UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT
INVESTMENT COMPANY
Investment Company Act file number 811-21539
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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, Suite 400
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, Suite 400
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: August 31, 2016
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Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of
this chapter), to file reports with the Commission, not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use
the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. ss. 3507.
ITEM 1. SCHEDULE OF INVESTMENTS. The Schedule(s) of Investments is attached
herewith.
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a)
AUGUST 31, 2016 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS - 138.8%
AEROSPACE & DEFENSE - 1.7%
$ 400,000 B/E Aerospace, Inc., Term Loan B ............................. 3.75% 12/16/21 $ 403,752
3,833,206 Transdigm, Inc., Term Loan F - Extended ...................... 3.75% 06/15/23 3,823,623
784,000 Transdigm, Inc., Tranche D Term Loan ......................... 3.75% 06/04/21 781,915
1,470,909 Wencor Group LLC (Jazz Acquisition, Inc.), Term (First Lien).. 4.50% 06/19/21 1,326,760
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6,336,050
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ALTERNATIVE CARRIERS - 1.5%
1,000,000 Level 3 Financing, Inc., Tranche B 2020 Term Loan ............ 4.00% 01/15/20 1,005,000
4,476,697 Level 3 Financing, Inc., Tranche B-II 2022 Term .............. 3.50% 05/31/22 4,497,200
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5,502,200
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APPAREL RETAIL - 0.4%
1,539,873 Neiman Marcus Group, Inc., Other Term Loan ................... 4.25% 10/25/20 1,443,631
250,000 Samsonite International S.A., Term Loan B .................... 4.00% 04/30/23 252,500
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1,696,131
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APPLICATION SOFTWARE - 4.1%
4,684,286 Epicor Software Corp., Term B Loan ........................... 4.75% 06/01/22 4,594,113
4,696,832 Infor (US), Inc., Tranche B-5 Term Loan ...................... 3.75% 06/03/20 4,642,818
2,723,013 Informatica Corp. (Ithacalux S.A.R.L), Dollar Term Loan ...... 4.50% 08/05/22 2,627,707
2,280,668 Mitchell International, Inc., Initial Term Loan............... 4.50% 10/13/20 2,274,397
1,355,756 Triple Point Technologies, Inc., Term Loan B ................. 5.25% 07/10/20 1,220,180
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15,359,215
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ASSET MANAGEMENT & CUSTODY BANKS - 2.3%
774,609 American Beacon Advisors, Inc., Term Loan B .................. 5.50% 03/15/22 765,414
1,312,875 Guggenheim Partners Investment Management Holdings LLC,
Initial Term Loan ......................................... 4.25% 07/22/20 1,316,984
1,431,058 Hamilton Lane Advisors LLC, Initial Term Loan ................ 4.25% 07/08/22 1,429,269
631,189 Mondrian Investment Partners Ltd. (MIPL Group Ltd.),
Term Loan B ............................................... 4.00% 03/05/20 630,798
4,562,500 Victory Capital Holdings (VCH Holdings LLC), Initial Term Loan 8.50% 10/29/21 4,422,796
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8,565,261
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AUTO PARTS & EQUIPMENT - 0.6%
882,000 Cooper Standard Holdings (CS Intermediate Holdco2 LLC),
Term Loan ................................................. 4.00% 04/04/21 885,087
See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
AUTO PARTS & EQUIPMENT (CONTINUED)
$ 1,260,727 Tower Automotive Holdings USA LLC, Initial Term Loan (2014) .. 4.00% 04/23/20 $ 1,252,848
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2,137,935
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AUTOMOTIVE RETAIL - 0.6%
2,066,913 KAR Auction Services, Inc., Tranche B-3 Term Loan ............ 4.25% 03/09/23 2,091,468
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BROADCASTING - 4.3%
2,798,370 Cumulus Media Holdings, Inc., Term Loan ...................... 4.25% 12/23/20 1,942,544
1,960,729 Media General, Inc., Term Loan B ............................. 4.00% 07/31/20 1,960,729
1,048,057 Mission Broadcasting, Inc. (Nexstar Broadcasting Group,
Inc.), Term B-2 Loan ...................................... 3.75% 10/01/20 1,047,648
1,188,513 Nexstar Broadcasting Group, Inc. (Mission Broadcasting,
Inc.), Term Loan B-2 ...................................... 3.75% 09/30/20 1,188,050
747,740 Tribune Media Co., Term B Loan ............................... 3.75% 12/27/20 749,146
2,629,787 Univision Communications, Inc., 2013 Incremental Term Loan ... 4.00% 03/01/20 2,627,605
6,911,560 Univision Communications, Inc., Replacement First-Lien
Term Loan ................................................. 4.00% 03/01/20 6,907,620
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16,423,342
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BUILDING PRODUCTS - 1.2%
4,610,160 Quikrete Holdings, Inc., Initial Loan (First Lien) ........... 4.00% 09/28/20 4,622,423
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CABLE & SATELLITE - 1.1%
497,500 Cequel Communications LLC (Altice US Finance I Corp.), Initial
Term Loan ................................................. 4.25% 12/14/22 499,365
2,493,750 CSC Holdings, Inc. (Neptune Finco Corp.), Initial Term Loan .. 5.00% 10/09/22 2,512,977
1,200,000 UPC Financing Partnership, Term Loan AN ...................... 4.08% 07/25/24 1,195,692
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4,208,034
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CASINOS & GAMING - 7.9%
721,875 Amaya Holdings B.V., 2nd Lien TL ............................. 8.00% 07/31/22 716,280
10,695,327 Amaya Holdings B.V., Initial Term B Loan (First Lien) ........ 5.00% 08/01/21 10,578,320
750,000 Boyd Gaming Corp., Term Loan B2 .............................. 3.45% 08/31/23 752,813
7,976,839 Caesars Growth Partners LLC, Term B Loan (First Lien) ........ 6.25% 05/08/21 7,667,736
4,316,388 CityCenter Holdings LLC, Term B Loan ......................... 4.25% 10/16/20 4,338,877
383,654 MGM Growth Properties Operating Partnership LP, Term B Loan .. 4.00% 04/25/23 386,738
5,300,000 Station Casinos, Inc., Term Loan B ........................... 3.75% 05/31/23 5,303,339
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29,744,103
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COAL & CONSUMABLE FUELS - 0.4%
2,667,808 Arch Coal, Inc., Term Loan (d) (e)............................ 7.50% 05/16/18 1,378,376
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See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
COMMERCIAL PRINTING - 0.3%
$ 1,233,333 Southern Graphic, Inc., Term Loan ............................ 4.25% 10/17/19 $ 1,230,250
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CONSTRUCTION MATERIALS - 0.2%
643,500 Summit Materials, Inc., Restatement Effective Date
Term Loans ................................................ 4.00% 07/15/22 645,913
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CONSUMER FINANCE - 1.4%
2,519,306 Altisource Solutions S.A.R.L., Term B Loan ................... 4.50% 12/09/20 2,308,315
3,064,626 Walter Investment Management Corp., Tranche B Term Loan ...... 4.75% 12/18/20 2,804,133
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5,112,448
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DISTRIBUTORS - 0.2%
837,884 HD Supply, Inc., Term Loan ................................... 3.75% 08/13/21 842,074
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DIVERSIFIED CHEMICALS - 0.1%
394,997 Ineos US Finance LLC, 2022 Dollar Term Loan .................. 4.25% 03/31/22 395,740
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EDUCATION SERVICES - 0.1%
246,875 Bright Horizons Family Solutions, Inc., Term B-1 Loan ........ 4.25%-5.50% 01/30/20 247,245
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ELECTRIC UTILITIES - 2.5%
375,000 Dayton Power & Light Co., Term Loan B ........................ 4.00% 08/31/22 377,580
4,241,410 TXU (Texas Competitive Electric Holdings Co. LLC), 2014
Term Loan (Non-Extending)(d)(e) ........................... 4.92% 10/10/14 1,334,984
2,250,000 TXU (Texas Competitive Electric Holdings Co. LLC), 2017
Term Loan (Extending)(d)(e) ............................... 4.92% 10/10/17 20,000
5,748,857 TXU (Texas Competitive Electric Holdings Co. LLC), DIP
Term Loan B (d) ........................................... 5.00% 10/31/17 5,761,792
1,311,143 TXU (Texas Competitive Electric Holdings Co. LLC), DIP
Term Loan C (d) ........................................... 5.00% 10/31/17 1,314,093
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9,508,449
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ENVIRONMENTAL & FACILITIES SERVICES - 1.0%
492,500 PSSI (Packers Holdings LLC), Term B Loan ..................... 5.00% 12/02/21 493,731
1,672,719 ServiceMaster Co., Initial Term Loan ......................... 4.25% 07/01/21 1,682,755
1,560,000 WTG Holdings III Corp. (EWT Holdings III Corp.), Term Loan
(First Lien) .............................................. 4.75% 01/15/21 1,563,900
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3,740,386
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FOOD DISTRIBUTORS - 0.3%
1,200,000 US Foods, Inc., Term Loan B .................................. 4.00% 06/30/23 1,205,256
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FOOD RETAIL - 2.7%
10,196,991 Albertsons LLC, New Term Loan B4 ............................. 4.50% 08/25/21 10,236,555
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HEALTH CARE EQUIPMENT - 2.8%
1,348,424 Alere, Inc., Term B Loan ..................................... 4.25% 06/15/22 1,331,568
See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
HEALTH CARE EQUIPMENT (CONTINUED)
$ 3,267,000 DJO Finance LLC (ReAble Therapeutics Finance LLC), Initial
Term Loan ................................................. 4.25% 06/08/20 $ 3,147,199
5,986,500 Kinetic Concepts, Inc., Term Loan F .......................... 5.00% 11/01/20 6,008,950
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10,487,717
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HEALTH CARE FACILITIES - 7.0%
1,086,897 Acadia Healthcare Co., Inc., Term Loan B1 .................... 3.75% 02/11/22 1,085,538
1,243,750 Acadia Healthcare Co., Inc., Tranche B-2 Term Loan ........... 4.50% 02/16/23 1,248,414
6,373,504 CHS/Community Health Systems, Inc., Incremental 2021
Term H Loan ............................................... 4.00% 01/27/21 6,107,155
1,361,250 Concentra, Inc. (MJ Acquisition Corp.), Term Loan B .......... 5.50% 05/15/22 1,362,952
6,420,277 Kindred Healthcare, Inc., New Term Loan ...................... 4.25% 04/09/21 6,350,745
2,710,823 National Veterinary Associates (NVA Holdings, Inc.),
Term Loan (First Lien) .................................... 4.75% 08/14/21 2,706,296
7,565,900 Select Medical Corp., Term Loan F ............................ 6.00%-7.50% 02/28/21 7,613,187
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26,474,287
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HEALTH CARE SERVICES - 9.0%
2,762,719 21st Century Oncology, Inc., Tranche B Term Loan ............. 7.13% 04/30/22 2,624,583
3,465,000 Air Medical Group Holdings, Inc., Initial Term Loan .......... 4.25% 04/28/22 3,411,951
802,083 AMAG Pharmaceuticals, Inc., Initial Term Loan ................ 4.75% 08/17/21 802,083
3,953,104 CareCore National LLC, Term Loan ............................. 5.50% 03/05/21 3,854,277
1,396,500 CHG Healthcare Services, Inc, Term Loan B .................... 4.75% 05/31/23 1,404,362
3,209,375 Curo Health Services Holdings, Inc., Term B Loan
(First Lien) .............................................. 6.50% 02/07/22 3,209,375
4,112,253 Envision Healthcare Corp. (Emergency Medical Services Corp,),
Initial Term Loan ......................................... 4.25% 05/25/18 4,112,253
248,750 Envision Healthcare Corp. (Emergency Medical Services Corp.),
Tranche B-2 Term Loan ..................................... 4.50% 10/28/22 248,984
666,667 ExamWorks Group, Inc., Term Loan B ........................... 4.75% 08/31/23 668,333
4,670,569 Healogics, Inc. (CDRH Parent, Inc.), Initial Term Loan
(First Lien) .............................................. 5.25% 07/01/21 3,969,983
1,482,450 Surgery Centers Holdings, Inc., Initial Term Loan
(First Lien) .............................................. 5.25% 11/03/20 1,482,450
987,500 Surgical Care Affiliates LLC, Initial Term Loan .............. 4.25% 03/17/22 990,591
2,156,419 Team Health, Inc., Term Loan B ............................... 3.75% 11/23/22 2,160,904
5,379,173 U.S. Renal Care, Inc., Term Loan B ........................... 5.25% 12/30/22 5,177,454
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34,117,583
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See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
HEALTH CARE SUPPLIES - 0.1%
$ 451,113 ConvaTec, Inc., TLB .......................................... 4.25% 06/30/20 $ 452,128
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HEALTH CARE TECHNOLOGY - 0.6%
2,410,257 Connolly Holdings, Inc. (Cotiviti Corp.), Term Loan B ........ 4.50% 05/14/21 2,414,017
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HOMEFURNISHING RETAIL - 0.6%
2,125,511 Serta Simmons Holdings LLC, Term Loan B ...................... 4.25% 10/01/19 2,131,888
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HOTELS, RESORTS & CRUISE LINES - 1.7%
1,440,000 Extended Stay America (ESH Hospitality, Inc.), Term Loan B ... 3.75% 08/31/23 1,442,995
444,509 Hilton Worldwide Finance LLC, Initial Term Loan .............. 3.50% 10/25/20 445,714
4,555,491 Hilton Worldwide Finance LLC, Term Loan B2 ................... 3.02%-3.21% 10/26/23 4,575,991
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6,464,700
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HOUSEHOLD PRODUCTS - 0.2%
760,734 Spectrum Brands, Inc., USD Term Loan ......................... 3.50%-5.25% 06/23/22 763,465
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HYPERMARKETS & SUPER CENTERS - 3.1%
2,488,092 BJ's Wholesale Club, Inc., 2013 (November) Replacement Loan
(Second Lien) ............................................. 8.50% 03/26/20 2,492,247
9,177,981 BJ's Wholesale Club, Inc., New 2013 (November) Replacement
Loan (First Lien) ......................................... 4.50% 09/26/19 9,169,078
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11,661,325
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INDEPENDENT POWER PRODUCERS & ENERGY TRADERS - 0.5%
1,980,000 Calpine Corp., Term Loan ..................................... 3.50% 05/27/22 1,980,554
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INDUSTRIAL CONGLOMERATES - 0.2%
1,000,000 Gardner Denver, Inc., Initial Dollar Term Loan ............... 4.25% 07/30/20 948,280
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INDUSTRIAL MACHINERY - 0.3%
1,182,000 Douglas Dynamics LLC, Term Loan B ............................ 5.25% 12/02/21 1,184,955
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INSURANCE BROKERS - 4.6%
3,408,786 Amwins Group LLC, Term Loan B ................................ 4.75% 09/06/19 3,425,216
3,873,247 Confie Seguros Holding II Co., Term B Loan (First Lien) ...... 5.75% 11/09/18 3,840,324
2,534,658 HUB International Ltd., Initial Term Loan (New) .............. 4.00% 10/02/20 2,524,367
395,000 Hyperion Finance S.A.R.L., Initial Term Loan ................. 5.50% 04/29/22 381,503
2,624,729 National Financial Partners Corp., 2014 Specified Refinancing
Term Loan ................................................. 4.50% 07/01/20 2,614,886
4,777,771 USI, Inc. (Compass Investors, Inc.), Initial Term Loan ....... 4.25% 12/27/19 4,767,833
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17,554,129
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See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
INTEGRATED TELECOMMUNICATION SERVICES - 3.4%
$ 2,917,500 Cincinnati Bell, Inc., Tranche B Term Loan ................... 4.00% 09/10/20 $ 2,917,500
1,925,537 Hawaiian Telcom Communications, Inc., Term Loan .............. 5.25% 06/06/19 1,930,351
4,873,908 Numericable U.S. LLC (Altice France S.A.), USD TLB-6 ......... 4.75% 02/10/23 4,886,092
3,139,731 Numericable U.S. LLC (Altice France S.A.), USD TLB-7 Loan .... 5.00% 01/15/24 3,156,214
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12,890,157
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LEISURE FACILITIES - 1.9%
3,799,887 ClubCorp Club Operations, Inc., Term Loan B .................. 4.25% 12/08/22 3,814,137
1,403,315 Life Time Fitness, Inc., Closing Date Term Loan .............. 4.25% 06/10/22 1,404,200
1,915,937 Planet Fitness Holdings LLC, Term Loan ....................... 4.50% 03/31/21 1,927,911
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7,146,248
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LIFE SCIENCES TOOLS & SERVICES - 7.1%
5,326,275 Immucor, Inc., Term B-2 Loan ................................. 5.00% 08/19/18 5,163,184
529,164 InVentiv Health, Inc., Term B-3 Loan ......................... 7.75% 05/15/18 529,497
7,626,842 InVentiv Health, Inc., Term B-4 Loan ......................... 7.75% 05/15/18 7,633,172
538,136 Millennium Laboratories LLC (New Millennium Holdco.),
Closing Date Term Loan (f) ................................ 7.50% 12/21/20 255,615
7,528,144 Ortho-Clinical Diagnostics, Inc. (Crimson Merger Sub, Inc.),
Initial Term Loan ......................................... 4.75% 06/30/21 7,344,684
3,567,007 Pharmaceutical Product Development, Inc., Initial Term Loan .. 4.25% 08/18/22 3,576,816
2,183,500 Sterigenics International (STHI Intermediate Holding Corp,),
Initial Term Loan ......................................... 4.25% 05/16/22 2,176,687
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26,679,655
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MANAGED HEALTH CARE - 1.7%
6,412,072 MultiPlan, Inc. (MPH Acquisition Holdings LLC), Term Loan B .. 5.00% 06/15/23 6,478,886
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METAL & GLASS CONTAINERS - 0.8%
611,210 Anchor Glass Container Corp., Term B Loan .................... 4.75% 07/01/22 615,030
371,026 Ardagh Holdings USA, Inc. (Ardagh Packaging Finance S.A.),
New Term Loan ............................................. 4.00% 12/17/19 372,302
2,117,013 Berlin Packaging LLC, Initial Term Loan (First Lien) ......... 4.50% 10/01/21 2,117,394
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3,104,726
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MOVIES & ENTERTAINMENT - 2.0%
281,208 AMC Entertainment, Inc., Term Loan B ......................... 4.00% 12/10/22 282,792
1,182,000 Creative Artists Agency LLC (CAA Holdings LLC), Term Loan B .. 5.00% 12/17/21 1,184,955
See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
MOVIES & ENTERTAINMENT (CONTINUED)
$ 4,350,283 Formula One (Delta 2 Lux S.A.R.L.), Facility B3 (USD) ........ 4.75% 07/30/21 $ 4,325,269
1,953,566 WME IMG Worldwide, Inc., Term Loan (First Lien) .............. 5.25% 05/06/21 1,955,402
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7,748,418
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OIL & GAS EXPLORATION & PRODUCTION - 0.2%
1,000,000 American Energy Marcellus Holdings LLC (Ascent Resources -
Marcellus LLC), Initial Loan (First Lien) ................. 5.25% 08/04/20 487,000
1,888,889 American Energy Marcellus Holdings LLC (Ascent Resources -
Marcellus LLC), Initial Loan (Second Lien) ................ 8.50% 08/04/21 144,028
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631,028
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OIL & GAS STORAGE & TRANSPORTATION - 0.1%
1,000,000 Fieldwood Energy LLC, Closing Date Loan (Second Lien) ........ 8.38% 09/30/20 360,000
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OTHER DIVERSIFIED FINANCIAL SERVICES - 2.7%
4,484,993 First Data Corp., 2021 New Dollar Term Loan .................. 4.52% 03/24/21 4,505,759
2,780,000 iPayment, Inc., Term Loan .................................... 6.75% 05/08/17 2,661,850
3,200,000 Wex, Inc., Term Loan B ...................................... 4.25% 06/30/23 3,222,272
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10,389,881
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PACKAGED FOODS & MEATS - 5.0%
5,500,000 Amplify Snack Brands, Inc., Term Loan B ...................... 6.50% 08/31/23 5,454,185
682,784 B&G Foods, Inc., Tranche B Term Loan ......................... 3.75% 11/02/22 686,198
9,452,381 New HB Acquisition LLC, Term B Loan (First Lien) ............. 4.50% 08/03/22 9,497,280
3,348,315 New HB Acquisition LLC, Term B Loan (Second Lien) ............ 8.50% 08/03/23 3,352,500
-------------
18,990,163
-------------
PAPER PACKAGING - 1.7%
6,375,104 Reynolds Group Holdings, Inc., Term Loan B ................... 4.25% 01/14/23 6,381,097
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PHARMACEUTICALS - 10.5%
1,682,692 Akorn, Inc., Loan ............................................ 5.25% 04/16/21 1,697,416
3,591,524 Amneal Pharmaceuticals LLC, Term Loan B ...................... 4.50% 11/01/19 3,587,034
2,286,673 Catalent Pharma Solutions, Inc., Dollar Term Loan ............ 4.25% 05/20/21 2,298,518
10,311,130 Concordia Healthcare Corp., Initial Dollar Term .............. 5.25% 10/21/21 9,748,864
5,380,481 Endo Pharmaceuticals Holdings, Inc., 2015 Incremental
Term B Loan ............................................... 3.75% 06/27/22 5,348,521
4,503,267 Horizon Pharma, Inc., Term Loan B ............................ 4.50% 04/30/21 4,492,009
1,372,000 Patheon, Inc. (JLL/Delta Dutch Newco B.V.), Initial Dollar
Term Loan ................................................. 4.25% 03/11/21 1,366,004
See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
PHARMACEUTICALS (CONTINUED)
$ 496,225 Valeant Pharmaceuticals International, Inc., Series C-2
Tranche B Term Loan ....................................... 5.25% 12/11/19 $ 496,846
9,739,478 Valeant Pharmaceuticals International, Inc., Series F-1
Tranche B Term Loan ....................................... 5.50% 04/01/22 9,751,653
1,009,488 Valeant Pharmaceuticals International, Inc., Term Loan BD .... 5.00% 02/13/19 1,007,803
-------------
39,794,668
-------------
PROPERTY & CASUALTY INSURANCE - 0.9%
194,886 Cunningham Lindsey U.S., Inc., Initial Loan
(Second Lien) (g) ......................................... 9.25% 06/10/20 73,326
2,802,086 Cunningham Lindsey U.S., Inc., Initial Term Loan
(First Lien) .............................................. 5.00% 12/10/19 2,255,679
1,200,000 Sedgwick Claims Management Services, Inc., Initial Loan
(Second Lien) ............................................. 6.75% 02/28/22 1,185,996
-------------
3,515,001
-------------
REAL ESTATE SERVICES - 2.3%
8,613,000 DTZ Worldwide LTD., 2015-1 Additional Term Loan .............. 4.25% 11/04/21 8,567,265
-------------
RESEARCH & CONSULTING SERVICES - 4.7%
5,060,544 Acosta, Inc., Term Loan B .................................... 4.25% 09/26/21 4,919,254
6,812,233 Advantage Sales & Marketing, Inc., Initial Term
(First Lien) .............................................. 4.25% 07/23/21 6,756,032
1,770,695 Information Resources, Inc., Term Loan ....................... 4.75% 09/30/20 1,777,335
4,335,098 TransUnion LLC, 2015 Term B-2 Loan ........................... 3.50% 04/09/21 4,347,756
-------------
17,800,377
-------------
RESTAURANTS - 6.4%
1,424,914 Burger King Corp. (1011778 B.C. ULC), Term B-2 Loan .......... 3.75% 12/10/21 1,430,257
3,685,028 Focus Brands, Inc., Refinancing Term Loan (First Lien) ....... 4.25% 02/21/18 3,696,562
1,450,000 Focus Brands, Inc., Term Loan (Second Lien) .................. 10.25% 08/21/18 1,448,188
8,341,454 Portillo's Holdings LLC, Second Lien Term Loan ............... 8.00% 08/15/22 8,299,747
7,976,330 Portillo's Holdings LLC, Term B Loan (First Lien) ............ 4.75% 08/02/21 7,909,888
1,263,214 Red Lobster Management LLC, Initial Term Loan (First Lien) ... 6.25% 07/28/21 1,266,372
-------------
24,051,014
-------------
RETAIL REITS - 0.8%
1,050,000 Capital Automotive LLC, Term Loan (Second Lien) .............. 6.00% 04/30/20 1,054,462
1,811,681 Capital Automotive LLC, Tranche B-1 Term Loan Facility ....... 4.00% 04/10/19 1,815,830
-------------
2,870,292
-------------
See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
SECURITY & ALARM SERVICES - 0.2%
$ 178,292 Garda World Security Corp., Term B Delayed Draw Loan ......... 4.00% 11/06/20 $ 175,394
696,958 Garda World Security Corp., Term Loan B ...................... 4.00%-5.50% 10/18/20 685,633
-------------
861,027
-------------
SEMICONDUCTORS - 3.1%
6,313,162 Avago Technologies Cayman Ltd. (BC Luxembourg S.A.R.L.),
Term Loan B3 .............................................. 3.51% 02/01/23 6,367,519
2,513,820 Micron Technology, Inc., Term Loan ........................... 6.64% 04/26/22 2,537,903
888,668 NXP B.V., Tranche B Loan ..................................... 3.75% 12/07/20 893,386
2,040,000 Western Digital Corp., Term Loan B ........................... 4.50% 08/31/23 2,050,567
-------------
11,849,375
-------------
SOFT DRINKS - 2.0%
7,358,133 Keurig Green Mountain, Inc. (Maple Holdings Acquisition
Corp.), Term B USD Loan ................................... 5.25% 03/03/23 7,424,357
-------------
SPECIALIZED CONSUMER SERVICES - 2.6%
4,247,164 Asurion LLC, Incremental Tranche B-1 Term Loan ............... 5.00% 05/24/19 4,249,500
4,621,351 Asurion LLC, Incremental Tranche B-4 Term Loan .............. 5.00% 08/04/22 4,619,688
1,058,824 Asurion LLC, Term Loan (Second Lien) ......................... 8.50% 03/03/21 1,054,588
-------------
9,923,776
-------------
SPECIALIZED FINANCE - 0.9%
1,290,250 AlixPartners LLP, Initial Term Loan .......................... 4.50% 07/15/22 1,296,701
2,258,078 Duff & Phelps Corp., Initial Term Loan ....................... 4.75% 04/23/20 2,253,856
-------------
3,550,557
-------------
SPECIALTY CHEMICALS - 0.6%
1,571,172 Platform Specialty Products Corp. (fka: Macdermid, Inc.),
Tranche B-2 Term Loan ..................................... 5.50% 06/07/20 1,569,208
528,000 Trinseo Materials Operating S.C.A., Term Loan B .............. 4.25% 10/13/21 530,144
-------------
2,099,352
-------------
SPECIALTY STORES - 3.6%
992,445 Party City Holdings, Inc., Term Loan ......................... 4.25%-4.49% 08/06/22 993,526
8,629,231 PetSmart, Inc., Tranche B-1 Loan ............................. 4.25% 03/11/22 8,641,484
2,290,434 Toys "R" US-Delaware, Inc., Term B-2 Loan .................... 5.25% 05/25/18 2,155,871
2,011,822 Toys "R" US-Delaware, Inc., Term B4 Loan ..................... 9.75% 04/25/20 1,780,463
-------------
13,571,344
-------------
SYSTEMS SOFTWARE - 5.2%
528,973 Applied Systems, Inc., Initial Term Loan (First Lien) ........ 4.00% 01/25/21 529,634
See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
PRINCIPAL STATED
VALUE DESCRIPTION RATE (b) MATURITY (c) VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
SENIOR FLOATING-RATE LOAN INTERESTS (CONTINUED)
SYSTEMS SOFTWARE (CONTINUED)
$ 533,266 Applied Systems, Inc., Initial Term Loan (Second Lien) ....... 7.50% 01/24/22 $ 534,765
1,650,000 Avast Software B.V. (Sybil Software LLC), Term Loan B ........ 5.00% 08/31/22 1,651,551
12,357,827 BMC Software Finance, Inc., Initial US Term Loan ............. 5.00% 09/10/20 11,783,683
1,850,000 Compuware Corp., Term Loan B ................................. 6.25% 12/31/19 1,843,062
3,400,000 Vertafore, Inc., Term Loan B ................................. 4.75% 06/30/23 3,405,202
-------------
19,747,897
-------------
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS - 2.8%
10,625,000 Dell, Inc. (Diamond 1 Finance Corp.), Term Loan B ............ 4.00% 06/15/22 10,681,950
-------------
TOTAL SENIOR FLOATING-RATE LOAN INTERESTS ............................................... 524,972,393
(Cost $537,245,605) -------------
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
-------------- -------------------------------------------------------------- ----------- ------------ -------------
CORPORATE BONDS AND NOTES - 3.8%
ALTERNATIVE CARRIERS - 0.2%
1,200,000 Intelsat Luxembourg S.A. (Luxembourg) ........................ 6.75% 06/01/18 786,000
-------------
AUTO PARTS & EQUIPMENT - 0.1%
500,000 MPG Holdco I, Inc. ........................................... 7.38% 10/15/22 517,810
-------------
CABLE & SATELLITE - 0.3%
1,000,000 CCO Holdings LLC/CCO Holdings Capital Corp. .................. 5.75% 01/15/24 1,066,250
-------------
CASINOS & GAMING - 1.3%
4,900,000 Caesars Growth Properties Holdings LLC/Caesars Growth
Properties Finance, Inc. .................................. 9.38% 05/01/22 4,961,250
-------------
HEALTH CARE FACILITIES - 0.8%
350,000 CHS/Community Health Systems, Inc. ........................... 6.88% 02/01/22 292,250
1,000,000 Select Medical Corp. ......................................... 6.38% 06/01/21 1,006,250
800,000 Tenet Healthcare Corp. ....................................... 6.00% 10/01/20 847,000
1,000,000 Tenet Healthcare Corp. ....................................... 8.13% 04/01/22 1,017,500
-------------
3,163,000
-------------
LIFE SCIENCES TOOLS & SERVICES - 0.6%
2,500,000 Crimson Merger Sub, Inc. (h) ................................. 6.63% 05/15/22 2,243,750
-------------
PHARMACEUTICALS - 0.2%
620,000 Valeant Pharmaceuticals International, Inc. (Canada) (h) ..... 5.38%(h) 03/15/20 587,450
-------------
SECURITY & ALARM SERVICES - 0.3%
1,000,000 Garda World Security Corp. (Canada) (h) ...................... 7.25% 11/15/21 917,500
-------------
TOTAL CORPORATE BONDS AND NOTES.......................................................... 14,243,010
(Cost $14,942,572) -------------
See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
SHARES DESCRIPTION VALUE
-------------- ----------------------------------------------------------------------------------------- -------------
COMMON STOCKS - 0.0%
COMMODITY CHEMICALS - 0.0%
20 LyondellBasell Industries N.V., Class A ................................................. $ 1,578
-------------
LIFE SCIENCES TOOLS & SERVICES - 0.0%
15,800 New Millennium Holdco, Inc. (f) (i) (j).................................................. 15,531
-------------
TOTAL COMMON STOCKS...................................................................... 17,109
(Cost $79,000) -------------
RIGHTS - 0.0%
LIFE SCIENCES TOOLS & SERVICES - 0.0%
1New Millennium Holdco, Inc., Corporate Claim Trust (f) (g) (i) (k) ..................... 0
1New Millennium Holdco, Inc., Lender Claim Trust (f) (g) (i) (k) ........................ 0
-------------
TOTAL RIGHTS............................................................................. 0
(Cost $0) -------------
WARRANTS - 0.0%
BROADCASTING - 0.0%
1,449 Cumulus Media, Inc. (g) (i) (k) (l) ..................................................... 0
(Cost $0) -------------
TOTAL INVESTMENTS - 142.6% .............................................................. 539,232,512
(Cost $552,267,177) (m) -------------
OUTSTANDING LOAN - (40.7%) .............................................................. (154,000,000)
NET OTHER ASSETS AND LIABILITIES - (1.9%) ............................................... (7,008,135)
-------------
NET ASSETS - 100.0%...................................................................... $ 378,224,377
=============
-----------------------------
(a) All or a portion of the securities are available to serve as collateral on
the outstanding loan.
(b) Senior Floating-Rate Loan Interests ("Senior Loans") in which the Fund
invests pay interest at rates which are periodically predetermined by
reference to a base lending rate plus a premium. These base lending rates
are generally (i) the lending rate offered by one or more major European
banks, such as the London Inter-Bank Offered Rate ("LIBOR"), (ii) the
prime rate offered by one or more United States banks or (iii) the
certificate of deposit rate. Certain Senior Loans are subject to a LIBOR
floor that establishes a minimum LIBOR rate. The interest rate shown
reflects the rate in effect at August 31, 2016. 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 issuer has filed for protection in federal bankruptcy court.
(e) This issuer is in default but interest is still being accrued by the Fund
and paid by the issuer.
See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
(f) On December 21, 2015, Millennium Health, LLC completed a Bankruptcy Plan
of Reorganization. As part of the Bankruptcy Plan of Reorganization, the
holders of Millennium Laboratories LLC, Tranche B Term Loan received a
portion of a new term loan and a pro rata share of the newly issued common
equity shares in New Millennium Holdco, Inc., the new company. Each lender
was also issued a beneficial interest in the Corporate Claim Trust
entitling it, as holder of such beneficial interest, to receive Corporate
Claim Trust Distributions when and if net cash proceeds from the pursuit
of Retained Corporate Causes of Action are available to make such a
distribution. In addition, each lender was issued a beneficial interest in
the Lender Claim Trust entitling it, as holder of such beneficial
interest, to receive Lender Claim Trust Distributions when and if net cash
proceeds from the pursuit of Retained Lender Causes of Action are
available to make such a distribution.
(g) Pursuant to procedures adopted by the Fund's Board of Trustees, this
security has been determined to be illiquid by First Trust Advisors L.P.
(the "Advisor").
(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 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
August 31, 2016, securities noted as such amounted to $3,748,700 or 1.0%
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 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 the security is determined based on security-specific factors and
assumptions, which require subjective judgment. At August 31, 2016,
security noted as such amounted to $15,531 or 0.0% of net assets.
(k) This security is fair valued by the Pricing Committee of the Advisor 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 August 31, 2016, investments noted as such are valued at $0 or
0.0% of net assets.
(l) This security is restricted and cannot be offered for public sale without
first being registered under the 1933 Act. Prior to registration,
restricted securities may only be resold in transactions exempt from
registration (See Note D - Restricted Securities in the Notes to Portfolio
of Investments).
(m) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of August 31, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $2,597,016 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $15,631,681.
See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of August 31,
2016 is as follows (see Note 2A - Portfolio Valuation in the Notes to Portfolio
of Investments):
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
INVESTMENTS 8/31/2016 PRICES INPUTS INPUTS
------------------------------------------------ ------------- ------------- ------------- -------------
Senior Floating-Rate Loan Interests:
Property & Casualty Insurance $ 3,515,001 $ -- $ 3,441,675 $ 73,326
Other Industry Categories* 521,457,392 -- 521,457,392 --
------------- ------------- ------------- -------------
Total Senior Floating-Rate Loan Interests 524,972,393 -- 524,899,067 73,326
Corporate Bonds and Notes* 14,243,010 -- 14,243,010 --
Common Stocks:
Commodity Chemicals 1,578 1,578 -- --
Life Sciences Tools & Services 15,531 -- 15,531 --
------------- ------------- ------------- -------------
Total Common Stocks 17,109 1,578 15,531 --
Rights* -- ** -- -- -- **
Warrants* -- ** -- -- ** --
------------- ------------- ------------- -------------
TOTAL INVESTMENTS $ 539,232,512 $ 1,578 $ 539,157,608 $ 73,326
============= ============= ============= =============
* See the Portfolio of Investments for the industry breakout. Industry
categories are only shown separately if they include holdings in two or more
levels or have holdings in only Level 3.
** Investment is valued at $0.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. There were no
transfers between levels at August 31, 2016.
Level 3 Senior Floating-Rate Loan Interests and Rights that are fair valued by
the Advisor's Pricing Committee are footnoted in the Portfolio of Investments.
Level 3 Senior Floating-Rate Loan Interests are valued based on either
third-party pricing service prices obtained from dealer runs and indicative
sheets from brokers or are valued using broker quotes. The Level 3 Rights values
are based on unobservable and non-quantitative inputs. The Fund's Board of
Trustees has adopted valuation procedures that are utilized by the Advisor's
Pricing Committee to oversee the day-to-day valuation of the Fund's investments.
The Advisor's Pricing Committee, through the Fund's fund accounting agent,
monitors the daily pricing via tolerance checks and stale and unchanged price
reviews. The Advisor's Pricing Committee also reviews monthly back testing of
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.
See Notes to Portfolio of Investments
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
PORTFOLIO OF INVESTMENTS (CONTINUED)
AUGUST 31, 2016 (UNAUDITED)
The following table presents the Fund's investments measured at fair value on a
recurring basis using significant unobservable inputs (Level 3) for the period
presented:
BEGINNING BALANCE AT MAY 31, 2016
Senior Floating-Rate Loan Interests $ 2,528,145
Rights -- **
Net Realized Gain (Loss)
Senior Floating-Rate Loan Interests (24,930)
Rights --
Net Change in Unrealized Appreciation/Depreciation
Senior Floating-Rate Loan Interests 107,468
Rights --
Purchases
Senior Floating-Rate Loan Interests --
Rights --
Sales
Senior Floating-Rate Loan Interests (2,537,357)
Rights --
Transfers In
Senior Floating-Rate Loan Interests --
Rights --
Transfers Out
Senior Floating-Rate Loan Interests --
Rights --
ENDING BALANCE AT AUGUST 31, 2016
Senior Floating-Rate Loan Interests 73,326
Rights -- **
--------------
Total Level 3 holdings $ 73,326
==============
** Investment is valued at $0.
There was a net change of $(26,715) in unrealized appreciation (depreciation)
from Level 3 investments held as of August 31, 2016.
See Notes to Portfolio of Investments
NOTES TO PORTFOLIO OF INVESTMENTS
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
AUGUST 31, 2016 (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 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, 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."
2. VALUATION AND INVESTMENT PRACTICES
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 floating-rate loan interests ("Senior Loans") (1) 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 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;
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.
(1) The terms "security" and "securities" used throughout the Notes to
Portfolio of Investments include Senior Loans.
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
AUGUST 31, 2016 (UNAUDITED)
Common stocks and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq Stock Market LLC ("Nasdaq") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for Nasdaq and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Corporate bonds, corporate notes and other debt securities are valued on
the basis of valuations provided by dealers who make markets in such
securities or by a third-party pricing service approved by the Fund's
Board of Trustees, which may use the following valuation inputs when
available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Fixed-income and other debt securities having a remaining maturity of 60
days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes
thereto;
2) the liquidity conditions in the relevant market and changes
thereto;
3) the interest rate conditions in the relevant market and
changes thereto (such as significant changes in interest
rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing
Committee may use last-obtained market-based data to assist it
when valuing portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Fund's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended (the "1933 Act")) for which a 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.
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:
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II (FCT)
AUGUST 31, 2016 (UNAUDITED)
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 August 31, 2016, is
included with the Fund's Portfolio of Investments.
B. SECURITY TRANSACTIONS
Security transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Interest income is recorded on the accrual basis. Market premiums and discounts
are amortized over the expected life of each respective borrowing.
Securities purchased or sold on a when-issued, delayed-delivery or forward
purchase commitment basis may have extended settlement periods. The value of the
security so purchased is subject to market fluctuations during this period. Due
to the nature of the Senior Loan market, the actual settlement date may not be
certain at the time of the purchase or sale for some of the Senior Loans.
Interest income on such Senior Loans is not accrued until settlement date. The
Fund maintains liquid assets with a current value at least equal to the amount
of its when-issued, delayed delivery or forward purchase commitments. The Fund
didn't have any when-issued, delayed-delivery or forward purchase commitments as
of August 31, 2016.
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 did not have any unfunded delayed draw loan
commitments as of August 31, 2016.
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 August 31, 2016, 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%
ITEM 2. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal quarter
that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) First Trust Senior Floating Rate Income Fund II
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By (Signature and Title)* /s/ James M. Dykas
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James M. Dykas
President and Chief Executive Officer
(principal executive officer)
Date: October 20, 2016
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas
President and Chief Executive Officer
(principal executive officer)
Date: October 20, 2016
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By (Signature and Title)* /s/ Donald P. Swade
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Donald P. Swade
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: October 20, 2016
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*Print the name and title of each signing officer under his or her signature.