As of the end of the period covered by the report,
the registrant’s board of trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee
financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
(a) AUDIT FEES (REGISTRANT) --
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the
audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements were $59,000 for 2022 and $59,000 for 2023.
(b) AUDIT-RELATED FEES (REGISTRANT)
-- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that
are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph
(a) of this Item were $0 for 2022 and $0 for 2023.
AUDIT-RELATED FEES (INVESTMENT
ADVISOR) -- The aggregate fees billed in each of the last two fiscal years of the registrant for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are
not reported under paragraph (a) of this Item were $0 for 2022 and $0 for 2023.
(c) TAX FEES (REGISTRANT) -- The
aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning to the registrant were $21,515 for 2022 and $14,070 for 2023. These fees were for tax consultation and/or
tax return preparation and professional services rendered for PFIC (Passive Foreign Investment Company) Identification Services.
TAX FEES (INVESTMENT ADVISOR)
-- The aggregate fees billed in each of the last two fiscal years of the registrant for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning to the registrant’s advisor were $0 for 2022 and $0 for 2023.
(d) ALL OTHER FEES (REGISTRANT)
-- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the
registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2022 and $0 for 2023.
ALL OTHER FEES (INVESTMENT ADVISOR)
-- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the
registrant’s investment advisor, other than services reported in paragraphs (a) through (c) of this Item were $0 for 2022 and $0
for 2023.
Pursuant to its charter
and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for
the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the
registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee
up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also
responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the registrant’s advisor
(not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor)
and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant,
if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions
for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant’s
advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment
advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services
to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit
services is compatible with the auditor’s independence.
(a)(1) Identification of Portfolio Manager(s) or Management Team
Members and Description of Role of Portfolio Manager(s) or Management Team Members
The First Trust Advisors Leveraged Finance
Investment team manages a portfolio comprised primarily of U.S. dollar denominated, senior secured floating-rate loans. The Portfolio
Managers are responsible for directing the investment activities within the Fund. William Housey is the Senior Portfolio Manager and has
primary responsibility for investment decisions. Jeffrey Scott assists Mr. Housey and there are also Senior Credit Analysts assigned to
certain industries. The Portfolio Managers are supported in their portfolio management activities by the First Trust Advisors Leveraged
Finance investment team, including a team of credit analysts, designated traders, and operations personnel. Senior Credit Analysts are
assigned industries and Associate Credit Analysts support the Senior Credit Analysts. All credit analysts, operations personnel and portfolio
managers report to Mr. Housey.
Mr. Housey joined First Trust Advisors L.P. in June
2010 as the Senior Portfolio Manager for the Leveraged Finance Investment Team and has 27 years of investment experience. Mr. Housey
is a Managing Director of Fixed Income and is also a member of the First Trust Strategic Model Investment Committee and the Fixed Income
Sub-Committee. Prior to joining First Trust, Mr. Housey was at Morgan Stanley Investment Management and its wholly owned subsidiary,
Van Kampen Funds, Inc. for 11 years where he last served as Executive Director and Co-Portfolio Manager. Mr. Housey has extensive
experience in the portfolio management of both leveraged and unleveraged credit products, including senior loans, high-yield bonds, credit
derivatives and corporate restructurings. Mr. Housey received a B.S. in Finance from Eastern Illinois University and an M.B.A. in
Finance as well as Management and Strategy from Northwestern University’s Kellogg School of Business. He also holds the FINRA Series
7, Series 52 and Series 63 licenses. Mr. Housey also holds the Chartered Financial Analyst designation. He is a member of
the CFA Institute and the CFA Society of Chicago. Mr. Housey also serves on the Village of Glen Ellyn, IL Police Pension Board.
Mr. Scott is a Portfolio Manager and a Sector
Specialist Credit Analyst for the Leveraged Finance Investment Team at First Trust Advisors L.P. He has 33 years of experience in
the investment management industry and has extensive experience in credit analysis, product development, and product management. Prior
to joining First Trust, Jeff served as an Assistant Portfolio Manager and as a Senior Credit Analyst for Morgan Stanley/Van Kampen from
October 2008 to June 2010. As Assistant Portfolio Manager, Jeff served on a team that managed over $4.0 billion of Senior Loan assets
in three separate funds: Van Kampen Senior Loan Fund; Van Kampen Senior Income Trust; and Van Kampen Dynamic Credit Opportunities Fund.
His responsibilities included assisting with portfolio construction, buy and sell decision making, and monitoring fund liquidity and leverage.
Mr. Scott earned a B.S. in Finance and Economics from Elmhurst College and an M.B.A. with specialization in Analytical Finance and Econometrics
and Statistics from the University of Chicago. He also holds the Chartered Financial Analyst designation and is a member of the CFA Institute
and the CFA Society of Chicago.
(a)(2) Other Accounts Managed by Portfolio
Manager(s) or Management Team Member and Potential Conflicts of Interest
* Information excludes the registrant.
The compensation structure
for internal portfolio managers is based upon a fixed salary as well as a discretionary bonus determined by the management of FTA. Salaries
are determined by management and are based upon an individual’s position and overall value to the firm. Bonuses are also determined
by management and are generally based upon an individual’s or team’s overall contribution to the success of the firm, assets
under management and the profitability of the firm. Certain internal portfolio managers have an indirect ownership stake in the firm and
will therefore receive their allocable share of ownership related distributions.
Not applicable.
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.
Not applicable.
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, Donald P. Swade, 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, Donald P. Swade, Treasurer, Chief Financial Officer
and Chief Accounting Officer of First Trust Senior Floating Rate Income Fund II (the “Registrant”), certify that:
FIRST TRUST
ADVISORS L.P.
PROXY VOTING GUIDELINES
First Trust Advisors L.P. (“FTA” or the “Adviser”)
serves as investment adviser to open- and closed-end investment companies, and other collective investments (“Funds”),
as well as separately managed accounts (collectively, “Clients”). As part of these services, the Adviser has, in most
cases, agreed to or been delegated proxy voting responsibility on such Clients’ behalf (“Proxy Clients”). FTA
is required to adopt and implement policies and procedures reasonably designed to ensure proxy voting on behalf of Proxy Clients is conducted
in a manner that is in their best interests and addresses how conflicts of interest between FTA’s interests and Proxy Clients’
interests are managed. FTA has adopted the following policies and procedures to comply with this requirement (the “Policy”).
These records are either maintained at FTA’s office or
are electronically available to FTA through access to the ISS Proxy Exchange portal.
N-2
|
12 Months Ended |
|
May 31, 2023
$ / shares
shares
|
|---|
| Cover [Abstract] |
|
| Entity Central Index Key |
0001282850
|
| Amendment Flag |
false
|
| Entity Inv Company Type |
N-2
|
| Document Type |
N-CSR
|
| Entity Registrant Name |
First
Trust Senior Floating Rate Income Fund II
|
| General Description of Registrant [Abstract] |
|
| Investment Objectives and Practices [Text Block] |
Investment
Objectives
The
Fund’s primary objective is to seek a high level of current income. As a secondary objective, the Fund attempts to preserve
capital.
Principal
Investment Policies
The
Fund pursues its investment objectives through investment in a portfolio of Senior Loans. There can be no assurance that the Fund will
achieve its investment objectives. Investment 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.
Under
normal market conditions, the Fund invests at least 80% of its Managed Assets in a diversified portfolio of Senior Loans. The portion
of the Fund’s assets invested in Senior Loans will vary from time to time consistent with the Fund’s investment objectives,
changes in market prices for Senior Loans, changes in interest rates and other economic and market factors. Senior Loans generally hold
one of the most senior positions in the capital structure of a business entity (the “Borrower”), are typically secured with
specific collateral and have a claim on the assets and/or stock of the Borrower that is senior to that held by subordinated debtholders and
stockholders of the Borrower. The proceeds of Senior Loans primarily are used to finance leveraged buyouts, recapitalizations, mergers,
acquisitions, stock repurchases, and, to a lesser extent, to finance internal growth and for other corporate purposes. Senior Loans have
rates of interest which are typically redetermined either monthly, quarterly or semiannually by reference to a base lending rate, plus
a premium. The Senior Loans in which the Fund invests are primarily below investment grade instruments, commonly referred to as “high
yield” securities or “junk bonds.”
Under
normal market conditions, the Fund may also:
| •
|
Invest
up to 10% of its Managed Assets through purchasing revolving credit facilities, investment grade debtor-in-possession financing, unsecured
loans, other floating rate debt securities, such as notes, bonds, and asset-backed securities (such as collateralized loan obligations
(“CLOs”)), investment grade loans and fixed income debt obligations of any maturity, money market instruments, such as commercial
paper, and publicly-traded high yield debt securities. |
| •
|
Invest
up to 10% of its Managed Assets in securities of: |
| o
|
Firms
that, at the time of acquisition, have defaulted on their debt obligations and/or filed for protection under Chapter 11 of the U.S. Bankruptcy
Code or have entered into a voluntary reorganization in conjunction with their creditors and stakeholders in order to avoid a bankruptcy
filing; or |
| o
|
Firms
prior to an event of default whose acute operating and/or financial problems have resulted in the markets valuing their respective securities
and debt at sufficiently discounted prices so as to be yielding, should they not default, a significant premium over comparable duration
U.S. Treasury bonds. |
These
foregoing investments are comprised of Senior Loans and, on limited occasions, equity and debt securities acquired in connection therewith.
| •
|
Invest
up to 15% of its Managed Assets in U.S. dollar-denominated foreign investments, exclusively in developed countries and territories of
those countries, but in no case will the Fund invest in securities of issuers located in emerging markets. |
It
is anticipated that at least 80% of the Fund’s Managed Assets are invested in lower grade debt instruments, although from time to
time all of the Fund’s Managed Assets may be invested in such lower grade debt instruments. The Fund’s investments in debt
instruments may have fixed or variable principal payments and all types of interest rate and reset terms, including, but not limited to,
fixed rate, adjustable rate, zero coupon, contingent, deferred, payment-in-kind and auction rate features.
The
Fund does not intend to purchase publicly-traded equity securities but may receive such securities as a result of a restructuring of the
debt of the issuer or the reorganization of a Senior Loan or as part of a package of securities acquired together with the Senior Loans
of an issuer.
The
Fund may enter into certain derivative transactions to seek to manage the risks of the Fund’s portfolio securities and certain of
these derivative transactions may provide investment leverage to the Fund’s portfolio. The Fund does not enter into derivative transactions
as a principal part of its investment strategy.
“Managed
Assets” means the gross asset value of the Fund (including assets attributable to the Fund’s preferred shares of beneficial
interest (“Preferred Shares”), if any, and the principal amount of borrowings) minus the sum of the Fund’s accrued and
unpaid dividends on any outstanding Preferred Shares and accrued liabilities (other than the principal amount of any borrowings incurred
or of commercial paper or notes issued by the Fund). For purposes of determining Managed Assets, the liquidation preference of Preferred
Shares is not treated as a liability. Percentage limitations described herein are as of the time of investment by the Fund and may be
exceeded on a going-forward basis as a result of market value fluctuations of the Fund’s portfolio and other events.
The
Fund’s investment objectives are considered fundamental and may not be changed without shareholder approval. The remainder of the
Fund’s investment policies, including its investment strategy, are considered non-fundamental and may be changed by the Board of
Trustees without shareholder approval. The Fund will provide investors with at least 60 days’ prior notice of any change in the
Fund’s investment strategy. There can be no assurance that the Fund’s investment objectives will be achieved.
Fundamental
Investment Policies
The
Fund, as a fundamental policy, may not:
1.
With respect to 75% of its total assets, purchase any securities, if as a result more than 5% of the Fund’s total assets would then
be invested in securities of any single issuer or if, as a result, the Fund would hold more than 10% of the outstanding voting securities
of any single issuer; provided, that Government securities (as defined in the Investment Company Act of 1940 (the “1940 Act”)),
securities issued by other investment companies and cash items (including receivables) shall not be counted for purposes of this limitation.
2.
Purchase any security if, as a result of the purchase, 25% or more of the Fund’s total assets (taken at current value) would be
invested in the securities of Borrowers and other issuers having their principal business activities in the same industry; provided, that
this limitation shall not apply with respect to obligations issued or guaranteed by the U.S. Government or by its agencies or instrumentalities.
3.
Borrow money, except as permitted by the 1940 Act, the rules thereunder and interpretations thereof or pursuant to a Commission exemptive
order.
4.
Issue senior securities, as defined in the 1940 Act, other than: (i) preferred shares which immediately after issuance will have asset
coverage of at least 200%; (ii) indebtedness which immediately after issuance will have asset coverage of at least 300%; (iii) the borrowings
permitted by investment restriction 3 above, or (iv) pursuant to a Commission exemptive order.
5.
Make loans of money or property to any person, except for obtaining interests in Senior Loans in accordance with its investment objectives,
through loans of portfolio securities or the acquisition of securities subject to repurchase agreements, or pursuant to a Commission rule
or exemptive order.
6.
Act as an underwriter of securities, except to the extent the Fund may be deemed to be an underwriter in certain cases when disposing
of its portfolio investments or acting as an agent or one of a group of co-agents in originating Senior Loans.
7.
Purchase or sell real estate, commodities or commodities contracts except pursuant to the exercise by the Fund of its rights under loan
agreements, bankruptcy or reorganization, or pursuant to a Commission rule or exemptive order, and except to the extent the interests
in Senior Loans the Fund may invest in are considered to be interests in real estate, commodities or commodities contracts and except
to the extent that hedging instruments the Fund may invest in are considered to be commodities or commodities contracts.
For
purposes of fundamental investment restriction numbers 1 and 2 above, the Fund treats the Lender selling a participation and any persons
interpositioned between the Lender and the Fund as an issuer. The Fund may incur borrowings and/or issue series of notes or other senior
securities in an amount up to 33-1/3% (or such other percentage to the extent permitted by the 1940 Act) of its total assets (including
the amount borrowed) less all liabilities other than borrowings.
|
| 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 and/or
interest 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.
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.
Many
financial instruments use or may use a floating rate based upon the London Interbank Offered Rate (“LIBOR”). The United Kingdom’s
Financial Conduct Authority (the “FCA”), which regulates LIBOR, intends to cease making LIBOR available as a reference rate
over a phase-out period that began in early 2022. However, subsequent announcements by the FCA, the LIBOR administrators, and other regulators
indicate that it is possible that the most widely used LIBOR rates may continue until mid-2023. While some instruments tied to LIBOR may
include a replacement rate, not all instruments have such fallback provisions and the effectiveness of such replacement rates remains
uncertain. 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 the Fund or on certain instruments in which the Fund invests can be difficult to ascertain, and they may vary depending
on a variety of factors. In the United States, it is anticipated that in many instances the Secured Overnight Financing Rate (“SOFR”)
will replace LIBOR as the reference rate for many of the floating rate instruments held by the Fund. There is no assurance that the composition
or characteristics of SOFR, or any alternative reference rate, will be similar to or produce the same value or economic equivalence as
LIBOR or that instruments using an alternative rate will have the same volume or liquidity. As a result, the transition process might
lead to increased volatility and reduced liquidity in markets that currently rely on LIBOR to determine interest rates; a reduction in
the value of some LIBOR-based investments; increased difficulty in borrowing or refinancing and diminished effectiveness of any applicable
hedging strategies against instruments whose terms currently include LIBOR; and/ or costs incurred in connection with temporary borrowings
and closing out positions and entering into new agreements. Any such effects (as well as other unforeseen effects) of the transition away
from LIBOR and the adoption of alternative reference rates could result in losses to the Fund.
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. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations
caused by factors such as general economic conditions, political events, regulatory 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,
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. For example, the coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments,
including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions,
had negative impacts, and in many cases severe impacts, on markets worldwide. While the development of vaccines has slowed the spread
of the virus and allowed for the resumption of reasonably normal business activity in the United States, many countries continue to impose
lockdown measures in an attempt to slow the spread. Also, in February 2022, Russia invaded Ukraine which has caused and could continue
to cause significant market disruptions and volatility across markets globally, including the United States. The hostilities and sanctions
resulting from those hostilities could have a significant impact on certain Fund investments as well as Fund performance. As the global
pandemic and conflict in Ukraine have illustrated, such events may affect certain geographic regions, countries, sectors and
industries
more significantly than others. 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. These events also may adversely affect the prices and liquidity of the Fund’s portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact
on the value of the Fund’s shares 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 and the bid/ask spread on the Fund’s shares may widen.
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.
|
| Effects of Leverage [Text Block] |
Effects
of Leverage
The
aggregate principal amount of borrowings under the credit agreement (the “Credit Agreement”) with The Bank of Nova Scotia
represented approximately 14.43% of Managed Assets as of May 31, 2023. Asset coverage with respect to the borrowings was 693.04% as of
May 31, 2023 and the Fund had $90,000,000 of unutilized funds available for borrowing under the Credit Agreement as of that date. As of
May 31, 2023, the maximum commitment amount of the Credit Agreement was $138,000,000. As of May 31, 2023, the approximate average annual
interest and fee rate was 6.61%.
Assuming
that the Fund’s leverage costs remain as described above (at an assumed average annual cost of 6.61%), the annual return that the
Fund’s portfolio must experience (net of expenses) in order to cover its leverage costs would be 0.95%.
The
following table is furnished in response to requirements of the SEC. It is designed to illustrate the effect of leverage on Common Share
total return, assuming investment portfolio total returns (comprised of income and changes in the value of securities held in the Fund’s
portfolio) of (10%), (5%), 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily
indicative of the investment portfolio returns experienced or expected to be experienced by the Fund.
The
table further assumes leverage representing 14.43% of the Fund’s Managed Assets, net of expenses, and an annual leverage interest
and fee rate of 6.61%.
|
Assumed Portfolio Total Return (Net of Expenses)
|
-10%
|
-5%
|
0%
|
5%
|
10%
|
|
Common Share Total Return
|
-12.80%
|
-6.96%
|
-1.11%
|
4.73%
|
10.57%
|
Common
share total return is composed of two elements: the common share dividends paid by the Fund (the amount of which is largely determined
by the net investment income of the Fund after paying dividends or interest on its leverage instruments) and gains or losses on the value
of the securities the Fund owns. As required by SEC rules, the table above assumes that the Fund is more likely to suffer capital losses
than to enjoy capital appreciation. For example, to assume a total return of 0% the Fund must assume that the interest it receives on
its debt security investments is entirely offset by losses in the value of those investments.
|
| Annual Interest Rate [Percent] |
6.61%
|
| Annual Coverage Return Rate [Percent] |
0.95%
|
| Effects of Leverage [Table Text Block] |
|
Assumed Portfolio Total Return (Net of Expenses)
|
-10%
|
-5%
|
0%
|
5%
|
10%
|
|
Common Share Total Return
|
-12.80%
|
-6.96%
|
-1.11%
|
4.73%
|
10.57%
|
|
| Return at Minus Ten [Percent] |
(12.80%)
|
| Return at Minus Five [Percent] |
(6.96%)
|
| Return at Zero [Percent] |
(1.11%)
|
| Return at Plus Five [Percent] |
4.73%
|
| Return at Plus Ten [Percent] |
10.57%
|
| Effects of Leverage, Purpose [Text Block] |
The
following table is furnished in response to requirements of the SEC. It is designed to illustrate the effect of leverage on Common Share
total return, assuming investment portfolio total returns (comprised of income and changes in the value of securities held in the Fund’s
portfolio) of (10%), (5%), 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures and are not necessarily
indicative of the investment portfolio returns experienced or expected to be experienced by the Fund.
The
table further assumes leverage representing 14.43% of the Fund’s Managed Assets, net of expenses, and an annual leverage interest
and fee rate of 6.61%.
|
| Share Price |
$ 9.56
|
| NAV Per Share |
$ 10.96
|
| 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 and/or
interest 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.
|
| 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.
|
| 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.
|
| 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. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations
caused by factors such as general economic conditions, political events, regulatory 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,
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. For example, the coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments,
including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions,
had negative impacts, and in many cases severe impacts, on markets worldwide. While the development of vaccines has slowed the spread
of the virus and allowed for the resumption of reasonably normal business activity in the United States, many countries continue to impose
lockdown measures in an attempt to slow the spread. Also, in February 2022, Russia invaded Ukraine which has caused and could continue
to cause significant market disruptions and volatility across markets globally, including the United States. The hostilities and sanctions
resulting from those hostilities could have a significant impact on certain Fund investments as well as Fund performance. As the global
pandemic and conflict in Ukraine have illustrated, such events may affect certain geographic regions, countries, sectors and
industries
more significantly than others. 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. These events also may adversely affect the prices and liquidity of the Fund’s portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of such circumstances could have a materially negative impact
on the value of the Fund’s shares 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 and the bid/ask spread on the Fund’s shares may widen.
|
| 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 Risks [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.
|
| Risk 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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| Interest Rate Risk [Member] |
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| General Description of Registrant [Abstract] |
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| 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.
Many
financial instruments use or may use a floating rate based upon the London Interbank Offered Rate (“LIBOR”). The United Kingdom’s
Financial Conduct Authority (the “FCA”), which regulates LIBOR, intends to cease making LIBOR available as a reference rate
over a phase-out period that began in early 2022. However, subsequent announcements by the FCA, the LIBOR administrators, and other regulators
indicate that it is possible that the most widely used LIBOR rates may continue until mid-2023. While some instruments tied to LIBOR may
include a replacement rate, not all instruments have such fallback provisions and the effectiveness of such replacement rates remains
uncertain. 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 the Fund or on certain instruments in which the Fund invests can be difficult to ascertain, and they may vary depending
on a variety of factors. In the United States, it is anticipated that in many instances the Secured Overnight Financing Rate (“SOFR”)
will replace LIBOR as the reference rate for many of the floating rate instruments held by the Fund. There is no assurance that the composition
or characteristics of SOFR, or any alternative reference rate, will be similar to or produce the same value or economic equivalence as
LIBOR or that instruments using an alternative rate will have the same volume or liquidity. As a result, the transition process might
lead to increased volatility and reduced liquidity in markets that currently rely on LIBOR to determine interest rates; a reduction in
the value of some LIBOR-based investments; increased difficulty in borrowing or refinancing and diminished effectiveness of any applicable
hedging strategies against instruments whose terms currently include LIBOR; and/ or costs incurred in connection with temporary borrowings
and closing out positions and entering into new agreements. Any such effects (as well as other unforeseen effects) of the transition away
from LIBOR and the adoption of alternative reference rates could result in losses to the Fund.
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