W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Name and address of agent for service)
Form N-CSR is to be used by management
investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report
that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking
roles.
A registrant is required to disclose
the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to
respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management
and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden
estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington,
DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 7. Disclosure of Proxy
Voting Policies and Procedures for Closed-End Management Investment Companies.
Proxy Voting Policies and Procedures
If an adviser exercises voting authority
with respect to client securities, Advisers Act Rule 206(4)-6 requires the adviser to adopt and implement written policies and
procedures reasonably designed to ensure that client securities are voted in the best interest of the client. This is consistent
with legal interpretations which hold that an adviser’s fiduciary duty includes handling the voting of proxies on securities
held in client accounts over which the adviser exercises investment or voting discretion, in a manner consistent with the best
interest of the client.
Absent unusual circumstances, EIP exercises
voting authority with respect to securities held in client accounts pursuant to provisions in its advisory agreements. Accordingly,
EIP has adopted these policies and procedures with the aim of meeting the following requirements of Rule 206(4)-6:
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ensuring that proxies are voted in the best interest of clients;
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addressing material conflicts that may arise between EIP’s interests and those of its clients in the voting of proxies;
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disclosing to clients how they may obtain information on how EIP voted proxies with respect to the client’s securities;
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describing to clients EIP’s proxy voting policies and procedures and, upon request, furnishing a copy of the policies
and procedures to the requesting client.
Engagement of Institutional Shareholder Services Inc.
With the aim of ensuring that proxies
are voted in the best interest of EIP clients, EIP has engaged Institutional Shareholder Services Inc. (“ISS”), as
its independent proxy voting service to provide EIP with proxy voting recommendations, as well as to handle the administrative
mechanics of proxy voting. EIP has directed ISS to utilize its Proxy Voting Guidelines in making recommendations to vote, as those
guidelines may be amended from time to time.
Conflicts of Interest in Proxy Voting
There may be instances where EIP’s
interests conflict, or appear to conflict, with client interests in the voting of proxies. For example, EIP may provide services
to, or have an investor who is a senior member of, a company whose management is soliciting proxies. There may be a concern that
EIP would vote in favor of management because of its relationship with the company or a senior officer. Or, for example, EIP (or
its senior executive officers) may have business or personal relationships with corporate directors or candidates for directorship.
EIP addresses these conflicts or appearances
of conflicts by ensuring that proxies are voted in accordance with the recommendations made by ISS, an independent third-party
proxy voting service. As previously noted, in most cases, proxies will be voted in accordance with ISS’s own pre-existing
proxy voting guidelines.
Disclosure on How Proxies Were Voted
EIP discloses to clients in its Form
ADV how clients can obtain information on how their proxies were voted, by contacting EIP at its office in Westport, CT. EIP also
discloses in the ADV a summary of these proxy voting policies and procedures and that upon request, clients will be furnished a
full copy of these policies and procedures.
It is the responsibility of the CCO
to ensure that any requests made by clients for proxy voting information are responded to in a timely fashion and that a record
of requests and responses are maintained in EIP’s books and records.
Proxy Materials
EIP personnel instructs custodians to
forward to ISS all proxy materials received on securities held in EIP client accounts.
Limitations
In certain circumstances, where EIP
has determined that it is consistent with the client’s best interest, EIP will not take steps to ensure that proxies are
voted on securities in the client’s account. The following are circumstances where this may occur:
*Limited Value: Proxies
will not be required to be voted on securities in a client’s account if the value of the client’s economic interest
in the securities is indeterminable or insignificant (less than $1,000). Proxies will also not be required to be voted for any
securities that are no longer held by the client’s account.
*Securities Lending Program:
When securities are out on loan, they are transferred into the borrower’s name and are voted by the borrower, in its discretion.
In most cases, EIP will not take steps to see that loaned securities are voted. However, where EIP determines that a proxy vote,
or other shareholder action, is materially important to the client’s account, EIP will make a good faith effort to recall
the security for purposes of voting, understanding that in certain cases, the attempt to recall the security may not be effective
in time for voting deadlines to be met.
*Unjustifiable Costs: In certain
circumstances, after doing a cost-benefit analysis, EIP may choose not to vote where the cost of voting a client’s proxy
would exceed any anticipated benefits to the client of the proxy proposal.
Oversight of Policy
The Chief Compliance Officer
(“CCO”) will follow the following procedures with respect to the oversight of each proxy advisory firm retained by
the Adviser(s):
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·
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Periodically, but no less frequently than semi-annually, sample proxy votes to review whether they
complied with the Advisers’ proxy voting policies and procedures including a review of those items that relate to certain
proposals that may require more analysis (e.g. other than voting for directors).
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·
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Collect information, no less frequently than annually, reasonably sufficient to support the conclusion
that the proxy voting service provide has the capacity and competency to adequately analyze proxy issues. In this regard,
the CCO shall consider, among other things:
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·
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the adequacy and quality of the proxy advisory firm’s staffing and personnel;
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the robustness of its policies and procedures regarding its ability to (i) ensure that its proxy
voting recommendations are based on current and accurate information and (ii) identify and address any conflicts of interest; and
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·
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any other considerations that the CCO believes would be appropriate in considering the nature and
quality of the services provided by the proxy voting service.
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For purposes of these
procedures, the CCO may rely upon information posted by a proxy advisory firm on its website, provided that the proxy advisory
firm represents that the information is complete and current.
Recordkeeping on Proxies
In it the responsibility of EIP’s
CCO to ensure that the following proxy voting records are maintained:
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·
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a copy of EIP’s proxy voting policies and procedures;
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a copy of all proxy statements received on securities in client accounts (EIP may rely on ISS or
the SEC’s EDGAR system to satisfy this requirement);
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a record of each vote cast on behalf of a client (EIP relies on ISS to satisfy this requirement);
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a copy of any document prepared by EIP that was material to making a voting decision or that memorializes
the basis for that decision;
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a copy of each written client request for information on how proxies were voted on the client’s
behalf or for a copy of EIP’s proxy voting policies and procedures, and
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·
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a copy of any written response to any client request for information on how proxies were voted
on their behalf or furnishing a copy of EIP’s proxy voting policies and procedures.
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The
CCO will see that these books and records are made and maintained in accordance with the requirements and time periods provided
in Rule 204-2 of the Advisers Act.
For any registered investment
companies advised by EIP, votes made on its behalf will be stored electronically or otherwise recorded so that they are available
for preparation of the Form N-PX, Annual Report of Proxy Voting Record of Registered Management Investment Company.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a)(1)
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Identification of Portfolio Managers or Management Team Members and Description
of Role of Portfolio Managers or Management Team Members
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Information provided as of December
27, 2019.
Energy Income Partners, LLC
Energy Income Partners, LLC (“EIP”),
located in Westport, CT, was founded in 2003 to provide professional asset management services in the area of energy-related master
limited partnerships (“MLPs”) and other high-payout securities such as pipeline companies, power utilities, YieldCos
and energy infrastructure real estate investment trusts (“REITs”). EIP mainly focuses on investments in energy-related
infrastructure assets such as pipelines, power transmission and distribution, petroleum storage and terminals that receive fee-based
or regulated income from their corporate and individual customers. EIP manages or supervises approximately $6.2 billion of assets
as of October 31, 2019. EIP advises two privately offered partnerships for U.S. high net worth individuals and an open-end mutual
fund. EIP also manages separately managed accounts and provides its model portfolio to unified managed accounts. Finally, EIP serves
as a sub-advisor to three closed-end management investment companies in addition to the Fund, two actively managed exchange-traded
funds (“ETF”), a sleeve of an actively managed ETF, a sleeve of a series of variable insurance trust, and an open-end
UCITS fund incorporated in Ireland. EIP is a registered investment advisor with the Securities and Exchange
Commission.
James J. Murchie, Co-Portfolio Manager
James J. Murchie is the Founder, Chief Executive
Officer, co-portfolio manager and a Principal of Energy Income Partners. After founding Energy Income Partners in October 2003,
Mr. Murchie and the Energy Income Partners investment team joined Pequot Capital Management Inc. (“Pequot Capital”)
in December 2004. In August 2006, Mr. Murchie and the Energy Income Partners investment team left Pequot Capital and re-established
Energy Income Partners. Prior to founding Energy Income Partners, Mr. Murchie was a Portfolio Manager at Lawhill Capital Partners,
LLC (“Lawhill Capital”), a long/short equity hedge fund investing in commodities and equities in the energy and basic
industry sectors. Before Lawhill Capital, Mr. Murchie was a Managing Director at Tiger Management, LLC, where his primary responsibility
was managing a portfolio of investments in commodities and related equities. Mr. Murchie was also a Principal at Sanford C. Bernstein.
He began his career at British Petroleum, PLC. Mr. Murchie holds a BA from Rice University and an MA from Harvard University.
Eva Pao, Co-Portfolio Manager
Eva Pao is a Principal of Energy
Income Partners and is co-portfolio manager. She has been with EIP since inception in 2003. From 2005 to mid-2006, Ms. Pao joined
Pequot Capital Management during EIP’s affiliation with Pequot. Prior to Harvard Business School, Ms. Pao was a Manager at
Enron Corp where she managed a portfolio in Canadian oil and gas equities for Enron’s internal hedge fund that specialized
in energy-related equities and managed a natural gas trading book. Ms. Pao holds degrees from Rice University and Harvard Business
School.
John K. Tysseland, Co-Portfolio Manager
John Tysseland is a Principal and
co-portfolio manager. From 2005 to 2014, he worked at Citi Research most currently serving as a Managing Director where he covered
midstream energy companies and MLPs. From 1998 to 2005, he worked at Raymond James & Associates as a Vice President who covered
the oilfield service industry and established the firm’s initial coverage of MLPs in 2001. Prior to that, he was an Equity
Trader at Momentum Securities from 1997 to 1998 and an Assistant Executive Director at Sumar Enterprises from 1996 to 1997. He
graduated from The University of Texas at Austin in 1996 with a BA in economics.
(a)(2)
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Other Accounts Managed by Portfolio Managers or Management Team Member and Potential
Conflicts of Interest
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Information provided as of October
31, 2019.
Name of Portfolio Manager or Team Member
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Type of Accounts*
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Total # of Accounts
Managed**
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Total Assets
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# of Accounts Managed for which Advisory Fee is Based on Performance
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Total Assets for which Advisory Fee is Based on Performance
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1. James Murchie
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Registered Investment Companies:
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8
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$4,450
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0
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$0
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Other Pooled Investment Vehicles:
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3
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$211
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2
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$206
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Other Accounts:
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321
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$1,203
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0
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$0
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2. Eva Pao
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Registered Investment Companies:
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8
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$4,450
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0
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$0
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Other Pooled Investment Vehicles:
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3
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$211
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2
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$206
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Other Accounts:
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321
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$1,203
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0
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$0
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3. John Tysseland
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Registered Investment Companies:
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8
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$4,450
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0
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$0
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Other Pooled Investment Vehicles:
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3
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$211
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2
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$206
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Other Accounts:
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321
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$1,203
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0
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$0
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*Examples for Types of Accounts:
Other Registered
Investment Companies: Any investment vehicle which is registered with the SEC, such as mutual funds of registered hedge funds.
Other Pooled
Investment Vehicles: Any unregistered account for which investor assets are pooled together, such as an unregistered hedge fund.
Other Accounts:
Any accounts managed not covered by the other two categories, such as privately managed accounts.
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Portfolio Manager Potential
Conflicts of Interests
Potential conflicts of interest may
arise when a fund’s portfolio manager has day-to-day management responsibilities with respect to one or more other funds
or other accounts, as is the case for the portfolio managers of the Fund. These potential conflicts may include:
Besides the Fund,
Energy Income Partners, LLC (“EIP”) portfolio managers serves as portfolio managers to separately
managed accounts and provides its model portfolio to unified managed accounts and serve as portfolio managers to three closed-end
management investment companies other than the Fund, two actively managed exchange-traded funds (ETFs), a sleeve of an ETF, a sleeve
of a series of a variable insurance trust and Irish domiciled UCITS Fund.
The portfolio managers
also serve as portfolio managers two private investment funds (the “Private Funds”), both of which have a performance
fee and an open end registered mutual fund.
EIP has written policies
and procedures regarding order aggregation and allocation that seek to ensure that all accounts are treated fairly and equitably
and that no account is at a disadvantage. EIP will generally execute client transactions on an aggregated basis when EIP believes
that to do so will allow it to obtain best execution and to negotiate more favorable commission rates or avoid certain transaction
costs that might have otherwise been paid had such orders been placed independently. EIP’s ability to implement this may
be limited by an account’s custodian, directed brokerage arrangements or other constraints limiting EIP’s use of a
common executing broker.
An aggregated order may
be allocated on a basis different from that specified herein provided that all clients receive fair and equitable treatment and
there is a legitimate reason for the different allocation. Reasons for deviation may include (but are not limited to): a client’s
investment guidelines and restrictions, available cash, liquidity or legal reasons, and to avoid odd-lots or in cases when an allocation
would result in a de minimis allocation to one or more clients.
Notwithstanding the above, due to differing tax ramifications
and compliance ratios, as well as dissimilar risk constraints and tolerances, accounts with similar investment mandates may trade
the same securities at differing points in time. Additionally, for the reasons noted above, certain accounts, including funds in
which EIP, its affiliates and/or employees (“EIP Funds”) have a financial interest including proprietary accounts,
may trade separately from other accounts and participate in transactions which are deemed to be inappropriate for other accounts
with similar investment mandates. Further, during periods in which EIP intends to trade the same securities across multiple accounts,
transactions for those accounts that must be traded through specific brokers and/or platforms will often be executed after those
for accounts over which EIP exercises full brokerage discretion, including the EIP Funds.
(a)(3)
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Compensation Structure of Portfolio Managers or Management Team Members
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Portfolio Manager Compensation
Information provided as of October 31,
2019.
The Fund’s
portfolio managers are compensated by a competitive minimum base salary and share in the profits of EIP in relation to their ownership
of EIP. The profits of EIP are influenced by the assets under management and the performance of the Funds (i.e. all Funds managed
or sub-advised by EIP) as described above. Therefore, their success is based on the growth and success for all the funds, not just
the funds that charge an incentive fee. The Fund’s portfolio managers understand that you cannot have asset growth without
the trust and confidence of investors, therefore, they do not engage in taking undue risk to generate performance.
The compensation of the EIP team members
is determined according to prevailing rates within the industry for similar positions. EIP wishes to attract, retain and reward
high quality personnel through a competitive compensation package.
(a)(4)
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Disclosure of Securities Ownership
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Information provided as of October
31, 2019.
Name
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Dollar Range of Fund Shares Beneficially Owned
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James J. Murchie
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$100,001-$500,000
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John Tysseland
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$10,001-$50,000
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Item 9. Purchases of Equity
Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
At the registrant’s organizational
meeting the registrant’s Board of Trustees adopted a Nominating and Governance Committee Charter which includes procedures
by which shareholders may recommend nominees to the registrant’s board of trustees as described below:
When a vacancy on the Board of
Trustees of a First Trust Fund 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. A shareholder
may recommend a person for nomination as a candidate at any time. If a recommendation is received with satisfactorily completed
information (as set forth below) regarding a candidate during a time when a vacancy exists on the Board or during such other time
as the Committee is accepting recommendations, the recommendation will be forwarded to the Chair of the Committee and the outside
counsel to the independent trustees. Recommendations received at any other time will be kept on file until such time as the Committee
is accepting recommendations, at which point they may be considered for nomination.
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) 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 Registrant 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 Securities Exchange Act of 1934, as amended (the “Exchange
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 Exchange 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 Registrant
(as defined in the Investment Company Act of 1940) and, if not an “interested person,” information regarding each nominee
that will be sufficient for the Registrant to make such determination; and (ii) the written and signed consent of any person to
be 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. The Committee will not consider new trustee candidates who are 72 years of age or older.
A copy of the Nominating and Governance Committee Charter
is available on the Registrant's website at www.ftportfolios.com.