,000 for 2021.
(b) AUDIT-RELATED FEES (REGISTRANT) -- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2020 and $0 for 2021.
AUDIT-RELATED FEES (INVESTMENT ADVISOR) -- The aggregate fees billed in each of the last two fiscal years of the registrant for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2020 and $0 for 2021.
(c) TAX FEES (REGISTRANT) -- The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant were $5,280 for 2020 and $0 for 2021. These fees were for tax consultation and tax preparation. These fees were for tax consultation and/or tax return preparation and professional services rendered for PFIC (Passive Foreign Investment Company) Identification Services.
TAX FEES (INVESTMENT ADVISOR) -- The aggregate fees billed in each of the last two fiscal years of the registrant for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant’s advisor were $0 for 2020 and $0 for 2021.
(d) ALL OTHER FEES (REGISTRANT) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2020 and $0 for 2021.
ALL OTHER FEES (INVESTMENT ADVISOR) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the Registrant’s investment advisor, other than services reported in paragraphs (a) through (c) of this Item were $0 for 2020 and $0 for 2021.
(e)(1) | Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. |
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the Registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the Registrant’s advisor (not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the Registrant, if the engagement relates directly to the operations and financial reporting of the Registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the Registrant’s advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the Registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor’s independence.
(e)(2) | The percentage of services described in each of paragraphs (b) through (d) for the Registrant and the Registrant’s investment advisor of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows: |
(b) 0%
(c) 0%
(d) 0%
(f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent. |
(g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the Registrant for the fiscal year ended May 31, 2020 were $5,280 for the Registrant and $60,670 for the Registrant’s investment advisor and for the fiscal year ended May 31, 2021 were $0 for the Registrant and $23,200 for the Registrant’s investment advisor. |
(h) | The Registrant’s audit committee of its Board of Trustees determined that the provision of non-audit services that were rendered to the Registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed registrants.
(a) | The registrant has a separately designated standing audit committee consisting of all the independent trustees of the registrant. The members of the audit committee are: Thomas R. Kadlec, Niel B. Nielson, Richard E. Erickson and Robert F. Keith. |
Item 6. Investments.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
The Proxy Voting Policies are attached herewith.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) Identification of Portfolio Manager(s) or Management Team Members and Description of Role of Portfolio Manager(s) or Management Team Members
Information provided as of August 6, 2021.
The First Trust Advisors Leveraged Finance Investment team manages a portfolio comprised primarily of U.S. dollar denominated, senior secured floating-rate loans. The Portfolio Managers are responsible for directing the investment activities within the Fund. William Housey is the Senior Portfolio Manager and has primary responsibility for investment decisions. Jeffrey Scott assists Mr. Housey and there are also Senior Credit Analysts assigned to certain industries. The Portfolio Managers are supported in their portfolio management activities by the First Trust Advisors Leveraged Finance investment team, including a team of credit analysts, designated traders, and operations personnel. Senior Credit Analysts are assigned industries and Associate Credit Analysts support the Senior Credit Analysts. All credit analysts, operations personnel and portfolio managers report to Mr. Housey.
William Housey, CFA
Managing Director of Fixed Income, Senior Portfolio Manager
Mr. Housey joined First Trust in June 2010 as the Senior Portfolio Manager for the Leveraged Finance
Investment Team and has 23 years of investment experience. Mr. Housey is a Senior Vice President of First Trust. Prior to joining First Trust, Mr. Housey was at Morgan Stanley/Van Kampen Funds, Inc. for 11 years and served as Executive Director and Co-Portfolio Manager. Mr. Housey has extensive experience in portfolio management of both leveraged and unleveraged credit products, including bank loans, high yield bonds, credit derivatives and corporate restructurings. Mr. Housey received a BS in Finance from Eastern Illinois University and an MBA in Finance and Management and Strategy from Northwestern University’s Kellogg School of Business. He holds the FINRA Series 7, Series 52 and Series 63 licenses and the Chartered Financial Analyst designation. He is a member of the CFA Institute and the CFA Society of Chicago.
Jeffrey Scott, CFA
Senior-Vice President, Deputy Credit Officer, Portfolio Manager
Mr. Scott, CFA, joined First Trust in June 2010 as a Portfolio Manager in the Leveraged Finance Investment Team and has 30 years of investment management industry experience and has extensive experience in credit analysis, product development and product management. Prior to joining First Trust, Mr. Scott served as an Assistant Portfolio Manager and as a Senior Credit Analyst for Morgan Stanley/Van Kampen from October 2008 to June 2010. As Assistant Portfolio Manager, Mr. Scott served on a team that managed over $4.0 billion of Senior Loan assets in three separate funds: Van Kampen Senior Loan Fund; Van Kampen Senior Income Trust; and Van Kampen Dynamic Credit Opportunities Fund. His responsibilities included assisting with portfolio construction, buy and sell decision making, and monitoring fund liquidity and leverage. Mr. Scott earned a B.S. in Finance and Economics from Elmhurst College and an M.B.A. with specialization in Analytical Finance and Econometrics and Statistics from the University of Chicago. He also holds the Chartered Financial Analyst designation and is a member of the CFA Institute and the CFA Society of Chicago.
(a)(2) Other Accounts Managed by Portfolio Manager(s) or Management Team Member and Potential Conflicts of Interest
Information provided as of May 31, 2021
Name of Portfolio Manager or Team Member | Type of Accounts | Total # of Accounts | Total Assets | # of Accounts Managed for which Advisory Fee is Based on Performance | Total Assets for which Advisory Fee is Based on Performance |
1. William Housey, CFA | Registered Investment Companies: | 6 | $6.307B | 0 | $0 |
Other Pooled Investment Vehicles: | 0 | $0 | 0 | $0 | |
Other Accounts: | 0 | $0 | 0 | $0 | |
2. Jeffrey Scott, CFA | Registered Investment Companies: | 6 | $6.307B | 0 | $0 |
Other Pooled Investment Vehicles: | 0 | $0 | 0 | $0 | |
| Other Accounts: | 0 | $0 | 0 | $0
|
* Information excludes the registrant.
Potential Conflicts of Interests
Potential conflicts of interest may arise when a portfolio manager of the Registrant has day-to-day management responsibilities with respect to one or more other funds or other accounts. The First Trust Advisors Leveraged Finance Investment Team adheres to its trade allocation policy utilizing a pro-rata methodology to address this conflict.
First Trust and its affiliate, First Trust Portfolios L.P. (“FTP”), have in place a joint Code of Ethics and Insider Trading Policies and Procedures that are designed to (a) prevent First Trust personnel from trading securities based upon material inside information in the possession of such personnel and (b) ensure that First Trust personnel avoid actual or potential conflicts of interest or abuse of their positions of trust and responsibility that could occur through such activities as front running securities trades for the Registrant. Personnel are required to have duplicate confirmations and account statements delivered to First Trust and FTP compliance personnel who then compare such trades to trading activity to detect any potential conflict situations. In addition to the personal trading restrictions specified in the Code of Ethics and Insider Trading Policies and Procedures, employees in the First Trust Advisors Leveraged Finance Investment Team are prohibited from buying or selling equity securities (including derivative instruments such as options, warrants and futures) and corporate bonds for their personal account and in any accounts over which they exercise control. Employees in the First Trust Advisors Leveraged Finance Investment Team are also prohibited from engaging in any personal transaction while in possession of material non-public information regarding the security or the issuer of the security. First Trust and FTP also maintain a restricted list of all issuers for which the First Trust Advisors Leveraged Finance Investment Team has material non-public information in its possession and all transactions executed for a product advised or supervised by First Trust or FTP are compared daily against the restricted list.
(a)(3) | Compensation Structure of Portfolio Manager(s) or Management Team Members |
Information provided as of May 31, 2021
The compensation structure for internal portfolio managers is based upon a fixed salary as well as a discretionary bonus determined by the management of FTA. Salaries are determined by management and are based upon an individual’s position and overall value to the firm. Bonuses are also determined by management and are generally based upon an individual’s or team’s overall contribution to the success of the firm, assets under management and the profitability of the firm. Certain internal portfolio managers have an indirect ownership stake in the firm and will therefore receive their allocable share of ownership related distributions.
(a)(4) | Disclosure of Securities Ownership as of May 31, 2021 |
Name of Portfolio Manager or Team Member | Dollar ($) Range of Fund Shares Beneficially Owned |
William Housey |
$50,001 - $100,000 |
Jeffrey Scott |
$10,001-$50,000 |
(b) | Not applicable. |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
Month #1 (06/01/2020– 06/30/2020) | 214,466 | $11.13 | 244,459 | 1,090,390 |
Month #2 (07/01/2020– 07/31/2020) | 111,137 | $10.76 | 355,596 | 979,253 |
Month #3 (08/01/2020– 08/31/2020) | 101,017 | $11.11 | 456,613 | 878,236 |
Month #4 (09/01/2020– 09/30/2020) | 159,906 | $11.14 | 616,519 | 718,330 |
Month #5 (10/01/2020– 10/31/2020) | 118,408 | $10.88 | 734,927 | 599,922 |
Month #6 (11/01/2020– 11/30/2020 | 0 | 0 | 734,927 | 599,922 |
Month #7 (12/01/2020– 12/31/2020 | 0 | 0 | 734,927 | 599,922 |
Month #8 (01/01/2021– 01/31/2021 | 8,634 | $11.55 | 743,561 | 591,288 |
Month #9 (02/01/2021– 02/28/2021 | 0 | 0 | 743,561 | 591,288 |
Month #10 (03/01/2021– 03/31/2021 | 0 | 0 | 743,561 | 0* |
Month #11 (04/01/2021– 04/30/2021) | 0 | 0 | 743,561 | 0 |
Month #12 (05/01/2021– 05/31/2021) | 0 | 0 | 743,561 | 0 |
Total | 713,568 | $11.03 | 743,561 | 0* |
* On May 12, 2020, First Trust announced that the Board of Trustees of First Trust Senior Floating Rate Income Fund II had authorized a share repurchase program. The share repurchase program permitted the Fund to purchase up to 5% of the Fund’s common shares (1,334,849 common shares) in secondary market transactions in accordance with applicable law. Pursuant to the terms of the share repurchase program, the Fund’s share repurchase program expired on March 15, 2021.
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 directors, 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 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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) | Code of Ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a)(3) | Not applicable. |
(a)(4) | 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: | August 6, 2021 |
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: | August 6, 2021 |
By (Signature and Title)* | /s/ Donald P. Swade | |
Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Date: | August 6, 2021 |
* Print the name and title of each signing officer under his or her signature.