As filed with the Securities and Exchange Commission on August 8, 2017.
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1933 Act File No. 333-113978
1940 Act File No. 811-21539
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement.
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II
120 EAST LIBERTY DRIVE, SUITE 400
WHEATON, ILLINOIS 60187
August 8, 2017
Dear Shareholder:
The accompanying materials relate to the Annual Meeting of Shareholders
(the "Meeting") of First Trust Senior Floating Rate Income Fund II (the "Fund").
The Meeting will be held on Monday, September 11, 2017, at 12:00 noon Central
Time, at the offices of First Trust Advisors L.P., the investment advisor to the
Fund, located at 120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187.
At the Meeting, you will be asked to vote on a proposal to elect two of
the Trustees of the Fund (the "Proposal") and to transact such other business as
may properly come before the Meeting and any adjournments or postponements
thereof. The Proposal is described in the accompanying Notice of Annual Meeting
of Shareholders and Proxy Statement.
YOUR PARTICIPATION AT THE MEETING IS VERY IMPORTANT. If you cannot attend
the Meeting, you may participate by proxy. As a Shareholder, you cast one vote
for each full share of the Fund that you own and a proportionate fractional vote
for any fraction of a share that you own. Please take a few moments to read the
enclosed materials and then cast your vote on the enclosed proxy card.
VOTING TAKES ONLY A FEW MINUTES. EACH SHAREHOLDER'S VOTE IS IMPORTANT.
YOUR PROMPT RESPONSE WILL BE MUCH APPRECIATED.
After you have voted on the Proposal, please be sure to sign your proxy
card and return it in the enclosed postage-paid envelope.
We appreciate your participation in this important Meeting.
Thank you.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of assistance
to you and will avoid the time and expense to the Fund involved in validating
your vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the party
signing should conform exactly to the name shown in the registration.
3. All Other Accounts: The capacity of the individual signing the proxy
should be indicated unless it is reflected in the form of registration. For
example:
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78 Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr., UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr., Executor
FIRST TRUST SENIOR FLOATING RATE INCOME FUND II
120 EAST LIBERTY DRIVE, SUITE 400
WHEATON, ILLINOIS 60187
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 11, 2017
August 8, 2017
To the Shareholders of First Trust Senior Floating Rate Income Fund II:
Notice is hereby given that the Annual Meeting of Shareholders (the
"Meeting") of First Trust Senior Floating Rate Income Fund II (the "Fund"), a
Massachusetts business trust, will be held at the offices of First Trust
Advisors L.P., 120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187, on
Monday, September 11, 2017, at 12:00 noon Central Time, for the following
purposes:
1. To elect two Trustees (the Class I Trustees).
2. To transact such other business as may properly come before the Meeting
or any adjournments or postponements thereof.
The Board of Trustees has fixed the close of business on July 25, 2017 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Meeting and any adjournments or postponements thereof.
By Order of the Board of Trustees,
/s/ W. Scott Jardine
W. Scott Jardine
Secretary
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SHAREHOLDERS ARE REQUESTED TO PROMPTLY COMPLETE, SIGN, DATE AND RETURN THE PROXY
CARD IN THE ENCLOSED ENVELOPE WHICH DOES NOT REQUIRE POSTAGE IF MAILED IN THE
CONTINENTAL UNITED STATES. INSTRUCTIONS FOR SIGNING PROXY CARDS ARE SET FORTH
FOLLOWING THE LETTER TO SHAREHOLDERS.
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FIRST TRUST SENIOR FLOATING RATE INCOME FUND II
120 EAST LIBERTY DRIVE, SUITE 400
WHEATON, ILLINOIS 60187
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 11, 2017
PROXY STATEMENT
AUGUST 8, 2017
THIS PROXY STATEMENT AND THE ENCLOSED PROXY CARD WILL FIRST BE MAILED TO
SHAREHOLDERS ON OR ABOUT AUGUST 15, 2017.
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of First Trust Senior Floating Rate Income Fund
II (the "Fund"), a Massachusetts business trust, for use at the Annual Meeting
of Shareholders of the Fund to be held on Monday, September 11, 2017, at 12:00
noon Central Time, at the offices of First Trust Advisors L.P., the investment
advisor to the Fund, located at 120 East Liberty Drive, Suite 400, Wheaton,
Illinois 60187, and at any adjournments or postponements thereof (the
"Meeting"). A Notice of Annual Meeting of Shareholders and a proxy card
accompany this Proxy Statement.
The close of business on July 25, 2017 has been fixed as the record date
(the "Record Date") for the determination of shareholders entitled to notice of
and to vote at the Meeting and any adjournments or postponements thereof. The
Fund has one class of shares of beneficial interest, par value $0.01 per share,
known as common shares ("Shares").
The expense of preparing, printing and mailing the enclosed proxy,
accompanying notice and this Proxy Statement, and all other costs in connection
with the solicitation by the Fund of proxies to be voted at the Meeting, will be
borne by the Fund. The Fund will also reimburse brokerage firms and others for
their expenses in forwarding the Fund's proxy solicitation materials to the
person(s) for whom they hold Shares. The solicitation of proxies will be largely
by mail, but may include telephonic, electronic or oral communication by
officers and service providers of the Fund, as well as agents and affiliates of
such service providers.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON SEPTEMBER 11, 2017. THIS PROXY STATEMENT IS
AVAILABLE ON THE INTERNET AT
HTTP://WWW.FTPORTFOLIOS.COM/LOADCONTENT/GRHDRP3TGY5O. THE FUND'S MOST RECENT
ANNUAL AND SEMI-ANNUAL REPORTS ARE ALSO AVAILABLE ON THE INTERNET AT
HTTP://WWW.FTPORTFOLIOS.COM/RETAIL/CEF/CEFFUNDNEWS.ASPX?TICKER=FCT. IN ADDITION,
THE FUND WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS MOST RECENT ANNUAL AND
SEMI-ANNUAL REPORTS TO ANY SHAREHOLDER UPON REQUEST. TO REQUEST A COPY, PLEASE
WRITE TO FIRST TRUST ADVISORS L.P. ("FIRST TRUST ADVISORS" OR THE "ADVISOR"), AT
120 EAST LIBERTY DRIVE, SUITE 400, WHEATON, ILLINOIS 60187, OR CALL TOLL-FREE
(800) 988-5891.
YOU MAY CALL TOLL-FREE (800) 988-5891 FOR INFORMATION ON HOW TO OBTAIN
DIRECTIONS TO BE ABLE TO ATTEND THE MEETING AND VOTE IN PERSON.
In order that your Shares may be represented at the Meeting, you are
requested to:
o indicate your instructions on the proxy card;
o date and sign the proxy card;
o mail the proxy card promptly in the enclosed envelope which requires
no postage if mailed in the continental United States; and
o allow sufficient time for the proxy card to be received BY 12:00
NOON CENTRAL TIME, on MONDAY, SEPTEMBER 11, 2017. (However, proxies
received after this date may still be voted in the event the Meeting
is adjourned or postponed to a later date.)
-2-
VOTING
As described further in the proposal, the affirmative vote of a plurality
of the Shares present and entitled to vote at the Meeting will be required to
elect the specified nominees as the Class I Trustees of the Fund provided a
quorum is present. Abstentions and broker non-votes (i.e., Shares held by
brokers or nominees as to which (i) instructions have not been received from the
beneficial owners or the persons entitled to vote and (ii) the broker or nominee
does not have discretionary voting power on a particular matter) will have no
effect on the approval of the proposal.
If the enclosed proxy card is properly executed and returned in time to be
voted at the Meeting, the Shares represented thereby will be voted in accordance
with the instructions marked thereon, or, if no instructions are marked thereon,
will be voted in the discretion of the persons named on the proxy card.
Accordingly, unless instructions to the contrary are marked thereon, a properly
executed and returned proxy will be voted FOR the election of the specified
nominees as the Class I Trustees and at the discretion of the named proxies on
any other matters that may properly come before the Meeting, as deemed
appropriate.
Any shareholder who has given a proxy has the right to revoke it at any
time prior to its exercise either by attending the Meeting and voting his or her
Shares in person, or by timely submitting a letter of revocation or a
later-dated proxy to the Fund at its address above. A list of shareholders
entitled to notice of and to be present and to vote at the Meeting will be
available at 120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187, for
inspection by any shareholder during regular business hours prior to the
Meeting. Shareholders will need to show valid identification and proof of Share
ownership to be admitted to the Meeting or to inspect the list of shareholders.
Under the Fund's By-Laws, a quorum is constituted by the presence in
person or by proxy of the holders of thirty-three and one-third percent
(33-1/3%) of the voting power of the outstanding Shares entitled to vote on a
matter. For the purposes of establishing whether a quorum is present, all Shares
present and entitled to vote, including abstentions and broker non-votes, shall
be counted. Any meeting of shareholders may be postponed prior to the meeting
with notice to the shareholders entitled to vote at that meeting. Any meeting of
shareholders may, by action of the chairman of the meeting, be adjourned to a
time and place announced at the meeting, to permit further solicitation of
proxies without further notice with respect to one or more matters to be
considered at such meeting, whether or not a quorum is present with respect to
such matter. In addition, upon motion of the chairman of the meeting, the
question of adjournment may be submitted to a vote of the shareholders, and in
that case, any adjournment must be approved by the vote of holders of a majority
of the Shares present and entitled to vote with respect to the matter or matters
adjourned, and without further notice if the time and place of the adjourned
meeting are announced at the meeting. Unless a proxy is otherwise limited in
this regard, any Shares present and entitled to vote at a meeting, including
broker non-votes, may, at the discretion of the proxies named therein, be voted
in favor of such an adjournment.
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OUTSTANDING SHARES
On the Record Date, the Fund had 26,696,982 Shares outstanding. Shares of
the Fund are listed on the New York Stock Exchange ("NYSE") under the ticker
symbol FCT.
Shareholders of record on the Record Date are entitled to one vote for
each full Share the shareholder owns and a proportionate fractional vote for any
fraction of a Share the shareholder owns.
To the knowledge of the Board of Trustees, as of the Record Date, no
single shareholder or "group" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934 (the "1934 Act")) beneficially owned more than
5% of the Fund's outstanding Shares, except as described in the following table.
A control person is one who owns, either directly or indirectly, more than 25%
of the voting securities of the Fund or acknowledges the existence of control. A
party that controls the Fund may be able to significantly affect the outcome of
any item presented to shareholders for approval. Information as to beneficial
ownership of Shares, including percentage of outstanding Shares beneficially
owned, is based on securities position listing reports as of the Record Date and
reports filed with the Securities and Exchange Commission (the "SEC") by
shareholders. The Fund does not have any knowledge of the identity of the
ultimate beneficiaries of the Shares listed below.
BENEFICIAL OWNERSHIP OF SHARES
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NAME AND ADDRESS SHARES BENEFICIALLY % OF OUTSTANDING SHARES
OF BENEFICIAL OWNER OWNED BENEFICIALLY OWNED
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Merrill Lynch, Pierce Fenner & Smith Safekeeping
c/o Merrill Lynch Corporate Actions
4804 Deer Lake Drive E. 10,805,659 Shares 40.48%
Jacksonville, FL 32246
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Morgan Stanley Smith Barney LLC
1300 Thames Street
6th Floor 1,426,136 Shares 5.34%
Baltimore, MD 21231
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Raymond James & Associates, Inc.
880 Carillon Parkway 1,380,038 Shares 5.17%
St. Petersburg, FL 33716
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Stifel, Nicolaus & Company, Incorporated
c/o Mediant Communications
200 Regency Forest Drive 2,228,097 Shares 8.35%
Cary, NC 27518
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Wells Fargo Clearing Services LLC
2801 Market Street
H0006-09B 2,023,118 Shares 7.58%
St. Louis, MO 63103
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Bank of America Corporation*
Bank of America Corporate Center
100 N. Tryon Street 2,137,479 Shares 8.01%
Charlotte, NC 28255
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*Information is according to Amendment No. 6 to Schedule 13G filed with the SEC on February 14, 2017.
-4-
PROPOSAL: ELECTION OF TWO (2) CLASS I TRUSTEES
TWO (2) CLASS I TRUSTEES ARE TO BE ELECTED BY HOLDERS OF SHARES OF THE FUND.
CURRENT TRUSTEES RICHARD E. ERICKSON AND THOMAS R. KADLEC ARE THE NOMINEES FOR
ELECTION AS THE CLASS I TRUSTEES BY SHAREHOLDERS OF THE FUND FOR A THREE-YEAR
TERM.
The Fund has established a staggered Board of Trustees pursuant to its
By-Laws, and, accordingly, Trustees are divided into the following three (3)
classes: Class I, Class II and Class III. Richard E. Erickson and Thomas R.
Kadlec are currently the Class I Trustees of the Fund for a term expiring at the
Meeting or until their respective successors are elected and qualified. If
elected, Dr. Erickson and Mr. Kadlec will hold office for a three-year term
expiring at the Fund's 2020 annual meeting of shareholders. Niel B. Nielson,
James A. Bowen and Robert F. Keith are current and continuing Trustees. Mr.
Nielson is currently the Class II Trustee of the Fund for a term expiring at the
Fund's 2018 annual meeting of shareholders. Mr. Bowen and Mr. Keith are
currently the Class III Trustees of the Fund for a term expiring at the Fund's
2019 annual meeting of shareholders. Each Trustee serves until his successor is
elected and qualified, or until he earlier resigns or is otherwise removed.
REQUIRED VOTE: Each nominee for election as a Class I Trustee must be
elected by the affirmative vote of the holders of a plurality of the Shares of
the Fund, cast in person or by proxy at the Meeting and entitled to vote
thereon, provided a quorum is present. Abstentions and broker non-votes will
have no effect on the approval of the proposal. Proxies cannot be voted for a
greater number of persons than the number of seats open for election.
Unless you give contrary instructions on your proxy card, your Shares will
be voted FOR the election of each nominee listed if your proxy card has been
properly executed and timely received by the Fund. If either nominee should
withdraw or otherwise become unavailable for election prior to the Meeting, the
proxies named on your proxy card intend to vote FOR any substitute nominee
recommended by the Board of Trustees of the Fund in accordance with the Fund's
procedures.
THE BOARD OF TRUSTEES OF THE FUND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE ELECTION OF EACH NOMINEE.
-5-
MANAGEMENT
MANAGEMENT OF THE FUND
The general supervision of the duties performed for the Fund under its
investment management agreement with the Advisor is the responsibility of the
Board of Trustees. The Trustees set broad policies for the Fund and choose the
Fund's officers. The following is a list of the Trustees and executive officers
of the Fund and a statement of their present positions and principal occupations
during the past five years, the number of portfolios each Trustee oversees and
the other directorships each Trustee holds, if applicable. As noted above, the
Fund has established a staggered Board of Trustees consisting of five (5)
Trustees divided into three (3) classes: Class I, Class II and Class III. The
length of the term of office of each Trustee is generally three years, and when
each Trustee's term begins and ends depends on the Trustee's designated class.
The officers of the Fund serve indefinite terms. James A. Bowen is deemed an
"interested person" (as that term is defined in the Investment Company Act of
1940, as amended ("1940 Act")) ("Interested Trustee") of the Fund due to his
position as Chief Executive Officer of the Advisor. Except for Mr. Bowen, each
Trustee is not an "interested person" (as that term is defined in the 1940 Act)
and is therefore referred to as an "Independent Trustee."
[The remainder of this page is intentionally left blank.]
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INTERESTED TRUSTEE
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NUMBER OF
PORTFOLIOS IN
POSITION(S) TERM OF OFFICE(2) PRINCIPAL OCCUPATION(S) FIRST TRUST FUND OTHER
NAME, ADDRESS, AND HELD WITH AND LENGTH OF DURING PAST FIVE COMPLEX OVERSEEN DIRECTORSHIPS
DATE OF BIRTH FUND TIME SERVED(3) YEARS BY TRUSTEE HELD BY TRUSTEE
----------------------------- ------------- ----------------- ---------------------------- ------------------ -----------------
James A. Bowen(1) Chairman of Class III Chief Executive Officer, 148 Portfolios None
120 East Liberty Drive the Board and First Trust Advisors L.P.
Suite 400 Trustee Since Fund and First Trust Portfolios
Wheaton, IL 60187 Inception L.P.; Chairman of the Board
DOB: 9/55 of Directors, BondWave LLC
(Software Development
Company) and Stonebridge
Advisors LLC (Investment
Advisor)
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INDEPENDENT TRUSTEES
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NUMBER OF
PORTFOLIOS IN
POSITION(S) TERM OF OFFICE(2) PRINCIPAL OCCUPATION(S) FIRST TRUST FUND OTHER
NAME, ADDRESS, AND HELD WITH AND LENGTH OF DURING PAST FIVE COMPLEX OVERSEEN DIRECTORSHIPS
DATE OF BIRTH FUND TIME SERVED(3) YEARS BY TRUSTEE HELD BY TRUSTEE
----------------------------- ------------- ----------------- ---------------------------- ------------------ -----------------
Richard E. Erickson Trustee Class I Nominee Physician; Officer, Wheaton 148 Portfolios None
c/o First Trust Advisors L.P. Orthopedics; Limited
120 East Liberty Drive Since Fund Partner, Gundersen Real
Suite 400 Inception Estate Limited Partnership
Wheaton, IL 60187 (June 1992 to December
DOB: 4/51 2016); Member, Sportsmed LLC
(April 2007 to November
2015)
----------------------------- ------------- ----------------- ---------------------------- ------------------ -----------------
Thomas R. Kadlec Trustee Class I Nominee President, ADM Investor 148 Portfolios Director of ADM
c/o First Trust Advisors L.P. Services, Inc. (Futures Investor
120 East Liberty Drive Since Fund Commission Merchant) Services, Inc.,
Suite 400 Inception ADM Investor
Wheaton, IL 60187 Services
DOB: 11/57 International and
Futures Industry
Association
----------------------------- ------------- ----------------- ---------------------------- ------------------ -----------------
Robert F. Keith Trustee Class III President, Hibs Enterprises 148 Portfolios Director of Trust
c/o First Trust Advisors L.P. (Financial and Management Company of
120 East Liberty Drive Since June 2006 Consulting) Illinois
Suite 400
Wheaton, IL 60187
DOB: 11/56
----------------------------- ------------- ----------------- ---------------------------- ------------------ -----------------
Niel B. Nielson Trustee Class II Managing Director and Chief 148 Portfolios Director of
c/o First Trust Advisors L.P. Operating Officer (January Covenant
120 East Liberty Drive Since Fund 2015 to present), Pelita Transport Inc.
Suite 400 Inception Harapan Educational (May 2003 to
Wheaton, IL 60187 Foundation (Educational May 2014)
DOB: 3/54 Products and Services);
President and Chief
Executive Officer (June 2012
to September 2014), Servant
Interactive LLC (Educational
Products and Services);
President and Chief
Executive Officer (June 2012
to September 2014), Dew
Learning LLC (Educational
Products and Services);
President (June 2002 to June
2012), Covenant College
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EXECUTIVE OFFICERS
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TERM OF OFFICE(2) PRINCIPAL OCCUPATION(S)
NAME, ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST FIVE
DATE OF BIRTH HELD WITH FUND TIME SERVED(3) YEARS
--------------------------------- -------------------- ----------------- ----------------------------------------------
James M. Dykas President and Chief Indefinite Managing Director and Chief Financial Officer
120 East Liberty Drive, Suite 400 Executive Officer (January 2016 to present), Controller (January 2011
Wheaton, IL 60187 Since 2012 to January 2016), Senior Vice President (April 2007
DOB: 1/66 to January 2016), First Trust Advisors L.P. and
First Trust Portfolios L.P.; Chief Financial
Officer (January 2016 to present), BondWave LLC
(Software Development Company) and Stonebridge
Advisors LLC (Investment Advisor)
--------------------------------- -------------------- ----------------- ----------------------------------------------
W. Scott Jardine Secretary and Chief Indefinite General Counsel, First Trust Advisors L.P. and
120 East Liberty Drive, Suite 400 Legal Officer First Trust Portfolios L.P.; Secretary and General
Wheaton, IL 60187 Since Fund Counsel, BondWave LLC (Software Development
DOB: 5/60 Inception Company); Secretary, Stonebridge Advisors LLC
(Investment Advisor)
--------------------------------- -------------------- ----------------- ----------------------------------------------
Daniel J. Lindquist Vice President Indefinite Managing Director (July 2012 to present), Senior
120 East Liberty Drive, Suite 400 Vice President (September 2005 to July 2012), First
Wheaton, IL 60187 Since 2005 Trust Advisors L.P. and First Trust Portfolios L.P.
DOB: 2/70
--------------------------------- -------------------- ----------------- ----------------------------------------------
Kristi A. Maher Assistant Secretary Indefinite Deputy General Counsel, First Trust Advisors L.P.
120 East Liberty Drive, Suite 400 and Chief Compliance and First Trust Portfolios L.P.
Wheaton, IL 60187 Officer Assistant
DOB: 12/66 Secretary since
2004 and Chief
Compliance Officer
since 2011
--------------------------------- -------------------- ----------------- ----------------------------------------------
Donald P. Swade Treasurer, Chief Indefinite Senior Vice President (July 2016 to present), Vice
120 East Liberty Drive, Suite 400 Financial Officer President (April 2012 to July 2016), First Trust
Wheaton, IL 60187 and Chief Since 2016 Advisors L.P. and First Trust Portfolios L.P.; Vice
DOB: 8/72 Accounting Officer President (September 2006 to April 2012),
Guggenheim Funds Investment Advisors, LLC/Claymore
Securities, Inc.
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1 Mr. Bowen is deemed an "interested person" of the Fund due to his position
as Chief Executive Officer of First Trust Advisors L.P., investment
advisor of the Fund.
2 Currently, Richard E. Erickson and Thomas R. Kadlec, as the Class I
Trustees, are each serving a term until the Meeting or until their
respective successors are elected and qualified. Niel B. Nielson, as the
Class II Trustee, is serving a term until the Fund's 2018 annual meeting
of shareholders or until his successor is elected and qualified. James A.
Bowen and Robert F. Keith, as the Class III Trustees, are each serving a
term until the Fund's 2019 annual meeting of shareholders or until their
respective successors are elected and qualified. Executive officers of the
Fund have an indefinite term.
3 For executive officers, unless otherwise specified, length of time served
represents the year the person first became an executive officer of the
Fund. Except as otherwise provided below, all Trustees and executive
officers were elected or appointed in connection with the Fund's
inception. Robert F. Keith was appointed Trustee of all then-existing
funds in the First Trust Fund Complex in June 2006. James M. Dykas was
elected (a) Treasurer, Chief Financial Officer and Chief Accounting
Officer of all then-existing funds in the First Trust Fund Complex in
January 2012, effective January 23, 2012 and (b) President and Chief
Executive Officer of all then-existing funds in the First Trust Fund
Complex in December 2015, effective January 2016. Daniel J. Lindquist was
elected Vice President of all then-existing funds in the First Trust Fund
Complex on December 12, 2005. Kristi A. Maher was elected Chief Compliance
Officer of all then-existing funds in the First Trust Fund Complex in
December 2010, effective January 1, 2011; before January 1, 2011, W. Scott
Jardine served as Chief Compliance Officer. Donald P. Swade was elected
Treasurer, Chief Financial Officer and Chief Accounting Officer of all
then-existing funds in the First Trust Fund Complex in December 2015,
effective January 2016.
UNITARY BOARD LEADERSHIP STRUCTURE
The same five persons serve as Trustees on the Fund's Board of Trustees
and on the boards of all other funds in the First Trust Fund Complex (the "First
Trust Funds"), which is known as a "unitary" board leadership structure. The
unitary board structure was adopted for the First Trust Funds because of the
efficiencies it achieves with respect to the governance and oversight of the
First Trust Funds. Each First Trust Fund is subject to the rules and regulations
of the 1940 Act (and other applicable securities laws), which means that many of
the First Trust Funds face similar issues with respect to certain of their
fundamental activities, including risk management, portfolio liquidity,
portfolio valuation and financial reporting. In addition, all of the First Trust
Funds that are closed-end funds (the "First Trust Closed-end Funds") are managed
-8-
by the Advisor and, except for two First Trust Closed-end Funds, they employ
common service providers for custody, fund accounting, administration and
transfer agency that provide substantially similar services to the First Trust
Closed-end Funds pursuant to substantially similar contractual arrangements.
Because of the similar and often overlapping issues facing the First Trust
Funds, including among the First Trust Closed-end Funds, the Board of Trustees
of each of the First Trust Funds (such Boards of Trustees referred to herein
collectively as the "Board") believes that maintaining a unitary board structure
promotes efficiency and consistency in the governance and oversight of all First
Trust Funds and reduces the costs, administrative burdens and possible conflicts
that may result from having multiple boards. In adopting a unitary board
structure, the Trustees seek to provide effective governance through
establishing a board the overall composition of which will, as a body, possess
the appropriate skills, diversity, independence and experience to oversee the
business of the First Trust Funds.
Annually, the Board reviews its governance structure and the committee
structures, their performance and functions and reviews any processes that would
enhance Board governance over the Fund's business. The Board has determined that
its leadership structure, including the unitary board and committee structure,
is appropriate based on the characteristics of the funds it serves and the
characteristics of the First Trust Fund Complex as a whole. The Board is
composed of four Independent Trustees and one Interested Trustee. The Interested
Trustee serves as the Chairman of the Board of the Fund. An individual who is
not a Trustee serves as President and Chief Executive Officer of the Fund.
In order to streamline communication between the Advisor and the
Independent Trustees and create certain efficiencies, the Board has a Lead
Independent Trustee who is responsible for: (i) coordinating activities of the
Independent Trustees; (ii) working with the Advisor, Fund counsel and the
independent legal counsel to the Independent Trustees to determine the agenda
for Board meetings; (iii) serving as the principal contact for and facilitating
communication between the Independent Trustees and the Fund's service providers,
particularly the Advisor; and (iv) any other duties that the Independent
Trustees may delegate to the Lead Independent Trustee. The Lead Independent
Trustee is selected by the Independent Trustees and serves a three-year term or
until his successor is selected. Richard E. Erickson currently serves as the
Lead Independent Trustee.
The Board has established four standing committees (as described below)
and has delegated certain of its responsibilities to those committees. The Board
and its committees meet frequently throughout the year to oversee the Fund's
activities, review contractual arrangements with and performance of service
providers, oversee compliance with regulatory requirements, and review Fund
performance. The Independent Trustees are represented by independent legal
counsel at all Board and committee meetings (other than meetings of the
Executive Committee). Generally, the Board acts by majority vote of all the
Trustees, except where a different vote is required by applicable law.
The three Committee Chairmen and the Lead Independent Trustee currently
rotate every three years in serving as Chairman of the Audit Committee, the
Nominating and Governance Committee or the Valuation Committee, or as Lead
Independent Trustee. The Lead Independent Trustee and the immediate past Lead
Independent Trustee also serve on the Executive Committee with the Interested
Trustee.
In addition to the Fund, the First Trust Fund Complex includes: 15 other
closed-end funds advised by First Trust Advisors; First Trust Series Fund, an
open-end management investment company with four portfolios advised by First
Trust Advisors; First Trust Variable Insurance Trust, an open-end management
-9-
investment company with three portfolios advised by First Trust Advisors; and
First Trust Exchange-Traded Fund, First Trust Exchange-Traded Fund II, First
Trust Exchange-Traded Fund III, First Trust Exchange-Traded Fund IV, First Trust
Exchange-Traded Fund V, First Trust Exchange-Traded Fund VI, First Trust
Exchange-Traded Fund VII, First Trust Exchange-Traded Fund VIII, First Trust
Exchange-Traded AlphaDEX(R) Fund and First Trust Exchange-Traded AlphaDEX(R)
Fund II, exchange-traded funds with, in the aggregate, 125 portfolios (each such
portfolio, an "ETF" and each such exchange-traded fund, an "ETF Trust") advised
by First Trust Advisors.
The four standing committees of the Board are: the Executive Committee
(and Dividend and Pricing Committee), the Nominating and Governance Committee,
the Valuation Committee and the Audit Committee. The Executive Committee, which
meets between Board meetings, is authorized to exercise all powers of and to act
in the place of the Board of Trustees to the extent permitted by the Fund's
Declaration of Trust and By-Laws. The members of the Executive Committee also
serve as a special committee of the Board known as the Dividend and Pricing
Committee which is authorized to exercise all of the powers and authority of the
Board in respect of the issuance and sale, through an underwritten public
offering, of the Shares of the Fund and all other such matters relating to such
financing, including determining the price at which such Shares are to be sold,
approval of the final terms of the underwriting agreement, and approval of the
members of the underwriting syndicate. Such Committee is also responsible for
the declaration and setting of dividends. Mr. Kadlec, Mr. Bowen and Dr. Erickson
are members of the Executive Committee. The Executive Committee held twelve
meetings during the Fund's last fiscal year.
The Nominating and Governance Committee is responsible for appointing and
nominating persons to the Board of Trustees. Messrs. Erickson, Kadlec, Keith and
Nielson are members of the Nominating and Governance Committee, and each is an
Independent Trustee who is also an "independent director" within the meaning of
the listing rules of the NYSE. The Nominating and Governance Committee operates
under a written charter adopted and approved by the Board, a copy of which is
available on the Fund's website at http://www.ftportfolios.com (go to News &
Literature on the Fund's webpage). If there is no vacancy on the Board of
Trustees, the Board will not actively seek recommendations from other parties,
including shareholders. In 2014, the Board of Trustees adopted a mandatory
retirement age of 75 for Trustees, beyond which age Trustees are ineligible to
serve. The Nominating and Governance Committee Charter provides that the
Committee will not consider new trustee candidates who are 72 years of age or
older or will turn 72 years old during the initial term. When a vacancy on the
Board of Trustees occurs and nominations are sought to fill such vacancy, the
Nominating and Governance Committee may seek nominations from those sources it
deems appropriate in its discretion, including shareholders of the Fund. The
Nominating and Governance Committee may retain a search firm to identify
candidates. To submit a recommendation for nomination as a candidate for a
position on the Board of Trustees, shareholders of the Fund shall mail such
recommendation to W. Scott Jardine, Secretary, at the Fund's address, 120 East
Liberty Drive, Suite 400, Wheaton, Illinois 60187. Such recommendation shall
include the following information: (i) evidence of Fund ownership of the person
or entity recommending the candidate (if a Fund shareholder); (ii) a full
description of the proposed candidate's background, including their education,
experience, current employment and date of birth; (iii) names and addresses of
at least three professional references for the candidate; (iv) information as to
whether the candidate is an "interested person" in relation to the Fund, as such
term is defined in the 1940 Act, and such other information that may be
considered to impair the candidate's independence; and (v) any other information
that may be helpful to the Committee in evaluating the candidate (see also
"ADDITIONAL INFORMATION - SHAREHOLDER PROPOSALS" below). If a recommendation is
received with satisfactorily completed information regarding a candidate during
a time when a vacancy exists on the Board or during such other time as the
-10-
Nominating and Governance Committee is accepting recommendations, the
recommendation will be forwarded to the Chairman of the Nominating and
Governance Committee and the counsel to the Independent Trustees.
Recommendations received at any other time will be kept on file until such time
as the Nominating and Governance Committee is accepting recommendations, at
which point they may be considered for nomination. In connection with the
evaluation of candidates, the review process may include, without limitation,
personal interviews, background checks, written submissions by the candidates
and third party references. Under no circumstances shall the Nominating and
Governance Committee evaluate nominees recommended by a shareholder of the Fund
on a basis substantially different than that used for other nominees for the
same election or appointment of Trustees. The Nominating and Governance
Committee held four meetings during the Fund's last fiscal year.
The Valuation Committee is responsible for the oversight of the valuation
procedures of the Fund (the "Valuation Procedures"), for determining the fair
value of the Fund's securities or other assets under certain circumstances as
described in the Valuation Procedures, and for evaluating the performance of any
pricing service for the Fund. Messrs. Erickson, Kadlec, Keith and Nielson are
members of the Valuation Committee. The Valuation Committee held four meetings
during the Fund's last fiscal year.
The Audit Committee is responsible for overseeing the Fund's accounting
and financial reporting process, the system of internal controls, audit process
and evaluating and appointing independent auditors (subject also to Board
approval). The Audit Committee operates under a written charter adopted and
approved by the Board, a copy of which is attached as Exhibit A hereto, and is
available on the Fund's website at http://www.ftportfolios.com (go to News &
Literature on the Fund's webpage). Messrs. Erickson, Kadlec, Keith and Nielson,
all of whom are "independent directors" within the meaning of the listing rules
of the NYSE, serve on the Audit Committee. Messrs. Kadlec and Keith have each
been determined to qualify as an "Audit Committee Financial Expert" as such term
is defined in Form N-CSR. The Audit Committee held three meetings during the
Fund's last fiscal year.
In carrying out its responsibilities, as described below under
"INDEPENDENT AUDITORS' FEES--Pre-Approval," the Audit Committee pre-approves all
audit services and permitted non-audit services for the Fund (including the fees
and terms thereof) and non-audit services to be performed for the Advisor by
Deloitte & Touche LLP ("Deloitte & Touche"), the Fund's independent registered
public accounting firm ("independent auditors"), if the engagement relates
directly to the operations and financial reporting of the Fund.
RISK OVERSIGHT
As part of the general oversight of the Fund, the Board is involved in the
risk oversight of the Fund. The Board has adopted and periodically reviews
policies and procedures designed to address the Fund's risks. Oversight of
investment and compliance risk, including oversight of sub-advisors, if any, is
performed primarily at the Board level in conjunction with the Advisor's
advisory oversight group and the Fund's Chief Compliance Officer ("CCO").
Oversight of other risks also occurs at the Committee level. The Advisor's
advisory oversight group reports to the Board at quarterly meetings regarding,
among other things, Fund performance and the various drivers of such performance
as well as information related to sub-advisors and their operations and
processes. The Board reviews reports on the Fund's and the service providers'
compliance policies and procedures at each quarterly Board meeting and receives
an annual report from the CCO regarding the operations of the Fund's and the
-11-
service providers' compliance program. In addition, the Independent Trustees
meet privately each quarter with the CCO. The Audit Committee reviews with the
Advisor the Fund's major financial risk exposures and the steps the Advisor has
taken to monitor and control these exposures, including the Fund's risk
assessment and risk management policies and guidelines. The Audit Committee
also, as appropriate, reviews in a general manner the processes other Board
committees have in place with respect to risk assessment and risk management.
The Nominating and Governance Committee monitors all matters related to the
corporate governance of the Fund. The Valuation Committee monitors valuation
risk and compliance with the Fund's Valuation Procedures and oversees the
pricing services and actions by the Advisor's Pricing Committee with respect to
the valuation of portfolio securities.
Not all risks that may affect the Fund can be identified nor can controls
be developed to eliminate or mitigate their occurrence or effects. It may not be
practical or cost-effective to eliminate or mitigate certain risks, the
processes and controls employed to address certain risks may be limited in their
effectiveness, and some risks are simply beyond the reasonable control of the
Fund or the Advisor or other service providers. For instance, as the use of
Internet technology has become more prevalent, the Fund and its service
providers have become more susceptible to potential operational risks through
breaches in cyber security (generally, intentional and unintentional events that
may cause the Fund or a service provider to lose proprietary information, suffer
data corruption or lose operational capacity). There can be no guarantee that
any risk management systems established by the Fund, its service providers, or
issuers of the securities in which the Fund invests to reduce cyber security
risks will succeed, and the Fund cannot control such systems put in place by
service providers, issuers or other third parties whose operations may affect
the Fund and/or its shareholders. Moreover, it is necessary to bear certain
risks (such as investment related risks) to achieve the Fund's goals. As a
result of the foregoing and other factors, the Fund's ability to manage risk is
subject to substantial limitations.
BOARD DIVERSIFICATION AND TRUSTEE QUALIFICATIONS
As described above, the Nominating and Governance Committee of the Board
oversees matters related to the nomination of Trustees. The Nominating and
Governance Committee seeks to establish an effective Board with an appropriate
range of skills and diversity, including, as appropriate, differences in
background, professional experience, education, vocations, and other individual
characteristics and traits in the aggregate. Each Trustee must meet certain
basic requirements, including relevant skills and experience, time availability,
and if qualifying as an Independent Trustee, independence from the Advisor,
sub-advisors (if any), underwriters or other service providers, including any
affiliates of these entities.
Listed below for the nominees and each continuing Trustee are the
experiences, qualifications and attributes that led to the conclusion, as of the
date of this Proxy Statement, that each nominee and continuing Trustee should
serve as a trustee.
Nominees
--------
Independent Trustees
Richard E. Erickson, M.D. is an orthopedic surgeon. He also has been
President of Wheaton Orthopedics, a co-owner and director of a fitness center
and a limited partner of two real estate companies. Dr. Erickson has served as a
Trustee of the Fund since its inception and of the First Trust Funds since 1999.
Dr. Erickson has also served as the Lead Independent Trustee and on the
Executive Committee (2008 - 2009), Chairman of the Nominating and Governance
-12-
Committee (2003 - 2007 and 2014 - 2016), Chairman of the Valuation Committee
(June 2006 - 2007 and 2010 - 2011) and Chairman of the Audit Committee (2012 -
2013) of the First Trust Funds. He currently serves as Lead Independent Trustee
and on the Executive Committee and the Dividend and Pricing Committee (since
January 1, 2017) of the First Trust Funds.
Thomas R. Kadlec is President of ADM Investor Services Inc. ("ADMIS"), a
futures commission merchant and wholly-owned subsidiary of the Archer Daniels
Midland Company ("ADM"). Mr. Kadlec has been employed by ADMIS and its
affiliates since 1990 in various accounting, financial, operations and risk
management capacities. Mr. Kadlec serves on the boards of several international
affiliates of ADMIS and is a member of ADM's Integrated Risk Committee, which is
tasked with the duty of implementing and communicating enterprise-wide risk
management. In 2014, Mr. Kadlec was elected to the board of the Futures Industry
Association. Mr. Kadlec has served as a Trustee of the Fund since its inception.
Mr. Kadlec also served on the Executive Committee from the organization of the
first First Trust Closed-end Fund in 2003 until he was elected as the first Lead
Independent Trustee in December 2005, serving as such through 2007 and 2014 -
2016. He also served as Chairman of the Valuation Committee (2008 - 2009),
Chairman of the Audit Committee (2010 - 2011) and Chairman of the Nominating and
Governance Committee (2012 - 2013) of the First Trust Funds. He currently serves
as Chairman of the Valuation Committee (since January 1, 2017) and as a member
of the Executive Committee and the Dividend and Pricing Committee (since January
1, 2014) of the First Trust Funds.
Continuing Trustees
-------------------
Independent Trustees
Robert F. Keith is President of Hibs Enterprises, a financial and
management consulting firm. Mr. Keith has been with Hibs Enterprises since 2003.
Prior thereto, Mr. Keith spent 18 years with ServiceMaster and Aramark,
including three years as President and COO of ServiceMaster Consumer Services,
where he led the initial expansion of certain products overseas, five years as
President and COO of ServiceMaster Management Services Company and two years as
President of Aramark ServiceMaster Management Services. Mr. Keith is a certified
public accountant and also has held the positions of Treasurer and Chief
Financial Officer of ServiceMaster, at which time he oversaw the financial
aspects of ServiceMaster's expansion of its Management Services division into
Europe, the Middle East and Asia. Mr. Keith has served as a Trustee of the Fund
and of the First Trust Funds since June 2006. Mr. Keith has also served as
Chairman of the Audit Committee (2008 - 2009), Chairman of the Nominating and
Governance Committee (2010 - 2011), and Chairman of the Valuation Committee
(2014 - 2016) of the First Trust Funds. He also served as Lead Independent
Trustee (2012 - 2013) and on the Executive Committee and the Dividend and
Pricing Committee (2012 - 2016) of the First Trust Funds. He currently serves as
Chairman of the Audit Committee (since January 1, 2017) of the First Trust
Funds.
Niel B. Nielson, Ph.D., has been the Managing Director and Chief Operating
Officer of Pelita Harapan Educational Foundation, a global provider of
educational products and services, since January 2015. Mr. Nielson formerly
served as President and Chief Executive Officer of Servant Interactive LLC
(providing educational products and services) from June 2012 to September 2014,
and he served as President and Chief Executive Officer of Dew Learning LLC from
June 2012 to September 2014. Mr. Nielson formerly served as President of
Covenant College (2002 - 2012), and as a partner and trader (of options and
futures contracts for hedging options) for Ritchie Capital Markets Group (1996 -
-13-
1997), where he held an administrative management position at this proprietary
derivatives trading company. He also held prior positions in new business
development for ServiceMaster Management Services Company, and in personnel and
human resources for NationsBank of North Carolina, N.A. and Chicago Research and
Trading Group, Ltd. ("CRT"). His international experience includes serving as a
director of CRT Europe, Inc. for two years, directing out of London all aspects
of business conducted by the U.K. and European subsidiary of CRT. Prior to that,
Mr. Nielson was a trader and manager at CRT in Chicago. Mr. Nielson has served
as a Trustee of the Fund since its inception and of the First Trust Funds since
1999. Mr. Nielson has also served as Chairman of the Audit Committee (2003 -
2007 and 2014 - 2016), Chairman of the Valuation Committee (2012 - 2013),
Chairman of the Nominating and Governance Committee (2008 - 2009), and Lead
Independent Trustee and a member of the Executive Committee (2010 - 2011) of the
First Trust Funds. He currently serves as Chairman of the Nominating and
Governance Committee (since January 1, 2017) of the First Trust Funds.
Interested Trustee
James A. Bowen is the Chairman of the Board of the Fund and of the First
Trust Funds and Chief Executive Officer of First Trust Advisors and First Trust
Portfolios L.P. Until January 23, 2012, he served as President and Chief
Executive Officer of the First Trust Funds. Mr. Bowen also serves on the
Executive Committee. He has over 33 years of experience in the investment
company business in sales, sales management and executive management. Mr. Bowen
has served as a Trustee of the Fund since its inception and of the First Trust
Funds since 1999.
OTHER INFORMATION
Independent Trustees
During the past five years, none of the Independent Trustees, nor any of
their immediate family members, has been a director, trustee, officer, general
partner or employee of, or consultant to, First Trust Advisors, First Trust
Portfolios L.P. (an affiliate of First Trust Advisors), any sub-advisor to any
fund in the First Trust Fund Complex, or any of their affiliates.
Executive Officers
The executive officers of the Fund hold the same positions with each fund
in the First Trust Fund Complex (representing 148 portfolios) as they hold with
the Fund.
BENEFICIAL OWNERSHIP OF SHARES HELD IN THE FUND BY TRUSTEES AND EXECUTIVE
OFFICERS
The following table sets forth the dollar range and number of equity
securities beneficially owned by the Trustees in the Fund and all funds in the
First Trust Fund Complex, including the Fund, as of December 31, 2016:
-14-
DOLLAR RANGE OF EQUITY SECURITIES IN THE FUND AND FIRST TRUST FUND COMPLEX (NUMBER OF SHARES HELD)
----------------------------------------------------------------------------------------------------------------------------------
INTERESTED INDEPENDENT
TRUSTEE TRUSTEES
-------------------------- ------------------ --------------------------------------------------------------------------------
James A. Bowen Richard E. Erickson Thomas R. Kadlec Robert F. Keith Niel B. Nielson
-------------------------- ------------------ ------------------- --------------------- ------------------ ----------------
DOLLAR RANGE OF EQUITY $50,001-$100,000 $1-$10,000 $1-$10,000 $0 $1-$10,000
SECURITIES IN THE FUND (4,955 Shares) (332 Shares) (600 Shares) (0 Shares) (332 Shares)
-------------------------- ------------------ ------------------- --------------------- ------------------ ----------------
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT Over $100,000 Over $100,000 Over $100,000 Over $100,000 Over $100,000
COMPANIES IN THE FIRST (157,911 Shares) (9,889 Shares) (12,567 Shares) (13,534 Shares) (7,403 Shares)
TRUST FUND COMPLEX
OVERSEEN BY TRUSTEE
----------------------------------------------------------------------------------------------------------------------------------
The Independent Trustees have adopted a policy that establishes the
expectation that each Independent Trustee will have invested an amount in the
First Trust Funds he oversees in the aggregate of at least one year's annual
retainer for Board service, with investments allocated among the First Trust
Funds depending on what is suitable for the Trustee's personal investment needs.
As of December 31, 2016, the Independent Trustees and their immediate
family members did not own, beneficially or of record, any class of securities
of First Trust Advisors or any principal underwriter of the Fund or any person,
other than a registered investment company, directly or indirectly controlling,
controlled by, or under common control with First Trust Advisors or any
principal underwriter of the Fund, nor, since the beginning of the most recently
completed fiscal year of the Fund, did any Independent Trustee purchase or sell
securities of First Trust Advisors, or any sub-advisor to any fund in the First
Trust Fund Complex, their parents or any subsidiaries of any of the foregoing.
As of December 31, 2016, the Trustees and executive officers of the Fund
as a group beneficially owned approximately 243,699 shares of the funds in the
First Trust Fund Complex (less than 1% of the shares outstanding). As of
December 31, 2016, the Trustees and executive officers of the Fund as a group
beneficially owned 8,419 of the Fund's Shares, which is less than 1% of the
Fund's Shares outstanding.
COMPENSATION
Since January 1, 2016, the fixed annual retainer paid to the Independent
Trustees has been $230,000 per year and an annual per fund fee of $2,500 for
each closed-end fund and actively managed fund and $250 for each index fund. The
fixed annual retainer is allocated equally among each fund in the First Trust
Fund Complex. Additionally, the Lead Independent Trustee is paid $30,000
annually, the Chairmen of the Audit Committee and the Valuation Committee are
each paid $20,000 annually and the Chairman of the Nominating and Governance
Committee is paid $10,000 annually to serve in such capacities with compensation
allocated pro rata among each fund in the First Trust Complex based on its net
assets. Trustees are also reimbursed by the investment companies in the First
Trust Fund Complex for travel and out-of-pocket expenses incurred in connection
with all meetings. Each Committee Chairman and the Lead Independent Trustee
rotate every three years.
The Board held four meetings during the Fund's last fiscal year.
-15-
The aggregate fees and expenses paid to all Trustees by the Fund for
fiscal year ended May 31, 2017 (including reimbursement for travel and
out-of-pocket expenses) amounted to $17,813.
The following table sets forth certain information regarding the
compensation of the Fund's Trustees (including reimbursement for travel and
out-of-pocket expenses) for the Fund's most recently completed fiscal year. The
Fund has no retirement or pension plans. The executive officers and the
Interested Trustee of the Fund receive no compensation from the Fund for serving
in such capacities.
AGGREGATE COMPENSATION
----------------------------------------------------------------------------------------------------------------------------------
INTERESTED INDEPENDENT
TRUSTEE TRUSTEES
-------------------------- ------------------ --------------------------------------------------------------------------------
James A. Bowen Richard E. Erickson Thomas R. Kadlec Robert F. Keith Niel B. Nielson
-------------------------- ------------------ ------------------- --------------------- ------------------ ----------------
COMPENSATION FOR SERVING
THE FUND $0 $4,397 $4,520 $4,456 $4,440
-------------------------- ------------------ ------------------- --------------------- ------------------ ----------------
TOTAL COMPENSATION FOR
SERVING THE FIRST
TRUST FUND COMPLEX(1) $0 $370,744 $391,203 $381,412 $381,482
----------------------------------------------------------------------------------------------------------------------------------
1 For the calendar year ended December 31, 2016 for services to four
portfolios of First Trust Series Fund and three portfolios of First Trust
Variable Insurance Trust, open-end funds; 16 closed-end funds; and 114
series of the ETF Trusts. Compensation includes, with respect to certain
ETFs, compensation paid by the Advisor rather than by the ETF directly
pursuant to the terms of the advisory agreement between the applicable ETF
Trust and the Advisor.
ATTENDANCE AT ANNUAL MEETINGS OF SHAREHOLDERS
The Board seeks to have as many Trustees as possible in attendance at
annual meetings of shareholders. The policy of the Nominating and Governance
Committee relating to attendance by Trustees at annual meetings of shareholders
is contained in the Fund's Nominating and Governance Committee Charter, which is
available on the Fund's website located at http://www.ftportfolios.com (go to
News & Literature on the Fund's webpage). In addition, the Board's attendance at
last year's annual shareholder meeting is available on the Fund's website
located at http://www.ftportfolios.com. To find the Board's attendance, select
the Fund under the "Closed-End Funds" tab, select the "News & Literature" link,
and go to the "Shareholder Updates and Information" heading.
AUDIT COMMITTEE REPORT
The role of the Audit Committee is to assist the Board of Trustees in its
oversight of the Fund's accounting and financial reporting process. The Audit
Committee operates pursuant to a charter (the "Charter") that was most recently
reviewed by the Board of Trustees on December 12, 2016, a copy of which is
attached as Exhibit A hereto, and is available on the Fund's website located at
http://www.ftportfolios.com (go to News & Literature on the Fund's webpage). As
set forth in the Charter, management of the Fund has the primary responsibility
for establishing and maintaining systems for accounting, reporting, disclosure
and internal controls. The Fund's independent auditors have the primary
responsibility to plan and implement an audit, with proper consideration given
to the accounting, reporting and internal controls.
In performing its oversight function, the Audit Committee reviewed and
discussed with management and the independent auditors, Deloitte & Touche LLP,
the audited financial statements of
-16-
the Fund for the fiscal year ended May 31, 2017 at a meeting held on July 20,
2017, and discussed the audits of such financial statements with the independent
auditors and management.
In addition, the Audit Committee discussed with the independent auditors
the accounting principles applied by the Fund and such other matters brought to
the attention of the Audit Committee by the independent auditors as required by
the Public Company Accounting Oversight Board ("PCAOB") Auditing Standard 1301,
Communications with Audit Committees. The Audit Committee also received from the
independent auditors the written disclosures and letter required by PCAOB Ethics
and Independence Rule 3526, Communication with Audit Committees Concerning
Independence, delineating relationships between the independent auditors and the
Fund, and discussed the impact that any such relationships may have on the
objectivity and independence of the independent auditors.
The members of the Fund's Audit Committee are not full-time employees of
the Fund and are not performing the functions of auditors or accountants. As
such, it is not the duty or responsibility of the Audit Committee or its members
to conduct "field work" or other types of auditing or accounting reviews or
procedures or to set auditor independence standards. Members of the Fund's Audit
Committee necessarily rely on the information provided to them by Fund
management and the independent auditors. Accordingly, the Audit Committee's
considerations and discussions referred to above do not assure that the audit of
the Fund's financial statements has been carried out in accordance with
generally accepted auditing standards, that the financial statements are
presented in accordance with generally accepted accounting principles or that
the independent auditors are in fact "independent."
Based on its consideration of the Fund's audited financial statements and
the discussions referred to above with Fund management and Deloitte & Touche
LLP, and subject to the limitations on the responsibilities and role of the
Audit Committee as set forth in the Charter and discussed above, the Audit
Committee recommended to the Board the inclusion of the Fund's audited financial
statements in the Fund's Annual Report to Shareholders for the fiscal year ended
May 31, 2017.
Submitted by the Audit Committee of the Fund:
Robert F. Keith
Richard E. Erickson
Niel B. Nielson
Thomas R. Kadlec
INDEPENDENT AUDITORS' FEES
Deloitte & Touche has been selected to serve as the independent auditors
for the Fund for its current fiscal year, and acted as the independent auditors
for the Fund for its most recently completed fiscal year. Deloitte & Touche has
advised the Fund that, to the best of its knowledge and belief, Deloitte &
Touche professionals did not have any direct or material indirect ownership
interest in the Fund inconsistent with independent professional standards
pertaining to independent registered public accounting firms. Representatives of
Deloitte & Touche are not expected to be present at the Meeting, but will have
the opportunity to make a statement if they desire to do so and will be
available should any matter arise requiring their presence. In reliance on Rule
32a-4 under the 1940 Act, the Fund is not seeking shareholder ratification of
the selection of Deloitte & Touche as independent auditors.
-17-
Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees
During each of the last two fiscal years of the Fund, Deloitte & Touche
has billed the Fund and the Advisor for the fees set forth below:
--------------------------------- --------------------- -------------------- --------------------- --------------------
AUDIT-RELATED ALL OTHER
AUDIT FEES(1) FEES TAX FEES(2) FEES
--------------------------------- --------------------- -------------------- --------------------- --------------------
FEES BILLED TO: 2016 2017 2016 2017 2016 2017 2016 2017
--------------------------------- ---------- ---------- ---------- --------- ---------- ---------- ----------- --------
Fund $70,000 $70,000 $0 $91(3) $5,200 $5,200 $0 $0
Advisor N/A N/A $0 $0 $0 $0 $0 $0
--------------------------------- ---------- ---------- ---------- --------- ---------- ---------- ----------- --------
1 These fees were the aggregate fees billed for professional services for
the audit of the Fund's annual financial statements and services that are
normally provided in connection with statutory and regulatory filings or
engagements.
2 These fees were for tax consultation and/or tax return preparation.
3 These fees relate to the review of pricing committee procedures.
Non-Audit Fees
During each of the last two fiscal years of the Fund, Deloitte & Touche
has billed the Fund and the Advisor for the non-audit fees listed below for
services provided to the entities indicated.
AGGREGATE NON-AUDIT FEES
--------------------------------------- -------------------- -------------------
2016 2017
--------------------------------------- -------------------- -------------------
Fund $5,200 $5,200
Advisor $14,300(1) $44,400(2)
--------------------------------------- -------------------- -------------------
1 These fees were for federal/state tax returns.
2 These fees were for federal/state tax returns and Foreign Account Tax
Compliance Act (FATCA).
Pre-Approval
Pursuant to its Charter and its Audit and Non-Audit Services Pre-Approval
Policy, the Fund's Audit 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 Fund by its independent auditors. The Chairman
of the Audit Committee is authorized to give such pre-approvals on behalf of the
Audit Committee up to $25,000 and report any such pre-approval to the full Audit
Committee.
The Audit Committee is also responsible for the pre-approval of the
independent auditors' engagements for non-audit services with the Advisor and
any entity controlling, controlled by or under common control with the Advisor
that provides ongoing services to the Fund, if the engagement relates directly
to the operations and financial reporting of the Fund, subject to the de minimis
exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If
the independent auditors have provided non-audit services to the Advisor or any
entity controlling, controlled by or under common control with the Advisor that
provides ongoing services to the Fund that were not pre-approved pursuant to its
policies, the Audit Committee will consider whether the provision of such
non-audit services is compatible with the auditors' independence.
None of the Audit Fees, Audit-Related Fees, Tax Fees, or All Other Fees,
if any, or the Aggregate Non-Audit Fees disclosed above that were required to be
pre-approved by the Audit Committee pursuant to its Pre-Approval Policy were
pre-approved by the Audit Committee pursuant to the pre-approval exceptions
included in Regulation S-X.
-18-
Because the Audit Committee has not been informed of any such services,
the Fund's Audit Committee has not considered whether the provision of non-audit
services that were rendered to the Advisor and any entity controlling,
controlled by, or under common control with the Advisor that provides ongoing
services to the Fund 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.
ADDITIONAL INFORMATION
SHAREHOLDER PROPOSALS
Shareholder Proposals for Inclusion in the Fund's Proxy Statement. To be
considered for presentation at the 2018 annual meeting of shareholders of the
Fund and included in the Fund's proxy statement relating to such meeting, a
shareholder proposal must be submitted pursuant to Rule 14a-8 under the 1934 Act
and must be received at the offices of the Fund at 120 East Liberty Drive, Suite
400, Wheaton, Illinois 60187, not later than April 17, 2018. Such a proposal
will be included in the Fund's proxy statement if it meets the requirements of
Rule 14a-8. Timely submission of a proposal does not mean that such proposal
will be included in the Fund's proxy statement.
Other Shareholder Proposals. In addition to any requirements of law,
including the proxy rules under the 1934 Act, under the Fund's By-Laws, any
proposal to elect any person nominated by shareholders for election as Trustee
and any other proposals by shareholders may only be brought before an annual
meeting of the Fund if timely written notice (the "Shareholder Notice") is
provided to the Secretary of the Fund and the other conditions summarized below
are met. In accordance with the advance notice provisions included in the Fund's
By-Laws, unless a greater or lesser period is required under applicable law, to
be timely, the Shareholder Notice must be delivered to or mailed and received at
the Fund's address, 120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187,
Attn: W. Scott Jardine, Secretary, not less than forty-five (45) days nor more
than sixty (60) days prior to the first anniversary date of the date of the
proxy statement released to shareholders for the preceding year's annual
meeting. However, if and only if the annual meeting is not scheduled to be held
within a period that commences thirty (30) days before the first anniversary
date of the annual meeting for the preceding year and ends thirty (30) days
after such anniversary date (an annual meeting date outside such period being
referred to herein as an "Other Annual Meeting Date"), such Shareholder Notice
must be given as described above by the later of the close of business on (i)
the date forty-five (45) days prior to such Other Annual Meeting Date or (ii)
the tenth (10th) business day following the date such Other Annual Meeting Date
is first publicly announced or disclosed.
Any shareholder submitting a nomination of any person or persons (as the
case may be) for election as a Trustee or Trustees of the Fund is required to
deliver, as part of such Shareholder Notice: (i) a statement in writing setting
forth: (A) the name, age, date of birth, business address, residence address and
nationality of the person or persons to be nominated; (B) the class or series
and number of all Shares of the Fund owned of record or beneficially by each
such person or persons, as reported to such shareholder by such nominee(s); (C)
any other information regarding each such person required by paragraphs (a),
(d), (e) and (f) of Item 401 of Regulation S-K or paragraph (b) of Item 22 of
Rule 14a-101 (Schedule 14A) under the 1934 Act (or any successor provision
thereto); (D) any other information regarding the person or persons to be
nominated that would be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitation of proxies for
election of trustees or directors pursuant to Section 14 of the 1934 Act and the
rules and regulations promulgated thereunder; and (E) whether such shareholder
believes any nominee is or will be an "interested person" of the Fund (as
defined in the 1940 Act) and, if not an "interested person," information
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regarding each nominee that will be sufficient for the Fund to make such
determination; and (ii) the written and signed consent of any person nominated
to be named as a nominee and to serve as a Trustee if elected. In addition, the
Trustees may require any proposed nominee to furnish such other information as
they may reasonably require or deem necessary to determine the eligibility of
such proposed nominee to serve as a Trustee.
Without limiting the foregoing, any shareholder who gives a Shareholder
Notice of any matter proposed to be brought before a shareholder meeting
(whether or not involving nominees for Trustees) is required to deliver, as part
of such Shareholder Notice: (i) the description of and text of the proposal to
be presented; (ii) a brief written statement of the reasons why such shareholder
favors the proposal; (iii) such shareholder's name and address as they appear on
the Fund's books; (iv) any other information relating to the shareholder that
would be required to be disclosed in a proxy statement or other filings required
to be made in connection with the solicitation of proxies with respect to the
matter(s) proposed pursuant to Section 14 of the 1934 Act and the rules and
regulations promulgated thereunder; (v) the class or series and number of all
Shares of the Fund owned beneficially and of record by such shareholder; (vi)
any material interest of such shareholder in the matter proposed (other than as
a shareholder); (vii) a representation that the shareholder intends to appear in
person or by proxy at the shareholder meeting to act on the matter(s) proposed;
(viii) if the proposal involves nominee(s) for Trustees, a description of all
arrangements or understandings between the shareholder and each proposed nominee
and any other person or persons (including their names) pursuant to which the
nomination(s) are to be made by the shareholder; and (ix) in the case of a
shareholder (a "Beneficial Owner") that holds Shares entitled to vote at the
meeting through a nominee or "street name" holder of record, evidence
establishing such Beneficial Owner's indirect ownership of, and entitlement to
vote, Shares at the meeting of shareholders. Shares "beneficially owned" means
all Shares which such person is deemed to beneficially own pursuant to Rules
13d-3 and 13d-5 under the 1934 Act.
In addition, the By-Laws provide that, unless required by federal law, no
matters shall be considered at or brought before any annual or special meeting
unless such matter has been deemed a proper matter for shareholder action by at
least sixty-six and two-thirds percent (66-2/3%) of the Trustees. Timely
submission of a proposal does not mean that such proposal will be brought before
the meeting.
SHAREHOLDER COMMUNICATIONS
Shareholders of the Fund who want to communicate with the Board of
Trustees or any individual Trustee should write the Fund to the attention of the
Fund Secretary, W. Scott Jardine. The letter should indicate that you are a Fund
shareholder. If the communication is intended for a specific Trustee and so
indicates, it will be sent only to that Trustee. If a communication does not
indicate a specific Trustee, it will be sent to the Chairman of the Nominating
and Governance Committee of the Board and the independent legal counsel to the
Independent Trustees for further distribution as deemed appropriate by such
persons.
INVESTMENT ADVISOR, ADMINISTRATOR AND TRANSFER AGENT
First Trust Advisors L.P., 120 East Liberty Drive, Suite 400, Wheaton,
Illinois 60187, serves as the Fund's investment advisor. First Trust Advisors is
also responsible for providing certain clerical, bookkeeping and other
administrative services to the Fund and, in addition, provides fund reporting
services to the Fund for a flat annual fee.
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The Bank of New York Mellon, 101 Barclay Street, 20th Floor, New York, New
York 10286, acts as the administrator, fund accountant and custodian to the
Fund. BNY Mellon Investment Servicing (US) Inc., 301 Bellevue Parkway,
Wilmington, Delaware 19809, acts as the transfer agent to the Fund.
SECTION 30(h) AND SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 30(h) of the 1940 Act and Section 16(a) of the 1934 Act require
the Fund's Trustees, the Fund's officers subject to such provisions, certain
persons affiliated with First Trust Advisors and any sub-advisor, and persons
who beneficially own more than 10% of the Fund's Shares to file reports of
ownership and changes of ownership with the SEC and to furnish the Fund with
copies of all Section 16(a) forms they file. Based solely upon a review of
copies of such forms received by the Fund and certain written representations,
the Fund believes that during the Fund's last fiscal year, all such filing
requirements applicable to such persons were met.
FISCAL YEAR
The Fund's last fiscal year end was May 31, 2017.
DELIVERY OF CERTAIN DOCUMENTS
Annual reports will be sent to shareholders of record of the Fund
following the Fund's fiscal year end. The Fund will furnish, without charge, a
copy of its annual report and/or semi-annual report as available upon request.
Such written or oral requests should be made by writing to the Fund at 120 East
Liberty Drive, Suite 400, Wheaton, Illinois 60187 or by calling (800) 988-5891.
Please note that only one annual or semi-annual report or proxy statement
may be delivered to two or more shareholders of the Fund who share an address,
unless the Fund has received instructions to the contrary. To request a separate
copy of an annual or semi-annual report or proxy statement, or for instructions
as to how to request a separate copy of such documents or as to how to request a
single copy if multiple copies of such documents are received, shareholders
should contact the Advisor at the address and phone number set forth above.
Pursuant to a request, a separate copy will be delivered promptly.
CERTAIN PROVISIONS OF STANDSTILL AGREEMENTS FOR
TWO OTHER FIRST TRUST CLOSED-END FUNDS
Earlier this year, First Trust High Income Long/Short Fund ("FSD")
commenced a new distribution policy and conducted a tender offer pursuant to a
standstill agreement (the "FSD Standstill Agreement") that FSD and the Advisor
entered into on January 20, 2017 with Saba Capital Management, L.P. and certain
associated parties (collectively referred to as "Saba"). Under the FSD
Standstill Agreement, Saba agreed, among other things, for two years from the
date of the FSD Standstill Agreement (the "FSD Effective Period"), generally to
vote or cause to be voted at any annual or special meeting of the shareholders
of FSD and of any other investment company advised by the Advisor other than
First Trust Strategic High Income Fund II (collectively, the "FSD Standstill
Funds") all of the shares of the FSD Standstill Funds that it beneficially owns
as of the applicable record date (i) in favor of the election of the nominee(s)
of the board of trustees of the applicable FSD Standstill Fund and (ii) against
any proposal made in opposition to, or in competition or inconsistent with, the
recommendation of the board of trustees of the applicable FSD Standstill Fund
regarding the election of such nominee(s) and, also, to be bound by certain
standstill covenants with respect to the FSD Standstill Funds during the FSD
Effective Period. Under the FSD Standstill Agreement, the Fund is an FSD
Standstill Fund.
-21-
In addition, earlier this year, First Trust/Aberdeen Global Opportunity
Income Fund ("FAM") conducted a tender offer pursuant to a standstill agreement
(the "FAM Standstill Agreement") that FAM and the Advisor entered into as of
February 14, 2017 with Karpus Management, Inc. (doing business as Karpus
Investment Management) and any present or future entities or accounts it manages
or controls or to which it is related (collectively referred to as "Karpus").
Under the FAM Standstill Agreement, Karpus agreed, among other things, until the
earlier of the conclusion of the 2019 annual meeting of shareholders of FAM and
April 30, 2019 (the "FAM Effective Period"), generally to vote or direct to be
voted at any annual or special meeting of the shareholders of FAM and of any
other investment company advised by the Advisor other than First Trust Enhanced
Equity Income Fund (collectively, the "FAM Standstill Funds") all of the shares
of the FAM Standstill Funds over which it has discretion or beneficial ownership
in accordance with the recommendations of the applicable board of
trustees/directors (subject to certain exceptions) and, also, to be bound by
certain standstill covenants with respect to the FAM Standstill Funds during the
FAM Effective Period. Under the FAM Standstill Agreement, the Fund is an FAM
Standstill Fund.
OTHER MATTERS TO COME BEFORE THE MEETING
No business other than the proposal to elect Class I Trustees of the Fund,
as described above, is expected to come before the Meeting, but should any other
matter requiring a vote of shareholders arise, including any question as to an
adjournment or postponement of the Meeting, the persons named on the enclosed
proxy card will vote thereon according to their best judgment in the interests
of the Fund.
August 8, 2017
--------------------------------------------------------------------------------
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS ARE THEREFORE
URGED TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD AS SOON AS POSSIBLE IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
--------------------------------------------------------------------------------
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EXHIBIT A
AUDIT COMMITTEE CHARTER
I. PURPOSE
The Audit Committee (the "Committee") is appointed by each Board of
Trustees (the "Board") of the investment companies (the "Funds") advised by
First Trust Advisors L.P. ("Fund Management") for the following purposes:
1. to oversee the accounting and financial reporting processes of
each Fund and its internal controls and, as the Audit Committee deems
appropriate, to inquire into the internal controls of certain third-party
service providers;
2. to oversee the quality and integrity of each Fund's financial
statements and the independent audit thereof;
3. to oversee, or, as appropriate, assist Board oversight of, each
Fund's compliance with legal and regulatory requirements that relate to
the Fund's accounting and financial reporting, internal controls and
independent audits; and
4. to approve, prior to the appointment, the engagement of each
Fund's independent auditor and, in connection therewith, to review and
evaluate the qualifications, independence and performance of the Fund's
independent auditor.
II. COMMITTEE ORGANIZATION AND COMPOSITION
A. Size and Membership Requirements.
1. The Committee shall be composed of at least three members, all of
whom shall be trustees of the Funds. Each member of the Committee, and a
Committee chairperson, shall be appointed by the Board on the
recommendation of the Nominating and Governance Committee. Committee
members shall serve until they resign or are removed or replaced by the
Board.
2. Each member of the Committee shall be independent of the Funds
and must be free of any relationship that, in the opinion of the Board,
would interfere with the exercise of independent judgment as a Committee
member. With respect to the Funds which are closed-end funds or open-end
exchange-traded funds ("ETFs"), each member must meet the independence and
experience requirements of the listing rules of the primary national
securities exchange on which a Fund's shares are listed for trading (as
applicable), and Section 10A of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 10A-3 thereunder, and other
applicable rules and regulations of the Securities and Exchange Commission
("SEC"). Included in the foregoing is the requirement that no member of
the Committee be an "interested person" of the Funds within the meaning of
Section 2(a)(19) of the Investment Company Act of 1940, as amended (the
"1940 Act"), nor shall any Committee member accept, directly or
indirectly, any consulting, advisory or other compensatory fee from the
Funds, or any subsidiary thereof, (except in the capacity as a Board or
committee member).
3. At least one member of the Committee shall have been determined
by the Board, exercising its business judgment, to qualify as an "audit
committee financial expert" as defined by the SEC.
4. With respect to Funds whose shares are listed on NYSE Arca or on
the New York Stock Exchange, each member of the Committee shall have been
determined by the Board, exercising its business judgment, to be
"financially literate" as required by the New York Stock Exchange or NYSE
Arca (as applicable). In addition, at least one member of the Committee
shall have been determined by the Board, exercising its business judgment,
to have "accounting or related financial management expertise," as
required by the New York Stock Exchange or NYSE Arca (as applicable). Such
member may, but need not be, the same person as the Funds' "audit
committee financial expert." With respect to Funds that are closed-end
funds or ETFs whose shares are listed on the NYSE MKT LLC or the NASDAQ
Stock Market, each member of the Committee shall be able to read and
understand fundamental financial statements, including a Fund's balance
sheet, income statement and cash flow statement. In addition, at least one
member of the Committee shall have been determined by the Board,
exercising its business judgment, to be "financially sophisticated," as
required by the NYSE MKT LLC or the NASDAQ Stock Market (as applicable).
Any member whom the Board determines to be an "audit committee financial
expert" shall be presumed to qualify as financially sophisticated. With
respect to Funds that are closed-end funds or ETFs whose shares are listed
and trade primarily on any other national securities exchange, the
Committee will comply with any applicable requirements of such exchange
relating to the financial backgrounds of the Committee members.
5. With respect to Funds that are closed-end funds or ETFs,
Committee members shall not serve simultaneously on the audit committee of
more than two public companies, in addition to their service on the
Committee.
B. Frequency of Meetings.
The Committee will ordinarily meet once for every regular meeting of the
Board. The Committee may meet more or less frequently as appropriate, but no
less than four times per year.
C. Term of Office.
Committee members shall serve until they resign or are removed or replaced
by the Board.
III. RESPONSIBILITIES
A. With respect to Independent Auditors:
1. The Committee shall be responsible for the appointment or
replacement (subject, if applicable, to Board and/or shareholder
ratification), compensation, retention and oversight of the work of any
registered public accounting firm engaged (including resolution of
disagreements between management and the auditor regarding financial
reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Funds ("External
Auditors"). The External Auditors shall report directly to the Committee.
A-2
2. The Committee shall meet with the External Auditors and Fund
Management to review the scope, fees, audit plans and staffing of the
proposed audits for each fiscal year. At the conclusion of the audit, the
Committee shall review such audit results, including the External
Auditors' evaluation of each Fund's financial and internal controls, any
comments or recommendations of the External Auditors, any audit problems
or difficulties and Fund Management's response, including any restrictions
on the scope of the External Auditors' activities or on access to
requested information, any significant disagreements with Fund Management,
any accounting adjustments noted or proposed by the auditor but not made
by the Fund, any communications between the audit team and the audit
firm's national office regarding auditing or accounting issues presented
by the engagement, any significant changes required from the originally
planned audit programs and any adjustments to the financial statements
recommended by the External Auditors.
3. The Committee shall meet with the External Auditors in the
absence of Fund Management, as necessary.
4. The Committee shall pre-approve all audit services and permitted
non-audit services (including the fees and terms thereof) to be performed
for each Fund by its External Auditors in accordance with the Audit and
Non-Audit Services Pre-Approval Policy. The Chairman of the Committee is
authorized to give such pre-approvals on behalf of the Committee where the
fee for such engagement does not exceed the amount specified in the Audit
and Non-Audit Services Pre-Approval Policy, and shall report any such
pre-approval to the full Committee.
5. The Committee shall pre-approve the External Auditors'
engagements for non-audit services to Fund Management and any entity
controlling, controlled by or under common control with Fund Management
that provides ongoing services to the Funds, if the engagement relates
directly to the operations and financial reporting of the Funds, subject
to the de minimis exceptions for non-audit services described in Rule 2-01
of Regulation S-X. The Chairman of the Committee is authorized to give
such pre-approvals on behalf of the Committee, and shall report any such
pre-approval to the full Committee.
6. If the External Auditors have provided non-audit services to Fund
Management and any entity controlling, controlled by or under common
control with Fund Management that provides ongoing services to the Funds
that were not pre-approved pursuant to the de minimis exception, the
Committee shall consider whether the provision of such non-audit services
is compatible with the External Auditors' independence.
7. The Committee shall obtain and review a report from the External
Auditors at least annually (including a formal written statement
delineating all relationships between the auditors and the Funds
consistent with PCAOB Ethics and Independence Rule 3526) regarding (a) the
External Auditors' internal quality-control procedures; (b) any material
issues raised by the most recent internal quality-control review, or peer
review, of the firm, or by an inquiry or investigation by governmental or
professional authorities within the preceding five years, respecting one
or more independent audits carried out by the firm; (c) any steps taken to
deal with any such issues; and (d) the External Auditors' independence,
including all relationships between the External Auditors and the Funds
and their affiliates; and evaluating the qualifications, performance and
independence of the External Auditors, including their membership in the
A-3
SEC practice section of the AICPA and their compliance with all applicable
requirements for independence and peer review, and a review and evaluation
of the lead partner, taking into account the opinions of management and
discussing such reports with the External Auditors. The Committee shall
present its conclusions with respect to the External Auditors to the
Board.
8. The Committee shall review reports and other information provided
to it by the External Auditors regarding any illegal acts that the
External Auditors should discover (whether or not perceived to have a
material effect on a Fund's financial statements), in accordance with and
as required by Section 10A(b)(1) of the Exchange Act.
9. The Committee shall oversee the rotation of the lead (or
concurring) audit partner having primary responsibility for the audit and
the audit partner responsible for reviewing the audit as required by law,
and further consider the rotation of the independent auditor firm itself.
10. The Committee shall establish and recommend to the Board for
ratification a policy of the Funds with respect to the hiring of employees
or former employees of the External Auditors who participated in the
audits of the Funds' financial statements.
11. The Committee shall take (and, where appropriate, recommend that
the Board take) appropriate action to oversee the independence of the
External Auditors.
12. The Committee shall report regularly to the Board on the results
of the activities of the Committee, including any issues that arise with
respect to the quality or integrity of the Funds' financial statements,
the Funds' compliance with legal or regulatory requirements that relate to
the Fund's accounting and financial reporting, internal controls and
independent audits, the performance and independence of the Funds'
External Auditors, or the performance of the internal audit function, if
any.
B. With respect to Fund Financial Statements:
1. The Committee shall meet to review and discuss with Fund
Management and the External Auditors the annual audited financial
statements of the Funds, and any major issues regarding accounting and
auditing principles and practices, and the Funds' disclosures under
"Management's Discussion and Analysis," and shall meet to review and
discuss with Fund Management the semi-annual financial statements of the
Funds and the Funds' disclosures under "Management's Discussion and
Analysis" or any similar discussion of the Fund's performance, if any.
2. The Committee shall review and discuss reports, both written and
oral, from the External Auditors or Fund Management regarding (a) all
critical accounting policies and practices to be used; (b) all alternative
treatments of financial information within generally accepted accounting
principles ("GAAP") for policies and practices that have been discussed
with Fund Management, including the ramifications of the use of such
alternative treatments and disclosures and the treatment preferred by the
External Auditors; (c) other material written communications between the
External Auditors and Fund Management, such as any management letter or
schedule of unadjusted differences; and (d) all non-audit services
provided to any entity in the investment company complex (as defined in
Rule 2-01 of Regulation S-X) that were not pre-approved by the Committee.
A-4
3. The Committee shall review disclosures made to the Committee by
the Funds' principal executive officer and principal financial officer
during their certification process for the Funds' periodic reports about
any significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving management
or other employees who have a significant role in the Funds' internal
controls.
4. The Committee shall discuss with the External Auditors the
matters required to be discussed by the applicable PCAOB Auditing Standard
that arise during the External Auditor's review of the Funds' financial
statements.
5. The Committee shall review and discuss with Fund Management and
the External Auditors (a) significant financial reporting issues and
judgments made in connection with the preparation and presentation of the
Funds' financial statements, including any significant changes in the
Funds' selection or application of accounting principles and any major
issues as to the adequacy of the Funds' internal controls and any special
audit steps adopted in light of material control deficiencies, and (b)
analyses prepared by Fund Management or the External Auditors setting
forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including
analyses of the effects of alternative GAAP methods on the financial
statements.
6. The Committee shall review and discuss with Fund Management and
the External Auditors the effect of regulatory and accounting initiatives
on the Funds' financial statements.
7. The Committee shall discuss with Fund Management the Funds' press
releases regarding financial results and dividends, as well as financial
information and earnings guidance provided to analysts and rating
agencies. This discussion may be done generally, consisting of discussing
the types of information to be disclosed and the types of presentations to
be made. The Chairman of the Committee or any member of the Committee also
serving on the Dividend and Pricing Committee shall be authorized to have
these discussions with Fund Management on behalf of the Committee, and
shall report to the Committee regarding any such discussions.
8. The Committee shall discuss with Fund Management the Funds' major
financial risk exposures and the steps Fund Management has taken to
monitor and control these exposures, including the Funds' risk assessment
and risk management policies and guidelines. In fulfilling its obligations
under this paragraph, the Committee may, as applicable, review in a
general manner the processes other Board committees have in place with
respect to risk assessment and risk management.
C. With respect to serving as a Qualified Legal Compliance Committee:
1. The Committee shall serve as the Funds' "qualified legal
compliance committee" ("QLCC") within the meaning of the rules of the SEC
and, in that regard, the following shall apply:
(i) The Committee shall receive and retain, in confidence,
reports of evidence of (a) a material violation of any federal or
state securities laws, (b) a material breach of a fiduciary duty
arising under any federal or state laws or (c) a similar material
violation of any federal or state law by a Fund or any of its
officers, trustees, employees or agents (a "Report of Material
A-5
Violation"). Reports of Material Violation may be addressed to the
Funds, attention W. Scott Jardine, by e-mail at
sjardine@ftportfolios.com or at the address of the principal office
of the Funds, which currently is 120 East Liberty Drive, Wheaton,
Illinois 60187, who shall forward the Report of Material Violation
to the Committee.
(ii) Upon receipt of a Report of Material Violation, the
Committee shall (a) inform the Fund's chief legal officer and chief
executive officer (or the equivalents thereof) of the report (unless
the Committee determines it would be futile to do so), and (b)
determine whether an investigation is necessary.
(iii) After considering the Report of Material Violation, the
Committee shall do the following if it deems an investigation
necessary:
(1) Notify the Board;
(2) Initiate an investigation, which may be conducted
either by the chief legal officer (or the equivalent thereof)
of the Fund or by outside attorneys; and
(3) Retain such additional expert personnel as the
Committee deems necessary.
(iv) At the conclusion of any such investigation, the
Committee shall:
(4) Recommend, by majority vote, that the Fund implement
an appropriate response to evidence of a material violation;
and
(5) Inform the chief legal officer and the chief
executive officer (or the equivalents thereof) and the Board
of the results of any such investigation and the appropriate
remedial measures to be adopted.
2. The Committee shall take all other action that it deems
appropriate in the event that the Fund fails in any material respect to
implement an appropriate response that the Committee, as the QLCC, has
recommended the Fund take.
D. Other Responsibilities:
1. The Committee shall receive, retain and handle complaints
received by the Funds regarding accounting, internal accounting controls,
or auditing matters from any person, whether or not an employee of the
Funds or Fund Management, and shall receive submissions of concerns
regarding questionable accounting or auditing matters by officers of the
Funds and employees of Fund Management, any administrator, fund
accountant, principal underwriter, or any other provider of
accounting-related services for the Funds. All such complaints and
concerns shall be handled in accordance with the Committee's procedures
for operating as a QLCC, outlined in III.C above.
2. The Committee shall review, with fund counsel and independent
legal counsel, any legal matters that could have significant impact on a
Fund's financial statements or compliance policies and the findings of any
A-6
examination by a regulatory agency as they relate to financial statement
matters.
3. The Committee shall review and reassess the adequacy of this
charter on an annual basis and provide a recommendation to the Board for
approval of any proposed changes deemed necessary or advisable by the
Committee.
4. The Committee shall evaluate on an annual basis the performance
of the Committee.
5. The Committee shall review with the External Auditors and with
Fund Management the adequacy and effectiveness of the Funds' internal
accounting and financial controls.
6. The Committee shall discuss with Fund Management and the External
Auditors any correspondence with regulators or governmental agencies that
raise material issues regarding the Funds' financial statements or
accounting policies.
7. The Committee shall perform other special reviews, investigations
or oversight functions as requested by the Board and shall receive and
review periodic or special reports issued on exposure/controls,
irregularities and control failures related to the Funds.
8. The Committee shall prepare any report of the Committee required
to be included in a proxy statement for a Fund.
9. The Committee may request any officer or employee of a Fund or
Fund Management, independent legal counsel, fund counsel and the External
Auditors to attend a meeting of the Committee or to meet with any members
of, or consultants to, the Committee.
10. The Committee shall maintain minutes of its meetings.
11. The Committee shall perform such other functions and have such
powers as may be necessary or appropriate in the efficient and lawful
discharge of its responsibilities.
IV. AUTHORITY TO ENGAGE ADVISERS
The Committee may engage independent counsel and other advisers, as it
determines necessary to carry out its duties. The Funds' External Auditors shall
have unrestricted accessibility at any time to Committee members.
V. FUNDING PROVISIONS
A. The Committee shall determine the:
1. Compensation to any independent registered public accounting firm
engaged for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for a Fund; and
2. Compensation to any advisers employed by the Committee.
A-7
B. The expenses enumerated in this Article V and all necessary and
appropriate administrative expenses of the Committee shall be paid by the
applicable Fund or Fund Management.
VI. MANAGEMENT AND EXTERNAL AUDITORS' RESPONSIBILITIES
A. Fund Management has the primary responsibility for establishing and
maintaining systems for accounting, reporting, disclosure and internal controls.
The External Auditors have the primary responsibility to plan and implement an
audit, with proper consideration given to the accounting, reporting and internal
controls. All External Auditors engaged for the purpose of preparing or issuing
an audit report or performing other audit, review or attest services for the
Funds shall report directly to the Committee. The External Auditors' ultimate
accountability is to the Board and the Committee, as representatives of
shareholders.
B. While the Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct audits or
to determine that the Funds' financial statements are complete and accurate and
are in accordance with GAAP, nor is it the duty of the Committee to assure
compliance with laws and regulations and/or the Funds' Code of Ethics.
C. In discharging its responsibilities, the Committee and its members are
entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, if prepared or presented by: (1)
one or more officers of a Fund; (2) legal counsel, public accountants, or other
persons as to matters the Committee member reasonably believes are within the
person's professional or expert competence; or (3) a Board committee of which
the Committee member is not a member.
Amended: December 12, 2016
A-8
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FORM OF PROXY CARD
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EVERY SHAREHOLDER'S VOTE IS IMPORTANT
EASY VOTING OPTIONS:
VOTE BY MAIL
VOTE, SIGN AND DATE THIS PROXY
CARD AND RETURN IN THE
POSTAGE-PAID ENVELOPE
VOTE IN PERSON
ATTEND SHAREHOLDER MEETING
120 EAST LIBERTY DRIVE, SUITE 400
WHEATON, ILLINOIS 60187
ON SEPTEMBER 11, 2017
PLEASE DETACH AT PERFORATION BEFORE MAILING.
PROXY FIRST TRUST SENIOR FLOATING RATE INCOME FUND II
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 11, 2017
PROXY SOLICITED BY THE BOARD OF TRUSTEES
The undersigned holder of shares of the First Trust Senior Floating Rate Income
Fund II, a Massachusetts business trust (the "Fund"), hereby appoints W. Scott
Jardine, Kristi A. Maher, Erin E. Klassman and James M. Dykas as attorneys and
proxies for the undersigned, with full powers of substitution and revocation, to
represent the undersigned and to vote on behalf of the undersigned all shares of
the Fund that the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Fund (the "Meeting") to be held at the offices of First
Trust Advisors L.P., 120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187,
at 12:00 noon Central Time on the date indicated above, and any adjournments or
postponements thereof.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated August 8, 2017, and hereby instructs said
attorneys and proxies to vote said shares as indicated hereon. In their
discretion, the proxies are authorized to vote upon such other business as may
properly come before the Meeting and any adjournments or postponements thereof
(including, but not limited to, any questions as to adjournment or postponement
of the Meeting). A majority of the proxies present and acting at the Meeting in
person or by substitute (or, if only one shall be so present, then that one)
shall have and may exercise all of the power and authority of said proxies
hereunder. The undersigned hereby revokes any proxy previously given. This
proxy, if properly executed, will be voted in the manner directed by the
undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE ELECTION OF THE NOMINEES SET FORTH.
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PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
FCT_29074_080317
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 11, 2017
THE PROXY STATEMENT AND PROXY CARD FOR THIS MEETING ARE AVAILABLE AT:
HTTPS://WWW.PROXY-DIRECT.COM/FIR-29074
Please detach at perforation before mailing.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE ELECTION OF THE NOMINEES SET FORTH.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS SHOWN IN THIS EXAMPLE: [X]
A. PROPOSAL
1. ELECTION OF TWO CLASS I TRUSTEES.
The Board of Trustees recommends that you vote FOR the election of two
Class I Nominees for a three-year term.
FOR WITHHOLD
01. RICHARD E. ERICKSON [ ] [ ]
02. THOMAS R. KADLEC [ ] [ ]
B. AUTHORIZED SIGNATURES - THIS SECTION MUST BE COMPLETED FOR YOUR VOTE TO BE
COUNTED. - SIGN AND DATE BELOW
Note: Please sign exactly as your name(s) appear(s) on this proxy card, and date
it. When shares are held jointly, each holder should sign. When signing as
attorney, executor, administrator, trustee, guardian, officer of
corporation or other entity or in another representative capacity, please
give the full title under the signature.
DATE (MM/DD/YYYY) - SIGNATURE 1 - PLEASE KEEP SIGNATURE 2 - PLEASE KEEP
PLEASE PRINT DATE BELOW SIGNATURE WITHIN THE BOX SIGNATURE WITHIN THE BOX
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