First Trust Senior Floating Rate Income Fund II (the "Fund")
(NYSE: FCT) has declared the Fund’s regularly scheduled monthly
common share distribution in the amount of $0.097 per share payable
on September 16, 2024, to shareholders of record as of September 3,
2024. The ex-dividend date is expected to be September 3, 2024. The
monthly distribution information for the Fund appears below.
First Trust Senior
Floating Rate Income Fund II (FCT):
Distribution per share:
$0.097
Distribution Rate based on the August 19,
2024 NAV of $10.86:
10.72%
Distribution Rate based on the August 19,
2024 closing market price of $10.23:
11.38%
This distribution will consist of net investment income earned
by the Fund and return of capital and may also consist of net
short-term realized capital gains. The final determination of the
source and tax status of all distributions paid in 2024 will be
made after the end of 2024 and will be provided on Form
1099-DIV.
The Fund has a practice of seeking to maintain a relatively
stable monthly distribution which may be changed periodically.
First Trust Advisors L.P. ("FTA") believes the practice may benefit
the Fund's market price and premium/discount to the Fund's NAV. The
practice has no impact on the Fund's investment strategy and may
reduce the Fund's NAV.
The Fund is a diversified, closed-end management investment
company. The Fund's primary investment objective is to seek a high
level of current income. As a secondary objective, the Fund
attempts to preserve capital. The Fund pursues these investment
objectives by investing primarily in senior secured floating-rate
corporate loans. Under normal market conditions, the Fund will
invest at least 80% of its Managed Assets in lower grade debt
instruments.
First Trust Advisors L.P. ("FTA") is a federally registered
investment advisor and serves as the Fund's investment advisor. FTA
and its affiliate First Trust Portfolios L.P. ("FTP"), a FINRA
registered broker-dealer, are privately-held companies that provide
a variety of investment services. FTA has collective assets under
management or supervision of approximately $235 billion as of July
31, 2024 through unit investment trusts, exchange-traded funds,
closed-end funds, mutual funds and separate managed accounts. FTA
is the supervisor of the First Trust unit investment trusts, while
FTP is the sponsor. FTP is also a distributor of mutual fund shares
and exchange-traded fund creation units. FTA and FTP are based in
Wheaton, Illinois.
Principal Risk Factors: Risks are inherent in all investing.
Certain risks applicable to the Fund are identified below, which
includes the risk that you could lose some or all of your
investment in the Fund. The principal risks of investing in the
Fund are spelled out in the Fund's annual shareholder reports. The
order of the below risk factors does not indicate the significance
of any particular risk factor. The Fund also files reports, proxy
statements and other information that is available for
review.
Past performance is no assurance of future results. Investment
return and market value of an investment in the Fund will
fluctuate. Shares, when sold, may be worth more or less than their
original cost. There can be no assurance that the Fund's investment
objectives will be achieved. The Fund may not be appropriate for
all investors.
Market risk is the risk that a particular investment, or shares
of a fund in general may fall in value. Investments held by the
Fund 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. 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 disease or other public health issues, recessions,
natural disasters or other events could have significant negative
impact on a fund and its investments.
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, 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. 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. Ongoing armed conflicts
between Russia and Ukraine in Europe and among Israel, 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 COVID-19 global pandemic, or any future public health crisis,
and the ensuing policies enacted by governments and central banks
have caused and may continue to cause significant volatility and
uncertainty in global financial markets, negatively impacting
global growth prospects.
The Fund will typically invest in senior loans rated below
investment grade, which are commonly referred to as "junk" or
"high-yield" securities and considered speculative because of the
credit risk of their issuers. Such issuers are more likely than
investment grade issuers to default on their payments of interest
and principal owed to the Fund, and such defaults could reduce the
Fund's NAV and income distributions. An economic downturn would
generally lead to a higher non-payment rate, and a senior loan may
lose significant market value before a default occurs. Moreover,
any specific collateral used to secure a senior loan may decline in
value or become illiquid, which would adversely affect the senior
loan's value.
The senior loan market has seen an increase in loans with weaker
lender protections which may impact recovery values and/or trading
levels 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.
To the extent a fund invests in floating or variable rate
obligations that use the London Interbank Offered Rate ("LIBOR") as
a reference interest rate, it is subject to LIBOR Risk. LIBOR has
ceased to be made available as a reference rate and there is no
assurance that any alternative reference rate, including the
Secured Overnight Financing Rate ("SOFR"), will be similar to or
produce the same value or economic equivalence as LIBOR. The
unavailability or replacement of LIBOR may affect the value,
liquidity or return on certain fund investments and may result in
costs incurred in connection with closing out positions and
entering into new trades. Any potential effects of the transition
away from LIBOR on a fund or on certain instruments in which a fund
invests is difficult to predict and could result in losses to the
fund.
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.
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.
Distressed securities frequently do not produce income while
they are outstanding. The Fund may be required to incur certain
extraordinary expenses in order to protect and recover its
investment. The Fund also will be subject to significant
uncertainty as to when and in what manner and for what value the
obligations evidenced by the distressed securities will eventually
be satisfied.
Use of leverage can result in additional risk and cost, and can
magnify the effect of any losses.
The Fund's portfolio is also subject to credit risk, interest
rate risk, liquidity risk, prepayment risk and reinvestment risk.
Interest rate risk is the risk that fixed-income securities will
decline in value because of changes in market interest rates.
Credit risk is the risk that an issuer of a security will be unable
or unwilling to make dividend, interest and/or principal payments
when due and that the value of a security may decline as a result.
Credit risk may be heightened for the Fund because it invests in
below investment grade securities. Liquidity risk is the risk that
the fund may have difficulty disposing of senior loans if it seeks
to repay debt, pay dividends or expenses, or take advantage of a
new investment opportunity. Prepayment risk is the risk that, upon
a prepayment, 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 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.
The risks of investing in the Fund are spelled out in the
shareholder reports and other regulatory filings.
The information presented is not intended to constitute an
investment recommendation for, or advice to, any specific person.
By providing this information, First Trust is not undertaking to
give advice in any fiduciary capacity within the meaning of ERISA,
the Internal Revenue Code or any other regulatory framework.
Financial professionals are responsible for evaluating investment
risks independently and for exercising independent judgment in
determining whether investments are appropriate for their
clients.
The Fund's daily closing New York Stock Exchange price and net
asset value per share as well as other information can be found at
https://www.ftportfolios.com or by calling 1-800-988-5891.
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