W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive
Wheaton, IL 60187
(Name and address of agent
for service)
Form N-CSR is to be used by management investment
companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required
to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use
the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information
specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection
of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing
the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection
of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
First Trust Senior Floating Rate Income Fund
II (“Registrant”) 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 (“Code of Ethics”).
During the period covered by this Form N-CSR, there were no substantive amendments to the Code of Ethics and there were no waivers from
the Code of Ethics granted to the Registrant’s principal executive officer, principal financial officer, principal accounting officer
or controller, or persons performing similar functions.
A copy of the currently effective Code of Ethics will be filed with
the Registrant’s annual Form N-CSR.
Not applicable to semi-annual reports on Form N-CSR.
Not applicable to semi-annual reports on Form N-CSR.
Not applicable to the Registrant.
Not applicable to the Registrant.
Not applicable to the Registrant.
This statement is included in the Registrant’s
Semi-annual Report filed under Item 1 of this Form N-CSR.
Not applicable to semi-annual reports on Form N-CSR.
No reportable purchases for the period covered by this report.
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.
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.
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.
I, James M. Dykas, certify that:
I, Derek D. Maltbie, certify that:
I, James M. Dykas, President and Chief Executive Officer
of First Trust Senior Floating Rate Income Fund II (the “Registrant”), certify that:
I, Derek D. Maltbie, Treasurer, Chief Financial Officer
and Chief Accounting Officer of First Trust Senior Floating Rate Income Fund II (the “Registrant”), certify that:
N-2
|
6 Months Ended |
|
Nov. 30, 2024
$ / shares
shares
|
|---|
| Prospectus [Line Items] |
|
| Document Period End Date |
Nov. 30, 2024
|
| Cover [Abstract] |
|
| Entity Central Index Key |
0001282850
|
| Amendment Flag |
false
|
| Entity Inv Company Type |
N-2
|
| Document Type |
N-CSRS
|
| Entity Registrant Name |
First
Trust Senior Floating Rate Income Fund II
|
| General Description of Registrant [Abstract] |
|
| Investment Objectives and Practices [Text Block] |
The primary investment objective
of the Fund is to seek a high level of current income. As a secondary objective, the Fund attempts to preserve
capital. The Fund pursues its investment objectives by investing primarily in a portfolio of senior secured floating-rate corporate
loans (“Senior Loans”)(1).
Under normal market conditions, the Fund invests at least 80% of its Managed Assets in a diversified
portfolio of Senior Loans. “Managed Assets” means the total asset value of the Fund minus the sum of its liabilities, other
than the principal amount of borrowings. There can
be no assurance that the Fund will achieve its investment objectives. Investing in Senior
Loans involves credit risk and, during periods of generally declining credit quality, it may be particularly difficult for the Fund to
achieve its secondary investment objective. The Fund may not be appropriate for all investors.
|
| Risk Factors [Table Text Block] |
Principal Risks
The Fund is a closed-end management
investment company designed primarily as a long-term investment and not as a trading vehicle. The
Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance
that the Fund will achieve its investment objectives. The following discussion summarizes the principal risks associated with investing
in the Fund, which includes the risk that you could lose some or all of your investment in the Fund. The Fund is subject to the informational
requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940 and, in accordance therewith,
files reports, proxy statements and other information that is available for review. The order of the below risk factors does not indicate
the significance of any particular risk factor.
Credit Agency Risk.
Credit ratings are determined by credit rating agencies and are only the opinions of such entities. Ratings assigned
by a rating agency are not absolute standards of credit quality and do not evaluate market risk or the liquidity of securities. Any
shortcomings or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely affect the credit
ratings of securities held by the Fund or such credit
rating agency’s ability to evaluate creditworthiness and, as a result, may adversely affect
those securities’ perceived or actual credit risk.
Credit and Below-Investment Grade Securities
Risk. Credit risk is the risk that the issuer or other
obligated party of a debt security in the Fund’s
portfolio will fail to pay, or it is perceived that it will fail to pay, dividends or interest and/or repay principal, when due. Below-investment
grade instruments, including instruments that are not rated but judged to be of comparable quality, are commonly referred
to as high-yield securities or “junk” bonds and are considered speculative with respect to the issuer’s capacity to
pay dividends or interest and repay principal and are
more susceptible to default or decline in market value than investment grade securities due to adverse
economic and business developments. High-yield securities are often unsecured and subordinated to other creditors of the issuer.
The market values for high-yield securities tend to be very volatile, and these securities are generally less liquid than investment grade
securities. For these reasons, an investment in the Fund is subject to the following specific risks: (i) increased price sensitivity to
changing interest rates and to a deteriorating economic
environment; (ii) greater risk of loss due to default or declining credit quality; (iii)
adverse company specific events more likely to render the issuer unable to make dividend, interest and/or principal payments; (iv)
negative perception of the high-yield market which may depress the price and liquidity of high-yield securities; (v) volatility; and (vi)
liquidity.
Current Market Conditions Risk.
Current market conditions risk is the risk that a particular investment, or shares of the Fund in general,
may fall in value due to current market conditions. As a means to fight inflation, which remains at elevated levels, the Federal Reserve
and certain foreign central banks have raised interest rates and expect to continue to do so, and the Federal Reserve has announced
that it intends to reverse previously implemented quantitative easing. U.S. regulators have proposed several changes to market
and issuer regulations which would directly impact the Fund, and any regulatory changes could adversely impact the Fund’s ability
to achieve its investment strategies or make certain investments. Recent and potential future bank failures could result in disruption
to the broader banking industry or markets generally and reduce confidence in financial institutions and the economy as a whole,
which may also heighten market volatility and reduce liquidity. Additionally, challenges in commercial real estate markets, including
rising interest rates, declining valuations and increasing vacancies, could have a broader impact on financial markets. The ongoing
adversarial political climate in the United States, as well as political and diplomatic events both domestic and abroad, have and
may continue to have an adverse impact the U.S. regulatory landscape, markets and investor behavior, which could have a negative impact
on the Fund’s investments and operations. The change in administration resulting from the 2024 United States national elections
could result in significant impacts to international trade relations, tax and immigration policies, and other aspects of the national
and international political and financial landscape, which could affect, among other things, inflation and the securities markets
generally. Other unexpected political, regulatory and diplomatic events within the U.S. and abroad may affect investor and consumer
confidence and may adversely impact financial markets and the broader economy. For example, ongoing armed conflicts
between
Russia and Ukraine in Europe and among Israel, Iran, Hamas and other militant groups in the Middle East, have caused and could
continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East and the United
States. The hostilities and sanctions resulting from those hostilities have and could continue to have a significant impact on certain
Fund investments as well as Fund performance and liquidity. The economies of the United States and its trading partners, as well
as the financial markets generally, may be adversely impacted by trade disputes and other matters. For example, the United States has
imposed trade barriers and restrictions on China. In addition, the Chinese government is engaged in a longstanding dispute with Taiwan,
continually threatening an invasion. If the political climate between the United States and China does not improve or continues
to deteriorate, if China were to attempt invading Taiwan, or if other geopolitical conflicts develop or worsen, economies, markets
and individual securities may be adversely affected, and the value of the Fund’s assets may go down. A future public health crisis
and the ensuing policies enacted by governments and central banks may cause significant volatility and uncertainty in global financial
markets, negatively impacting global growth prospects. As the COVID-19 global pandemic illustrated, such events may affect certain
geographic regions, countries, sectors and industries more significantly than others. Advancements in technology may also adversely
impact markets and the overall performance of the Fund. For instance, the economy may be significantly impacted by the advanced
development and increased regulation of artificial intelligence. Additionally, cyber security breaches of both government and non-government
entities could have negative impacts on infrastructure and the ability of such entities, including the Fund, to operate properly.
These events, and any other future events, may adversely affect the prices and liquidity of the Fund’s portfolio investments and
could result in disruptions in the trading markets.
Cyber Security Risk. The
Fund is susceptible to potential operational risks through breaches in cyber security. A breach in cyber security
refers to both intentional and unintentional events that may cause the Fund to lose proprietary information, suffer data corruption
or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage, additional
compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result
from outside attacks such as denial-of-service attacks
through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent or custodian, or
issuers in which the Fund invests, can also subject
the Fund to many of the same risks associated with direct cyber security breaches. The
Fund has established risk management systems designed to reduce the risks associated with cyber security. However, there is no guarantee
that such efforts will succeed, especially because the Fund does not directly control the cyber security systems of issuers or third
party service providers. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber incidents in the future.
Health Care Companies Risk. Through
the Fund’s investments in senior loans, the Fund may be significantly exposed to companies in
the health care sector. Health care companies are involved in medical services or health care, including biotechnology research
and production, drugs and pharmaceuticals and health
care facilities and services. These companies are subject to extensive competition, generic
drug sales or the loss of patent protection, product liability litigation and increased government regulation. Research and development
costs of bringing new drugs to market are substantial, and there is no guarantee that the product will ever come to market. Health
care facility operators may be affected by the demand for services, efforts by government or insurers to limit rates, restriction of government
financial assistance and competition from other providers.
Illiquid Securities Risk.
The Fund invests a substantial portion of its assets in lower-quality debt issued by companies that are highly leveraged.
Lower-quality debt tends to be less liquid than higher-quality debt. Moreover, smaller debt issues tend to be less liquid than larger
debt issues. Although the resale or secondary market for senior loans is growing, it is currently limited. There is no organized exchange
or board of trade on which senior loans are traded. Instead, the secondary market for senior loans is an unregulated inter-dealer
or inter-bank resale market. In addition, senior loans in which the Fund invests may require the consent of the borrower and/or
agent prior to the settlement of the sale or assignment. These consent requirements can delay or impede the Fund’s ability to settle
the sale of senior loans. Depending on market conditions, the Fund may have difficulty disposing its senior loans, which may adversely
impact its ability to obtain cash to repay debt, to pay dividends, to pay expenses or to take advantage of new investment opportunities.
Information Technology Companies Risk.
Information technology companies produce and provide hardware, software and information
technology systems and services. Information technology companies are generally subject to the following risks: rapidly changing
technologies and existing product obsolescence; short product life cycles; fierce competition; aggressive pricing and reduced profit
margins; the loss of patent, copyright and trademark protections; cyclical market patterns; evolving industry standards; and frequent
new product introductions and new market entrants. Information technology companies may be smaller and less experienced companies,
with limited product lines, markets or financial resources and fewer experienced management or marketing personnel. Information
technology company stocks, particularly those involved with the internet, have experienced extreme price and volume fluctuations
that are often unrelated to their operating performance. In addition, information technology companies are particularly vulnerable
to federal, state and local government regulation, and competition and consolidation, both domestically and internationally, including
competition from foreign competitors with lower production costs. Information technology companies also face competition
for services
of qualified personnel and heavily rely on patents and intellectual property rights and the ability to enforce such rights to maintain
a competitive advantage.
Interest Rate Risk. The
yield on the Fund’s common shares will tend to rise or fall as market interest rates rise and fall, as senior loans
pay interest at rates which float in response to changes in market rates. Changes in prevailing interest rates can be expected to cause
some fluctuation in the Fund’s net asset value. Similarly, a sudden and significant increase in market interest rates may cause
a decline in the Fund’s net asset value.
Leverage Risk.
The use of leverage by the Fund can magnify the effect of any losses. If the income and gains from the securities and investments
purchased with leverage proceeds do not cover the cost of leverage, the return to the common shares will be less than if leverage
had not been used. Leverage involves risks and special considerations for common shareholders including: (i) the likelihood of
greater volatility of net asset value and market price of the common shares than a comparable portfolio without leverage; (ii) the risk
that fluctuations in interest rates on borrowings will reduce the return to the common shareholders or will result in fluctuations in
the dividends paid on the common shares; (iii) in a
declining market, the use of leverage is likely to cause a greater decline in the net asset
value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the common
shares; and (iv) when the Fund uses certain types of leverage, the investment advisory fee payable to the Advisor will be higher
than if the Fund did not use leverage.
Management Risk and Reliance on Key Personnel.
The implementation of the Fund’s investment strategy depends upon the continued
contributions of certain key employees of the Advisor, some of whom have unique talents and experience and would be difficult
to replace. The loss or interruption of the services of a key member of the portfolio management team could have a negative impact
on the Fund.
Market Discount from Net Asset Value.
Shares of closed-end investment companies such as the Fund frequently trade at a discount from
their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset value.
Market Risk.
Investments held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by real or perceived
adverse economic conditions, political events, regulatory factors or market developments, changes in interest rates and perceived
trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, market manipulation,
government defaults, government shutdowns, regulatory actions, political changes, diplomatic developments, the imposition
of sanctions and other similar measures, spread of infectious diseases or other public health issues, recessions, or other events
could have a significant negative impact on a fund and its investments. Any of such circumstances could have a materially negative
impact on the value of the Fund’s shares, the liquidity of an investment, and result in increased market volatility. During any
such events, the Fund’s shares may trade at increased
premiums or discounts to their net asset value, the bid/ask spread on the Fund’s shares
may widen and the returns on investment may fluctuate.
Non-U.S. Securities Risk.
The Fund may invest a portion of its assets in securities of non-U.S. issuers. Investing in securities of non-U.S.
issuers may involve certain risks not typically associated with investing in securities of U.S. issuers. These risks include: (i) there
may be less publicly available information about non-U.S. issuers or markets due to less rigorous disclosure or accounting standards
or regulatory practices; (ii) non-U.S. markets may be smaller, less liquid and more volatile than the U.S. market; (iii)
potential adverse effects of fluctuations in currency exchange rates or controls on the value of the Fund’s investments; (iv) the
economies of non-U.S. countries may grow at slower
rates than expected or may experience a downturn or recession; (v) the impact of economic,
political, social or diplomatic events; (vi) certain non-U.S. countries may impose restrictions on the ability of non-U.S. issuers
to make payments of principal and interest to investors located in the United States due to blockage of non-U.S. currency exchanges
or otherwise; and (vii) withholding and other non-U.S. taxes may decrease the Fund’s return. Foreign companies are generally
not subject to the same accounting, auditing and financial reporting standards as are U.S. companies. In addition, there may be
difficulty in obtaining or enforcing a court judgment abroad. These risks may be more pronounced to the extent that the Fund invests
a significant amount of its assets in companies located in one region.
Operational Risk. The
Fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing
and communication errors, errors of the Fund’s service providers, counterparties or other third-parties, failed or inadequate processes
and technology or systems failures. The Fund relies on third parties for a range of services, including custody. Any delay or failure
relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its investment objectives. Although
the Fund and the Advisor seek to reduce these operational risks through controls and procedures, there is no way to completely
protect against such risks.
Potential Conflicts of Interest Risk.
First Trust and the portfolio managers have interests which may conflict with the interests of the Fund.
In particular, First Trust currently manages and may in the future manage and/or advise other investment funds or accounts with
the same
or substantially similar investment objectives and strategies as the Fund. In addition, while the Fund is using leverage, the amount
of the fees paid to First Trust for investment advisory and management services are higher than if the Fund did not use leverage
because the fees paid are calculated based on managed assets. Therefore, First Trust has a financial incentive to leverage the Fund.
Prepayment Risk.
Loans are subject to prepayment risk. Prepayment risk is the risk that the borrower on a loan will repay principal (in
part or in whole) prior to the scheduled maturity date. The degree to which borrowers prepay loans, whether as a contractual requirement
or at their election, may be affected by general business conditions, interest rates, the financial condition of the borrower and
competitive conditions among loan investors, among others. As such, prepayments cannot be predicted with accuracy. Upon a prepayment,
either in part or in full, the actual outstanding debt on which the Fund derives interest income will be reduced. The Fund may
not be able to reinvest the proceeds received on terms as favorable as the prepaid loan.
Reinvestment Risk.
Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from
matured, traded or called instruments at market interest rates that are below the Fund’s portfolio’s current earnings rate.
A decline in income could affect the common shares’
market price, level of distributions or the overall return of the Fund.
Risks Associated with Investments in Distressed
Issuers. The Fund may invest in instruments of distressed
issuers, including firms that have defaulted on their
debt obligations and/or filed for bankruptcy protection. Investing in such investments involves a far greater
level of risk than investing in issuers whose debt obligations are being met and whose debt trades at or close to its “par”
value. These investments are highly speculative with
respect to the issuer’s ability to continue to make interest payments and/or to pay its principal
obligations in full; can be very difficult to properly value, making them susceptible to a high degree of price volatility and rendering
them less liquid than performing debt obligations; and, for issuers involved in a bankruptcy proceeding, can be subject to a high
degree of uncertainty with regard to both the timing and the amount of the ultimate settlement.
Second Lien Loan Risk.
A second lien loan may have a claim on the same collateral pool as the first lien or it may be secured by a separate
set of assets. Second lien loans are typically secured by a second priority security interest or lien on specified collateral securing
the borrower’s obligation under the interest. Because second lien loans are second to first lien loans, they present a greater degree
of investment risk. Specifically, these loans are subject to the additional risk that the cash flow of the borrower and property securing
the loan may be insufficient to meet scheduled payments after giving effect to those loans with a higher priority. In addition, loans
that have a lower than first lien priority on collateral of the borrower generally have greater price volatility than those loans with
a higher priority and may be less liquid.
Senior Loan Risk. The
Fund invests in senior loans and therefore is subject to the risks associated therewith. Investments in senior loans
are subject to the same risks as investments in other types of debt securities, including credit risk, interest rate risk, liquidity risk
and valuation risk (which may be heightened because
of the limited public information available regarding senior loans and because loan
borrowers may be leveraged and tend to be more adversely affected by changes in market or economic conditions). Further, no active
trading market may exist for certain senior loans, which may impair the ability of the Fund to realize full value in the event of the
need to sell a senior loan and which may make it difficult to value senior loans. Senior loans may not be considered “securities”
and the Fund may not be entitled to rely on the anti-fraud
protections of the federal securities laws.
In the event a borrower fails
to pay scheduled interest or principal payments on a senior loan held by the Fund, the Fund will experience
a reduction in its income and a decline in the value of the senior loan, which will likely reduce dividends and lead to a decline
in the net asset value of the Fund’s common shares. If the Fund acquires a senior loan from another lender, for example, by acquiring
a participation, the Fund may also be subject to credit risks with respect to that lender. Although senior loans may be secured by
specific collateral, the value of the collateral may not equal the Fund’s investment when the senior loan is acquired or may decline
below the principal amount of the senior loan subsequent
to the Fund’s investment. Also, to the extent that collateral consists of stock of
the borrower or its subsidiaries or affiliates, the Fund bears the risk that the stock may decline in value, be relatively illiquid, and/or
may lose all or substantially all of its value, causing
the senior loan to be under collateralized. Therefore, the liquidation of the collateral
underlying a senior loan may not satisfy the issuer’s obligation to the Fund in the event of non-payment of scheduled interest or
principal, and the collateral may not be readily liquidated. The senior loan market has seen a significant increase in loans with weaker
lender protections including, but not limited to, limited financial maintenance covenants or, in some cases, no financial maintenance
covenants (i.e., “covenant-lite loans”) that would typically be included in a traditional loan agreement and general weakening
of other restrictive covenants applicable to the borrower such as limitations on incurrence of additional debt, restrictions on payments
of junior debt or restrictions on dividends and distributions. Weaker lender protections such as the absence of financial maintenance
covenants in a loan agreement and the inclusion of “borrower-favorable” terms may impact recovery values and/or trading
levels of senior loans in the future. The absence of financial maintenance covenants in a loan agreement generally means that the
lender may not be able to declare a default if financial performance deteriorates. This may hinder the Fund’s ability to reprice
credit risk associated with a particular borrower and
reduce the Fund’s ability to restructure a problematic loan and mitigate potential
loss. As
a result, the Fund’s exposure to losses on investments in senior loans may be increased, especially during a downturn in the credit
cycle or changes in market or economic conditions.
Valuation Risk.
The valuation of senior loans may carry more risk than that of common stock. Because the secondary market for senior
loans is limited, it may be difficult to value the loans held by the Fund. Market quotations may not be readily available for some
senior loans and valuation may require more research
than for liquid securities. In addition, elements of judgment may play a greater role
in the valuation of senior loans than for securities with a secondary market, because there is less reliable objective data available.
These difficulties may lead to inaccurate asset pricing.
|
| Share Price |
$ 10.44
|
| NAV Per Share |
$ 10.87
|
| Latest Premium (Discount) to NAV [Percent] |
(3.96%)
|
| Capital Stock, Long-Term Debt, and Other Securities [Abstract] |
|
| Outstanding Security, Title [Text Block] |
Common Shares outstanding (unlimited number of Common Shares has been authorized)
|
| Outstanding Security, Held [Shares] | shares |
25,983,388
|
| Credit Agency Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Credit Agency Risk.
Credit ratings are determined by credit rating agencies and are only the opinions of such entities. Ratings assigned
by a rating agency are not absolute standards of credit quality and do not evaluate market risk or the liquidity of securities. Any
shortcomings or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely affect the credit
ratings of securities held by the Fund or such credit
rating agency’s ability to evaluate creditworthiness and, as a result, may adversely affect
those securities’ perceived or actual credit risk.
|
| Credit And Below Investment Grade Securities Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Credit and Below-Investment Grade Securities
Risk. Credit risk is the risk that the issuer or other
obligated party of a debt security in the Fund’s
portfolio will fail to pay, or it is perceived that it will fail to pay, dividends or interest and/or repay principal, when due. Below-investment
grade instruments, including instruments that are not rated but judged to be of comparable quality, are commonly referred
to as high-yield securities or “junk” bonds and are considered speculative with respect to the issuer’s capacity to
pay dividends or interest and repay principal and are
more susceptible to default or decline in market value than investment grade securities due to adverse
economic and business developments. High-yield securities are often unsecured and subordinated to other creditors of the issuer.
The market values for high-yield securities tend to be very volatile, and these securities are generally less liquid than investment grade
securities. For these reasons, an investment in the Fund is subject to the following specific risks: (i) increased price sensitivity to
changing interest rates and to a deteriorating economic
environment; (ii) greater risk of loss due to default or declining credit quality; (iii)
adverse company specific events more likely to render the issuer unable to make dividend, interest and/or principal payments; (iv)
negative perception of the high-yield market which may depress the price and liquidity of high-yield securities; (v) volatility; and (vi)
liquidity.
|
| Current Market Conditions Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Current Market Conditions Risk.
Current market conditions risk is the risk that a particular investment, or shares of the Fund in general,
may fall in value due to current market conditions. As a means to fight inflation, which remains at elevated levels, the Federal Reserve
and certain foreign central banks have raised interest rates and expect to continue to do so, and the Federal Reserve has announced
that it intends to reverse previously implemented quantitative easing. U.S. regulators have proposed several changes to market
and issuer regulations which would directly impact the Fund, and any regulatory changes could adversely impact the Fund’s ability
to achieve its investment strategies or make certain investments. Recent and potential future bank failures could result in disruption
to the broader banking industry or markets generally and reduce confidence in financial institutions and the economy as a whole,
which may also heighten market volatility and reduce liquidity. Additionally, challenges in commercial real estate markets, including
rising interest rates, declining valuations and increasing vacancies, could have a broader impact on financial markets. The ongoing
adversarial political climate in the United States, as well as political and diplomatic events both domestic and abroad, have and
may continue to have an adverse impact the U.S. regulatory landscape, markets and investor behavior, which could have a negative impact
on the Fund’s investments and operations. The change in administration resulting from the 2024 United States national elections
could result in significant impacts to international trade relations, tax and immigration policies, and other aspects of the national
and international political and financial landscape, which could affect, among other things, inflation and the securities markets
generally. Other unexpected political, regulatory and diplomatic events within the U.S. and abroad may affect investor and consumer
confidence and may adversely impact financial markets and the broader economy. For example, ongoing armed conflicts
between
Russia and Ukraine in Europe and among Israel, Iran, Hamas and other militant groups in the Middle East, have caused and could
continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East and the United
States. The hostilities and sanctions resulting from those hostilities have and could continue to have a significant impact on certain
Fund investments as well as Fund performance and liquidity. The economies of the United States and its trading partners, as well
as the financial markets generally, may be adversely impacted by trade disputes and other matters. For example, the United States has
imposed trade barriers and restrictions on China. In addition, the Chinese government is engaged in a longstanding dispute with Taiwan,
continually threatening an invasion. If the political climate between the United States and China does not improve or continues
to deteriorate, if China were to attempt invading Taiwan, or if other geopolitical conflicts develop or worsen, economies, markets
and individual securities may be adversely affected, and the value of the Fund’s assets may go down. A future public health crisis
and the ensuing policies enacted by governments and central banks may cause significant volatility and uncertainty in global financial
markets, negatively impacting global growth prospects. As the COVID-19 global pandemic illustrated, such events may affect certain
geographic regions, countries, sectors and industries more significantly than others. Advancements in technology may also adversely
impact markets and the overall performance of the Fund. For instance, the economy may be significantly impacted by the advanced
development and increased regulation of artificial intelligence. Additionally, cyber security breaches of both government and non-government
entities could have negative impacts on infrastructure and the ability of such entities, including the Fund, to operate properly.
These events, and any other future events, may adversely affect the prices and liquidity of the Fund’s portfolio investments and
could result in disruptions in the trading markets.
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| Cyber Security Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Cyber Security Risk. The
Fund is susceptible to potential operational risks through breaches in cyber security. A breach in cyber security
refers to both intentional and unintentional events that may cause the Fund to lose proprietary information, suffer data corruption
or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage, additional
compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized
access to the Fund’s digital information systems through “hacking” or malicious software coding, but may also result
from outside attacks such as denial-of-service attacks
through efforts to make network services unavailable to intended users. In addition,
cyber security breaches of the Fund’s third-party service providers, such as its administrator, transfer agent or custodian, or
issuers in which the Fund invests, can also subject
the Fund to many of the same risks associated with direct cyber security breaches. The
Fund has established risk management systems designed to reduce the risks associated with cyber security. However, there is no guarantee
that such efforts will succeed, especially because the Fund does not directly control the cyber security systems of issuers or third
party service providers. Substantial costs may be incurred by the Fund in order to resolve or prevent cyber incidents in the future.
|
| Health Care Companies Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Health Care Companies Risk. Through
the Fund’s investments in senior loans, the Fund may be significantly exposed to companies in
the health care sector. Health care companies are involved in medical services or health care, including biotechnology research
and production, drugs and pharmaceuticals and health
care facilities and services. These companies are subject to extensive competition, generic
drug sales or the loss of patent protection, product liability litigation and increased government regulation. Research and development
costs of bringing new drugs to market are substantial, and there is no guarantee that the product will ever come to market. Health
care facility operators may be affected by the demand for services, efforts by government or insurers to limit rates, restriction of government
financial assistance and competition from other providers.
|
| Illiquid Securities Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Illiquid Securities Risk.
The Fund invests a substantial portion of its assets in lower-quality debt issued by companies that are highly leveraged.
Lower-quality debt tends to be less liquid than higher-quality debt. Moreover, smaller debt issues tend to be less liquid than larger
debt issues. Although the resale or secondary market for senior loans is growing, it is currently limited. There is no organized exchange
or board of trade on which senior loans are traded. Instead, the secondary market for senior loans is an unregulated inter-dealer
or inter-bank resale market. In addition, senior loans in which the Fund invests may require the consent of the borrower and/or
agent prior to the settlement of the sale or assignment. These consent requirements can delay or impede the Fund’s ability to settle
the sale of senior loans. Depending on market conditions, the Fund may have difficulty disposing its senior loans, which may adversely
impact its ability to obtain cash to repay debt, to pay dividends, to pay expenses or to take advantage of new investment opportunities.
|
| Information Technology Companies Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Information Technology Companies Risk.
Information technology companies produce and provide hardware, software and information
technology systems and services. Information technology companies are generally subject to the following risks: rapidly changing
technologies and existing product obsolescence; short product life cycles; fierce competition; aggressive pricing and reduced profit
margins; the loss of patent, copyright and trademark protections; cyclical market patterns; evolving industry standards; and frequent
new product introductions and new market entrants. Information technology companies may be smaller and less experienced companies,
with limited product lines, markets or financial resources and fewer experienced management or marketing personnel. Information
technology company stocks, particularly those involved with the internet, have experienced extreme price and volume fluctuations
that are often unrelated to their operating performance. In addition, information technology companies are particularly vulnerable
to federal, state and local government regulation, and competition and consolidation, both domestically and internationally, including
competition from foreign competitors with lower production costs. Information technology companies also face competition
for services
of qualified personnel and heavily rely on patents and intellectual property rights and the ability to enforce such rights to maintain
a competitive advantage.
|
| Interest Rate Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Interest Rate Risk. The
yield on the Fund’s common shares will tend to rise or fall as market interest rates rise and fall, as senior loans
pay interest at rates which float in response to changes in market rates. Changes in prevailing interest rates can be expected to cause
some fluctuation in the Fund’s net asset value. Similarly, a sudden and significant increase in market interest rates may cause
a decline in the Fund’s net asset value.
|
| Leverage Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Leverage Risk.
The use of leverage by the Fund can magnify the effect of any losses. If the income and gains from the securities and investments
purchased with leverage proceeds do not cover the cost of leverage, the return to the common shares will be less than if leverage
had not been used. Leverage involves risks and special considerations for common shareholders including: (i) the likelihood of
greater volatility of net asset value and market price of the common shares than a comparable portfolio without leverage; (ii) the risk
that fluctuations in interest rates on borrowings will reduce the return to the common shareholders or will result in fluctuations in
the dividends paid on the common shares; (iii) in a
declining market, the use of leverage is likely to cause a greater decline in the net asset
value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the common
shares; and (iv) when the Fund uses certain types of leverage, the investment advisory fee payable to the Advisor will be higher
than if the Fund did not use leverage.
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| Management Risk And Reliance On Key Personnel [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Management Risk and Reliance on Key Personnel.
The implementation of the Fund’s investment strategy depends upon the continued
contributions of certain key employees of the Advisor, some of whom have unique talents and experience and would be difficult
to replace. The loss or interruption of the services of a key member of the portfolio management team could have a negative impact
on the Fund.
|
| Market Discount From Net Asset Value [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Market Discount from Net Asset Value.
Shares of closed-end investment companies such as the Fund frequently trade at a discount from
their net asset value. The Fund cannot predict whether its common shares will trade at, below or above net asset value.
|
| Market Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Market Risk.
Investments held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by real or perceived
adverse economic conditions, political events, regulatory factors or market developments, changes in interest rates and perceived
trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of
loss associated with these market fluctuations. In addition, local, regional or global events such as war, acts of terrorism, market manipulation,
government defaults, government shutdowns, regulatory actions, political changes, diplomatic developments, the imposition
of sanctions and other similar measures, spread of infectious diseases or other public health issues, recessions, or other events
could have a significant negative impact on a fund and its investments. Any of such circumstances could have a materially negative
impact on the value of the Fund’s shares, the liquidity of an investment, and result in increased market volatility. During any
such events, the Fund’s shares may trade at increased
premiums or discounts to their net asset value, the bid/ask spread on the Fund’s shares
may widen and the returns on investment may fluctuate.
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| Non U S Securities Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Non-U.S. Securities Risk.
The Fund may invest a portion of its assets in securities of non-U.S. issuers. Investing in securities of non-U.S.
issuers may involve certain risks not typically associated with investing in securities of U.S. issuers. These risks include: (i) there
may be less publicly available information about non-U.S. issuers or markets due to less rigorous disclosure or accounting standards
or regulatory practices; (ii) non-U.S. markets may be smaller, less liquid and more volatile than the U.S. market; (iii)
potential adverse effects of fluctuations in currency exchange rates or controls on the value of the Fund’s investments; (iv) the
economies of non-U.S. countries may grow at slower
rates than expected or may experience a downturn or recession; (v) the impact of economic,
political, social or diplomatic events; (vi) certain non-U.S. countries may impose restrictions on the ability of non-U.S. issuers
to make payments of principal and interest to investors located in the United States due to blockage of non-U.S. currency exchanges
or otherwise; and (vii) withholding and other non-U.S. taxes may decrease the Fund’s return. Foreign companies are generally
not subject to the same accounting, auditing and financial reporting standards as are U.S. companies. In addition, there may be
difficulty in obtaining or enforcing a court judgment abroad. These risks may be more pronounced to the extent that the Fund invests
a significant amount of its assets in companies located in one region.
|
| Operational Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Operational Risk. The
Fund is subject to risks arising from various operational factors, including, but not limited to, human error, processing
and communication errors, errors of the Fund’s service providers, counterparties or other third-parties, failed or inadequate processes
and technology or systems failures. The Fund relies on third parties for a range of services, including custody. Any delay or failure
relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its investment objectives. Although
the Fund and the Advisor seek to reduce these operational risks through controls and procedures, there is no way to completely
protect against such risks.
|
| Potential Conflicts Of Interest Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Potential Conflicts of Interest Risk.
First Trust and the portfolio managers have interests which may conflict with the interests of the Fund.
In particular, First Trust currently manages and may in the future manage and/or advise other investment funds or accounts with
the same
or substantially similar investment objectives and strategies as the Fund. In addition, while the Fund is using leverage, the amount
of the fees paid to First Trust for investment advisory and management services are higher than if the Fund did not use leverage
because the fees paid are calculated based on managed assets. Therefore, First Trust has a financial incentive to leverage the Fund.
|
| Prepayment Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Prepayment Risk.
Loans are subject to prepayment risk. Prepayment risk is the risk that the borrower on a loan will repay principal (in
part or in whole) prior to the scheduled maturity date. The degree to which borrowers prepay loans, whether as a contractual requirement
or at their election, may be affected by general business conditions, interest rates, the financial condition of the borrower and
competitive conditions among loan investors, among others. As such, prepayments cannot be predicted with accuracy. Upon a prepayment,
either in part or in full, the actual outstanding debt on which the Fund derives interest income will be reduced. The Fund may
not be able to reinvest the proceeds received on terms as favorable as the prepaid loan.
|
| Reinvestment Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Reinvestment Risk.
Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from
matured, traded or called instruments at market interest rates that are below the Fund’s portfolio’s current earnings rate.
A decline in income could affect the common shares’
market price, level of distributions or the overall return of the Fund.
|
| Risks Associated With Investments In Distressed Issuers [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Risks Associated with Investments in Distressed
Issuers. The Fund may invest in instruments of distressed
issuers, including firms that have defaulted on their
debt obligations and/or filed for bankruptcy protection. Investing in such investments involves a far greater
level of risk than investing in issuers whose debt obligations are being met and whose debt trades at or close to its “par”
value. These investments are highly speculative with
respect to the issuer’s ability to continue to make interest payments and/or to pay its principal
obligations in full; can be very difficult to properly value, making them susceptible to a high degree of price volatility and rendering
them less liquid than performing debt obligations; and, for issuers involved in a bankruptcy proceeding, can be subject to a high
degree of uncertainty with regard to both the timing and the amount of the ultimate settlement.
|
| Second Lien Loan Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Second Lien Loan Risk.
A second lien loan may have a claim on the same collateral pool as the first lien or it may be secured by a separate
set of assets. Second lien loans are typically secured by a second priority security interest or lien on specified collateral securing
the borrower’s obligation under the interest. Because second lien loans are second to first lien loans, they present a greater degree
of investment risk. Specifically, these loans are subject to the additional risk that the cash flow of the borrower and property securing
the loan may be insufficient to meet scheduled payments after giving effect to those loans with a higher priority. In addition, loans
that have a lower than first lien priority on collateral of the borrower generally have greater price volatility than those loans with
a higher priority and may be less liquid.
|
| Senior Loan Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Senior Loan Risk. The
Fund invests in senior loans and therefore is subject to the risks associated therewith. Investments in senior loans
are subject to the same risks as investments in other types of debt securities, including credit risk, interest rate risk, liquidity risk
and valuation risk (which may be heightened because
of the limited public information available regarding senior loans and because loan
borrowers may be leveraged and tend to be more adversely affected by changes in market or economic conditions). Further, no active
trading market may exist for certain senior loans, which may impair the ability of the Fund to realize full value in the event of the
need to sell a senior loan and which may make it difficult to value senior loans. Senior loans may not be considered “securities”
and the Fund may not be entitled to rely on the anti-fraud
protections of the federal securities laws.
In the event a borrower fails
to pay scheduled interest or principal payments on a senior loan held by the Fund, the Fund will experience
a reduction in its income and a decline in the value of the senior loan, which will likely reduce dividends and lead to a decline
in the net asset value of the Fund’s common shares. If the Fund acquires a senior loan from another lender, for example, by acquiring
a participation, the Fund may also be subject to credit risks with respect to that lender. Although senior loans may be secured by
specific collateral, the value of the collateral may not equal the Fund’s investment when the senior loan is acquired or may decline
below the principal amount of the senior loan subsequent
to the Fund’s investment. Also, to the extent that collateral consists of stock of
the borrower or its subsidiaries or affiliates, the Fund bears the risk that the stock may decline in value, be relatively illiquid, and/or
may lose all or substantially all of its value, causing
the senior loan to be under collateralized. Therefore, the liquidation of the collateral
underlying a senior loan may not satisfy the issuer’s obligation to the Fund in the event of non-payment of scheduled interest or
principal, and the collateral may not be readily liquidated. The senior loan market has seen a significant increase in loans with weaker
lender protections including, but not limited to, limited financial maintenance covenants or, in some cases, no financial maintenance
covenants (i.e., “covenant-lite loans”) that would typically be included in a traditional loan agreement and general weakening
of other restrictive covenants applicable to the borrower such as limitations on incurrence of additional debt, restrictions on payments
of junior debt or restrictions on dividends and distributions. Weaker lender protections such as the absence of financial maintenance
covenants in a loan agreement and the inclusion of “borrower-favorable” terms may impact recovery values and/or trading
levels of senior loans in the future. The absence of financial maintenance covenants in a loan agreement generally means that the
lender may not be able to declare a default if financial performance deteriorates. This may hinder the Fund’s ability to reprice
credit risk associated with a particular borrower and
reduce the Fund’s ability to restructure a problematic loan and mitigate potential
loss. As
a result, the Fund’s exposure to losses on investments in senior loans may be increased, especially during a downturn in the credit
cycle or changes in market or economic conditions.
|
| Valuation Risk [Member] |
|
| General Description of Registrant [Abstract] |
|
| Risk [Text Block] |
Valuation Risk.
The valuation of senior loans may carry more risk than that of common stock. Because the secondary market for senior
loans is limited, it may be difficult to value the loans held by the Fund. Market quotations may not be readily available for some
senior loans and valuation may require more research
than for liquid securities. In addition, elements of judgment may play a greater role
in the valuation of senior loans than for securities with a secondary market, because there is less reliable objective data available.
These difficulties may lead to inaccurate asset pricing.
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