As filed with the Securities and Exchange Commission on August 12, 2013.
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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 9, 2013
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 at the offices of First Trust Advisors L.P., 120 East
Liberty Drive, Suite 400, Wheaton, Illinois 60187, on Monday, September 16,
2013, at 4:00 p.m. Central Time.
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 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 16, 2013
August 9, 2013
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 16, 2013, at 4:00 p.m. Central Time, for the following
purposes:
1. To elect two Trustees (the Class III 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 22, 2013 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 THE PROPER EXECUTION OF PROXIES ARE
SET FORTH ON THE INSIDE COVER OF THIS PROXY STATEMENT.
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FIRST TRUST SENIOR FLOATING RATE INCOME FUND II
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 16, 2013
120 EAST LIBERTY DRIVE, SUITE 400
WHEATON, ILLINOIS 60187
PROXY STATEMENT
AUGUST 9, 2013
THIS PROXY STATEMENT AND THE ENCLOSED PROXY CARD WILL FIRST BE MAILED TO
SHAREHOLDERS ON OR ABOUT AUGUST 16, 2013.
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 16, 2013, at 4:00
p.m. Central Time, at the offices of First Trust Advisors L.P. ("First Trust
Advisors" or the "Advisor"), 120 East Liberty Drive, Suite 400, Wheaton,
Illinois 60187, and at any adjournments or postponements thereof (collectively,
the "Meeting"). A Notice of Annual Meeting of Shareholders and a proxy card
accompany this Proxy Statement.
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 of the Fund. 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.
The close of business on July 22, 2013 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. The Fund has one class of shares of beneficial
interest, par value $0.01 per share, known as common shares ("Shares").
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON SEPTEMBER 16, 2013. THIS PROXY STATEMENT IS
AVAILABLE ON THE INTERNET AT http://www.ftportfolios.com/LoadContent/gw5uoc33.
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 AT 120 EAST LIBERTY DRIVE, SUITE 400,
WHEATON, ILLINOIS 60187, OR CALL (800) 988-5891.
YOU MAY CALL (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 4:00 P.M.
CENTRAL TIME, on MONDAY, SEPTEMBER 16, 2013. (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 each specified nominee as a Class III Trustee of the Fund provided a
quorum is present. Abstentions and broker non-votes 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 Fund 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 each
specified nominee as a Class III Trustee 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 the offices of the Fund, 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 (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), shall be counted. The Meeting may be postponed prior to the Meeting
with notice to the shareholders entitled to vote at the Meeting. The Meeting
may, by action of the chairman of the Meeting, be adjourned to permit further
solicitation of proxies without further notice with respect to one or more
matters to be considered at the Meeting to a designated time and place, 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.
Unless a proxy is otherwise limited in this regard, any Shares present and
entitled to vote at the Meeting, including broker non-votes, may, at the
discretion of the proxies named therein, be voted in favor of such an
adjournment.
- 3 -
OUTSTANDING SHARES
On the Record Date, the Fund had 26,540,618 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 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 ("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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First Clearing, LLC 3,602,014 Shares 13.57%
One North Jefferson Street
St. Louis, MO 63103
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Merrill Lynch, Pierce Fenner & Smith Safekeeping
101 Hudson Street, 8th Floor 11,398,938 Shares 42.95%
Jersey City, NJ 07302
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Raymond James & Associates, Inc.
880 Carillon Parkway
P.O. Box 12749 2,084,439 Shares 7.85%
St. Petersburg, FL 33716
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UBS Financial
1200 Harbor Blvd. 1,515,942 Shares 5.71%
Weehawken, NJ 07086
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Bank of America Corporation
100 North Tryon Street
Floor 25 1,313,474 Shares* 5.18%*
Bank of America Corporate Center
Charlotte, NC 28255
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* Information is according to Schedule 13G filed by the reporting
person with the SEC on February 14, 2013 on behalf of itself and its
wholly-owned subsidiaries, Merrill Lynch Pierce Fenner & Smith and
Bank of America, N.A.
- 4 -
PROPOSAL: ELECTION OF TWO (2) CLASS III TRUSTEES
TWO CLASS III TRUSTEES ARE TO BE ELECTED BY HOLDERS OF SHARES OF THE FUND.
CURRENT TRUSTEES JAMES A. BOWEN AND ROBERT F. KEITH ARE THE NOMINEES FOR
ELECTION AS THE CLASS III 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. James A. Bowen and Robert F. Keith are
the Class III Trustees of the Fund for a term expiring at the Meeting or until
their respective successors are elected and qualified. If elected, they will
hold office for a three-year term expiring at the Fund's annual meeting of
shareholders in 2016. Richard E. Erickson, Thomas R. Kadlec and Niel B. Nielson
are current and continuing Trustees. Messrs. Erickson and Kadlec are currently
the Class I Trustees of the Fund for a term expiring at the Fund's annual
meeting of shareholders in 2014. Niel B. Nielson is currently the Class II
Trustee of the Fund for a term expiring at the Fund's annual meeting of
shareholders in 2015. Each Trustee serves until his successor is elected and
qualified, or until he earlier resigns, retires or is otherwise removed.
REQUIRED VOTE: Each nominee for election as a Class III 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 a 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 or nominees
recommended by 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.
[The remainder of this page is intentionally left blank.]
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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. The Trustees set broad policies for the Fund and choose the Fund's
officers. The following is a list of the Trustees and 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 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.]
- 6 -
INTERESTED TRUSTEE
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NUMBER OF
TERM OF OFFICE(2) PRINCIPAL OCCUPATION(S) PORTFOLIOS IN FIRST OTHER
NAME, ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST FIVE TRUST FUND COMPLEX DIRECTORSHIPS
DATE OF BIRTH HELD WITH FUND TIME SERVED YEARS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
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James A. Bowen(1) Chairman of Class III Chief Executive Officer 103 Portfolios None
120 East Liberty Drive the Board and Nominee (December 2010 to Present),
Suite 400 Trustee President (until December
Wheaton, IL 60187 Since Fund 2010), First Trust Advisors
DOB: 9/55 Inception L.P. and First Trust Portfolios
L.P.; Chairman of the Board of
Directors, BondWave LLC
(Software Development
Company/Investment Advisor) and
Stonebridge Advisors LLC
(Investment Advisor)
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INDEPENDENT TRUSTEES
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NUMBER OF
TERM OF OFFICE(2) PRINCIPAL OCCUPATION(S) PORTFOLIOS IN FIRST OTHER
NAME, ADDRESS, AND POSITION(S) AND LENGTH OF DURING PAST FIVE TRUST FUND COMPLEX DIRECTORSHIPS
DATE OF BIRTH HELD WITH FUND TIME SERVED YEARS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
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Richard E. Erickson Trustee Class I Physician; President, Wheaton 103 Portfolios None
c/o First Trust Advisors Orthopedics; Co-owner and
L.P. Since Fund Co-Director (January 1996 to
120 East Liberty Drive Inception May 2007), Sports Med Center
Suite 400 for Fitness; Limited Partner,
Wheaton, IL 60187 Gundersen Real Estate Limited
DOB: 4/51 Partnership; Member, Sportsmed
LLC
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Thomas R. Kadlec Trustee Class I President (March 2010 to 103 Portfolios Director of ADM
c/o First Trust Advisors Present), Senior Vice President Investor Services,
L.P. Since Fund and Chief Financial Officer (May Inc.; ADM Investor
120 East Liberty Drive Inception 2007 to March 2010), Vice Services
Suite 400 President and Chief Financial International; ADM
Wheaton, IL 60187 Officer (1990 to May 2007), ADM Investor Services
DOB: 11/57 Investor Services, Inc. (Futures Hong Kong Ltd.;
Commission Merchant) and ADM Investor
Services Singapore
Limited
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Robert F. Keith Trustee Class III President (2003 to Present), 103 Portfolios Director of Trust
c/o First Trust Advisors Nominee Hibs Enterprises (Financial and Company of
L.P. Management Consulting) Illinois
120 East Liberty Drive Since June
Suite 400 2006
Wheaton, IL 60187
DOB: 11/56
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Niel B. Nielson Trustee Class II President and Chief Executive 103 Portfolios Director of
c/o First Trust Advisors Officer (July 2012 to Present), Covenant
L.P. Since Fund Dew Learning LLC (Educational Transport Inc.
120 East Liberty Drive Inception Products and Services),
Suite 400 President (June 2002 to June
Wheaton, IL 60187 2012), Covenant College
DOB: 3/54
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- 7 -
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
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Mark R. Bradley President and Chief Indefinite Chief Financial Officer and Chief Operating
120 East Liberty Drive, Suite 400 Executive Officer Officer (December 2010 to Present), First Trust
Wheaton, IL 60187 Since Fund Advisors L.P. and First Trust Portfolios L.P.;
DOB: 11/57 Inception Chief Financial Officer, BondWave LLC (Software
Development Company/Investment Advisor) and
Stonebridge Advisors LLC (Investment Advisor)
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James M. Dykas Treasurer, Chief Indefinite Controller (January 2011 to Present), Senior Vice
120 East Liberty Drive, Suite 400 Financial Officer President (April 2007 to Present), First Trust
Wheaton, IL 60187 and Chief Accounting Since December Advisors L.P. and First Trust Portfolios L.P.
DOB: 1/66 Officer 2005
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Christopher R. Fallow Assistant Vice Indefinite Assistant Vice President, First Trust Advisors
120 East Liberty Drive, Suite 400 President L.P. and First Trust Portfolios L.P.
Wheaton, IL 60187 Since December
DOB: 4/79 2006
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Rosanne Gatta Assistant Secretary Indefinite Board Liaison Associate (July 2010 to Present),
120 East Liberty Drive, Suite 400 First Trust Advisors L.P. and First Trust
Wheaton, IL 60187 Since March 2011 Portfolios L.P.; Assistant Vice President
DOB: 7/55 (February 2001 to July 2010), PNC Global
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W. Scott Jardine Secretary and Chief Indefinite General Counsel and Secretary, First Trust
120 East Liberty Drive, Suite 400 Legal Officer Advisors L.P. and First Trust Portfolios L.P.;
Wheaton, IL 60187 Since Fund General Counsel and Secretary, BondWave LLC
DOB: 5/60 Inception (August 2009 to Present) (Software Development
Company/Investment Advisor); Secretary of
Stonebridge Advisors LLC (Investment Advisor)
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Erin E. Klassman Assistant Secretary Indefinite Assistant General Counsel, First Trust Advisors
120 East Liberty Drive, Suite 400 L.P. and First Trust Portfolios L.P.
Wheaton, IL 60187 Since June 2009
DOB: 8/76
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Daniel J. Lindquist Vice President Indefinite Senior Vice President, First Trust Advisors L.P.
120 East Liberty Drive, Suite 400 and First Trust Portfolios L.P.
Wheaton, IL 60187 Since December
DOB: 2/70 2005
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Coleen D. Lynch Assistant Vice Indefinite Assistant Vice President, First Trust Advisors
120 East Liberty Drive, Suite 400 President L.P. and First Trust Portfolios L.P.
Wheaton, IL 60187 Since July 2008
DOB: 7/58
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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
July 2004 and
Chief Compliance
Officer since
January 2011
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Donald Swade Assistant Treasurer Indefinite Vice President (April 2012 to Present), First
120 East Liberty Drive, Suite 400 Trust Advisors L.P. and First Trust Portfolios
Wheaton, IL 60187 Since September L.P.; Vice President (September 2006 to April
DOB: 8/72 2012 2012), Guggenheim Funds Investment Advisors, LLC
and Claymore Securities, Inc. (Investment Advisor)
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Katherine Urevig Assistant Treasurer Indefinite Vice President (June 2007 to Present), First Trust
120 East Liberty Drive, Suite 400 Advisors L.P. and First Trust Portfolios L.P.;
Wheaton, IL 60187 Since September Vice President (December 2002 to May 2007), Van
DOB: 5/65 2012 Kampen Asset Management and Morgan Stanley
Investment Management (Investment Advisor)
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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.
- 8 -
2 Currently, James A. Bowen and Robert F. Keith, as the Class III Trustees,
are each serving a term until the Meeting or until their successors are
elected and qualified. Richard E. Erickson and Thomas R. Kadlec, as the
Class I Trustees, are each serving a term until the Fund's 2014 annual
meeting of shareholders 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 2015 annual meeting of shareholders or until his
successor is elected and qualified. Officers of the Fund have an
indefinite term.
3 For officers, length of time served represents the month and year the
person first became an officer of the Fund. James A. Bowen resigned as
President and Chief Executive Officer of the funds in the First Trust Fund
Complex on January 23, 2012. Mark R. Bradley was elected President and
Chief Executive Officer, and James M. Dykas was elected Treasurer, Chief
Financial Officer and Chief Accounting Officer, of all funds in the First
Trust Fund Complex, including the Fund, in January 2012, effective January
23, 2012. Before January 23, 2012, Mr. Bradley served as Treasurer, Chief
Financial Officer and Chief Accounting Officer and Mr. Dykas served as
Assistant Treasurer.
UNITARY BOARD LEADERSHIP STRUCTURE
The same five persons serve as Trustees on the Fund's Board 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
by the Advisor and thirteen of the fourteen First Trust Closed-end Funds 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 the First
Trust Funds 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 and, prior to January
23, 2012, also served as the Chief Executive Officer and President 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 currently serves a two-year
term or until his successor is selected. Robert F. Keith currently serves as the
Lead Independent Trustee.
- 9 -
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. 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 two years in serving as Chairman of the Audit Committee, the
Nominating and Governance Committee or the Valuation Committee, or as Lead
Independent Trustee. Effective January 1, 2014, each Committee Chairman and the
Lead Independent Trustee will rotate every three years. The Lead Independent
Trustee also serves on the Executive Committee with the Interested Trustee.
In addition to the Fund, the First Trust Fund Complex includes: First
Defined Portfolio Fund, LLC, an open-end management investment company with
eight portfolios advised by First Trust Advisors; 13 other closed-end funds
advised by First Trust Advisors; First Trust Series Fund, an open-end management
investment company with three portfolios advised by First Trust Advisors; First
Trust Variable Insurance Trust, an open-end management investment company with
one portfolio 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 AlphaDEX(R) Fund and
First Trust Exchange-Traded AlphaDEX(R) Fund II, each an exchange-traded fund
with 19, 12, 1, 3, 1, 2, 21, and 18 operating portfolios (each such portfolio,
an "ETF" and each such exchange-traded fund, an "ETF Trust"), respectively,
advised by First Trust Advisors.
The four standing committees of the Board are: the Executive Committee
(and Pricing and Dividend 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 Pricing and Dividend
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. Keith and Mr. Bowen are members of
the Executive Committee. The Executive Committee held 12 meetings during the
Fund's last fiscal year.
The Nominating and Governance Committee is responsible for appointing and
nominating non-interested 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 standards 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. If there is no vacancy on the Board of Trustees,
the Board will not actively seek recommendations from other parties, including
shareholders. In 2005, the Board of Trustees adopted a mandatory retirement age
of 72 for Trustees, beyond which age Trustees are ineligible to serve. The
- 10 -
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
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 4 meetings during the Fund's last fiscal year.
The Valuation Committee is responsible for the oversight of the pricing
procedures of the Fund. Messrs. Erickson, Kadlec, Keith and Nielson are members
of the Valuation Committee. The Valuation Committee held 4 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). Messrs. Erickson, Kadlec, Keith and Nielson, all of whom are
"independent" as defined in the listing standards of the NYSE, serve on the
Audit Committee. Messrs. Kadlec and Keith have been determined to qualify as an
"Audit Committee Financial Expert" as such term is defined in Form N-CSR. The
Audit Committee held 9 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.
- 11 -
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
investment oversight group and the Fund's Chief Compliance Officer ("CCO").
Oversight of other risks also occurs at the Committee level. The Advisor's
investment oversight group reports to the Board at quarterly meetings regarding,
among other things, Fund performance and the various drivers of such
performance. 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
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. 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,
underwriters or other service providers, including any affiliates of these
entities.
Listed below for each current Trustee and nominee are the experiences,
qualifications and attributes that led to the conclusion, as of the date of this
Proxy Statement, that each current Trustee and nominee should serve as a
trustee.
Independent Trustees
Richard E. Erickson, M.D., is an orthopedic surgeon and President of
Wheaton Orthopedics. He also has been a co-owner and director of a fitness
center and a limited partner of two real estate companies. Dr. Erickson has
- 12 -
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 (2008 -
2009), Chairman of the Nominating and Governance Committee (2003 - 2007) and
Chairman of the Valuation Committee (June 2006 - 2007 and 2010 - 2011) of the
First Trust Funds. He currently serves as Chairman of the Audit Committee (since
January 1, 2012) 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. 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. He also
served as Chairman of the Valuation Committee (2008 - 2009) and Chairman of the
Audit Committee (2010 - 2011), and he currently serves as Chairman of the
Nominating and Governance Committee (since January 1, 2012) of the First Trust
Funds.
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 First
Trust Funds since June 2006. Mr. Keith has also served as Chairman of the Audit
Committee (2008 - 2009) and as Chairman of the Nominating and Governance
Committee (2010 - 2011) of the First Trust Funds. He currently serves as Lead
Independent Trustee and on the Executive Committee (since January 1, 2012) of
the First Trust Funds.
Niel B. Nielson, Ph.D., has served as President and Chief Executive
Officer of Dew Learning LLC (a global provider of digital and on-line
educational products and services) since 2012. 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 - 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 the Chairman of the
Audit Committee (2003 - 2007), Chairman of the Nominating and Governance
Committee (2008 - 2009) and Lead Independent Trustee (2010 - 2011) and currently
serves as Chairman of the Valuation Committee (since January 1, 2012) of the
First Trust Funds.
- 13 -
Interested Trustee
James A. Bowen is Chief Executive Officer of First Trust Advisors and
First Trust Portfolios L.P. and, until January 23, 2012, also served as
President and Chief Executive Officer of the First Trust Funds. Mr. Bowen is
involved in the day-to-day management of the First Trust Funds and serves on the
Executive Committee. He has over 29 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.
Officers
The officers of the Fund hold the same positions with each fund in the
First Trust Fund Complex (representing 103 portfolios) as they hold with the
Fund, except for Christopher R. Fallow. Mr. Fallow is an officer of 14 First
Trust Closed-end Funds and an officer of First Trust Series Fund, but is not an
officer of First Defined Portfolio Fund, LLC, First Trust Variable Insurance
Trust or any ETF Trust.
BENEFICIAL OWNERSHIP OF SHARES HELD IN THE FUND BY TRUSTEES AND 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, 2012:
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 $10,001-$50,000 $1-$10,000 $1-$10,000 $0 $1-$10,000
SECURITIES IN THE FUND (1,000 Shares) (296 Shares) (600 Shares) (0 Shares) (283 Shares)
----------------------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF
EQUITY SECURITIES IN ALL
REGISTERED INVESTMENT $10,001-$50,000 Over $100,000 Over $100,000 Over $100,000 Over $100,000
COMPANIES IN THE FIRST (2,498 Shares) (10,194 Shares) (9,727 Shares) (11,437 Shares) (6,351 Shares)
TRUST FUND COMPLEX
OVERSEEN BY TRUSTEE
----------------------------------------------------------------------------------------------------------------------------------
As of December 31, 2012, 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
- 14 -
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, 2012, the Trustees and officers of the Fund as a group
beneficially owned approximately 40,210 shares of the funds in the First Trust
Fund Complex (less than 1% of the shares outstanding). As of December 31, 2012,
the Trustees and officers of the Fund as a group beneficially owned 2,179 Shares
of the Fund, which is less than 1% of the Fund's Shares outstanding.
COMPENSATION
Each Independent Trustee is paid a fixed annual retainer of $125,000 per
year and an annual per fund fee of $4,000 for each closed-end fund or other
actively managed fund and $1,000 for each index fund in the First Trust Fund
Complex. The fixed annual retainer is allocated pro rata among each fund in the
First Trust Fund Complex based on net assets. Additionally, the Lead Independent
Trustee is paid $15,000 annually, the Chairman of the Audit Committee is paid
$10,000 annually, and each of the Chairmen of the Nominating and Governance
Committee and the Valuation Committee is paid $5,000 annually to serve in such
capacities, with such compensation allocated pro rata among each fund in the
First Trust Fund Complex based on 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 currently serves a two-year term
expiring December 31, 2013 before rotating to serve as a Chairman of another
Committee or as Lead Independent Trustee. Effective January 1, 2014, each
Committee Chairman and the Lead Independent Trustee will rotate every three
years.
The Board held seven (7) meetings during the Fund's last fiscal year.
The aggregate fees and expenses paid to the Trustees by the Fund for its
most recent fiscal year ended May 31, 2013 (including reimbursement for travel
and out-of-pocket expenses) amounted to $33,036.
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 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. Richard E. Thomas R. Robert F. Niel B.
Bowen Erickson Kadlec Keith Nielson
----------------------------------------------------------------------------------------------------------------------------
COMPENSATION FOR SERVING THE FUND $0 $8,263 $8,105 $8,447 $8,221
----------------------------------------------------------------------------------------------------------------------------
TOTAL COMPENSATION FOR SERVING THE FIRST
TRUST FUND COMPLEX(1) $0 $276,500 $271,500 $282,250 $275,249
----------------------------------------------------------------------------------------------------------------------------
1 For the calendar year ended December 31, 2012. 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.
- 15 -
ATTENDANCE AT ANNUAL MEETINGS OF SHAREHOLDERS
The policy of the Board is 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. 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 and approved by the Board of Trustees on March 11, 2013, a copy of
which is attached as Exhibit A hereto, and is available on the Fund's website
located at http://www.ftportfolios.com. As set forth in the Charter, management
of the Fund is responsible for maintaining appropriate systems for accounting
and internal controls and the audit process. The Fund's independent auditors are
responsible for planning and carrying out proper audits of the Fund's financial
statements and expressing an opinion as to their conformity with accounting
principles generally accepted in the United States of America.
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 the Fund for the fiscal year ended May 31,
2013 at a meeting held on July 23, 2013, and discussed the audit 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") AU 380, Communication
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 audits
of the Fund's financial statements have 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."
- 16 -
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 year ended May
31, 2013.
Submitted by the Audit Committee of the Fund:
Richard E. Erickson
Thomas R. Kadlec
Robert F. Keith
Niel B. Nielson
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.
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 following fees:
--------------------------------------------------------------------------------------------------------------------------
AUDIT FEES(1) AUDIT-RELATED ALL OTHER
FEES TAX FEES(2) FEES
--------------------------------------------------------------------------------------------------------------------------
FEES BILLED TO: 2012 2013 2012 2013 2012 2013 2012 2013
--------------------------------------------------------------------------------------------------------------------------
Fund $69,000 $90,000 $0 $0 $10,400 $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.
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
------------------------------------------------------------------------------
2012 2013
------------------------------------------------------------------------------
Fund $10,400 $5,200
Advisor $10,320(1) $3,000(1)
------------------------------------------------------------------------------
1 These fees were for tax compliance and federal/state tax returns.
- 17 -
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.
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 Annual Meeting of Shareholders of the Fund to
be held in 2014 and included in the Fund's proxy statement relating to such
meeting, a shareholder proposal submitted pursuant to Rule 14a-8 of the 1934 Act
must be received at the offices of the Fund at 120 East Liberty Drive, Suite
400, Wheaton, Illinois 60187, not later than April 18, 2014. 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. 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
- 18 -
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
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.
- 19 -
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.
BNY Mellon Investment Servicing (US) Inc., 301 Bellevue Parkway,
Wilmington, Delaware 19809, acts as the administrator, accounting agent and
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 officers and Trustees, 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 the NYSE, 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, 2013.
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 directed 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, proxy statement or
Notice of Internet Availability of Proxy Materials (as applicable) 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, proxy statement or Notice of Internet
Availability of Proxy Materials (as applicable), 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 Fund at the address and phone number set forth above. Pursuant to a
request, a separate copy will be delivered promptly.
- 20 -
OTHER MATTERS TO COME BEFORE THE MEETING
No business other than the matter 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 9, 2013
--------------------------------------------------------------------------------
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 RETURN ENVELOPE.
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- 21 -
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EXHIBIT A
AUDIT COMMITTEE CHARTER
I. PURPOSE
The Audit Committee (the "Committee") is appointed by the Boards of
Trustees (the "Boards") of 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.
2. Each member of the Committee shall be independent of the Fund
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 New York Stock Exchange, NYSE Arca, NYSE
MKT LLC or the NASDAQ Stock Market (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 (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). A
member whom the Board determines to be the Funds' "audit committee
financial expert" shall be presumed to qualify as financially
sophisticated.
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 twice 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.
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
Auditor's evaluation of the 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 Auditor's activities or on access to
A-2
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 the 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 Auditor's
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 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. 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 Fund
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 Auditor's 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 Fund consistent
with PCAOB Ethics and Independence Rule 3526) regarding (a) the External
Auditor's 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 Auditor's independence,
including all relationships between the External Auditors and the Fund and
its affiliates; and evaluating the qualifications, performance and
independence of the External Auditors, including their membership in the
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.
A-3
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 the Fund' s financial statements), in accordance with
and as required by Section 10A(b) of the Exchange Act.
9. The Committee shall ensure 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 considering 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, 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, 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."
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 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 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.
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.
A-4
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 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 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 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
Violation"). Reports of Material Violation may be addressed to the
Funds, attention W. Scott Jardine, at the address of the principal
offices of the Funds, which currently is 120 East Liberty Drive,
Wheaton, Illinois 60187, who shall forward the Report of Material
Violation to the Committee.
A-5
(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 a Material Violation, the
Committee shall do the following if it deems an investigation
necessary:
(1) Notify the full 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:
(1) Recommend, by majority vote, that the Fund implement
an appropriate response to evidence of a material violation;
and
(2) 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 employees of the
Funds and Fund Management, administrator, 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 the
Fund's financial statements or compliance policies and the findings of any
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.
A-6
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 obtain any reports from Fund Management with
respect to the Funds' policies and procedures regarding compliance with
applicable laws and regulations. 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.
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.
A-7
VI. MANAGEMENT AND EXTERNAL AUDITOR'S 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 March 11, 2013
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[BLANK BACK COVER]
FORM OF PROXY
=============
FIRST TRUST SENIOR FLOATING
RATE INCOME FUND II
------------------------------------
IMPORTANT ANNUAL MEETING INFORMATION
------------------------------------
Using a black ink pen, mark your votes with an X as shown in [X]
this example. Please do not write outside the designated areas.
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ANNUAL MEETING PROXY CARD
-------------------------------------------------------------------------------
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE.
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A PROPOSAL -- THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
THE NOMINEES, EACH FOR A THREE-YEAR TERM.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE ELECTION OF THE NOMINEES SET FORTH.
01 - James A. Bowen FOR WITHHOLD 02 - Robert F. Keith FOR WITHHOLD
(Class III) (Class III)
[ ] [ ] [ ] [ ]
B NON-VOTING ITEMS
CHANGE OF ADDRESS -- Please print new address below.
-----------------------------------------------------
-----------------------------------------------------
COMMENTS -- Please print your comments below.
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-----------------------------------------------------
C AUTHORIZED SIGNATURES -- THIS SECTION MUST BE COMPLETED FOR YOUR VOTE TO BE
COUNTED. -- DATE AND SIGN BELOW
PLEASE SIGN AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING
AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN OR CORPORATE OFFICER,
PLEASE GIVE FULL TITLE AS SUCH.
Date (mm/dd/yyyy) -- Please print date below.
-----------------------------------------------------
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Signature 1 -- Please keep signature within the box.
-----------------------------------------------------
-----------------------------------------------------
Signature 2 -- Please keep signature within the box.
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[ SCAN AREA ]
PLEASE FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE
ENCLOSED ENVELOPE.
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--------------------------------------------------------------------------------
PROXY -- FIRST TRUST SENIOR FLOATING RATE INCOME FUND II
--------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS - SEPTEMBER 16, 2013
PROXY SOLICITED BY THE BOARD OF TRUSTEES
The undersigned holder of shares of the First Trust Senior Floating Rate Income
Fund II (the "Fund"), a Massachusetts business trust, hereby appoints
W. Scott Jardine, Mark R. Bradley, Kristi A. Maher, James M. Dykas and Erin E.
Klassman 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 4:00 p.m. 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 9, 2013, 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 adjournments or postponements 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. PLEASE VOTE, DATE AND SIGN ON REVERSE SIDE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
(Continued and to be marked, dated and signed, on the other side)