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.
FIRST TRUST ADVISORS L.P.
PROXY VOTING GUIDELINES
Rule 206(4)-6 requires
advisors to adopt and implement policies and procedures reasonably designed to ensure any proxy voting on behalf of advisory clients is
conducted in a manner in the best interests of clients and address how conflicts of interest are managed between the advisor’s interest
and the interests of the client. In addition to adopting policies and procedures, advisors must disclose proxy voting policies and procedures
to its clients, offer to furnish a copy of its policies and procedures and inform clients on how to obtain records of proxy votes cast
on their behalf.
First Trust Advisors
L.P. (“FTA” or the “Advisor”) serves as investment advisor to separate managed accounts, open- and closed-end
investment companies, and other collective investments (the “Clients”). As part of these services, the Advisor has, in most
cases, agreed to be responsible for proxy voting on its Clients’ behalf. In fulfilling these duties, the Advisor has adopted the
following policies and procedures:
1. It is the Advisor’s policy
to seek and to ensure that proxies are voted consistently and in the best economic interests of the Client. FTA’s Investment Committee
is responsible for the implementation of the FTA Proxy Voting Guidelines (the “Policy”).
2. The Advisor has contracted with
Institutional Shareholder Services (“ISS”) to provide proxy research, recommendations, and voting services. ISS provides a
password protected website which is accessible to authorized FTA personnel to download upcoming proxy meeting data, including research
reports, of companies held in Client portfolios. The website can be used to view the various Client accounts for which FTA votes proxies,
to view proposed proxy votes, to enter votes for upcoming meetings and to run various reports.
FTA typically provides
a file of the securities held in each Client account to ISS nightly. ISS uses this data to update the Client holdings in their system.
3. FTA will generally follow the
ISS Proxy Voting Guidelines to vote proxies for Client accounts, so long as such guidelines are considered to be in the best interests
of the Client, and so long as there are no noted or perceived conflicts of interest. FTA’s use of the ISS Proxy Voting Guidelines
is not intended to constrain FTA’s consideration of any proxy proposal, and there may be times when FTA deviates from the ISS Proxy
Voting Guidelines. FTA retains final authority and fiduciary responsibility for proxy voting.
In certain circumstances,
where FTA has determined that it is consistent with the Client’s best interest, FTA will not take steps to ensure that proxies are
voted on securities in the Client’s accounts. The following are circumstances where this may occur:
(a) 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.
(b) 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, FTA will not take steps to see that loaned securities are recalled to be voted. However, where FTA determines
that a proxy vote, or other shareholder action, is materially important to the Client’s account, FTA 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.
(c) Unjustifiable Costs.
In certain circumstances, after doing a cost-benefit analysis, FTA 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 (e.g. foreign securities).
(d) International Markets
Share Blocking. In international markets where share blocking applies, FTA typically will not, but reserves the right to, vote proxies
due to liquidity constraints. Share blocking is the “freezing” of shares for trading purposes at the custodian/sub-custodian
bank level in order to vote proxies. While shares are frozen, they may not be traded. Therefore, the potential exists for a pending trade
to fail if trade settlement falls on a date during the blocking period.
4. On a weekly basis, a member
of FTA’s Portfolio and Product Management Department reviews ISS’ Level Classification and Quality Score of new proxies. For
any proxy meeting deemed material1 a copy of
the ISS research report will be downloaded and saved. All other matters will be reviewed only at the discretion of FTA’s Investment
Committee, Portfolio Management or Research. The downloaded ISS research reports are submitted to FTA’s Research Department for
review and to determine if they agree with ISS’ recommendations. Research will review ISS’ and the target company’s
management recommendation and may review information publicly available about the target company. This includes original and subsequent
amendments to ISS’ research report, EDGAR filings and any noted conflicts of interest. The Research Department’s decision
will be communicated to FTA’s Investment Committee.
1
Materiality is generally defined as any proxy with a Classification Level of 4 or higher or a target company’s
governance Quality Score of 10. See below for a description of Classification Levels. Quality Score indicates a company’s
governance risk (board structure, compensation programs, shareholder rights, and audit and risk oversight). The lowest score of 1 indicates
relatively higher quality governance practices and relatively lower governance risk and conversely, the highest score of 10 indicates
relatively higher governance risk.
For fund Clients relying
on Section 12(d)(1)(F) of the 1940 Act or applicable exemptive relief, FTA will vote proxies for investment company securities held by
such funds in the same proportion as all other holders of such securities (i.e. mirror or echo voting) to the extent possible.
5. FTA may determine voting in
accordance with the ISS recommendations is not in the best interests of a Client. Whenever a conflict of interest arises between ISS and
a target company subject to a proxy vote, the Advisor will consider the recommendation of the company and what the Advisor believes to
be in the best interests of the Client and will vote the proxy without using the analyses of ISS. If FTA has knowledge of a material conflict
of interest between itself and a Client, the Advisor shall vote the applicable proxy in accordance with the ISS recommendations to avoid
such conflict of interest. If there is a decision to go against the ISS recommendation, FTA’s Investment Committee will document
the reasoning for the decision and instruct ISS to change its vote to reflect this decision.
With respect to fund
and variable annuity sub-account Clients, if there is a conflict of interest between fund shareholders and FTA or other fund service providers,
FTA will vote the proxy based on the recommendations of ISS to avoid such conflict of interest.
6. If a Client requests the Advisor
to follow specific voting guidelines or additional guidelines, the Advisor shall review the request and follow such guidelines, unless
the Advisor determines that it is unable to follow such guidelines. In such case, the Advisor shall inform the Client that it is not able
to follow the Client’s request.
7. FTA receives various reports
from ISS on a quarterly basis. These reports include, among other things, a proxy summary of all proxies voted during the prior quarter,
a list of all proxies that were not voted and the reason. FTA will periodically review a random sample of the votes recommended by ISS
to ensure they are consistent with the Voting Guidelines and report any inconsistencies to FTA’s Investment Committee. A list of
proxies not voted for the First Trust funds and reason why is provided to Legal for inclusion in the quarterly First Trust funds board
book.
8. Any Client requests for a copy
of FTA’s proxy voting policies and procedures, voting guidelines, or voting results must be forwarded to Compliance for review and
response.
Shareholders of any
fund managed by FTA can review the proxy voting guidelines on the First Trust Fund’s website www.ftportfolios.com
and a fund’s voted proxies (if any) relating to portfolio securities during the most recent 12-month period ended June 30 is available
upon request or by accessing EDGAR from the SEC’s website at www.sec.gov. This Policy will be provided
with each advisory contract and will also be described and provided with the Form ADV, Part 2A.
9. FTA shall provide reasonable
oversight of ISS. FTA will seek to ascertain whether ISS has the capacity and competency to adequately analyze proxy issues. Specific
oversight responsibilities will include the following:
(a)
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On at least an annual basis, if not more frequent, FTA will:
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(i)
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conduct a due diligence review of ISS;
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(ii)
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review the adequacy and quality of the proxy advisory firm’s staffing and personnel
and technology;
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(iii)
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monitor changes to the ISS guidelines and disclosed conflicts of interest on at least an
annual basis to determine that such guidelines and potential conflicts continue to result in a proxy voting policy that is in the best
interest of clients; and
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(iv)
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review whether ISS has identified any recommendation based on a material factual error. If
so, FTA’s Investment Committee shall investigate the error and evaluate whether ISS is taking steps to mitigate making such errors
in the future.
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10. Recordkeeping
FTA will maintain
the following records relating to proxy voting:
(a)
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a copy of this Policy;
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(b)
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a copy of each proxy form for which it is responsible to vote;
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(c)
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a copy of each proxy solicitation, including proxy statements and related materials with
regard to each proxy issue it votes;
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(d)
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documents relating to the identification and resolution of conflicts of interest, if any;
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(e)
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any documents created by FTA that were material to a proxy voting decision or that memorialized
the basis for that decision; and
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(f)
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a copy of each written request from any Client for information on how FTA voted proxies on
the Client’s behalf, and a copy of any written response by FTA to any written or oral request for information by a Client on how
FTA voted proxies for that Client’s account.
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11. ISS, on FTA’s behalf,
will maintain the following records relating to proxy voting:
(a)
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a copy of each proxy form (as voted);
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(b)
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a copy of each proxy solicitation, including proxy statements and related materials with
regard to each vote;
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(c)
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documents relating to the identification and resolution of conflicts of interest it identifies,
if any; and
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(d)
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any documents created by ISS that were material to a proxy voting decision or that memorialized
the basis for that decision.
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12. These records are either maintained
at FTA’s office or are electronically available to FTA through access to ISS’s portal.
ISS Level Classification Descriptions
Level 1 – Election of directors
(except for proxy contests); fix number of directors; ratification of auditors; name change; change in date of time of meeting; adjourn
meeting; other business; can include shareholder proposals.
Level 2 – Employee stock purchase
plans; increase in stock (except for private placements); reverse stock splits; standard corporate governance provisions (declassifying
the board, supermajority votes, etc.); social/environmental/human rights proposals; standard mutual fund proposals (except for advisory
agreements, proposals to open-end the fund).
Level 3 – Compensation Plans.
Level 4 – Private Placements; formation
of a holding company; anti-takeover proposals (poison pills, fair price provisions, etc.); reincorporation; director and officer liability
indemnification; conversion of securities; liquidation of assets; mutual fund advisory agreements.
Level 5 – Mergers; acquisitions;
sale of assets; conversion of closed-end fund to open-end; reorganization; restructuring.
Level 6 – Proxy Contests.
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Adopted:
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September 15, 2003
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Amended:
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December 10, 2007
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Amended:
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September 21, 2009
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Amended:
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September 12, 2016
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Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
(a)(1) Identification of Portfolio Manager(s) or Management
Team Members and Description of Role of Portfolio Manager(s) or Management Team Members.
Information provided as of January 7, 2022.
The Securitized Products Group of First Trust
Advisors L.P. is responsible for the day–to-day management of the registrant’s portfolio. The Securitized Products group has
been led by James Snyder and Jeremiah Charles since 2013 and was previously known as the Mortgage Securities Team.
James Snyder. Mr. Snyder is a Portfolio
Manager for the First Trust Securitized Products Group. Prior to joining First Trust in 2013, Mr. Snyder worked as a Senior Portfolio
Manager at Fort Sheridan Advisors where he managed mortgage portfolios for institutional clients. Mr. Snyder has led several mortgage
trading and portfolio groups at Deerfield Capital, Spyglass Capital & Trading and American Express Financial Advisors. Mr. Snyder
managed AXP Federal Income Fund and developed mortgage trading strategies for Spyglass Capital and Deerfield’s Mortgage REIT and
Opportunity Fund. Mr. Snyder holds a B.S. and M.A. in Economics from DePaul University and an MBA from University of Chicago Booth School
of Business.
Jeremiah Charles. Mr. Charles is a Portfolio
Manager for the First Trust Securitized Products Group. Prior to joining First Trust in 2013, Mr. Charles worked as a Vice President of
Mortgage Product Sales for CRT Capital where he advised pension funds, hedge funds, and institutional money managers. Before joining CRT
in 2011, Mr. Charles spent 6 years with Deerfield Capital Management LLC as a Senior Vice President and Senior Portfolio Manager for the
Mortgage Trading team. He began his professional career as an Analyst at Piper Jaffray. Mr. Charles holds a B.S. in Finance from the Leeds
School of Business at the University of Colorado, and a M.S. in Real Estate Finance with Honors from the Charles H. Kellstadt Graduate
School of Business at DePaul University.
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(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, 2021.
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. Jeremiah Charles
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Registered Investment Companies:
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5
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$7,395,448,604
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0
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$ 0
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Other Pooled Investment Vehicles:
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0
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$ 0
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0
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$ 0
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Other Accounts:
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0
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$ 0
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0
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$ 0
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2. James Snyder
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Registered Investment Companies:
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5
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$7,395,448,604
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0
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$ 0
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Other Pooled Investment Vehicles:
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0
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$ 0
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0
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$ 0
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Other Accounts:
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0
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$ 0
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0
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$ 0
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*Information excludes the registrant.
Portfolio Manager Material Conflicts of Interest
Potential
conflicts of interest may arise when a portfolio manager of the registrant has day-to-day management responsibilities with respect to
one or more other funds or other accounts. The First Trust Securitized Products Group adheres
to its trade allocation policy utilizing a pro-rata methodology to address this conflict.
First Trust and its
affiliate, First Trust Portfolios L.P. (“FTP”), have in place a joint Code of Ethics and Insider Trading Policies and Procedures
that are designed to (a) prevent First Trust personnel from trading securities based upon material inside information in the possession
of such personnel and (b) ensure that First Trust personnel avoid actual or potential conflicts of interest or abuse of their positions
of trust and responsibility that could occur through such activities as front running securities trades for the registrant. Personnel
are required to have duplicate confirmations and account statements delivered to First Trust and FTP compliance personnel who then compare
such trades to trading activity to detect any potential conflict situations.
(3) Compensation Structure
of Portfolio Managers or Management Team Members
Portfolio Manager Compensation
Information provided
as of October 31, 2021.
The compensation structure
at First Trust is based on a fixed salary and discretionary bonus determined by First Trust management. Salaries are based on each individual’s
position and overall value to First Trust. Bonuses are determined by First Trust management and are based on individual performance, the
commitment to team performance and profitability, and the profitability of First Trust. Certain internal portfolio managers have an indirect
ownership stake in the firm and will therefore receive their allocable share of ownership-related distributions.
(4)(a) Disclosure of Securities Ownership
Information provided as of October 31, 2021.
Name
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Dollar Range of Fund Shares
Beneficially Owned
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Jeremiah Charles
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None
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James Snyder
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None
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Item 9. Purchases of Equity Securities
by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures
by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after
the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required
by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.