UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-23199
First Trust Senior Floating Rate 2022
Target Term Fund
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address of agent for service)
Registrant’s telephone number, including
area code: 630-765-8000
Date of fiscal year end: May 31
Date of reporting period: May 31, 2021
Form N-CSR is to be used by management investment
companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required
to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use
the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information
specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection
of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”)
control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing
the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this
collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) The Report to Shareholders
is attached herewith.
First Trust
Senior Floating
Rate 2022
Target Term Fund (FIV)
Annual Report
For the
Year Ended
May 31,
2021
First Trust Senior Floating Rate
2022 Target Term Fund (FIV)
Annual Report
May 31, 2021
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1
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4
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12
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23
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34
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36
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Caution Regarding
Forward-Looking Statements
This report contains
certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. (“First Trust” or the “Advisor”) and its representatives, taking into account the information currently available to them.
Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as “anticipate,”
“estimate,” “intend,” “expect,” “believe,” “plan,” “may,” “should,” “would” or other words that convey uncertainty of
future events or outcomes.
Forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of First Trust Senior Floating Rate 2022 Target Term Fund (the
“Fund”) to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you
are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly
revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof.
Performance and Risk
Disclosure
There is no assurance
that the Fund will achieve its investment objectives. The Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the
Fund’s shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in the Fund. See “Principal Risks” in the Investment Objectives, Policies, Risks and
Effects of Leverage section of this report for a discussion of certain other risks of investing in the Fund.
Performance data quoted
represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and common share price will fluctuate and Fund shares, when sold,
may be worth more or less than their original cost.
The Advisor may also
periodically provide additional information on Fund performance on the Fund’s web page at www.ftportfolios.com.
How to Read This
Report
This report contains
information that may help you evaluate your investment in the Fund. It includes details about the Fund and presents data and analysis that provide insight into the Fund’s performance and investment approach.
By reading the portfolio
commentary by the portfolio management team of the Fund, you may obtain an understanding of how the market environment affected the Fund’s performance. The statistical information that follows may help you
understand the Fund’s performance compared to that of a relevant market benchmark.
It is important to keep
in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the
date on the cover of this report. The material risks of investing in the Fund are spelled out in the prospectus, the statement of additional information, this report and other Fund regulatory filings.
First Trust Senior Floating Rate
2022 Target Term Fund (FIV)
Annual Letter from the Chairman and
CEO
May 31, 2021
Dear Shareholders,
First Trust is pleased
to provide you with the annual report for the First Trust Senior Floating Rate 2022 Target Term Fund (the “Fund”), which contains detailed information about the Fund for the twelve months ended May 31,
2021.
The number one topic in
the markets these days is inflation. While there are several economic indicators that track the prices of goods and services in the U.S. over time, perhaps the most quoted is the Consumer Price Index
(“CPI”). The reason why inflation is back in the news is because we have witnessed a short-term spike that is likely a byproduct of the fallout (bottlenecks in the global supply chain) from the coronavirus
(“COVID-19”) pandemic, which is a fancy way of saying companies are having a hard time getting all of the materials and parts needed to manufacture their products. Shipping delays have also contributed to
companies’ struggles to obtain materials and parts. The trailing 12-month CPI-Headline inflation rate stood at 5.0% in May 2021, according to the Bureau of Labor Statistics. For comparative purposes, the CPI
averaged 1.3% and 1.8%, in 2018 and 2019, respectively. The Federal Reserve’s (the “Fed”) take on inflation is that it will ease moving forward as the so-called bottlenecks abate during the reopening
of the global economy. The Fed’s buzzword for this type of inflation spike is “transitory.” Many economists and pundits do not agree with the Fed’s take on inflation and believe it is here to
stay for the foreseeable future. We shall see.
The trepidation over
rising inflation stems mostly from how the capital markets (debt and equity) react to it. Some areas of the economy are going to be more sensitive to higher inflation levels than others. Companies with the ability to
raise prices on their goods and services have a distinct advantage, in our view. For most companies these days, that is easier said than done without negatively impacting sales, in our opinion. Investors need to
monitor bond yields, particularly the benchmark 10-Year Treasury Note. If it begins to rise along with inflation, which to date it has not (apparently investors are buying the Fed’s transitory theory at this
point), other fixed-income securities, such as corporate and municipal bonds, will likely experience the same, and that tends to translate into lower bond prices. Keep in mind that some debt, such as leveraged loans
(corporate) and other floating-rate securities, do offer a diversification alternative to fixed-income securities.
We need to get people
back to work. U.S. job openings totaled 9.29 million as of April 30, 2021. There is an ongoing debate about why so many Americans are opting for government benefits over taking a position in the workplace. Simply put,
some are making more money than in their previous jobs. We do acknowledge that there could be other reasons, such as childcare. Many of you are probably aware that the federal government boosted the payout to millions
of people receiving unemployment checks by $300 per week back in March of this year. It was a part of the Biden Administration’s $1.9 trillion aid package. The additional benefits are scheduled to expire on
September 6, 2021. What you may not know is that some 25 Republican governors have opted to stop passing along the $300 per week benefits to their unemployed workers as of early June. That could impact around four
million people in those states. Hopefully, this will help motivate at least some people to secure a job, help make the U.S. economy more productive and get off the government dole.
In closing, we welcome
the reopening of the U.S. economy and, hopefully, the global economy shortly thereafter. We encourage investors to stay the course even though the markets could experience some turbulence in the months ahead, in our
opinion. The potential for additional volatility represents an opportunity for investors to check their asset allocation levels to determine if they are suitable for an extended inflationary climate.
Thank you for giving
First Trust the opportunity to play a role in your financial future. We value our relationship with you and will report on the Fund again in six months.
Sincerely,
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust
Advisors L.P.
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
“AT A GLANCE”
As of May 31, 2021
(Unaudited)
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Fund Statistics
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Symbol on New York Stock Exchange
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FIV
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Common Share Price
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$9.47
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Common Share Net Asset Value (“NAV”)
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$9.67
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Premium (Discount) to NAV
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(2.07)%
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Net Assets Applicable to Common Shares
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$346,589,900
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Current Monthly Distribution per Common Share(1)
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$0.0103
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Current Annualized Distribution per Common Share
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$0.1236
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Current Distribution Rate on Common Share Price(2)
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1.31%
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Current Distribution Rate on NAV(2)
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1.28%
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Common Share Price & NAV (weekly closing price)
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Performance
|
|
|
|
|
|
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Average Annual
Total Returns
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Cumulative
Total Returns
|
|
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1 Year Ended
5/31/21
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Inception (12/21/16)
to 5/31/21
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Inception (12/21/16)
to 5/31/21
|
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Fund Performance(3)
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|
|
|
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NAV
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10.75%
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3.64%
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17.19%
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Market Value
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17.12%
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2.80%
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13.04%
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Index Performance
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|
|
|
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S&P/LSTA Leveraged Loan Index
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12.51%
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4.34%
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20.79%
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(1)
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Most recent distribution paid or declared through 5/31/2021. Subject to change in the future.
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(2)
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Distribution rates are calculated by annualizing the most recent distribution paid or declared through the report date and then dividing by Common Share Price or NAV, as applicable, as of 5/31/2021.
Subject to change in the future.
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(3)
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Total return is based on the combination of reinvested dividend, capital gain, and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per
share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of
future results.
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First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
“AT A GLANCE”
(Continued)
As of May 31, 2021
(Unaudited)
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Credit Quality (S&P Ratings)(4)
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% of Senior
Loans and other
Debt Securities(5)
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BBB-
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3.3%
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BB+
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2.3
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BB
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6.7
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BB-
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9.6
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B+
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27.9
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B
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34.0
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B-
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11.7
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CCC+
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0.7
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CCC
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1.9
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D
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1.9
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Total
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100.0%
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Industry Classification
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% of Senior
Loans and other
Securities(5)
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Software
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20.4%
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Hotels, Restaurants & Leisure
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19.5
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Health Care Providers & Services
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14.4
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Pharmaceuticals
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9.6
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Media
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9.4
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Health Care Technology
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4.5
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Insurance
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4.1
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Diversified Consumer Services
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3.8
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Containers & Packaging
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3.5
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Aerospace & Defense
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2.4
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Food Products
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2.4
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Food & Staples Retailing
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1.5
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Entertainment
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1.5
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Professional Services
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1.2
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Oil, Gas & Consumable Fuels
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0.8
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Electric Utilities
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0.4
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Household Durables
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0.2
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Communications Equipment
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0.2
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Diversified Telecommunication Services
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0.1
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Specialty Retail
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0.1
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Total
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100.0%
|
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Top 10 Issuers
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% of Senior
Loans and other
Securities(5)
|
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Parexel International Corp.
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4.1%
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Solera Holdings, Inc.
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3.9
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SolarWinds Holdings, Inc.
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3.9
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Asurion, LLC
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3.8
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Caesars Resort Collection, LLC
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3.7
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Pactiv LLC/Evergreen Packaging, LLC (fka Reynolds Group Holdings)
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3.5
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Internet Brands, Inc. (Web MD/MH Sub I, LLC)
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3.4
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Exam Works (Gold Merger Co., Inc.)
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3.3
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Nexstar Broadcasting, Inc.
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3.3
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CHG Healthcare Services, Inc.
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3.3
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Total
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36.2%
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(4)
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The ratings are by Standard & Poor’s except where otherwise indicated. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the
creditworthiness of an issuer with respect to debt obligations except for those debt obligations that are only privately rated. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest).
Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and
not to the Fund or its shares. Credit ratings are subject to change.
|
|
(5)
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Percentages are based on long-term positions. Money market funds are excluded.
|
Portfolio Commentary
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
Annual Report
May 31, 2021
(Unaudited)
Advisor
The First Trust Advisors
L.P. (“First Trust”) Leveraged Finance Team is comprised of 17 experienced investment professionals specializing in below investment grade securities. The team is comprised of portfolio management,
research, trading and operations personnel. As of May 31, 2021, the First Trust Leveraged Finance Team managed or supervised approximately $6.77 billion in senior secured bank loans and high-yield bonds. These assets
are managed across various strategies, including three closed-end funds, an open-end fund, three exchange-traded funds, and a series of unit investment trusts on behalf of retail and institutional clients.
Portfolio Management
Team
William Housey, CFA –
Managing Director of Fixed Income, Senior Portfolio Manager
Jeffrey Scott, CFA –
Senior Vice President and Portfolio Manager
Commentary
First Trust Senior Floating
Rate 2022 Target Term Fund
The investment objectives
of the First Trust Senior Floating Rate 2022 Target Term Fund (“FIV” or the “Fund”) are to seek a high level of current income and to return $9.85 per Common Share of beneficial interest of the
Fund to the holders of Common Shares on or about February 1, 2022 (“Termination Date”). The Fund, under normal market conditions, seeks to achieve its investment objectives by investing at least 80% of its
Managed Assets in a portfolio of senior secured floating-rate loan interests (“senior loans”) of any maturity. “Managed Assets” means the average daily gross asset value of the Fund (which
includes assets attributable to the Fund’s preferred shares of beneficial interest (“Preferred Shares”), if any, and the principal amount of any borrowings or commercial paper or notes issued by the
Fund), 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 of money incurred or of commercial
paper or notes issued by the Fund). There can be no assurance that the Fund’s investment objectives will be achieved. The Fund may not be appropriate for all investors.
As a result of the sharp
and sudden economic shock resulting from the unprecedented shut down of significant parts of the U.S. economy due to the coronavirus (“COVID-19”) and the significant decline in the value of the
Fund’s assets in March of 2020, the Fund was required to sell assets and pay down outstanding indebtedness in order to remain in compliance with applicable limitations on leverage imposed on the Fund by
applicable law. While the market for the Fund’s assets has improved since such time, sales of the Fund’s investments during the downturn had a negative impact on the Fund’s net asset value
(“NAV”). In addition, due to the Federal Open Market Committee lowering the Federal Funds target rate to 0% - 0.25% from 1.50% - 1.75% in March 2020, the London Interbank Offered Rate rates declined
significantly which reduced the income earning potential of the Fund and its ability to increase NAV through withholding Fund income. As a result, based on current market conditions and expectations, the Fund believes
that it is unlikely to achieve its objective of returning $9.85 per common share upon its termination. The NAV as of May 31, 2021 was $9.67. The ultimate NAV of the Fund that will be returned to shareholders upon
termination of the Fund, will be dependent on a number of factors including, but not limited to, the rate of refinancing activity in the portfolio, the level of income earned in the portfolio, default losses
experienced in the portfolio, trading losses in the portfolio, and the use of leverage.
Market Recap
During the twelve-month
period ended May 31, 2021, risk asset prices steadily increased and reached new all-time highs as the global economy continued to recover from the COVID-19 pandemic. The positive investor sentiment was buoyed by the
outcome of the U.S. Presidential and congressional elections, the approval and distribution of effective COVID-19 vaccines, and the continued unprecedented fiscal and monetary support provided by the Federal
government and the Federal Reserve (the “Fed”). The yield curve steepened with longer term U.S. treasury yields moving up, driven by an improving growth outlook and higher inflation expectations. The
10-Year U.S. Treasury yield (rates) ended the same period at 1.59%, an increase of 94 basis points (“bps”) over the last twelve-month period (“LTM”). Rising commodity prices stoked inflation
concerns, with the Bloomberg Commodities Index up 46.10% in the LTM period due to improving global economic conditions. Given the rate move, higher quality fixed income assets, which are negatively correlated with
rising interest rates, underperformed other risk assets. During the LTM period, the US Aggregate Index was down 0.40%, investment grade corporate bonds returned 3.97%, while the 10-Year U.S. Treasury and 30-Year U.S.
Treasury were down 7.30% and 17.62%, respectively. Over the same period, the S&P 500® Index returned 40.32%, high-yield bonds returned 15.13% and senior loans returned 12.51%.1
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1
|
Bloomberg: High-Yield Bonds are represented by the ICE BofA US High Yield Constrained Index, Investment Grade Corporate Bonds are represented by the ICE BofA US Corporate Index, the US Aggregate Index
is represented by the Bloomberg Barclays US Aggregate Bond Index, and Senior Loans are represented by the S&P/LSTA Leveraged Loan Index.
|
Portfolio Commentary (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
Annual Report
May 31, 2021
(Unaudited)
Senior loans generated
positive returns in all but one month during the LTM period. The one exception was in March 2021 when senior loans generated a return of 0.00%. The returns were consistent and evenly distributed with no large monthly
outliers driving the total return throughout the same period.
Retail demand for the
senior loan asset class turned positive in the LTM period as senior loans ended May 2021 with six consecutive months of inflows after previously experiencing 26-months of consecutive outflows. The rising rate
environment coupled with higher inflation expectations drove investor demand for floating rate assets. Inflows totaled $15.6 billion during the LTM period with $22.7 billion of inflows recorded in the last 6 months of
the LTM period.2,3 Despite higher inflation expectations the Fed has stated that it considers inflationary pressures to be transitory, and continues to indicate to the market that they do not
expect to raise rates until 2023 as they expect the economy will take time to fully recover.
Performance Analysis
The Fund’s NAV and
market price returns4 were 10.75% and 17.12%, respectively, for the LTM period ended May 31, 2021. The S&P/LSTA Leveraged Loan Index (the
“Index”) returned 12.51% during the same period. The Fund entered the period at a 7.40% discount to NAV and tightened 533 bps to a 2.07% discount to NAV by the end of the period. The Fund traded at an
average discount to NAV of 5.22% during the LTM period. The Fund remains well diversified and was invested in 66 different issuers and 77 individual securities (1.30% average position size). The Fund was also well
diversified across 20 different industries, the largest of which was Software at 20.43%, followed by Hotels, Restaurants & Leisure at 19.45% and Health Care Providers & Services at 14.38%. The Fund held 99.40%
of its assets in senior loans and 0.23% of its assets in high-yield bonds, which is relatively unchanged from the prior year period.
Relative to the Index,
the primary detractor to performance was the Fund’s overweight and security selection within the electronics/electrical (technology) industry. Within electronics/electrical (technology), the primary drivers were
the Fund’s overweight positions in an information technology management company, a document management software company and a cyber security services provider that all delivered positive returns during the LTM
period but lagged the electronics/electrical (technology) industry return. The Fund’s use of leverage was a tailwind as risk asset prices generated positive returns over the LTM period. In contrast to the Fund,
the Index is not levered. In addition, the Fund benefitted from security selection within the leisure and automotive industries. Within leisure, the Fund’s overweight positions in movie theaters significantly
outperformed during the LTM period as the rollout of vaccines is expected to result in an acceleration of the film slate.
From an income
perspective, the monthly distribution rate began the period at $0.0203 per share and ended at $0.0103 per share. The annualized distribution rate at the end of May 2021 was 1.28% at NAV and 1.31% at market price.
Market and Fund Outlook
Fixed income spreads are
tight relative to the historical average, however, we believe that the economic outlook remains supportive as widespread vaccination and full reopening of the economy, coupled with continued support from the Federal
government and the Fed, progresses. Moreover, we believe that interest rates are poised to rise in the near to medium term which would dampen longer duration fixed income asset returns. Over the next eight months as
the Fund approaches its Termination Date, the portfolio management team anticipates actively reducing the Fund’s leverage and shifting the portfolio composition to shorter dated and higher-quality holdings. As a
result of these actions, investors should continue to anticipate periodic reductions in the Fund’s distribution per share going forward.
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2
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JP Morgan Leverage Loan Market Monitor.
|
|
3
|
The outflows began in the fourth quarter of 2018 due to a general concern for the sustainability of growth in the economy which was fueled by the ongoing trade dispute with China and the potential
implications of the Fed’s tightening cycle which began in December 2016 and resulted in a 200 bps increase in the target Federal Funds rate to 2.50%. Since then the Federal Funds target rate was cut to 0.25% to
combat the current economic conditions due to the COVID-19 pandemic.
|
|
4
|
Total return is based on the combination of reinvested dividends, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per
Common Share for NAV returns and changes in Common Share price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not
indicative of future results.
|
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Portfolio of Investments
May 31, 2021
Principal
Value
|
|
Description
|
|
Rate (a)
|
|
Stated
Maturity (b)
|
|
Value
|
|
SENIOR FLOATING-RATE LOAN INTERESTS (c) – 140.2%
|
|
|
|
Aerospace & Defense – 3.5%
|
|
|
|
|
|
|
|
$12,113,893
|
|
Transdigm, Inc., Tranche G Refinancing TL, 1 Mo. LIBOR + 2.25%, 0.00% Floor
|
|
2.34%
|
|
08/22/24
|
|
$11,962,470
|
|
|
|
Apparel Retail – 0.1%
|
|
|
|
|
|
|
|
300,110
|
|
Burlington Coat Factory Warehouse Corp., Term Loan B-5, 1 Mo. LIBOR + 1.75%, 0.00% Floor
|
|
1.85%
|
|
11/17/24
|
|
297,109
|
|
|
|
Application Software – 24.1%
|
|
|
|
|
|
|
|
6,489,093
|
|
CCC Information Services, Inc. (Cypress), Term Loan B, 1 Mo. LIBOR + 3.00%, 1.00% Floor
|
|
4.00%
|
|
04/26/24
|
|
6,488,509
|
|
9,236,885
|
|
Hyland Software, Inc., Term Loan B, 1 Mo. LIBOR + 3.50%, 0.75% Floor
|
|
4.25%
|
|
07/01/24
|
|
9,255,175
|
|
1,574,847
|
|
Inmar, Inc., Term Loan B, 3 Mo. LIBOR + 4.00%, 1.00% Floor
|
|
5.00%
|
|
05/01/24
|
|
1,568,941
|
|
3,968,083
|
|
Internet Brands, Inc. (Web MD/MH Sub I, LLC), 2020 June New Term Loan, 1 Mo. LIBOR + 3.75%, 1.00% Floor
|
|
4.75%
|
|
09/15/24
|
|
3,978,836
|
|
12,546,516
|
|
Internet Brands, Inc. (Web MD/MH Sub I, LLC), Initial Term Loan, 1 Mo. LIBOR + 3.50%, 0.00% Floor
|
|
3.59%
|
|
09/13/24
|
|
12,485,540
|
|
11,926,378
|
|
McAfee, LLC, Term Loan B, 1 Mo. LIBOR + 3.75%, 0.00% Floor
|
|
3.84%
|
|
09/30/24
|
|
11,929,359
|
|
19,143,731
|
|
SolarWinds Holdings, Inc., Initial Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.84%
|
|
02/05/24
|
|
18,856,575
|
|
18,984,074
|
|
Solera Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.84%
|
|
03/03/23
|
|
18,954,839
|
|
|
|
|
|
83,517,774
|
|
|
|
Broadcasting – 11.0%
|
|
|
|
|
|
|
|
812,851
|
|
Cumulus Media Holdings, Inc., Term Loan B, 3 Mo. LIBOR + 3.75%, 1.00% Floor
|
|
4.75%
|
|
03/31/26
|
|
810,818
|
|
1,563,784
|
|
iHeartCommunications, Inc., Incremental Term Loan B, 1 Mo. LIBOR + 4.00%, 0.75% Floor
|
|
4.75%
|
|
05/01/26
|
|
1,565,738
|
|
2,251,870
|
|
iHeartCommunications, Inc., Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor
|
|
3.09%
|
|
04/29/26
|
|
2,227,009
|
|
1,681,529
|
|
Nexstar Broadcasting, Inc., Incremental Term Loan B-4, 1 Mo. LIBOR + 2.50%, 0.00% Floor
|
|
2.61%
|
|
09/19/26
|
|
1,675,695
|
|
14,387,161
|
|
Nexstar Broadcasting, Inc., Nexstar Term Loan B-3, 1 Mo. LIBOR + 2.25%, 0.00% Floor
|
|
2.34%
|
|
01/17/24
|
|
14,337,238
|
|
6,343,798
|
|
Sinclair Television Group, Inc., Term Loan B-2, 1 Mo. LIBOR + 2.25%, 0.00% Floor
|
|
2.37%
|
|
01/03/24
|
|
6,300,978
|
|
11,284,968
|
|
Univision Communications, Inc., 2017 Replacement Repriced First Lien Term Loan C-5, 1 Mo. LIBOR + 2.75%, 1.00% Floor
|
|
3.75%
|
|
03/15/24
|
|
11,266,799
|
|
|
|
|
|
38,184,275
|
|
|
|
Cable & Satellite – 2.0%
|
|
|
|
|
|
|
|
2,225,235
|
|
Cablevision (aka CSC Holdings, LLC), March 2017 Term Loan B-1, 1 Mo. LIBOR + 2.25%, 0.00% Floor
|
|
2.35%
|
|
07/17/25
|
|
2,197,976
|
|
4,766,208
|
|
WideOpenWest Finance, LLC, Term Loan B, 1 Mo. LIBOR + 3.25%, 1.00% Floor
|
|
4.25%
|
|
08/19/23
|
|
4,751,337
|
|
|
|
|
|
6,949,313
|
|
|
|
Casinos & Gaming – 23.6%
|
|
|
|
|
|
|
|
3,000,000
|
|
Aristocrat Technologies, Inc., Term B-3 Loan, 3 Mo. LIBOR + 1.75%, 0.00% Floor
|
|
1.94%
|
|
10/19/24
|
|
2,979,750
|
|
651,987
|
|
Bally’s Corp. (fka Twin River), Term Loan B, 3 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.95%
|
|
05/10/26
|
|
645,956
|
|
12,835,500
|
|
Boyd Gaming Corp., Term Loan B, 1 Mo. LIBOR + 2.25%, 0.00% Floor
|
|
2.31%
|
|
09/15/23
|
|
12,812,011
|
Page 6
See Notes to Financial Statements
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Portfolio of Investments
(Continued)
May 31, 2021
Principal
Value
|
|
Description
|
|
Rate (a)
|
|
Stated
Maturity (b)
|
|
Value
|
|
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued)
|
|
|
|
Casinos & Gaming (Continued)
|
|
|
|
|
|
|
|
$439,614
|
|
Caesars Resort Collection, LLC, Term B-1 Loans, 1 Mo. LIBOR + 4.50%, 0.00% Floor
|
|
4.59%
|
|
06/30/25
|
|
$440,796
|
|
17,915,026
|
|
Caesars Resort Collection, LLC, Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.84%
|
|
12/22/24
|
|
17,764,719
|
|
15,998,274
|
|
CityCenter Holdings, LLC, Term Loan B, 1 Mo. LIBOR + 2.25%, 0.75% Floor
|
|
3.00%
|
|
04/18/24
|
|
15,870,768
|
|
11,346,002
|
|
Golden Nugget, Inc., Term Loan B, 2 Mo. LIBOR + 2.50%, 0.75% Floor
|
|
3.25%
|
|
10/04/23
|
|
11,251,036
|
|
4,987,147
|
|
GVC Holdings PLC, Term Loan B3 (USD), 6 Mo. LIBOR + 2.25%, 1.00% Floor
|
|
3.00%
|
|
03/16/24
|
|
4,966,899
|
|
15,184,704
|
|
Scientific Games International, Inc., Term Loan B5, 1 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.84%
|
|
08/14/24
|
|
15,026,480
|
|
|
|
|
|
81,758,415
|
|
|
|
Coal & Consumable Fuels – 1.0%
|
|
|
|
|
|
|
|
3,884,455
|
|
Arch Coal, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 1.00% Floor
|
|
3.75%
|
|
03/07/24
|
|
3,612,543
|
|
|
|
Communications Equipment – 0.3%
|
|
|
|
|
|
|
|
849,070
|
|
Commscope, Inc., Term Loan B, 1 Mo. LIBOR + 3.25%, 0.00% Floor
|
|
3.34%
|
|
04/06/26
|
|
845,003
|
|
|
|
Electric Utilities – 0.5%
|
|
|
|
|
|
|
|
1,809,603
|
|
PG&E Corp., Term Loan B, 3 Mo. LIBOR + 3.00%, 0.50% Floor
|
|
3.50%
|
|
06/23/25
|
|
1,793,769
|
|
|
|
Food Distributors – 2.1%
|
|
|
|
|
|
|
|
7,352,755
|
|
US Foods, Inc., Term Loan B, 1 Mo. LIBOR + 1.75%, 0.00% Floor
|
|
1.84%
|
|
06/27/23
|
|
7,283,198
|
|
|
|
Health Care Facilities – 1.4%
|
|
|
|
|
|
|
|
4,697,055
|
|
Select Medical Corporation, Term Loan B, 1 Mo. LIBOR + 2.25%, 0.00% Floor
|
|
2.37%
|
|
03/06/25
|
|
4,657,412
|
|
|
|
Health Care Services – 14.9%
|
|
|
|
|
|
|
|
2,157,758
|
|
Air Methods Corp. (aka ASP AMC Intermediate Holdings, Inc.), Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor
|
|
4.50%
|
|
04/21/24
|
|
2,128,909
|
|
13,388
|
|
athenahealth, Inc. (VVC Holding Corp.), Term Loan B-1, 1 Mo. LIBOR + 4.25%, 0.00% Floor
|
|
4.35%
|
|
02/11/26
|
|
13,425
|
|
5,341,778
|
|
athenahealth, Inc. (VVC Holding Corp.), Term Loan B-1, 3 Mo. LIBOR + 4.25%, 0.00% Floor
|
|
4.41%
|
|
02/11/26
|
|
5,356,467
|
|
1,834,005
|
|
Aveanna Healthcare, LLC, Term Loan B, 3 Mo. LIBOR + 4.25%, 1.00% Floor
|
|
5.25%
|
|
03/16/24
|
|
1,835,381
|
|
15,920,695
|
|
CHG Healthcare Services, Inc., Term Loan, 6 Mo. LIBOR + 3.00%, 1.00% Floor
|
|
4.00%
|
|
06/07/23
|
|
15,900,794
|
|
3,881,393
|
|
Envision Healthcare Corporation, Initial Term Loan, 1 Mo. LIBOR + 3.75%, 0.00% Floor
|
|
3.84%
|
|
10/10/25
|
|
3,305,239
|
|
16,306,497
|
|
Exam Works (Gold Merger Co., Inc.), Term Loan B-1, 3 Mo. LIBOR + 3.25%, 1.00% Floor
|
|
4.25%
|
|
07/27/23
|
|
16,321,010
|
|
3,074,112
|
|
Team Health, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 1.00% Floor
|
|
3.75%
|
|
02/06/24
|
|
2,958,833
|
|
3,989,637
|
|
U.S. Anesthesia Partners Intermediate Holdings, Inc., Term Loan B, 6 Mo. LIBOR + 3.00%, 1.00% Floor
|
|
4.00%
|
|
06/23/24
|
|
3,949,741
|
|
|
|
|
|
51,769,799
|
|
|
|
Health Care Technology – 6.4%
|
|
|
|
|
|
|
|
450,418
|
|
Change Healthcare Holdings, LLC, Closing Date Term Loan, 1 Mo. LIBOR + 2.50%, 1.00% Floor
|
|
3.50%
|
|
03/01/24
|
|
450,008
|
See Notes to Financial Statements
Page 7
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Portfolio of Investments
(Continued)
May 31, 2021
Principal
Value
|
|
Description
|
|
Rate (a)
|
|
Stated
Maturity (b)
|
|
Value
|
|
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued)
|
|
|
|
Health Care Technology (Continued)
|
|
|
|
|
|
|
|
$15,283,795
|
|
Change Healthcare Holdings, LLC, Closing Date Term Loan, 3 Mo. LIBOR + 2.50%, 1.00% Floor
|
|
3.50%
|
|
03/01/24
|
|
$15,269,887
|
|
1,701
|
|
Press Ganey (Azalea TopCo, Inc.), Term Loan B, 1 Mo. LIBOR + 3.50%, 0.00% Floor
|
|
3.59%
|
|
07/25/26
|
|
1,690
|
|
668,424
|
|
Press Ganey (Azalea TopCo, Inc.), Term Loan B, 3 Mo. LIBOR + 3.50%, 0.00% Floor
|
|
3.69%
|
|
07/25/26
|
|
664,247
|
|
5,735,982
|
|
Verscend Technologies, Inc. (Cotiviti), New Term Loan B, 1 Mo. LIBOR + 4.00%, 0.00% Floor
|
|
4.09%
|
|
08/27/25
|
|
5,737,014
|
|
|
|
|
|
22,122,846
|
|
|
|
Hotels, Resorts & Cruise Lines – 2.3%
|
|
|
|
|
|
|
|
8,105,306
|
|
Four Seasons Holdings, Inc., Term Loan B, 1 Mo. LIBOR + 2.00%, 0.00% Floor
|
|
2.09%
|
|
11/30/23
|
|
8,086,178
|
|
|
|
Household Appliances – 0.3%
|
|
|
|
|
|
|
|
1,140,210
|
|
Traeger Grills (TGP Holdings III, LLC), 2018 Refinancing Term Loan, 3 Mo. LIBOR + 4.00%, 1.00% Floor
|
|
5.00%
|
|
09/25/24
|
|
1,139,138
|
|
|
|
Human Resource & Employment Services – 1.7%
|
|
|
|
|
|
|
|
5,932,126
|
|
Alight, Inc. (fka Tempo Acq.), Non Extended Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.84%
|
|
05/01/24
|
|
5,921,033
|
|
|
|
Insurance Brokers – 5.9%
|
|
|
|
|
|
|
|
2,067,644
|
|
Alliant Holdings I, LLC, 2019 New Term Loan, 1 Mo. LIBOR + 3.20%, 0.00% Floor
|
|
3.34%
|
|
05/10/25
|
|
2,048,621
|
|
3,257,036
|
|
Alliant Holdings I, LLC, Initial Term Loan, 1 Mo. LIBOR + 3.25%, 0.00% Floor
|
|
3.34%
|
|
05/09/25
|
|
3,226,909
|
|
16,338
|
|
HUB International Limited, Initial Term Loan B, 2 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.90%
|
|
04/25/25
|
|
16,173
|
|
6,339,237
|
|
HUB International Limited, Initial Term Loan B, 3 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.93%
|
|
04/25/25
|
|
6,275,211
|
|
2,035,282
|
|
HUB International Limited, New Term Loan B-3, 3 Mo. LIBOR + 3.25%, 0.75% Floor
|
|
4.00%
|
|
04/25/25
|
|
2,035,872
|
|
6,705,765
|
|
USI, Inc. (fka Compass Investors, Inc.), Term Loan B, 3 Mo. LIBOR + 3.00%, 0.00% Floor
|
|
3.20%
|
|
05/15/24
|
|
6,649,168
|
|
|
|
|
|
20,251,954
|
|
|
|
Integrated Telecommunication Services – 0.2%
|
|
|
|
|
|
|
|
717,925
|
|
Numericable (Altice France SA or SFR), Term Loan B-11, 3 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.94%
|
|
07/31/25
|
|
706,481
|
|
|
|
Managed Health Care – 4.0%
|
|
|
|
|
|
|
|
13,907,342
|
|
Multiplan, Inc. (MPH), Term Loan B, 3 Mo. LIBOR + 2.75%, 1.00% Floor
|
|
3.75%
|
|
06/07/23
|
|
13,885,229
|
|
|
|
Movies & Entertainment – 2.0%
|
|
|
|
|
|
|
|
916,245
|
|
Cineworld Group PLC (Crown), Priority Term Loan B-1, Fixed Rate at 15.25% (d)
|
|
15.25%
|
|
05/23/24
|
|
1,151,033
|
|
6,695,539
|
|
Cineworld Group PLC (Crown), Term Loan B, 3 Mo. LIBOR + 2.50%, 1.00% Floor
|
|
3.50%
|
|
02/28/25
|
|
5,803,359
|
|
|
|
|
|
6,954,392
|
|
|
|
Packaged Foods & Meats – 3.3%
|
|
|
|
|
|
|
|
3,005,216
|
|
Hostess Brands, LLC (HB Holdings), Term Loan B, 1 Mo. LIBOR + 2.25%, 0.75% Floor
|
|
3.00%
|
|
08/03/25
|
|
2,993,195
|
|
27,967
|
|
Hostess Brands, LLC (HB Holdings), Term Loan B, 2 Mo. LIBOR + 2.25%, 0.75% Floor
|
|
3.00%
|
|
08/03/25
|
|
27,855
|
Page 8
See Notes to Financial Statements
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Portfolio of Investments
(Continued)
May 31, 2021
Principal
Value
|
|
Description
|
|
Rate (a)
|
|
Stated
Maturity (b)
|
|
Value
|
|
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued)
|
|
|
|
Packaged Foods & Meats (Continued)
|
|
|
|
|
|
|
|
$7,985,658
|
|
Hostess Brands, LLC (HB Holdings), Term Loan B, 3 Mo. LIBOR + 2.25%, 0.75% Floor
|
|
3.00%
|
|
08/03/25
|
|
$7,953,715
|
|
175,458
|
|
Simply Good Foods (Atkins Nutritionals, Inc.), Term Loan B, 1 Mo. LIBOR + 3.75%, 1.00% Floor
|
|
4.75%
|
|
07/07/24
|
|
176,042
|
|
412,843
|
|
Simply Good Foods (Atkins Nutritionals, Inc.), Term Loan B, 3 Mo. LIBOR + 3.75%, 1.00% Floor
|
|
4.75%
|
|
07/07/24
|
|
414,218
|
|
|
|
|
|
11,565,025
|
|
|
|
Paper Packaging – 5.0%
|
|
|
|
|
|
|
|
17,342,206
|
|
Pactiv LLC/Evergreen Packaging, LLC (fka Reynolds Group Holdings), Tranche B-1 U.S. Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.84%
|
|
02/05/23
|
|
17,296,423
|
|
|
|
Pharmaceuticals – 13.0%
|
|
|
|
|
|
|
|
1,194,429
|
|
Akorn, Inc., Exit Take Back Term Loan , 3 Mo. LIBOR + 7.50%, 1.00% Floor (e) (f)
|
|
8.50%
|
|
09/30/25
|
|
1,221,303
|
|
5,462,662
|
|
Bausch Health Companies, Inc. (Valeant), First Incremental Term Loan, 1 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.84%
|
|
06/01/25
|
|
5,431,580
|
|
7,118,210
|
|
Bausch Health Companies, Inc. (Valeant), Initial Term Loan B, 1 Mo. LIBOR + 3.00%, 0.00% Floor
|
|
3.09%
|
|
06/01/25
|
|
7,087,958
|
|
2,436,426
|
|
GoodRX, Inc., Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.84%
|
|
10/15/25
|
|
2,430,335
|
|
8,263,640
|
|
Mallinckrodt International Finance S.A., 2017 Term Loan B, 6 Mo. LIBOR + 5.25%, 0.75% Floor (g)
|
|
6.00%
|
|
09/24/24
|
|
7,938,796
|
|
1,094,266
|
|
Mallinckrodt International Finance S.A., 2018 Incremental Term Loan, 6 Mo. LIBOR + 5.50%, 0.75% Floor (g)
|
|
6.25%
|
|
02/24/25
|
|
1,052,322
|
|
20,150,938
|
|
Parexel International Corp., Term Loan B, 1 Mo. LIBOR + 2.75%, 0.00% Floor
|
|
2.84%
|
|
09/27/24
|
|
19,980,260
|
|
|
|
|
|
45,142,554
|
|
|
|
Restaurants – 1.5%
|
|
|
|
|
|
|
|
13,712
|
|
IRB Holding Corp. (Arby’s/Inspire Brands), Term Loan B, 3 Mo. LIBOR + 2.75%, 1.00% Floor
|
|
3.75%
|
|
02/05/25
|
|
13,647
|
|
5,306,572
|
|
IRB Holding Corp. (Arby’s/Inspire Brands), Term Loan B, 6 Mo. LIBOR + 2.75%, 1.00% Floor
|
|
3.75%
|
|
02/05/25
|
|
5,281,259
|
|
|
|
|
|
5,294,906
|
|
|
|
Specialized Consumer Services – 5.4%
|
|
|
|
|
|
|
|
18,674,788
|
|
Asurion, LLC, Term Loan B6, 1 Mo. LIBOR + 3.00%, 0.00% Floor
|
|
3.09%
|
|
11/03/23
|
|
18,624,179
|
|
|
|
Systems Software – 4.7%
|
|
|
|
|
|
|
|
5,493,077
|
|
Applied Systems, Inc., 1st Lien Term Loan, 3 Mo. LIBOR + 3.25%, 0.50% Floor
|
|
3.75%
|
|
09/19/24
|
|
5,484,838
|
|
76,496
|
|
Applied Systems, Inc., 1st Lien Term Loan, Prime Rate + 2.25%, 3.25% Floor
|
|
5.50%
|
|
09/19/24
|
|
76,381
|
|
8,359,940
|
|
BMC Software Finance, Inc. (Boxer Parent), Term Loan B, 1 Mo. LIBOR + 3.75%, 0.00% Floor
|
|
3.84%
|
|
10/02/25
|
|
8,313,292
|
|
349,319
|
|
Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term Loan B, 3 Mo. LIBOR + 3.50%, 1.00% Floor
|
|
4.50%
|
|
06/13/24
|
|
344,673
|
|
894,262
|
|
Misys Financial Software Ltd. (Almonde, Inc.) (Finastra), Term Loan B, 6 Mo. LIBOR + 3.50%, 1.00% Floor
|
|
4.50%
|
|
06/13/24
|
|
882,368
|
See Notes to Financial Statements
Page 9
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Portfolio of Investments
(Continued)
May 31, 2021
Principal
Value
|
|
Description
|
|
Rate (a)
|
|
Stated
Maturity (b)
|
|
Value
|
|
SENIOR FLOATING-RATE LOAN INTERESTS (c) (Continued)
|
|
|
|
Systems Software (Continued)
|
|
|
|
|
|
|
|
$1,261,093
|
|
SUSE (Marcel Lux IV SARL), Facility B1 USD, 1 Mo. LIBOR + 3.25%, 0.00% Floor
|
|
3.36%
|
|
03/15/26
|
|
$1,257,940
|
|
|
|
|
|
16,359,492
|
|
|
|
Total Senior Floating-Rate Loan Interests
|
|
485,980,910
|
|
|
|
(Cost $486,351,443)
|
|
|
|
|
|
|
Principal
Value
|
|
Description
|
|
Stated
Coupon
|
|
Stated
Maturity
|
|
Value
|
|
CORPORATE BONDS AND NOTES (c) – 0.4%
|
|
|
|
Broadcasting – 0.3%
|
|
|
|
|
|
|
|
1,290,000
|
|
Diamond Sports Group, LLC/Diamond Sports Finance Co. (h)
|
|
5.38%
|
|
08/15/26
|
|
956,212
|
|
|
|
Coal & Consumable Fuels – 0.1%
|
|
|
|
|
|
|
|
280,000
|
|
Peabody Energy Corp. (h)
|
|
6.38%
|
|
03/31/25
|
|
161,000
|
|
|
|
Total Corporate Bonds and Notes
|
|
1,117,212
|
|
|
|
(Cost $1,058,224)
|
|
|
|
|
|
|
|
Shares
|
|
Description
|
|
Value
|
|
COMMON STOCKS (c) – 0.4%
|
|
|
|
Pharmaceuticals – 0.4%
|
|
|
|
101,688
|
|
Akorn, Inc. (e) (i) (j)
|
|
1,584,655
|
|
|
|
(Cost $1,166,043)
|
|
|
|
WARRANTS (c) – 0.1%
|
|
|
|
Movies & Entertainment – 0.1%
|
|
|
|
286,831
|
|
Cineworld Group PLC, expiring 12/10/25 (j) (k)
|
|
240,163
|
|
|
|
(Cost $0)
|
|
|
|
MONEY MARKET FUNDS (c) – 1.9%
|
|
6,628,360
|
|
Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 0.01% (l)
|
|
6,628,360
|
|
|
|
(Cost $6,628,360)
|
|
|
|
|
|
Total Investments – 143.0%
|
|
495,551,300
|
|
|
|
(Cost $495,204,070) (m)
|
|
|
|
|
|
Outstanding Loans – (40.1)%
|
|
(139,000,000)
|
|
|
|
Net Other Assets and Liabilities – (2.9)%
|
|
(9,961,400)
|
|
|
|
Net Assets – 100.0%
|
|
$346,589,900
|
|
|
(a)
|
Senior Floating-Rate Loan Interests (“Senior Loans”) in which the Fund invests pay interest at rates which are periodically predetermined by reference to a base lending
rate plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks, such as the LIBOR, (ii) the prime rate offered by one or more United States banks or (iii)
the certificate of deposit rate. Certain Senior Loans are subject to a LIBOR floor that establishes a minimum LIBOR rate. When a range of rates is disclosed, the Fund holds more than one contract within the same
tranche with identical LIBOR period, spread and floor, but different LIBOR reset dates.
|
|
(b)
|
Senior Loans generally are subject to mandatory and/or optional prepayment. As a result, the actual remaining maturity of Senior Loans may be substantially less than the stated
maturities shown.
|
|
(c)
|
All of these securities are available to serve as collateral for the outstanding loans.
|
|
(d)
|
The issuer may pay interest on the loans in cash and in Payment-In-Kind (“PIK”) interest. Interest paid in cash will accrue at the rate of 7.00% per
annum (“Cash Interest Rate”) and PIK interest will accrue on the loan at the rate of 8.25% per annum. For the fiscal year ended May 31, 2021, the Fund received a portion of the interest in cash and PIK
interest with a principal value of $26,266 for Cineworld Group PLC (Crown).
|
Page 10
See Notes to Financial Statements
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Portfolio of Investments
(Continued)
May 31, 2021
|
(e)
|
On October 1, 2020, Akorn Holding Company LLC completed a Bankruptcy Plan of Reorganization. In connection with the Plan of Reorganization, the Fund received a portion of a new exit
term loan and a share of the newly issued common equity shares in the re-organized company.
|
|
(f)
|
The issuer may pay interest on the loans (1) entirely in cash or (2) in the event that both the PIK Toggle Condition has been satisfied and the issuer elects to exercise the PIK
interest, 2.50% payable in cash and 7.00% payable as PIK interest. For the fiscal year ended May 31, 2021, this security paid all of its interest in cash.
|
|
(g)
|
This issuer has filed for protection in bankruptcy court.
|
|
(h)
|
This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A under the Securities Act of 1933, as amended (the
“1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has
been determined to be liquid by First Trust Advisors L.P. (the “Advisor”). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is
determined based on security specific factors and assumptions, which require subjective judgment. At May 31, 2021, securities noted as such amounted to $1,117,212 or 0.3% of net assets.
|
|
(i)
|
Security received in a transaction exempt from registration under the 1933 Act. The security may be resold pursuant to an exemption from registration under the 1933 Act, typically to
qualified institutional buyers. Pursuant to procedures adopted by the Trust’s Board of Trustees, this security has been determined to be illiquid by the Advisor. Although market instability can result in periods
of increased overall market illiquidity, liquidity for the security is determined based on security-specific factors and assumptions, which require subjective judgment. At May 31, 2021, securities noted as such
amounted to $1,584,655 or 0.4% of net assets.
|
|
(j)
|
Non-income producing security.
|
|
(k)
|
Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be illiquid by the Advisor.
|
|
(l)
|
Rate shown reflects yield as of May 31, 2021.
|
|
(m)
|
Aggregate cost for federal income tax purposes was $495,386,987. As of May 31, 2021, the aggregate gross unrealized appreciation for all investments in which there
was an excess of value over tax cost was $2,752,243 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $2,587,930. The net unrealized
appreciation was $164,313.
|
|
LIBOR
|
London Interbank Offered Rate
|
|
USD
|
United States Dollar
|
Valuation Inputs
A summary of the inputs
used to value the Fund’s investments as of May 31, 2021 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements):
|
|
Total
Value at
5/31/2021
|
Level 1
Quoted
Prices
|
Level 2
Significant
Observable
Inputs
|
Level 3
Significant
Unobservable
Inputs
|
|
Senior Floating-Rate Loan Interests*
|
$ 485,980,910
|
$ —
|
$ 485,980,910
|
$ —
|
|
Corporate Bonds and Notes*
|
1,117,212
|
—
|
1,117,212
|
—
|
|
Common Stocks*
|
1,584,655
|
—
|
1,584,655
|
—
|
|
Warrants*
|
240,163
|
—
|
240,163
|
—
|
|
Money Market Funds
|
6,628,360
|
6,628,360
|
—
|
—
|
|
Total Investments
|
$ 495,551,300
|
$ 6,628,360
|
$ 488,922,940
|
$—
|
|
*
|
See Portfolio of Investments for industry breakout.
|
See Notes to Financial Statements
Page 11
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Statement of Assets and
Liabilities
May 31, 2021
|
ASSETS:
|
|
|
Investments, at value
(Cost $495,204,070)
|
$ 495,551,300
|
|
Cash
|
642,929
|
|
Receivables:
|
|
|
Investment securities sold
|
1,734,718
|
|
Interest
|
931,709
|
|
Prepaid expenses
|
26,911
|
|
Total Assets
|
498,887,567
|
|
LIABILITIES:
|
|
|
Outstanding loans
|
139,000,000
|
|
Payables:
|
|
|
Investment securities purchased
|
12,571,010
|
|
Investment advisory fees
|
348,814
|
|
Excise tax
|
165,440
|
|
Audit and tax fees
|
79,246
|
|
Interest and fees on loans
|
43,823
|
|
Legal fees
|
29,061
|
|
Administrative fees
|
26,076
|
|
Shareholder reporting fees
|
17,262
|
|
Custodian fees
|
7,272
|
|
Transfer agent fees
|
3,338
|
|
Trustees’ fees and expenses
|
2,592
|
|
Financial reporting fees
|
771
|
|
Other liabilities
|
2,962
|
|
Total Liabilities
|
152,297,667
|
|
NET ASSETS
|
$346,589,900
|
|
NET ASSETS consist of:
|
|
|
Paid-in capital
|
$ 351,128,646
|
|
Par value
|
358,316
|
|
Accumulated distributable earnings (loss)
|
(4,897,062)
|
|
NET ASSETS
|
$346,589,900
|
|
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)
|
$9.67
|
|
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized)
|
35,831,569
|
Page 12
See Notes to Financial Statements
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Statement of Operations
For the Year Ended May 31,
2021
|
INVESTMENT INCOME:
|
|
|
Interest
|
$ 17,514,378
|
|
Other
|
500,276
|
|
Total investment income
|
18,014,654
|
|
EXPENSES:
|
|
|
Investment advisory fees
|
3,935,468
|
|
Interest and fees on loans
|
1,165,746
|
|
Excise tax expense
|
311,049
|
|
Administrative fees
|
294,007
|
|
Audit and tax fees
|
80,877
|
|
Legal fees
|
76,373
|
|
Shareholder reporting fees
|
66,056
|
|
Listing expense
|
30,163
|
|
Transfer agent fees
|
20,293
|
|
Trustees’ fees and expenses
|
15,631
|
|
Custodian fees
|
10,905
|
|
Financial reporting fees
|
9,250
|
|
Other
|
42,031
|
|
Total expenses
|
6,057,849
|
|
NET INVESTMENT INCOME (LOSS)
|
11,956,805
|
|
NET REALIZED AND UNREALIZED GAIN (LOSS):
|
|
|
Net realized gain (loss) on investments
|
(1,333,220)
|
|
Net change in unrealized appreciation (depreciation) on investments
|
22,994,485
|
|
NET REALIZED AND UNREALIZED GAIN (LOSS)
|
21,661,265
|
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
|
$ 33,618,070
|
See Notes to Financial Statements
Page 13
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Statements of Changes in
Net Assets
|
|
Year
Ended
5/31/2021
|
|
Year
Ended
5/31/2020
|
|
OPERATIONS:
|
|
|
|
|
Net investment income (loss)
|
$ 11,956,805
|
|
$ 14,378,718
|
|
Net realized gain (loss)
|
(1,333,220)
|
|
(7,431,479)
|
|
Net change in unrealized appreciation (depreciation)
|
22,994,485
|
|
(15,085,573)
|
|
Net increase (decrease) in net assets resulting from operations
|
33,618,070
|
|
(8,138,334)
|
|
DISTRIBUTIONS TO SHAREHOLDERS FROM:
|
|
|
|
|
Investment operations
|
(6,757,834)
|
|
(11,774,254)
|
|
Total increase (decrease) in net assets
|
26,860,236
|
|
(19,912,588)
|
|
NET ASSETS:
|
|
|
|
|
Beginning of period
|
319,729,664
|
|
339,642,252
|
|
End of period
|
$ 346,589,900
|
|
$ 319,729,664
|
|
COMMON SHARES:
|
|
|
|
|
Common Shares at end of period
|
35,831,569
|
|
35,831,569
|
Page 14
See Notes to Financial Statements
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Statement of Cash Flows
For the Year Ended May 31,
2021
|
Cash flows from operating activities:
|
|
|
|
Net increase (decrease) in net assets resulting from operations
|
$33,618,070
|
|
|
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating
activities:
|
|
|
|
Purchases of investments
|
(586,197,294)
|
|
|
Sales, maturities and paydown of investments
|
560,053,491
|
|
|
Net amortization/accretion of premiums/discounts on investments
|
(1,408,919)
|
|
|
Net realized gain/loss on investments
|
1,333,220
|
|
|
Net change in unrealized appreciation/depreciation on investments
|
(22,994,485)
|
|
|
Changes in assets and liabilities:
|
|
|
|
Increase in interest receivable
|
(38,916)
|
|
|
Increase in prepaid expenses
|
(4,485)
|
|
|
Decrease in interest and fees payable on loans
|
(122,378)
|
|
|
Increase in investment advisory fees payable
|
47,372
|
|
|
Increase in audit and tax fees payable
|
19,491
|
|
|
Increase in legal fees payable
|
21,497
|
|
|
Decrease in shareholder reporting fees payable
|
(991)
|
|
|
Decrease in administrative fees payable
|
(3,180)
|
|
|
Decrease in custodian fees payable
|
(13,844)
|
|
|
Decrease in transfer agent fees payable
|
(1,769)
|
|
|
Decrease in trustees’ fees and expenses payable
|
(144)
|
|
|
Increase in excise tax payable
|
42,172
|
|
|
Decrease in other liabilities payable
|
(739)
|
|
|
Cash used in operating activities
|
|
$(15,651,831)
|
|
Cash flows from financing activities:
|
|
|
|
Distributions to Common Shareholders from investment operations
|
(6,757,834)
|
|
|
Repayment of borrowings
|
(145,000,000)
|
|
|
Proceeds from borrowings
|
168,000,000
|
|
|
Cash provided by financing activities
|
|
16,242,166
|
|
Increase in cash
|
|
590,335
|
|
Cash at beginning of period
|
|
52,594
|
|
Cash at end of period
|
|
$642,929
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
Cash paid during the period for interest and fees
|
|
$1,288,124
|
|
Cash paid during the year for excise taxes
|
|
$268,877
|
See Notes to Financial Statements
Page 15
First Trust Senior Floating Rate 2022
Target Term Fund (FIV)
Financial Highlights
For a Common Share
outstanding throughout each period
|
|
Year Ended
|
|
Period
Ended
5/31/2017 (a)
|
|
5/31/2021
|
|
5/31/2020
|
|
5/31/2019
|
|
5/31/2018
|
|
|
Net asset value, beginning of period
|
$ 8.92
|
|
$ 9.48
|
|
$ 9.64
|
|
$ 9.88
|
|
$ 9.85
|
|
Income from investment operations:
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
0.34
|
|
0.40
|
|
0.48
|
|
0.47
|
|
0.17
|
|
Net realized and unrealized gain (loss)
|
0.60
|
|
(0.63)
|
|
(0.16)
|
|
(0.21)
|
|
0.00 (b)
|
|
Total from investment operations
|
0.94
|
|
(0.23)
|
|
0.32
|
|
0.26
|
|
0.17
|
|
Distributions paid to shareholders from:
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
(0.19)
|
|
(0.33)
|
|
(0.48)
|
|
(0.50)
|
|
(0.13)
|
|
Common Shares offering costs charged to paid-in capital
|
—
|
|
—
|
|
—
|
|
—
|
|
(0.02)
|
|
Premiums from shares sold in at the market offering
|
—
|
|
—
|
|
—
|
|
—
|
|
0.01
|
|
Net asset value, end of period
|
$9.67
|
|
$8.92
|
|
$9.48
|
|
$9.64
|
|
$9.88
|
|
Market value, end of period
|
$9.47
|
|
$8.26
|
|
$8.87
|
|
$9.37
|
|
$10.00
|
|
Total return based on net asset value (c)
|
10.75%
|
|
(2.30)%
|
|
3.67%
|
|
2.83%
|
|
1.59%
|
|
Total return based on market value (c)
|
17.12%
|
|
(3.30)%
|
|
(0.21)%
|
|
(1.24)%
|
|
1.28%
|
|
Ratios to average net assets/supplemental data:
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (in 000’s)
|
$ 346,590
|
|
$ 319,730
|
|
$ 339,642
|
|
$ 345,578
|
|
$ 353,941
|
|
Ratio of total expenses to average net assets
|
1.81%
|
|
2.41%
|
|
2.66%
|
|
2.10%
|
|
1.69% (d)
|
|
Ratio of total expenses to average net assets excluding interest expense
|
1.46%
|
|
1.41%
|
|
1.38%
|
|
1.33%
|
|
1.28% (d)
|
|
Ratio of net investment income (loss) to average net assets
|
3.57%
|
|
4.34%
|
|
5.01%
|
|
4.84%
|
|
3.86% (d)
|
|
Portfolio turnover rate
|
76%
|
|
68%
|
|
61%
|
|
95%
|
|
61%
|
|
Indebtedness:
|
|
|
|
|
|
|
|
|
|
|
Total loans outstanding (in 000’s)
|
$ 139,000
|
|
$ 116,000
|
|
$ 148,000
|
|
$ 119,000
|
|
$ 128,000
|
|
Asset coverage per $1,000 of indebtedness (e)
|
$ 3,493
|
|
$ 3,756
|
|
$ 3,295
|
|
$ 3,904
|
|
$ 3,765
|
|
(a)
|
The Fund was seeded on November 15, 2016 and commenced operations on December 21, 2016.
|
|
(b)
|
Amount represents less than $0.01 per share.
|
|
(c)
|
Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan, and
changes in net asset value per share for net asset value returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one
year. Past performance is not indicative of future results.
|
|
(d)
|
Annualized.
|
|
(e)
|
Calculated by subtracting the Fund’s total liabilities (not including the loans outstanding) from the Fund’s total assets, and dividing by the
outstanding loans balance in 000’s.
|
Page 16
See Notes to Financial Statements
Notes to Financial Statements
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
1. Organization
First Trust Senior
Floating Rate 2022 Target Term Fund (the “Fund”) is a diversified, closed-end management investment company organized as a Massachusetts business trust on October 14, 2016, and is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund trades under the ticker symbol “FIV” on the New York Stock Exchange
(“NYSE”).
The investment objectives
of the Fund are to seek a high level of current income and to return $9.85 per Common Share of beneficial interest of the Fund to the holders of Common Shares on or about February 1, 2022. Under normal market
conditions, the Fund pursues its investment objectives by investing at least 80% of its Managed Assets in a portfolio of senior secured floating-rate loans (“Senior Loans”)(1) of any maturity. “Managed Assets” means the average daily gross asset value of the Fund (which includes assets
attributable to the Fund’s preferred shares of beneficial interest (“Preferred Shares”), if any, and the principal amount of any borrowings or commercial paper or notes issued by the Fund), 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 of money incurred or of commercial paper or notes
issued by the Fund). There can be no assurance that the Fund’s investment objectives will be achieved. The Fund may not be appropriate for all investors.
2. Significant
Accounting Policies
The Fund is considered an
investment company and follows accounting and reporting guidance under Financial Accounting Standards Board Accounting Standards Codification Topic 946, “Financial Services-Investment Companies.” The
following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. Portfolio
Valuation
The NAV of the Common
Shares of the Fund is determined daily as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is
determined as of that time. Domestic debt securities and foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. The Fund’s NAV per Common Share is
calculated by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses, dividends declared but unpaid and any borrowings of the Fund),
by the total number of Common Shares outstanding.
The Fund’s
investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a
national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained
from a third-party pricing service or are determined by the Pricing Committee of the Fund’s investment advisor, First Trust Advisors L.P. (“First Trust” or the “Advisor”), in accordance
with valuation procedures adopted by the Fund’s Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor’s Pricing Committee, if any, are footnoted as such in
the footnotes to the Portfolio of Investments. The Fund’s investments are valued as follows:
Senior
Loans are not listed on any securities exchange or board of trade. Senior Loans are typically bought and sold by institutional investors in individually negotiated private transactions that function in many respects
like an over-the-counter secondary market, although typically no formal market-makers exist. This market, while having grown substantially since its inception, generally has fewer trades and less liquidity than the
secondary market for other types of securities. Some Senior Loans have few or no trades, or trade infrequently, and information regarding a specific Senior Loan may not be widely available or may be incomplete.
Accordingly, determinations of the market value of Senior Loans may be based on infrequent and dated information. Because there is less reliable, objective data available, elements of judgment may play a greater role
in valuation of Senior Loans than for other types of securities. Typically, Senior Loans are fair valued using information provided by a third-party pricing service. The third-party pricing service primarily uses
over-the-counter pricing from dealer runs and broker quotes from indicative sheets to value the Senior Loans. If the third-party pricing service cannot or does not provide a valuation for a particular Senior Loan or
such valuation is deemed unreliable, the Advisor’s Pricing Committee may value such Senior Loan at a fair value according to procedures adopted by the Fund’s Board of Trustees, and in accordance with the
provisions of the 1940 Act. Fair valuation of a Senior Loan is based on the consideration of all available information, including, but not limited to the following:
|
1)
|
the fundamental business data relating to the borrower;
|
|
(1)
|
The terms “security” and “securities” used throughout the Notes to Financial Statements include Senior Loans.
|
Notes to Financial Statements (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
|
2)
|
an evaluation of the forces which influence the market in which these securities are purchased and sold;
|
|
3)
|
the type, size and cost of the security;
|
|
4)
|
the financial statements of the borrower;
|
|
5)
|
the credit quality and cash flow of the borrower, based on the Advisor’s or external analysis;
|
|
6)
|
the information as to any transactions in or offers for the security;
|
|
7)
|
the price and extent of public trading in similar securities (or equity securities) of the borrower, or comparable companies;
|
|
8)
|
the coupon payments;
|
|
9)
|
the quality, value and salability of collateral, if any, securing the security;
|
|
10)
|
the business prospects of the borrower, including any ability to obtain money or resources from a parent or affiliate and an assessment of the borrower’s management;
|
|
11)
|
the prospects for the borrower’s industry, and multiples (of earnings and/or cash flows) being paid for similar businesses in that industry;
|
|
12)
|
the borrower’s competitive position within the industry;
|
|
13)
|
the borrower’s ability to access additional liquidity through public and/or private markets; and
|
|
14)
|
other relevant factors.
|
Corporate bonds, corporate notes, and other debt securities are fair valued on the basis of valuations provided by dealers who make markets in such securities or by a third-party pricing service approved by the
Fund’s Board of Trustees, which may use the following valuation inputs when available:
|
1)
|
benchmark yields;
|
|
2)
|
reported trades;
|
|
3)
|
broker/dealer quotes;
|
|
4)
|
issuer spreads;
|
|
5)
|
benchmark securities;
|
|
6)
|
bids and offers; and
|
|
7)
|
reference data including market research publications.
|
Common
stocks and other equity securities listed on any national or foreign exchange (excluding The Nasdaq Stock Market LLC (“Nasdaq”) and the London Stock Exchange Alternative Investment Market
(“AIM”)) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities
exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities.
Shares
of open-end funds are valued at fair value which is based on NAV per share.
Certain securities may
not be able to be priced by pre-established pricing methods. Such securities may be valued by the Fund’s Board of Trustees or its delegate, the Advisor’s Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is
unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to
which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a
reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security’s fair value. As a general principle, the current fair value of a security
would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official
closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following:
|
1)
|
the type of security;
|
|
2)
|
the size of the holding;
|
|
3)
|
the initial cost of the security;
|
|
4)
|
transactions in comparable securities;
|
|
5)
|
price quotes from dealers and/or third-party pricing services;
|
|
6)
|
relationships among various securities;
|
|
7)
|
information obtained by contacting the issuer, analysts, or the appropriate stock exchange;
|
|
8)
|
an analysis of the issuer’s financial statements; and
|
Notes to Financial Statements (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
|
9)
|
the existence of merger proposals or tender offers that might affect the value of the security.
|
The Fund is subject to
fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
|
•
|
|
Level 1 – Level 1 inputs are quoted prices in active markets for identical investments.
An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information
on an ongoing basis.
|
|
•
|
|
Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following:
|
|
o
|
Quoted prices for similar investments in active markets.
|
|
o
|
Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or
price quotations vary substantially either over time or among market makers, or in which little information is released publicly.
|
|
o
|
Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss
severities, credit risks, and default rates).
|
|
o
|
Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
•
|
|
Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing
the investment.
|
The inputs or
methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value the Fund’s investments as of May 31,
2021, is included with the Fund’s Portfolio of Investments.
B. Security
Transactions and Investment Income
Security transactions are
recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income is recorded on the accrual basis. Market premiums and discounts are
amortized to the earliest call date of each respective borrowing.
The United
Kingdom’s Financial Conduct Authority, which regulates the London Interbank Offered Rates (“LIBOR”), announced on March 5, 2021 that all non-USD LIBOR reference rates and the 1-week and 2-month USD
LIBOR reference rates will cease to be provided or no longer be representative immediately after December 31, 2021 and the remaining USD LIBOR settings will cease to be provided or no longer be representative
immediately after June 30, 2023. The International Swaps and Derivatives Association, Inc. (“ISDA”) confirmed that the March 5, 2021 announcement constituted an index cessation event under the Interbank
Offered Rates (“IBOR”) Fallbacks Supplement and the ISDA 2020 IBOR Fallbacks Protocol for all 35 LIBOR settings and confirmed that the spread adjustment to be used in ISDA fallbacks was fixed as of the
date of the announcement.
In the United States, the
Alternative Reference Rates Committee (the “ARRC”), a group of market participants convened by the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York in cooperation
with other federal and state government agencies, has since 2014 undertaken efforts to identify U.S. dollar reference interest rates as alternatives to LIBOR and to facilitate the mitigation of LIBOR-related risks. In
June 2017, the ARRC identified the Secured Overnight Financing Rate (“SOFR”), a broad measure of the cost of cash overnight borrowing collateralized by U.S. Treasury securities, as the preferred
alternative for U.S. dollar LIBOR. The Federal Reserve Bank of New York began daily publishing of SOFR in April 2018.
At this time, it is not
possible to predict the full impact of the elimination of LIBOR and the establishment of an alternative reference rate on the Fund or its investments.
Securities purchased or
sold on a when-issued, delayed-delivery or forward purchase commitment basis may have extended settlement periods. The value of the security so purchased is subject to market fluctuations during this period. Due to
the nature of the Senior Loan market, the actual settlement date may not be certain at the time of the purchase or sale for some of the Senior Loans. Interest income on such Senior Loans is not accrued until
settlement date. The Fund maintains liquid assets with a current value at least equal to the amount of its when-issued, delayed-delivery or forward purchase commitments until payment is made. At May 31, 2021, the Fund
had no when-issued, delayed-delivery or forward purchase commitments.
Notes to Financial Statements (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
C. Unfunded Loan
Commitments
The Fund may enter into
certain credit agreements, all or a portion of which may be unfunded. The Fund is obligated to fund these loan commitments at the borrower’s discretion. The Fund had no unfunded loan commitments as of May 31,
2021.
D. Dividends and
Distributions to Shareholders
The Fund will distribute
to holders of its Common Shares monthly dividends of all or a portion of its net income after the payment of interest and dividends in connection with leverage, if any. Distributions of any net long-term capital gains
earned by the Fund are distributed at least annually. Distributions will automatically be reinvested into additional Common Shares pursuant to the Fund’s Dividend Reinvestment Plan unless cash distributions are
elected by the shareholder.
Distributions from net
investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically
adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Fund and
have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will
reverse at some point in the future. Permanent differences incurred during the fiscal year ended May 31, 2021, resulting in book and tax accounting differences, have been reclassified at year end to reflect an
increase in accumulated net investment income (loss) of $488,569, an increase in accumulated net realized gain (loss) of $134,968 and a decrease in paid-in capital of $623,537. Accumulated distributable earnings
(loss) consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments, and unrealized appreciation (depreciation) on investments. Net assets were not affected by these
reclassifications.
The tax character of
distributions paid by the Fund during the fiscal years ended May 31, 2021 and 2020, was as follows:
|
Distributions paid from:
|
2021
|
2020
|
|
Ordinary income
|
$6,757,834
|
$11,774,254
|
|
Capital gains
|
—
|
—
|
|
Return of capital
|
—
|
—
|
As of May 31, 2021, the
components of distributable earnings and net assets on a tax basis were as follows:
|
Undistributed ordinary income
|
$9,859,067
|
|
Undistributed capital gains
|
—
|
|
Total undistributed earnings
|
9,859,067
|
|
Accumulated capital and other losses
|
(14,920,442)
|
|
Net unrealized appreciation (depreciation)
|
164,313
|
|
Total accumulated earnings (losses)
|
(4,897,062)
|
|
Other
|
—
|
|
Paid-in capital
|
351,486,962
|
|
Total net assets
|
$346,589,900
|
E. Income Taxes
The Fund intends to
continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, the Fund may be subject to
an excise tax of 4% of the amount by which approximately 98% of the Fund’s taxable income exceeds the distributions from such taxable income for the calendar year. For the fiscal year ended May 31, 2021, the
Fund incurred $311,049 of excise tax expense.
The Fund intends to
utilize provisions of the federal income tax laws, which allow it to carry a realized capital loss forward indefinitely following the year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. At
May 31, 2021, the Fund had $13,804,621 of non-expiring capital loss carryforwards for federal income tax purposes.
Notes to Financial Statements (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
Certain losses realized
during the current fiscal year may be deferred and treated as occurring on the first day of the following fiscal year for federal income tax purposes. For the fiscal year ended May 31, 2021, the Fund incurred
$1,115,821 of late year capital losses.
The Fund is subject to
accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ended 2018, 2019, 2020,
and 2021 remain open to federal and state audit. As of May 31, 2021, management has evaluated the application of these standards to the Fund, and has determined that no provision for income tax is required in the
Fund’s financial statements for uncertain tax positions.
F. Expenses
The Fund will pay all
expenses directly related to its operations.
3. Investment
Advisory Fee, Affiliated Transactions and Other Fee Arrangements
First Trust, the
investment advisor to the Fund, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the Fund’s investment portfolio, managing the Fund’s business
affairs and providing certain administrative services necessary for the management of the Fund. For these investment management services, First Trust is entitled to a monthly fee calculated at an annual rate of 0.85%
of the Fund’s Managed Assets. First Trust also provides fund reporting services to the Fund for a flat annual fee in the amount of $9,250.
BNY Mellon Investment
Servicing (US) Inc. (“BNYM IS”) serves as the Fund’s transfer agent in accordance with certain fee arrangements. As transfer agent, BNYM IS is responsible for maintaining shareholder records for the
Fund. The Bank of New York Mellon (“BNYM”) serves as the Fund’s administrator, fund accountant, and custodian in accordance with certain fee arrangements. As administrator and fund accountant, BNYM
is responsible for providing certain administrative and accounting services to the Fund, including maintaining the Fund’s books of account, records of the Fund’s securities transactions, and certain other
books and records. As custodian, BNYM is responsible for custody of the Fund’s assets. BNYM IS and BNYM are subsidiaries of The Bank of New York Mellon Corporation, a financial holding company.
Each Trustee who is not
an officer or employee of First Trust, any sub-advisor or any of their affiliates (“Independent Trustees”) is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund
Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, a defined-outcome fund or an index fund.
Additionally, the Lead
Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata
among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and
Committee Chairmen rotate every three years. The officers and “Interested” Trustee receive no compensation from the Fund for acting in such capacities.
4. Purchases and
Sales of Securities
The cost of purchases and
proceeds from sales of securities, excluding short-term investments, for the fiscal year ended May 31, 2021, were $384,285,624 and $356,630,787, respectively.
5. Borrowings
For the fiscal year ended
May 31, 2021, the Fund has a committed facility agreement (the “agreement”) with The Bank of Nova Scotia (“Scotia”) that has a maximum commitment amount of $151,000,000. As the Fund approaches
its Termination Date, the Fund has reduced and intends to continue reducing the maximum commitment amount in its Scotia agreement. The borrowing rate under the facility is equal to the 1-month LIBOR plus 0.85%. Prior
to January 4, 2021, the maximum commitment amount was $158,000,000 and the borrowing rate under the facility was equal to the 1-month LIBOR plus 0.775%. When LIBOR loans are not available, the Fund may request
alternate base rate loans in which case the exact interest rate is determined at the time of borrowing. In addition, under the facility, the Fund pays a commitment fee of 0.25% on the undrawn amount of such facility
when the utilization is below 75% of the maximum commitment amount, and 0.15% in all other events. For the fiscal year ended May 31, 2021, the average amount outstanding was $127,863,014 with a weighted average
interest rate of 0.96%. As of May 31, 2021, the Fund had outstanding borrowings of $139,000,000, which approximates fair value, under the agreement. During the year ended May 31, 2021, the Fund had Prime Rate loans
with an interest rate of 3.25%. The borrowings are categorized as Level 2 within the fair value hierarchy. The high and low annual interest rates for the fiscal year ended May 31, 2021 were 3.25% and 0.91%,
respectively. The weighted average interest rate at May 31, 2021 was 0.95%.
Notes to Financial Statements (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
6. Indemnification
The Fund has a variety of
indemnification obligations under contracts with its service providers. The Fund’s maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
7. Subsequent
Events
Management has evaluated
the impact of all subsequent events to the Fund through the date the financial statements were issued, and has determined that there was the following subsequent event:
As explained in Note 5,
as the Fund approaches its Termination Date, the Fund intends to reduce the maximum commitment amount in the Scotia agreement. As of July 14, 2021, the maximum commitment amount in the Scotia agreement was
$103,000,000.
Report of Independent
Registered Public Accounting Firm
To the Shareholders and the
Board of Trustees of First Trust Senior Floating Rate 2022 Target Term Fund:
Opinion on the Financial
Statements and Financial Highlights
We have audited the
accompanying statement of assets and liabilities of First Trust Senior Floating Rate 2022 Target Term Fund (the “Fund”), including the portfolio of investments, as of May 31, 2021, the related statements
of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for the years ended May 31, 2021, 2020, 2019,
2018 and the period from December 21, 2016 (commencement of operations) through May 31, 2017, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material
respects, the financial position of the Fund as of May 31, 2021, and the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for the years ended May 31, 2021, 2020, 2019, 2018, and the period from December 21, 2016 (commencement of operations) through May 31, 2017, in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
These financial
statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of
material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly,
we express no such opinion.
Our audits included
performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31,
2021, by correspondence with the custodian, agent banks and brokers; when replies were not received from agent banks and brokers, we performed other auditing procedures. We believe that our audits provide a reasonable
basis for our opinion.
Chicago, Illinois
July 23, 2021
We have served as the
auditor of one or more First Trust investment companies since 2001.
Additional Information
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
Dividend Reinvestment
Plan
If your Common Shares are
registered directly with the Fund or if you hold your Common Shares with a brokerage firm that participates in the Fund’s Dividend Reinvestment Plan (the “Plan”), unless you elect, by written notice
to the Fund, to receive cash distributions, all dividends, including any capital gain distributions, on your Common Shares will be automatically reinvested by BNY Mellon Investment Servicing (US) Inc. (the “Plan
Agent”), in additional Common Shares under the Plan. If you elect to receive cash distributions, you will receive all distributions in cash paid by check mailed directly to you by the Plan Agent, as the dividend
paying agent.
If you decide to
participate in the Plan, the number of Common Shares you will receive will be determined as follows:
|
(1)
|
If Common Shares are trading at or above net asset value (“NAV”) at the time of valuation, the Fund will issue new shares at a price equal to the greater of (i) NAV per Common Share on that
date or (ii) 95% of the market price on that date.
|
|
(2)
|
If Common Shares are trading below NAV at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market,
on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average
purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares
issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market within 30 days of the valuation date except where temporary curtailment or
suspension of purchases is necessary to comply with federal securities laws. Interest will not be paid on any uninvested cash payments.
|
You may elect to opt-out
of or withdraw from the Plan at any time by giving written notice to the Plan Agent, or by telephone at (866) 340-1104, in accordance with such reasonable requirements as the Plan Agent and the Fund may agree upon. If
you withdraw or the Plan is terminated, you will receive a certificate for each whole share in your account under the Plan, and you will receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage commissions.
The Plan Agent maintains
all Common Shareholders’ accounts in the Plan and gives written confirmation of all transactions in the accounts, including information you may need for tax records. Common Shares in your account will be held by
the Plan Agent in non-certificated form. The Plan Agent will forward to each participant any proxy solicitation material and will vote any shares so held only in accordance with proxies returned to the Fund. Any proxy
you receive will include all Common Shares you have received under the Plan.
There is no brokerage
charge for reinvestment of your dividends or distributions in Common Shares. However, all participants will pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market
purchases.
Automatically reinvesting
dividends and distributions does not mean that you do not have to pay income taxes due upon receiving dividends and distributions. Capital gains and income are realized although cash is not received by you. Consult
your financial advisor for more information.
If you hold your Common
Shares with a brokerage firm that does not participate in the Plan, you will not be able to participate in the Plan and any dividend reinvestment may be effected on different terms than those described above.
The Fund reserves the
right to amend or terminate the Plan if in the judgment of the Board of Trustees the change is warranted. There is no direct service charge to participants in the Plan; however, the Fund reserves the right to amend
the Plan to include a service charge payable by the participants. Additional information about the Plan may be obtained by writing BNY Mellon Investment Servicing (US) Inc., 301 Bellevue Parkway, Wilmington, Delaware
19809.
Proxy Voting Policies
and Procedures
A description of the
policies and procedures that the Fund uses to determine how to vote proxies and information on how the Fund voted proxies relating to portfolio investments during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Fund’s website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
Portfolio Holdings
The Fund files portfolio
holdings information for each month in a fiscal quarter within 60 days after the end of the relevant fiscal quarter on Form N-PORT. Portfolio holdings information for the third month of each fiscal quarter will be
publicly available on the
Additional Information (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
SEC’s website at www.sec.gov. The Fund’s complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the semi-annual and
annual reports to shareholders, respectively, and is filed with the SEC on Form N-CSR. The semi-annual and annual report for the Fund is available to investors within 60 days after the period to which it relates. The
Fund’s Forms N-PORT and Forms N-CSR are available on the SEC’s website listed above.
Tax Information
Of the ordinary income
(including short-term capital gain) distributions made by the Fund during the fiscal year ended May 31, 2021, none qualify for the corporate dividends received deduction available to corporate shareholders or as
qualified dividend income.
Distributions paid to
foreign shareholders during the Fund’s fiscal year ended May 31, 2020 that were properly designated by the Fund as “interest-related dividends” or “short-term capital gain dividends,” may
not be subject to federal income tax provided that the income was earned directly by such foreign shareholders.
NYSE Certification
Information
In accordance with
Section 303A-12 of the New York Stock Exchange (“NYSE”) Listed Company Manual, the Fund’s President has certified to the NYSE that, as of September 18, 2020, he was not aware of any violation by the
Fund of NYSE corporate governance listing standards. In addition, the Fund’s reports to the SEC on Form N-CSR contain certifications by the Fund’s principal executive officer and principal financial
officer that relate to the Fund’s public disclosure in such reports and are required by Rule 30a-2 under the 1940 Act.
Submission of Matters to
a Vote of Shareholders
The Fund held its Annual
Meeting of Shareholders (the “Annual Meeting”) on September 14, 2020. At the Annual Meeting, James A. Bowen and Robert F. Keith were elected by the Common Shareholders of the First Trust Senior Floating
Rate 2022 Target Term Fund as Class III Trustees for a three-year term expiring at the Fund’s annual meeting of shareholders in 2023. The number of votes cast in favor of Mr. Bowen was 17,351,250 and the number
of votes withheld was 15,109,158. The number of votes cast in favor of Mr. Keith was 31,903,608 and the number of votes withheld was 556,800. Richard E. Erickson, Thomas R. Kadlec and Niel B. Nielson are the other
current and continuing Trustees.
Amended and Restated
By-Laws
On October 19, 2020,
after a thorough review, and consistent with the interests of the Fund, the Board of Trustees adopted Amended and Restated By-Laws, dated October 19, 2020 (the “Amended and Restated By-Laws”).
Among other changes, the
Amended and Restated By-Laws contain new timelines for advance notice of shareholder proposals and nominations to be brought before a meeting of shareholders. Further, the Amended and Restated By-Laws require
compliance with certain procedural and informational requirements in connection with the advance notice of shareholder proposals or nominations, including a requirement to provide certain information about the
proponent and the proposal, or in the case of a nomination, the nominee. Any shareholder considering making a nomination or proposal should carefully review and comply with those provisions of the Amended and Restated
By-Laws.
The Amended and Restated
By-Laws contain certain changes contemplating the nomination, qualification and procedures for the election of Trustees. The Amended and Restated By-Laws require additional information from a nominee for Trustee, and
if requested, require a nominee to sit for an interview with the Board, to determine whether the nominee has the ability to critically review, evaluate, question and discuss information provided to the Board, and
interact effectively with the other Trustees and management of the Fund, among other parties. Additionally, the Amended and Restated By-Laws include qualifications and eligibility requirements for Trustees.
The Amended and Restated
By-Laws provide that in the instance in which the number of persons nominated for election as Trustee exceeds the number of Trustees to be elected, the affirmative vote of a majority of shares outstanding and entitled
to vote in such an election is required to elect a Trustee. In all other elections, the plurality standard pursuant to which Trustees are elected will remain.
The Amended and Restated
By-Laws also include provisions (the “Control Share Provisions”) pursuant to which, in summary, a shareholder who obtains beneficial ownership of common shares of the Fund in a “Control Share
Acquisition” may exercise voting rights with respect to such shares only to the extent the authorization of such voting rights is approved by other shareholders of the Fund. The Control Share Provisions are
primarily intended to seek to protect the interests of the Fund and its long-term shareholders by limiting the risk that the Fund will become subject to undue influence by opportunistic traders pursuing short-term
agendas adverse to the best interests of the Fund and its long-term shareholders. The Control Share Provisions do not eliminate voting rights for
Additional Information (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
common shares acquired in Control Share
Acquisitions, but rather entrust the Fund’s other “non-interested” shareholders with determining whether to approve the authorization of the voting rights of the person acquiring such shares.
Subject to various
conditions and exceptions, the Control Share Provisions define a “Control Share Acquisition” to include an acquisition of common shares that, but for the Control Share Provisions, would give the beneficial
owner upon the acquisition of such shares the ability to exercise voting power in the election of Trustees of the Fund in any of the following ranges:
(i)
one-tenth or more, but less than one-fifth of all voting power;
(ii)
one-fifth or more, but less than one-third of all voting power;
(iii)
one-third or more, but less than a majority of all voting power; or
(iv) a
majority or more of all voting power.
Share acquisitions that
pre-date the adoption of the Amended and Restated By-Laws are excluded from the definition of Control Share Acquisition. However, such shares are included in assessing whether any subsequent share acquisition exceeds
the above thresholds.
Subject to certain
conditions and procedural requirements set forth in the Control Share Provisions, including the delivery of a “Control Share Acquisition Statement” to the Fund setting forth certain required information, a
shareholder who obtains or proposes to obtain beneficial ownership of common shares in a Control Share Acquisition may demand a special meeting of shareholders for the purpose of considering whether the voting rights
of such acquiring person with respect to such shares shall be authorized. If a shareholder who obtains or proposes to obtain beneficial ownership of shares in a Control Share Acquisition does not demand a special
meeting of Fund shareholders, consideration of the authorization of voting rights of such shares shall be presented at the Fund’s next annual or special meeting of shareholders.
This discussion is only a
high-level summary of certain aspects of the Amended and Restated By-Laws, and is qualified in its entirety by reference to the Amended and Restated By-Laws. Shareholders should refer to the Amended and Restated
By-Laws for more information. A copy of the Amended and Restated By-Laws can be found in the Current Report on Form 8-K filed by the Fund with the Securities and Exchange Commission on October 20, 2020, which is
available at www.sec.gov, and may also be obtained by writing to the Secretary of the Fund at the Fund’s principal executive office.
Investment Objectives, Policies, Risks and Effects of Leverage
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
Changes Occurring During
the Prior Fiscal Year
The following information
is a summary of certain changes during the most recent fiscal year ended May 31, 2021. This information may not reflect all of the changes that have occurred since you purchased shares of the Fund.
During the Fund’s
most recent fiscal year, there were no material changes to the Fund’s investment objectives or policies that have not been approved by shareholders or in the principal risk factors associated with an investment
in the Fund.
Investment Objectives
The Fund’s
investment objectives are to seek a high level of current income and to return $9.85 per common share of beneficial interest (“Common Share”) of the Fund on or about February 1, 2022. Based on current market conditions and expectations, the Fund believes it is unlikely to achieve its objective of returning $9.85 per Common Share upon its termination.
Principal Investment
Policies
Under normal market
conditions, the Fund invests at least 80% of its Managed Assets (as defined below) in Senior Loans of any maturity. Senior Loans are made to U.S. and non-U.S. corporations, partnerships and other business entities
which operate in various industries and geographical regions, including entities in emerging market countries (collectively, “Borrowers”).
“Managed
Assets” means the average daily gross asset value of the Fund (which includes assets attributable to the Fund’s preferred shares of beneficial interest (“Preferred Shares”), if any, and the
principal amount of any borrowings or commercial paper or notes issued by the Fund), 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 of money incurred or of commercial paper or notes issued by the Fund).
Senior Loans pay interest
at rates which are determined periodically on the basis of a floating base lending rate, plus a risk premium. Senior Loans are generally negotiated between a Borrower and several financial institution lenders
(“Lenders”) represented by one or more Lenders acting as agent of all of the Lenders (“Agent”). The Agent is responsible for negotiating the loan agreement that establishes the terms and
conditions of the Senior Loan and the rights of the Borrower and the Lenders. The Fund may purchase assignments of portions of Senior Loans from third parties or invest in participations in Senior Loans. The
Fund’s investments in Senior Loans primarily consists of assignments, and participations represent a minor portion of the Fund’s portfolio. An assignment involves the sale of a loan by an existing Lender
to the Fund whereas a participation involves the sale of a beneficial interest in a loan by the lender to the Fund. In an assignment, the Fund becomes a lender of record and a party to the underlying loan agreement;
whereas, in a participation, the Fund purchases only an economic interest in the loan and does not become a party to the underlying loan agreement.
The Fund generally
acquires Senior Loans of Borrowers that the Advisor believes can make timely payments on their Senior Loans and that satisfy other credit standards established by the Advisor. Senior Loans generally hold one of the
most senior positions in the capital structure of the Borrower, are secured with specific collateral and have a claim on the assets and/or stock of the Borrower that is senior to that held by unsecured creditors,
subordinated debt holders and stockholders of the Borrower. This capital structure position generally gives holders of Senior Loans a priority claim on some or all of the Borrower’s assets in the event of
default. All of the Fund’s Senior Loan investments are secured and have a first lien priority on collateral of the Borrower. Senior Loans are typically rated below investment grade, and the Fund’s
investments in such securities are considered speculative with respect to the issuer’s capacity to pay interest and repay principal.
As the Fund nears its
termination date, the Fund may invest in higher credit quality instruments with maturities extending beyond the termination date to seek to improve the liquidity of its portfolio and reduce investment risk. This may
reduce the amount available for distribution to common shareholders. In seeking to return Original NAV to investors on or about the termination date, the Fund intends to utilize various portfolio and cash flow
management techniques, including setting aside a portion of its net investment income and possibly retaining gains.
In addition, the Fund:
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May invest no more than 15% of its Managed Assets in securities rated “CCC+”
or lower by S&P Global Ratings or Fitch Ratings, a part of the Fitch Group, or “Caa1” or lower by Moody’s Investor
Services, Inc., or comparably rated by another nationally recognized statistical rating organization or, if unrated, determined by the
Advisor to be of comparable quality.
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For purposes of determining whether a security is “CCC+/Caa1” or its equivalent,
the highest available rating is used.
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May invest up to 20% of its Managed Assets in:
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(i) loans that have lower than first lien priority on collateral or that are not secured
by any specific collateral of the Borrower;
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Investment Objectives, Policies, Risks and Effects of Leverage (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
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(ii) other income producing securities (including, without limitation, U.S. government debt
securities and corporate debt securities);
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(iii) warrants and equity securities, including common stock and preferred stock, issued
by a Borrower or its affiliates; and
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(iv) investment companies.
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Will not invest in defaulted securities or in the securities of an issuer that is in bankruptcy
or insolvency proceedings, other than:
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(i) such securities which it already owns that, at the time of initial investment, were not
in default or involved in bankruptcy or insolvency proceedings; and
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(ii) debtor-in-possession loans.
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May not invest more than 5% of its Managed Assets in securities issued by a single issuer,
other than securities issued by the U.S. government. • The Fund may use certain credit derivatives to take on additional credit
risk and obtain exposure to Senior Loans. The Fund’s use of total return swaps, credit default swaps and other derivative transactions
other than for hedging purposes, as measured by the total notional amount of such instruments, will not exceed 20% of the Fund’s
Managed Assets.
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If and when used, derivative instruments will be considered an investment in Senior Loans
for purposes of the Fund’s investment policy to invest, under normal market conditions, at least 80% of its Managed Assets in Senior
Loans. Total return swaps and credit default swaps, including loan credit default swaps, are the primary type of credit derivatives that
may be used to gain such exposure to Senior Loans.
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If the exposure to the underlying instrument of a derivative position of the Fund
is negated or offset by another derivative position of the Fund providing exposure to the same underlying instrument, the Fund includes
only the net amount of the exposure for purposes of calculating the 20% limitation described above.
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The Fund may, but is not
required to, use various derivative instruments and other transactions to seek to: (i) reduce interest rate risks arising from any use of leverage; (ii) facilitate portfolio management, including to take on additional
credit risk and obtain exposure to Senior Loans; (iii) mitigate other risks including, without limitation, interest rate and credit risks; and/or (iv) earn income.
The Fund uses leverage to
seek to achieve its investment objectives. The Fund may also use leverage for other purposes, such as hedging or to meet cash requirements, however, the Fund will not use any leverage that would result in the Fund
becoming a taxable mortgage pool. Pursuant to the provisions of the 1940 Act, the Fund may borrow or issue notes in an amount up to 33-1/3% of its total assets or may issue Preferred Shares in an amount up to 50% of
the Fund’s total assets (including the proceeds from leverage). This is known as “structural leverage”. The Fund may also employ portfolio leverage through other techniques that have the economic
effect of leverage. “Effective leverage” is the combination of the amount of structural leverage plus the amount of portfolio leverage, and the Fund’s effective leverage will not exceed 50% of the
Fund’s Managed Assets.
During temporary
defensive periods or the period in which the Fund is approaching its termination date (i.e., the “wind-down” period during which the Fund may begin liquidating its portfolio in anticipation of the
Fund’s termination), the Fund may deviate from its investment policies and objective. During such periods, the Fund may invest up to 100% of its Managed Assets in cash or short-term investments, including high
quality, short-term securities, or may invest in short- or intermediate-term U.S. Treasury securities. There can be no assurance that such techniques will be successful, and during such periods, the Fund may not
achieve its investment objective.
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 (i) more than 5% of the Fund’s total assets would then be invested in securities of any single issuer, or
(ii) the Fund would hold more than 10% of the outstanding voting securities of any single issuer; provided, that Government securities (as defined in 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 or sell real estate or commodities except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation of registered
investment companies, or interpretations or modifications thereof by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other
authority of competent jurisdiction.
3. Borrow money except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation of registered investment companies, or
interpretations or modifications thereof by the SEC, SEC
Investment Objectives, Policies, Risks and Effects of Leverage (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
staff or other
authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent jurisdiction.
4. Issue senior securities except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation of registered investment companies, or
interpretations or modifications thereof by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent
jurisdiction.
5. Underwrite the securities of other issuers except (a) to the extent that the Fund may be deemed to be an underwriter within the meaning of the Securities Act of 1933, as amended, in connection
with the purchase and sale of portfolio securities; and (b) as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation of registered investment
companies, or interpretations or modifications thereof by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of
competent jurisdiction.
6. Make loans except as permitted by (i) the 1940 Act and the rules and regulations thereunder, or other successor law governing the regulation of registered investment companies, or
interpretations or modifications thereof by the SEC, SEC staff or other authority of competent jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority of competent
jurisdiction.
7. Concentrate (invest 25% or more of the Fund’s total assets) the Fund’s investments in any particular industry; provided, however, that such limitation shall not apply to
obligations issued or guaranteed by the United States government or by its agencies or instrumentalities.
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.
Except as noted above,
the foregoing fundamental investment policies, together with the investment objectives of the Fund, cannot be changed without approval by holders of a “majority of the outstanding voting securities” of the
Fund, as defined in the 1940 Act, which includes Common Shares and Preferred Shares, if any, voting together as a single class, and of the holders of the outstanding Preferred Shares, if any, voting as a single class.
Under the 1940 Act, a “majority of the outstanding voting securities” means (i) 67% or more of the Fund’s shares present at a meeting, if the holders of more than 50% of the Fund’s shares are
present or represented by proxy, or (ii) more than 50% of the Fund’s shares, whichever is less.
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.
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 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 one or more securities in the Fund’s portfolio will decline in price, or the issuer thereof will fail to pay dividends or interest or repay principal
when due. Below-investment grade instruments 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 susceptible to default or decline in market value 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.
Investment Objectives, Policies, Risks and Effects of Leverage (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
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.
Earnings Risk. The Fund’s limited term may cause it to invest in lower yielding securities or hold the proceeds of securities sold near the end of its term in cash or cash equivalents, which may
adversely affect the performance of the Fund or the Fund’s ability to maintain its dividend.
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.
Hotels, Restaurants &
Leisure Risk. Companies in the hotels, restaurants and leisure industry are subject to, among other things, a highly competitive marketplace; the ongoing need to contribute significant capital
expenditures and keep pace with changes in technology and consumer preferences; difficulty in obtaining financing; and rapid obsolescence. In addition, these companies may be more sensitive to adverse economic
(general and local), business or regulatory developments than other companies.
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, which regulates LIBOR, intends to cease making
LIBOR available as a reference rate over a
Investment Objectives, Policies, Risks and Effects of Leverage (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
phase-out period that is currently
expected to begin after the end of 2021. 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. Any such effects on the transition away from LIBOR, as well as other unforeseen effects, could result in losses to the Fund.
In addition, for the
Fund’s fixed rate investments, when market interest rates rise, the market value of such securities generally will fall. Market value generally falls further for fixed rate securities with longer duration.
During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected prepayments. This may lock in a below-market yield, increase the
security’s duration and further reduce the value of the security. Investments in fixed rate securities with long-term maturities may experience significant price declines if long-term interest rates increase.
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: the likelihood of greater volatility of
net asset value and market price of the common shares than a comparable portfolio without leverage; 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; 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 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.
Limited Term and Return of
Original NAV Risk. Because the assets of the Fund will be liquidated in connection with its termination, the Fund may be required to sell portfolio securities when it otherwise would not, including at times
when market conditions are not favorable, or at a time when a particular security is in default or bankruptcy, or otherwise in severe distress, which may cause the Fund to lose money. Although the Fund has an
investment objective of returning original NAV to common shareholders on or about its termination date, the Fund may not be successful in achieving this objective and such return is not backed or otherwise guaranteed
by the Fund, Advisor or any other entity. Based on current market conditions and expectations, the Fund believes it is unlikely to achieve its objective of returning $9.85 per Common Share upon its
termination.
The Fund’s ability
to return original NAV to common shareholders on or about its termination date will depend in part on market conditions, the presence or absence of defaulted or distressed securities in the Fund’s portfolio that
may prevent those securities from being sold in a timely manner at a reasonable price, and various portfolio and cash flow management techniques. The Fund may set aside and retain in its net assets (and therefore its
NAV) a portion of its net investment income, and possibly all or a portion of its gains, in pursuit of its objective to return original NAV to common shareholders upon termination. This would reduce the amounts
otherwise available for distribution prior to the liquidation of the Fund. As it nears the termination date, the Fund may invest in higher credit quality instruments with maturities extending beyond the termination
date to seek to improve the liquidity of its portfolio and reduce investment risk. Investing in higher credit quality instruments may reduce the amount available for distribution to common shareholders.
The Fund’s final
distribution to shareholders will be based upon the Fund’s NAV at the termination date and initial investors and any investors that purchase common shares after the completion of the Fund’s initial
offering (particularly if their purchase price differs meaningfully from the original offering price or original NAV) may receive less in such final distribution than their original investment. Rather than reinvesting
any proceeds from the sale or redemption of its securities, the Fund may distribute such proceeds in one or more distributions prior to the final liquidation, which may cause the Fund’s fixed expenses to
increase when expressed as a percentage of net assets attributable to common shares. Depending upon a variety of factors, including the performance of the Fund’s portfolio over the life of the Fund, the amount
distributed to shareholders on or about the termination date may be significantly less than original NAV.
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 the Fund, as well as shares of the 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
Investment Objectives, Policies, Risks and Effects of Leverage (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
trends in securities prices. Shares of
the 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 the Fund and its investments. Such events may affect certain geographic
regions, countries, sectors and industries more significantly than others. The outbreak of the respiratory disease designated as COVID-19 in December 2019 caused significant volatility and declines in global financial
markets, which caused losses for investors. The COVID-19 pandemic may last for an extended period of time and continue to impact the economy for the foreseeable future.
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.
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. 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. 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.
Investment Objectives, Policies, Risks and Effects of Leverage (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
Effects of Leverage
The aggregate principal
amount of borrowings under the committed facility agreement (the “Agreement”) with the Bank of Nova Scotia represented approximately 28.62% of Managed Assets as of May 31, 2021. Asset coverage with respect
to the borrowings under the Agreement was 349.35% as of May 31, 2021, and the Fund had $12,000,000 of unutilized funds available for borrowing under the Agreement as of that date. As of May 31, 2021, the maximum
commitment amount under the Agreement was $151,000,000. As of May 31, 2021, the approximate average annual interest and fee rate for the borrowings under the Agreement was 0.96%.
Assuming that the
Fund’s leverage costs remain as described above (at an assumed average annual cost of 0.96%), the annual return that the Fund’s portfolio must experience (net of expenses) in order to cover its leverage
costs would be 0.28%.
The following table is
furnished in response to requirements of the Securities and Exchange Commission. 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 28.62% of the Fund’s Managed Assets, net of expenses, and an annual leverage interest and fee rate of 0.96%.
|
Assumed Portfolio Total Return (Net of Expenses)
|
-10%
|
-5%
|
0%
|
5%
|
10%
|
|
Common Share Total Return
|
-14.40%
|
-7.39%
|
-0.39%
|
6.62%
|
13.63%
|
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) and
gains or losses on the value of the securities the Fund owns. As required by Securities and Exchange Commission 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 distributions it receives on its investments is entirely offset by losses in the value of those securities.
Board of Trustees and Officers
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
The following tables
identify the Trustees and Officers of the Fund. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187.
|
Name, Year of Birth and Position with the Fund
|
Term of Office and Year First Elected or Appointed(1)
|
Principal Occupations
During Past 5 Years
|
Number of Portfolios in the First Trust Fund Complex Overseen by Trustee
|
Other Trusteeships or Directorships Held by Trustee During Past 5 Years
|
|
INDEPENDENT TRUSTEES
|
Richard E. Erickson, Trustee
(1951)
|
• Three Year Term
• Since Fund Inception
|
Physician; Officer, Wheaton Orthopedics; Limited Partner, Gundersen Real Estate Limited Partnership (June 1992 to December 2016)
|
206
|
None
|
Thomas R. Kadlec, Trustee
(1957)
|
• Three Year Term
• Since Fund Inception
|
President, ADM Investor Services, Inc. (Futures Commission Merchant)
|
206
|
Director of ADM Investor Services, Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association
|
Robert F. Keith, Trustee
(1956)
|
• Three Year Term
• Since Fund Inception
|
President, Hibs Enterprises (Financial and Management Consulting)
|
206
|
Director of Trust Company of Illinois
|
Niel B. Nielson, Trustee
(1954)
|
• Three Year Term
• Since Fund Inception
|
Senior Advisor (August 2018 to Present), Managing Director and Chief Operating Officer (January 2015 to August 2018), Pelita Harapan Educational Foundation
(Educational Products and Services)
|
206
|
None
|
|
INTERESTED TRUSTEE
|
James A. Bowen(2), Trustee and
Chairman of the Board
(1955)
|
• Three Year Term
• Since Fund Inception
|
Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software
Development Company) and Stonebridge Advisors LLC (Investment Advisor)
|
206
|
None
|
|
(1)
|
Currently, Richard E. Erickson and Thomas R. Kadlec, as Class I Trustees, are serving as trustees until the Fund’s 2021 annual meeting of shareholders. Niel B. Nielson, as a Class II Trustee, is
serving as a trustee until the Fund’s 2022 annual meeting of shareholders. James A. Bowen and Robert F. Keith, as Class III Trustees, are serving as trustees until the Fund’s 2023 annual meeting of
shareholders.
|
|
(2)
|
Mr. Bowen is deemed an “interested person” of the Fund due to his position as CEO of First Trust Advisors L.P., investment advisor of the Fund.
|
Board of Trustees and Officers (Continued)
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
|
Name and Year of Birth
|
Position and Offices with Fund
|
Term of Office and Length of Service
|
Principal Occupations
During Past 5 Years
|
|
OFFICERS(3)
|
James M. Dykas
(1966)
|
President and Chief Executive Officer
|
• Indefinite Term
• Since Fund Inception
|
Managing Director and Chief Financial Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and
Stonebridge Advisors LLC (Investment Advisor)
|
Donald P. Swade
(1972)
|
Treasurer, Chief Financial Officer and Chief Accounting Officer
|
• Indefinite Term
• Since Fund Inception
|
Senior Vice President (July 2016 to Present), Vice President (April 2012 to July 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.
|
W. Scott Jardine
(1960)
|
Secretary and Chief Legal Officer
|
• Indefinite Term
• Since Fund Inception
|
General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC
|
Daniel J. Lindquist
(1970)
|
Vice President
|
• Indefinite Term
• Since Fund Inception
|
Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P.
|
Kristi A. Maher
(1966)
|
Chief Compliance Officer and Assistant Secretary
|
• Indefinite Term
• Since Fund Inception
|
Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.
|
|
(3)
|
The term “officer” means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function.
|
Privacy Policy
First Trust Senior
Floating Rate 2022 Target Term Fund (FIV)
May 31, 2021
(Unaudited)
Privacy Policy
First Trust values our
relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information.
Sources of Information
We collect nonpublic
personal information about you from the following sources:
|
•
|
Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms;
|
|
•
|
Information about your transactions with us, our affiliates or others;
|
|
•
|
Information we receive from your inquiries by mail, e-mail or telephone; and
|
|
•
|
Information we collect on our website through the use of “cookies”. For example, we may identify the pages on our website that your browser requests or visits.
|
Information Collected
The type of data we
collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history,
investment objectives, marital status, family relationships and other personal information.
Disclosure of
Information
We do not disclose any
nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses
may also include the disclosure of such information to unaffiliated companies for the following reasons:
|
•
|
In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial
service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as
trustees, banks, financial representatives, proxy services, solicitors and printers.
|
|
•
|
We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your
account from fraud).
|
In addition, in order to
alert you to our other financial products and services, we may share your personal information within First Trust.
Use of Website
Analytics
We currently use third
party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust’s website and marketing our products and services to you. These tools employ cookies, which are
small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs
viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web
navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust’s website better and more useful to our users. The
information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in
order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis.
Confidentiality and
Security
With regard to our
internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic personal information.
Policy Updates and
Inquiries
As required by federal
law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional
copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors).
March 2021
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 East Liberty Drive, Suite
400
Wheaton, IL 60187
TRANSFER AGENT
BNY Mellon Investment Servicing
(US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
ADMINISTRATOR,
FUND ACCOUNTANT, AND
CUSTODIAN
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
Item 2. Code of Ethics.
|
(a)
|
|
The registrant, as of the end of the period covered by this report, has adopted a code of
ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer
or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third
party.
|
|
(c)
|
|
There have been no amendments, during the period covered by this report, to a provision of
the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant
or a third party, and that relates to any element of the code of ethics description.
|
|
(d)
|
|
The registrant has not granted any waivers, including an implicit waiver, from a provision
of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant
or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions.
|
|
(f)
|
|
A copy of the code of ethics that applies to the registrant’s principal executive officer,
principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1).
|
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report,
the registrant’s Board of Trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee
financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) AUDIT FEES (REGISTRANT) --
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the
audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements were $57,000 for 2020 and $57,000 for 2021.
(b) AUDIT-RELATED FEES (REGISTRANT)
-- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that
are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph
(a) of this Item were $0 for 2020 and $0 for 2021.
AUDIT-RELATED FEES (INVESTMENT
ADVISOR) -- The aggregate fees billed in each of the last two fiscal years of the registrant for assurance and related services by the
principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are
not reported under paragraph (a) of this Item were $0 for 2020 and $0 for 2021.
(c) TAX FEES (REGISTRANT) -- The
aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning to the registrant were $5,288 for 2020 and $0 for 2021. These fees were for tax consultation and/or tax return
preparation and professional services rendered for PFIC (Passive Foreign Investment Company) Identification Services.
TAX FEES (INVESTMENT ADVISOR)
-- The aggregate fees billed in each of the last two fiscal years of the registrant for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning to the registrant’s advisor were $0 for 2020 and $0 for 2021.
(d) ALL OTHER FEES (REGISTRANT)
-- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the
registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2020 and $0 for 2021.
ALL OTHER FEES (INVESTMENT ADVISOR)
-- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the
Registrant’s investment advisor, other than services reported in paragraphs (a) through (c) of this Item were $0 for 2020 and $0
for 2021.
|
|
(e)(1)
|
Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7)
of Rule 2-01 of Regulation S-X.
|
Pursuant to its charter
and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for
the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the
Registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee
up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also
responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the Registrant’s advisor
(not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor)
and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the Registrant,
if the engagement relates directly to the operations and financial reporting of the Registrant, subject to the de minimis exceptions
for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the Registrant’s
advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment
advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services
to the Registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit
services is compatible with the auditor’s independence.
|
|
(e)(2)
|
The percentage of services described in each of paragraphs (b) through (d) for the Registrant and the
Registrant’s investment advisor of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included
in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:
|
(b) 0%
(c) 0%
(d) 0%
|
|
(f)
|
The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s
financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s
full-time, permanent employees was less than fifty percent.
|
|
|
(g)
|
The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the
registrant, and rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio
management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common
control with the advisor that provides ongoing services to the Registrant for the fiscal year ended May 31, 2020 were $5,288 for the Registrant
and $60,670 for the Registrant’s investment advisor and for the fiscal year ended May 31, 2021 were $0 for the Registrant and $23,200
for the Registrant’s investment advisor.
|
|
|
(h)
|
The Registrant’s audit committee of its Board of Trustees determined that the provision of non-audit
services that were rendered to the Registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio
management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common
control with the investment advisor that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
|
Item 5. Audit Committee of Listed Registrants.
|
(a)
|
|
The registrant has a separately designated standing audit committee consisting of all the
independent trustees of the registrant. The members of the audit committee are: Thomas R. Kadlec, Niel B. Nielson, Richard E. Erickson
and Robert F. Keith.
|
Item 6. Investments.
|
(a)
|
|
Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting
period is included as part of the report to shareholders filed under Item 1 of this form.
|
Item 7. Disclosure of Proxy Voting
Policies and Procedures for Closed-End Management Investment Companies.
The Proxy Voting Policies are attached herewith.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a)(1) Identification of Portfolio Manager(s) or Management
Team Members and Description of Role of Portfolio Manager(s) or Management Team Members
Information provided as of August 6, 2021.
The First Trust Advisors Leveraged Finance
Investment team manages a portfolio comprised primarily of U.S. dollar denominated, senior secured floating-rate loans. The Portfolio
Managers are responsible for directing the investment activities within the Fund. William Housey is the Senior Portfolio Manager and has
primary responsibility for investment decisions. Jeff Scott assists Mr. Housey and there are also Senior Credit Analysts assigned to certain
industries. The Portfolio Managers are supported in their portfolio management activities by the First Trust Advisors Leveraged Finance
investment team, including a team of credit analysts, designated traders, and operations personnel. Senior Credit Analysts are assigned
industries and Associate Credit Analysts support the Senior Credit Analysts. All credit analysts, operations personnel and portfolio managers
report to Mr. Housey.
William Housey, CFA
Managing Director of Fixed Income, Senior Portfolio
Manager
Mr. Housey joined First Trust in June 2010 as the Senior Portfolio Manager
for the Leveraged Finance
Investment Team and has 23 years of investment experience.
Mr. Housey is a Senior Vice President of First Trust. Prior to joining First Trust, Mr. Housey was at Morgan Stanley/Van Kampen Funds,
Inc. for 11 years and served as Executive Director and Co-Portfolio Manager. Mr. Housey has extensive experience in portfolio management
of both leveraged and unleveraged credit products, including bank loans, high yield bonds, credit derivatives and corporate restructurings.
Mr. Housey received a BS in Finance from Eastern Illinois University and an MBA in Finance and Management and Strategy from Northwestern
University’s Kellogg School of Business. He holds the FINRA Series 7, Series 52 and Series 63 licenses and the Chartered Financial
Analyst designation. He is a member of the CFA Institute and the CFA Society of Chicago.
Jeffrey Scott, CFA
Senior-Vice President, Deputy Credit Officer,
Portfolio Manager
Mr. Scott, CFA, joined First Trust in June 2010 as
a Portfolio Manager in the Leveraged Finance Investment Team and has 30 years of investment management industry experience and has extensive
experience in credit analysis, product development and product management. Prior to joining First Trust, Mr. Scott served as an Assistant
Portfolio Manager and as a Senior Credit Analyst for Morgan Stanley/Van Kampen from October 2008 to June 2010. As Assistant Portfolio
Manager, Mr. Scott served on a team that managed over $4.0 billion of Senior Loan assets in three separate funds: Van Kampen Senior Loan
Fund; Van Kampen Senior Income Trust; and Van Kampen Dynamic Credit Opportunities Fund. His responsibilities included assisting with portfolio
construction, buy and sell decision making, and monitoring fund liquidity and leverage. Mr. Scott earned a B.S. in Finance and Economics
from Elmhurst College and an M.B.A. with specialization in Analytical Finance and Econometrics and Statistics from the University of Chicago.
He also holds the Chartered Financial Analyst designation and is a member of the CFA Institute and the CFA Society of Chicago.
(a)(2) Other Accounts Managed by Portfolio
Manager(s) or Management Team Member and Potential Conflicts of Interest
Information provided as of May 31,
2021
|
Name of Portfolio Manager or Team Member
|
Type of Accounts
|
Total
# of Accounts Managed*
|
Total Assets
|
# of Accounts Managed for which Advisory Fee is Based on Performance
|
Total Assets for which Advisory Fee is Based on Performance
|
|
|
|
|
|
|
|
|
1. William Housey, CFA
|
Registered Investment Companies:
|
6
|
$6.287B
|
0
|
$0
|
|
|
Other Pooled Investment Vehicles:
|
0
|
$0
|
0
|
$0
|
|
|
Other Accounts:
|
0
|
$0
|
0
|
$0
|
|
|
|
|
|
|
|
|
2. Jeffrey Scott, CFA
|
Registered Investment Companies:
|
6
|
$6.287B
|
0
|
$0
|
|
|
Other Pooled Investment Vehicles:
|
0
|
$0
|
0
|
$0
|
|
|
Other Accounts:
|
0
|
$0
|
0
|
$0
|
* Information excludes the registrant.
Potential Conflicts of Interests
Potential conflicts
of interest may arise when a portfolio manager of the Registrant has day-to-day management responsibilities with respect to one or more
other funds or other accounts. The First Trust Advisors Leveraged Finance Investment Team adheres to its trade allocation policy utilizing
a pro-rata methodology to address this conflict.
First Trust and its
affiliate, First Trust Portfolios L.P. (“FTP”), have in place a joint Code of Ethics and Insider Trading Policies and Procedures
that are designed to (a) prevent First Trust personnel from trading securities based upon material inside information in the possession
of such personnel and (b) ensure that First Trust personnel avoid actual or potential conflicts of interest or abuse of their positions
of trust and responsibility that could occur through such activities as front running securities trades for the Registrant. Personnel
are required to have duplicate confirmations and account statements delivered to First Trust and FTP compliance personnel who then compare
such trades to trading activity to detect any potential conflict situations. In addition to the personal trading restrictions specified
in the Code of Ethics and Insider Trading Policies and Procedures, employees in the First Trust Advisors Leveraged Finance Investment
Team are prohibited from buying or selling equity securities (including derivative instruments such as options, warrants and futures)
and corporate bonds for their personal account and in any accounts over which they exercise control. Employees in the First Trust Advisors
Leveraged Finance Investment Team are also prohibited from engaging in any personal transaction while in possession of material non-public
information regarding the security or the issuer of the security. First Trust and FTP also maintain a restricted list of all issuers for
which the First Trust Advisors Leveraged Finance Investment Team has material non-public information in its possession and all transactions
executed for a product advised or supervised by First Trust or FTP are compared daily against the restricted list.
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(a)(3)
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Compensation Structure of Portfolio Manager(s) or Management Team Members
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Information provided as of May 31,
2021
The compensation structure
for internal portfolio managers is based upon a fixed salary as well as a discretionary bonus determined by the management of FTA. Salaries
are determined by management and are based upon an individual’s position and overall value to the firm. Bonuses are also determined
by management and are generally based upon an individual’s or team’s overall contribution to the success of the firm, assets
under management and the profitability of the firm. Certain internal portfolio managers have an indirect ownership stake in the firm and
will therefore receive their allocable share of ownership related distributions.
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(a)(4)
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Disclosure of Securities Ownership as of May 31, 2021
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Name of Portfolio Manager or
Team Member
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Dollar ($) Range of Fund Shares
Beneficially Owned
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|
William Housey
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$1 - $10,000
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Jeffrey Scott
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$10,001 - $50,000
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Item 9. Purchases of Equity Securities
by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the
procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented
after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407)
(as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. Controls and Procedures.
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(a)
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The registrant’s principal executive and principal financial officers, or persons performing
similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90
days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls
and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
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(b)
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There were no changes in the registrant’s internal control over financial reporting
(as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
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Item 12. Disclosure of Securities
Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
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(registrant)
|
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First Trust Senior Floating Rate 2022 Target Term Fund
|
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By (Signature and Title)*
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/s/ James M. Dykas
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James M. Dykas, President and Chief Executive Officer
(principal executive
officer)
|
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.
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By (Signature and Title)*
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|
/s/ James M. Dykas
|
|
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James M. Dykas, President and Chief Executive Officer
(principal executive
officer)
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By (Signature and Title)*
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/s/ Donald P. Swade
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|
|
|
Donald P. Swade, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer)
|
* Print the name and title of each signing officer under
his or her signature.
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