FAV First Trust Dividend And Income Fund of Beneficial Interest

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=FAV].
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 THE ADVISOR 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, please vote your proxy as soon as possible either by mail, by telephone or through the Internet, as indicated on the enclosed proxy card. If voting by mail, 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 3:30 P.M. CENTRAL TIME, ON MONDAY, SEPTEMBER 16, 2013. (However, proxies received after this date may still be voted in the event of an adjournment or postponement to a later date.)

BACKGROUND AND REASON FOR VOTE

Aviance Capital Management, LLC ("Aviance"), an affiliate of the Advisor, currently serves as the investment sub-adviser to the Fund under an Investment Sub-Advisory Agreement dated January 3, 2011 among the Fund, Aviance and the Advisor (the "Aviance Sub-Advisory Agreement"), that will expire on June 30, 2013. At a meeting of the Board of Trustees of the Fund (the "Board") held on June 9-10, 2013 (the "Board Meeting"), the Board considered renewal of the Aviance Sub-Advisory Agreement for another one-year period upon its expiration. Over the course of several meetings prior to the Board Meeting, in connection with its ongoing oversight of the Fund, the Board had considered information provided by the Advisor and held discussions regarding various alternatives presented by the Advisor to address the Fund's underperformance (in terms of both share price and net asset value) relative to its benchmarks and peer group average and to narrow its trading discount. Ultimately, the Advisor recommended that the Aviance Sub-Advisory Agreement not be renewed and that Aviance be replaced by Chartwell. Accordingly, after careful consideration, based on the Advisor's recommendation, the Board determined that the appointment of Chartwell as the Fund's new investment sub-adviser was in the best interests of the Fund and did not renew the Aviance Sub-Advisory Agreement at the Board Meeting.

As a related matter, because it appears that certain of the Fund's investment strategies may have contributed to its performance issues, the Board, at the Board Meeting, approved a repositioning of the Fund's portfolio (the "Repositioning") including, among other things, certain changes to the Fund's investment strategies, including changes proposed by Chartwell, as described in more detail below. In making its recommendation that Chartwell be appointed as the Fund's sub-adviser, the Advisor indicated to the Board that it believed Chartwell was well-qualified to serve as sub-adviser to the Fund both during the Repositioning transition and once the Repositioning is completed, and noted Chartwell's experience and expertise in managing investment strategies similar to certain of those contemplated by the Repositioning (i.e., investment strategies for the Equity Component and the Options Strategy, as defined below), as well as its track record in serving as the investment sub-adviser to the First Trust Enhanced Equity Income Fund, another closed-end fund in the First Trust Fund Complex overseen by the Board.

As permitted under the Investment Company Act of 1940, as amended (the "1940 Act"), at the Board Meeting, to ensure the continuation of investment sub-advisory services to the Fund after the expiration of the Aviance Sub-Advisory Agreement on June 30, 2013 (the "Termination Date"), the Board, including a majority of the Trustees who are not "interested persons," as that term is defined in the 1940 Act, of the Fund (such Trustees, the "Independent Trustees"), approved an interim sub-advisory agreement (the "Interim Sub-Advisory Agreement") among the Advisor, the Fund and Chartwell. The Interim Sub-Advisory Agreement will become effective on July 1, 2013. In addition, at the Board Meeting, the Board, including a majority of the Independent Trustees, approved, subject to shareholder approval, a new investment sub-advisory agreement (the "New Sub-Advisory Agreement") among the Advisor, the Fund and Chartwell.

Section 15(a) of the 1940 Act generally requires that investment advisory agreements (including investment sub-advisory agreements) be approved by shareholders; however, Rule 15a-4 promulgated under the 1940 Act ("Rule 15a-4") provides a temporary exemption from the shareholder approval requirement if a previous advisory contract was terminated due to certain events, including failure to renew the contract. Pursuant to Rule 15a-4, the Interim Sub-Advisory

Agreement will be in effect no longer than through November 27, 2013 (i.e., 150 days after the Termination Date, referred to as the "Interim Termination Date"). If shareholders of the Fund do not approve the New Sub-Advisory Agreement by the Interim Termination Date, the Board will take such action as it deems to be in the best interests of the Fund. The Interim Sub-Advisory Agreement will automatically terminate upon the approval by shareholders of the New Sub-Advisory Agreement. In addition, the Interim Sub-Advisory Agreement may be terminated by action of the Board or by a vote of a majority of the outstanding voting securities (as defined in the 1940 Act and rules and regulations promulgated thereunder) of the Fund upon 60 days' written notice to Chartwell.

DESCRIPTION OF THE REPOSITIONING

A brief description of the Repositioning is set forth below. The Advisor recommended and the Board approved the changes to the Fund contemplated by the Repositioning, which do not require shareholder approval, although implementation of certain of the investment strategy changes requires 60 days' advance notice to shareholders. The description of the Repositioning set forth below and elsewhere in the proxy materials, together with the separate notice entitled "Important Notice Regarding Change in Investment Policy" that accompanies the proxy materials, constitute such 60 days' advance notice.

GOALS OF THE REPOSITIONING

The Advisor and the Board believe that the Repositioning, which, in general terms, contemplates a high income generating equity strategy combined with the addition of leverage, the proceeds of which are expected to be invested in Senior Loans and High Yield Debt Securities (as such terms are defined below), may improve the Fund's performance and could lead to increased secondary market demand for the Fund's Shares. More specifically, because the Repositioning includes, in addition to an Equity Component, a Senior Loan/High Yield Debt Component (as such terms are defined below), the potential combination of income generated from dividend yield, modest capital appreciation assumptions, option income from the Options Strategy (as defined below) and interest income from Senior Loans and High Yield Debt Securities may improve the Fund's net asset value performance relative to its benchmarks as well as the Fund's yield. Moreover, the use of leverage, while introducing certain additional risks, may generate a higher yield for the Fund, which may help to narrow the Fund's trading discount.

INVESTMENT OBJECTIVES

The Fund's current primary investment objective is to seek a high level of current income. It has a secondary objective of capital appreciation. The Fund's investment objectives will not change as a result of the Repositioning.

INVESTMENT STRATEGIES

Pre-Repositioning. Currently, under normal market conditions, the Fund invests at least 80% of its Currently Defined Managed Assets (defined as the average daily gross asset value of the Fund (which includes assets attributable to the Fund's Preferred Shares, if any, and the principal amount of borrowings (i.e., issuance by the Fund of commercial paper or notes and/or other borrowings)), minus the sum of the Fund's accrued and unpaid dividends on any outstanding Preferred Shares and accrued liabilities (other than the principal amount of any borrowings incurred and the liquidation preference of any outstanding Preferred Shares)) in a diversified portfolio of dividend-paying multi-cap equity securities of both U.S. and non-U.S. issuers that the Fund's sub-adviser believes offer the potential for attractive income and/or capital appreciation. Equity securities in which the Fund may invest include common stocks, preferred stocks, convertible securities, American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and warrants, all of which generally trade on a U.S. national securities exchange. The Fund may, from time to time, also invest a portion of

its Currently Defined Managed Assets in real estate investment trusts ("REITs"), master limited partnerships ("MLPs"), exchange-traded funds ("ETFs") and U.S. government securities, and does not invest more than 20% of its Currently Defined Managed Assets in MLPs. The Fund currently combines four quantitative and fundamental research-driven investment strategies -- value, growth, dividend capture rotation and special dividends identification -- with the aim of providing a balanced approach to income, capital gains and tax efficiency. The Fund currently also may write call options on index and single stock options on up to 50% of the Fund's portfolio value.

The Fund may seek to enhance the level of dividend income it receives by engaging in dividend capture trading. In a dividend capture trade, the Fund sells a stock on or shortly after the stock's ex-dividend date and uses the sale proceeds to purchase one or more other stocks that are expected to pay dividends before the next dividend payment on the stock being sold.

In addition, the Fund may, but is not required to, use various strategic transactions to seek to: (i) reduce interest rate risks arising from any use of financial leverage; (ii) facilitate portfolio management; (iii) mitigate risks, including interest rate, currency and credit risks; and/or (iv) earn income. The Fund may purchase and sell derivative investments such as exchange-listed and over-the-counter put and call options on currencies, securities, fixed-income, currency and interest rate indices and other financial instruments, purchase and sell financial futures contracts and options thereon, and enter into various interest and currency transactions such as swaps, caps, floors or collars or credit transactions and credit derivative instruments. The Fund also may purchase derivative instruments that combine features of these instruments.

To generate additional income, the Fund may lend portfolio securities in an amount up to 20% of Currently Defined Managed Assets to broker-dealers, major banks or other recognized domestic institutional borrowers of securities.

Repositioned Fund. Upon completion of the Repositioning, it is anticipated that the Fund will seek to achieve its investment objectives by investing at least 80% of its Managed Assets (as defined below) in a diversified portfolio of dividend-paying multi-cap equity securities, debt securities and senior, secured floating rate loans ("Senior Loans") that offer the potential for attractive income and/or capital appreciation. The Fund's portfolio will consist of two components: (1) the "Equity Component," which will consist primarily of equity securities of both U.S. and non-U.S. issuers of any market capitalization that are readily traded on a registered U.S. national securities exchange ("Equity Securities"); and (2) the "Senior Loan/High Yield Debt Component," which will primarily consist of Senior Loans and debt securities that are rated below investment grade (i.e., "junk bonds") or unrated at the time of purchase ("High Yield Debt Securities"). "Managed Assets" means the average daily gross asset value of the Fund (which includes assets attributable to the Fund's Preferred Shares, if any, and the principal amount of Borrowings (as defined below)), minus the sum of the Fund's accrued and unpaid dividends on any outstanding Preferred Shares and accrued liabilities (other than the principal amount of any Borrowings incurred and notes issued by the Fund). For purposes of determining Managed Assets, the liquidation preference of any outstanding Preferred Shares is not treated as a liability. "Borrowings" means the issuance of notes or other borrowings. It is currently anticipated that Chartwell will be primarily responsible for the day-to-day management of the Equity Component as well as the Options Strategy (defined and described below), and the Advisor, through its Leveraged Finance Investment Team (which currently manages or supervises over $900 million in senior secured bank loans and high yield bonds), will be primarily responsible for the Senior Loan/High Yield Debt Component.

The Equity Securities in which the Fund may invest include common stocks, preferred securities, convertible securities, ADRs, including American

Depositary Shares ("ADS"), EDRs, GDRs and warrants, all of which will generally trade on a registered U.S. national securities exchange. In addition, Equity Securities also include (including for purposes of the 80% test set forth above) investments in REITs, MLPs and investment companies, including ETFs and business development companies ("BDCs").

Further, under normal market conditions, the Fund also intends to apply the following guidelines to its investments:

o the Fund will invest a majority of its Managed Assets in a diversified portfolio of dividend-paying Equity Securities;

o the Fund may invest up to 25% of its Managed Assets in U.S. dollar-denominated Equity Securities of non-U.S. issuers;

o the Fund will not invest more than 20% of its Managed Assets in MLPs;

o the Fund may invest up to 10% of its Managed Assets in Equity Securities of other investment companies (including ETFs and BDCs) that invest primarily in securities of the type in which the Fund may invest directly; and

o up to 100% of the Senior Loan/High Yield Debt Component may consist of below-investment grade securities.

On an ongoing and consistent basis, the Fund expects to write (sell) covered call options on equity indices and/or Equity Securities within the Equity Component. It is intended that writing (selling) call options will provide the Fund with current income (in the form of premiums received for writing (selling) the call options) and may enhance the Fund's total return in a neutral to modestly rising market and provide a partial hedge in a declining market. The Fund will normally write (sell) covered call options against equity indices and/or Equity Securities with strike prices and expiration dates that are collectively intended to provide risk/reward characteristics that are consistent with the Fund's investment objectives (the "Options Strategy"). Such call options would give the option holders the right, but not the obligation, to purchase the security underlying the option (or the cash value of the index underlying the option) at a specified price (the "strike price") on one or more future dates (each, an "expiration date"). Upon exercise, the writer of an option on a security has the obligation to deliver the underlying security upon payment of the strike price or to pay the strike price upon delivery of the underlying security. Upon exercise, the writer of an option on an index is required to pay the difference between the cash value of the index and the exercise price multiplied by the specified multiplier for the index option.

The Fund intends to write call options only if they are "covered." The Fund will not write (sell) "naked" call options (e.g., options on more Equity Securities than are held in the Fund's portfolio). As a result, the number of call options the Fund can write (sell) on individual securities will normally be limited by the number of securities in the Equity Component. In the case of a call option on an individual security, the option will be "covered" if the Fund owns the security underlying the call or has an absolute and immediate right to acquire that security without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by the Fund's investment sub-adviser (in accordance with procedures approved by the Board) in such amount are segregated by the Fund's custodian) upon conversion or exchange of other securities held by the Fund. In the case of a call option on an index, the option will be "covered" if the Fund owns a portfolio of stocks substantially replicating the movement of the index. A call option on a security or index also will be "covered" if the Fund holds a call on the same security or index as the call written where the strike price of the call held is (i) equal to or less than the strike price of the call written; or (ii) greater than the strike price of the call written, provided the difference is maintained by the Fund in earmarked or segregated cash or liquid securities.

It is anticipated that the Fund will primarily write (sell) options that are "out-of-the-money" (i.e., that have a strike price that is generally above the current market value of the underlying security or the current cash value of the underlying index); however, the Fund may also write (sell) options that are "in-the-money" (i.e., that have a strike price that is generally below the current market value of the underlying security or the current cash value of the underlying index) or "at-the-money" (i.e., that have a strike price that is equal to the current market value of the underlying security or the current cash value of the underlying index).

In addition to writing (selling) covered call options, the Fund may enter into certain other derivative transactions ("Strategic Transactions") to seek to manage the risks of the Fund's portfolio securities or for other purposes to the extent the Advisor or the sub-adviser determines that the use of Strategic Transactions is consistent with the Fund's investment objectives and policies and applicable regulatory requirements. For instance, the Fund may purchase call options and purchase and sell put options on equity indices and/or Equity Securities within the Equity Component. The market value of the Fund's Strategic Transactions, if any, will be counted towards the Fund's policy to invest, under normal market conditions, at least 80% of its Managed Assets in Equity Securities, Senior Loans and High Yield Debt Securities, as discussed above, to the extent the Strategic Transactions have economic characteristics similar to such Equity Securities, Senior Loans and High Yield Debt Securities. Certain of the Fund's Strategic Transactions, if any, may provide investment leverage to the Fund's portfolio. Other than writing (selling) covered call options, the Fund does not intend to enter into Strategic Transactions as a principal part of its investment strategy.

To generate additional income, the Fund may lend portfolio securities in an amount up to 20% of Managed Assets to broker-dealers, major banks or other recognized domestic institutional borrowers of securities. The Fund intends to engage in lending portfolio securities only when such lending is fully secured by investment grade collateral held by an independent agent.

LEVERAGE

Although it is authorized to utilize leverage, the Fund currently has no outstanding leverage. As a result of the Repositioning, the Fund is initially expected to utilize leverage through Borrowings in an amount up to 25% of the Fund's Managed Assets to seek to enhance its potential for current income. To the extent leverage is used, the Fund is expected to invest the funds raised through leverage in Senior Loans and High Yield Debt Securities. The Fund initially anticipates that, under normal market conditions, it will utilize leverage through Borrowings under a revolving credit facility representing approximately 25% of the Fund's Managed Assets.

RISKS

Many of the principal risks of investing in the Fund currently will also apply to the repositioned Fund. For example, the Fund will continue to be subject to, among others, equity securities risk; investment and market risk; management risk; MLP risk; non-U.S. securities risk; convertible securities risk; and portfolio turnover risk. However, as a result of the Repositioning, including in particular the addition of the Senior Loan/High Yield Debt Component, the implementation of the Options Strategy and the anticipated use of leverage, the Fund will be exposed to certain new and/or heightened risks that are associated with these strategies, including the following:

Senior Loan Risk. An investment in Senior Loans involves risk that the borrowers under Senior Loans may default on their obligations to pay principal or interest when due. Such payment defaults would result in a reduction of income to the Fund, a reduction in the value of the investment and a potential decrease in the net asset value of the Fund. An economic downturn would generally lead to a higher non-payment rate, and a Senior Loan may lose significant market value before a default occurs. Moreover, any specific collateral used to secure a Senior Loan may decline in value or become illiquid,

which would adversely affect the Senior Loan's value. If the Fund acquires a Senior Loan from another lender, for example, by acquiring a participation, the Fund may also be subject to credit risks with respect to that lender. Senior Loans are typically structured as floating rate instruments in which the interest rate payable on the obligation fluctuates with interest rate changes. As a result, the yield on Senior Loans will generally decline in a falling interest rate environment causing the Fund to experience a reduction in the income it receives from a Senior Loan. Senior Loans are generally below investment grade quality and may be unrated at the time of investment; are generally not registered with the Securities and Exchange Commission ("SEC") or state securities commissions; and are generally not listed on any securities exchange. In addition, the amount of public information available on Senior Loans is generally less extensive than that available for other types of assets.

Debt Securities Risk. Debt securities, including High Yield Debt Securities, are subject to certain risks, including: (i) issuer risk (the risk that the value of debt securities may decline for a number of reasons which directly relate to the issuer); (ii) interest rate risk (the risk that debt securities will decline in value because of changes in market interest rates);
(iii) liquidity risk (the risk that the securities will not be able to be sold at the time desired by the Fund or at prices approximating the value at which the Fund is carrying the securities on its books); (iv) prepayment risk (the risk that during periods of declining interest rates, the issuer of a security may exercise its option to prepay principal earlier than scheduled, forcing the Fund to reinvest the proceeds from such prepayment in lower yielding securities); and (v) reinvestment risk (the risk that income from the Fund's portfolio will decline if the Fund invests the proceeds from matured, traded or called bonds at market interest rates that are below the Fund portfolio's current earnings rate).

Credit and Below Investment Grade Securities Risk. Credit risk is the risk that an issuer of a security may be unable or unwilling to make dividend, interest and principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability or willingness to make such payments. Credit risk may be heightened for the Fund because it may invest in below investment grade securities, such as certain of the Senior Loans and High Yield Debt Securities in which it invests, which are commonly referred to as "junk" or "high yield" securities; such securities, while generally offering higher yields than investment grade debt with similar maturities, involve greater risks, including the possibility of dividend or interest deferral, default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer's capacity to pay dividends or interest and repay principal. Below investment grade securities are issued by companies that may have limited operating history, narrowly focused operations and/or other impediments to the timely payment of periodic interest and principal at maturity. These securities are susceptible to default or decline in market value due to adverse economic and business developments and are often unsecured and subordinated to other creditors of the issuer.

Credit Rating Agency Risk. Credit ratings are determined by credit rating agencies such as Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies, Moody's Investors Service, Inc. and Fitch Ratings, Inc., and are only the opinions of such entities. Ratings assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risk or the liquidity of securities. Consequently, securities with the same maturity, duration, coupon and rating may have different yields. Any shortcomings or inefficiencies in credit rating agencies' processes for determining credit ratings may adversely affect the credit ratings of securities held by the Fund and, as a result, may adversely affect those securities' perceived or actual credit risk.

Valuation Risk. Unlike publicly traded common stock that trades on national exchanges, there is no central place or exchange for trading of certain other securities in which the Fund may invest, such as Senior Loans and High Yield Debt Securities. High Yield Debt Securities generally trade on an over-the-counter ("OTC") market which may be anywhere in the world where the buyer and seller can settle on a price. Senior Loans are typically bought and

sold by institutional investors in individually negotiated private transactions that function in many respects like an OTC secondary market. Due to the lack of centralized information and trading, the valuation of Senior Loans and High Yield Debt Securities may carry more risk than that of common stock.

Credit Crisis Liquidity and Volatility Risk. The markets for credit instruments, including Senior Loans and High Yield Debt Securities, have experienced periods of extreme illiquidity and volatility since the latter half of 2007. There can be no assurance that conditions such as those prevalent during the recent credit crisis will not occur in the future. During this period, liquidity in these markets was significantly reduced. General market uncertainty and consequent repricing risk led to market imbalances of sellers and buyers, which in turn resulted in significant valuation uncertainties in a variety of debt securities, including Senior Loans and High Yield Debt Securities. In addition, several major dealers of debt securities exited the market via acquisition or bankruptcy during this period. These conditions resulted in, and in certain cases continue to result in, greater volatility, less liquidity, widening credit spreads and a lack of price transparency, with certain debt securities remaining illiquid and of uncertain value.

Interest Rate Manipulation Risk. According to various reports, certain financial institutions, commencing as early as 2005 and throughout the global financial crisis, may have routinely made artificially low submissions in the London-Interbank Offered Rate ("LIBOR") rate setting process. Since June 2012, at least two such financial institutions have been fined a significant amount by various financial regulators in connection with allegations of manipulation of LIBOR rates. Investigations of other financial institutions for similar actions in various countries are ongoing. These developments may have adversely affected the interest rates on securities whose interest payments were determined by reference to LIBOR, including Senior Loans in which the Fund may invest. Any future similar developments could, in turn, positively or negatively impact the value of such securities owned by the Fund. In addition, regulatory actions taken in response to these developments may result in changes to the manner in which LIBOR is determined. Uncertainty as to the nature of such potential changes, including the use of alternative interest rate setting procedures, may adversely affect the trading market for LIBOR-based instruments, including Senior Loans.

Leverage Risk. The use of leverage by the Fund can magnify the effect of any losses. If the income and gains from the securities and investments purchased with such proceeds do not cover the cost of leverage, the return to the common shares will be less than if leverage had not been used. Moreover, leverage involves additional risks and special considerations for common shareholders including: (i) potentially greater volatility of net asset value and market price of common shares; (ii) the risk that fluctuations in interest rates on Borrowings and short-term debt or in the dividend rates on any Preferred Shares that the Fund may pay will reduce the return to the common shareholders or will result in fluctuations in the dividends paid on the common shares; and (iii) the effect of leverage in a declining market, which is likely to cause a greater decline in the net asset value of the common shares than if the Fund were not leveraged, which may result in a greater decline in the market price of the common shares. In addition, shareholders should be aware that the investment advisory fee payable to the Advisor will be, and the sub-advisory fee payable by the Advisor to the sub-adviser may be, higher than if the Fund did not use leverage because the definition of "Managed Assets" includes the proceeds of leverage.

Covered Call Options Risk. There are various risks associated with the Fund writing (or selling) covered call options. As the writer (seller) of a call option, the Fund would receive cash (the premium) from the purchaser of the option, and the purchaser would have the right to receive from the Fund any appreciation in the underlying security (or the cash value of the index) over the strike price upon exercise. In effect, the Fund would forgo, during the life of the option, the opportunity to profit from increases in the market value of

the underlying security or securities held by the Fund with respect to which the option was written above the sum of the premium and the strike price of the call option (which, for index options, will depend in part on the extent of correlation of the performance of the securities in the Equity Component with the performance of the relevant index), but would retain the risk of loss should the price of the underlying security or index decline. Therefore, the writing (or selling) of covered call options may limit the Fund's ability to benefit from the full upside potential of its investment strategies. In addition, the value of call options written by the Fund is determined by trading activity in the broad options market and may be adversely affected if the market for the option is reduced or becomes illiquid.

BDC Risk. Because BDCs typically invest in small and medium-sized companies, a BDC's portfolio is subject to the risks inherent in investing in smaller companies, including that portfolio companies may be dependent on a small number of products or services and may be more adversely affected by poor economic or market conditions. Some BDCs invest substantially, or even exclusively, in one sector or industry group. Accordingly, the BDC may be susceptible to adverse conditions and economic or regulatory occurrences affecting the sector or industry group, which tends to increase the BDC's volatility and risk. Investments made by BDCs are generally subject to legal and other restrictions on resale and are otherwise less liquid than publicly traded securities. BDCs are not redeemable at the option of the shareholder and they may trade in the market at a discount to their net asset value. The BDCs held by the Fund may employ the use of leverage their portfolios through borrowings or the issuance of preferred stock. While leverage often serves to increase the yield of a BDC, this leverage also subjects a BDC to increased risks, including the likelihood of increased volatility and the possibility that a BDC's common share income will fall if the dividend rate of the preferred shares or the interest rate on any borrowings rises.

Please note that the above discussion does not include all of the risks associated with an investment in the Fund, but rather briefly summarizes certain new and/or heightened risks that will be presented as a result of the Repositioning.

PORTFOLIO MANAGEMENT

It is currently expected that Bernard P. Schaffer, Douglas W. Kugler and Peter M. Schofield, all of whom are portfolio managers with Chartwell, will be responsible for the management of the Fund's portfolio allocated to the Equity Component, as well as the Options Strategy. Biographical information for these portfolio managers is set forth under "Proposal: Approval of a New Investment Sub-Advisory Agreement for the Fund -- Portfolio Management."

It is currently expected that the portfolio managers identified below, both of whom are members of the Advisor's Leveraged Finance Investment Team, which currently manages or supervises over $900 million in senior secured bank loans and high yield bonds, will be responsible for the management of the Fund's portfolio allocated to the Senior Loan/High Yield Debt Component.

WILLIAM HOUSEY, CFA
SENIOR VICE PRESIDENT, SENIOR PORTFOLIO MANAGER

William Housey, CFA, joined First Trust Advisors in June 2010 as Senior Portfolio Manager for the Leveraged Finance Investment Team and has 16 years of investment experience. Mr. Housey is a Senior Vice President of First Trust Advisors. Prior to joining First Trust Advisors, Mr. Housey was at Morgan Stanley/Van Kampen Funds, Inc. for 11 years and served as Executive Director and Co-Portfolio Manager. Mr. Housey has extensive experience in portfolio management of both leveraged and unleveraged credit products, including Senior Loans, high-yield bonds, credit derivatives and corporate restructurings. Mr. Housey received a B.S. in Finance from Eastern Illinois University and an M.B.A.

in Finance as well as Management and Strategy from Northwestern University's Kellogg School of Business. He also holds the FINRA Series 7, Series 52 and Series 63 licenses. Mr. Housey also holds the Chartered Financial Analyst designation. He is a member of the CFA Institute and the CFA Society of Chicago.

SCOTT D. FRIES, CFA
VICE PRESIDENT, PORTFOLIO MANAGER

Scott Fries, CFA, joined First Trust Advisors in June 2010 as Co-Portfolio Manager in the Leveraged Finance Investment Team and has 18 years of investment industry experience. Mr. Fries is a Vice President of First Trust Advisors. Prior to joining First Trust Advisors, Mr. Fries spent 15 years at Morgan Stanley/Van Kampen Funds, Inc, where he most recently served as Executive Director and Co-Portfolio Manager of Institutional Separately Managed Accounts. Mr. Fries received a B.A. in International Business from Illinois Wesleyan University and an M.B.A. in Finance from DePaul University. Mr. Fries holds the Chartered Financial Analyst designation. He is a member of the CFA Institute and the CFA Society of Chicago.

ASSOCIATED COSTS

The Fund pays trading costs, such as commissions or dealer mark-ups, when it buys and sells securities. It is anticipated that the Repositioning will result in some increased portfolio turnover, which will result in higher explicit (i.e., trading commissions) and implicit (i.e., dealer mark-ups) transaction costs than might otherwise be incurred. Any such costs incurred will initially reduce the total return on net asset value to shareholders. The Advisor and the Board believe that the potential benefits of the Repositioning, including potential improved market price of the Fund's Shares relative to net asset value, should outweigh the reduction in the Fund's net asset value due to the trading costs associated with the Repositioning. In addition, it should be noted that the Fund currently operates under strategies that have resulted in high portfolio turnover and the implementation of the Repositioning is anticipated to reduce the Fund's annual portfolio turnover rate going forward.

TAX EFFECTS

Although the Fund may realize gains or losses from the sale of existing portfolio securities, it is expected that the Fund's capital loss carry-forwards will offset any net realized capital gains.

NAME CHANGE

The Fund will change its name to First Trust Dividend and Income Fund on July 1, 2013.

IMPLEMENTATION

When Chartwell begins managing the Fund under the Interim Sub-Advisory Agreement effective July 1, 2013, it may employ certain investment practices and techniques that differ from those that Aviance has used in managing the Fund, but that are consistent with the strategies and policies that were set forth in the Fund's most recent prospectus and statement of additional information or that were subsequently disclosed and became effective. Otherwise, it is currently expected that the process to effect the Repositioning will begin on or about September __, 2013. The Repositioning is not contingent upon approval of the New Sub-Advisory Agreement and may still be implemented (in whole or in part) even if shareholders do not approve the New Sub-Advisory Agreement.

PROPOSAL: APPROVAL OF A NEW INVESTMENT SUB-ADVISORY AGREEMENT FOR THE FUND

INFORMATION ABOUT THE AVIANCE SUB-ADVISORY AGREEMENT

Aviance currently serves as investment sub-adviser to the Fund pursuant to the Aviance Sub-Advisory Agreement. Aviance has served as the sub-adviser to the Fund since the Fund's inception on September 20, 2007. The Aviance Sub-Advisory Agreement was last approved by shareholders of the Fund at a special meeting held on January 3, 2011 at which shareholder approval was sought because a prior sub-advisory agreement, also among the Fund, the Advisor and Aviance, had terminated as the result of an automatic assignment in connection with a change in control of the Advisor. Since the beginning of the Fund's last fiscal year, the continuation of the Aviance Sub-Advisory Agreement was approved by the Board at a meeting held on June 10-11, 2012.

For the Fund's last fiscal year, (i) the aggregate amount of advisory fees paid by the Fund to the Advisor was $749,278; and (ii) the aggregate amount of fees paid by the Advisor to Aviance under the Aviance Sub-Advisory Agreement was $374,639. In addition, the Fund paid $9,250 to the Advisor for certain services pertaining to fund reporting.

INFORMATION ABOUT CHARTWELL

General Information

Chartwell, located at 1235 Westlakes Drive, Berwyn, Pennsylvania 19312, is an SEC-registered investment advisor. Founded in 1997, Chartwell is an employee-owned investment firm focusing on institutional, sub-advisory, and private client relationships. The firm is a quality-based equity and fixed-income manager with a disciplined, team-oriented investment process. As of May 31, 2013, Chartwell had 48 employees and approximately $6.3 billion of assets under management.

Organizational Information

Chartwell is a Pennsylvania limited partnership. The general partner of Chartwell is Chartwell GP, Inc. ("Chartwell GP"), a Pennsylvania corporation that has elected to be treated as an "S corporation" for federal income tax purposes. The address of Chartwell GP is 1235 Westlakes Drive, Berwyn, Pennsylvania 19312. Chartwell GP owns 1% of Chartwell and currently has nine equal shareholders, six of whom are employees or retired employees of Chartwell, and three of whom are limited partners of Maverick Partners, L.P. ("Maverick"). Maverick, a Pennsylvania limited partnership whose general partner is Bobcat Partners, L.P., a Pennsylvania limited partnership, was formed in 1997 for the sole purpose of investing seed capital to fund the start of Chartwell's operations. Limited partnership interests in Maverick are currently held by various individuals. Maverick currently holds a minority ownership interest in Chartwell and is not actively involved in the operations of Chartwell. The remainder of the ownership interests in Chartwell (approximately 75%) are held by approximately 30 employees and retired employees of Chartwell.

The operations of Chartwell and Chartwell GP are governed by the board of directors of Chartwell GP (the "Chartwell GP Board"). The names and principal occupations of the persons who are principal executive officers of Chartwell and/or Chartwell GP and/or members of the Chartwell GP Board are set forth below:

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                                                     POSITION(S) WITH CHARTWELL AND CHARTWELL GP AND
             NAME                                                 PRINCIPAL OCCUPATION
-------------------------------  ----------------------------------------------------------------------------------------
Edward N. Antoian                Board Member and Vice President (Chartwell GP); Managing Partner and
                                 Senior Portfolio Manager (Chartwell)
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G. Gregory Hagar                 Treasurer and Secretary (Chartwell GP); Managing Partner, Chief Financial Officer and
                                 Chief Compliance Officer (Chartwell)
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R. Radcliffe Hastings            Board Member (Chartwell GP); Private Investor
-------------------------------  ----------------------------------------------------------------------------------------
Michael J. McCloskey             Vice President (Chartwell GP); Managing Partner, President and Director of
                                 Client Services and Marketing (Chartwell)
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Timothy J. Riddle                Board Member and President (Chartwell GP); Managing Partner and
                                 Chief Executive Officer (Chartwell)
-------------------------------  ----------------------------------------------------------------------------------------
Bernard P. Schaffer              Board Member and Vice President (Chartwell GP); Managing Partner and
                                 Senior Portfolio Manager (Chartwell)
-------------------------------  ----------------------------------------------------------------------------------------

The business address for each is 1235 Westlakes Drive, Suite 400, Berwyn, Pennsylvania 19312.

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              FUND NAME                     ASSETS UNDER MANAGEMENT AS OF           ANNUAL RATE OF COMPENSATION
                                                     MAY 31, 2013
---------------------------------------  ------------------------------------  -------------------------------------
First Trust Enhanced Equity Income           Approximately $288.2 million            0.50% of managed assets*
Fund
---------------------------------------  ------------------------------------  -------------------------------------
         * Chartwell has not waived, reduced or otherwise agreed to reduce its compensation for sub-advisory services
provided to the Equity Income Fund.

The Interim Sub-Advisory Agreement

Many of the terms of the Interim Sub-Advisory Agreement are substantially the same as those of the Aviance Sub-Advisory Agreement; however, in addition to various updates, there are differences in provisions relating to the effective date and the term. Unless terminated sooner in accordance with its terms, the Interim Sub-Advisory Agreement will continue to be in effect until the Interim Termination Date or until shareholders of the Fund approve the New Sub-Advisory Agreement, whichever occurs first. In addition, the Interim Sub-Advisory Agreement may be terminated by action of the Board or by a vote of a majority of the outstanding voting securities (as defined in the 1940 Act and the rules and regulations thereunder) of the Fund upon 60 calendar days' written notice to the sub-adviser, without payment of any penalty.

PORTFOLIO MANAGEMENT

It is currently expected that the portfolio managers identified below will be responsible for the day-to-day management of the Fund's portfolio under the Interim Sub-Advisory Agreement and that they will continue to manage the portion of the Fund's portfolio allocated to the Equity Component, as well as the Options Strategy, if shareholders approve the New Sub-Advisory Agreement.

BERNARD P. SCHAFFER
MANAGING PARTNER, SENIOR PORTFOLIO MANAGER

Mr. Schaffer is a founding partner of Chartwell and has 42 years of investment industry experience. He serves as senior portfolio manager for Chartwell's closed-end fund and hedged large-cap equity strategies and focuses on securities in the Energy and Financials sectors. He was employed as a Senior Portfolio Manager at Delaware Investment Advisers from 1990 to 1997, managing closed-end equity income funds that utilized option strategies to generate portfolio gains. Mr. Schaffer earned a Bachelor's degree in Economics from Villanova University and an MBA from the University of Pennsylvania's Wharton School.

DOUGLAS W. KUGLER
CFA PRINCIPAL, SENIOR PORTFOLIO MANAGER

Mr. Kugler is a portfolio manager on Chartwell's large-cap equity portfolio management team and has 16 years of investment industry experience. His areas of focus include the Consumer Discretionary, Energy, Industrials, Materials and Technology sectors of the market. From 1993 to 2003, he held several positions at Morgan Stanley Investment Management (Miller Anderson & Sherrerd) including Head of Mutual Fund Administration and Vice President and Treasurer of the MAS Funds, Junior Associate in the Equity Department, and his last position held prior to joining Chartwell was Senior Associate and Analyst for the Large Cap Value team. Mr. Kugler holds the Chartered Financial Analyst designation and is a member of the CFA (Chartered Financial Analysts) Institute and the CFA Society of Philadelphia. Mr. Kugler earned a Bachelor's degree in Accounting from the University of Delaware.

PETER M. SCHOFIELD
CFA PRINCIPAL, SENIOR PORTFOLIO MANAGER

Mr. Schofield is a Senior Portfolio Manager on Chartwell's large-cap equity portfolio management team and has 29 years of investment industry experience. His areas of focus include the Consumer Staples, Financials, Health Care, Industrials and Materials sectors of the market. From 2005 to 2010, he was a Co-Chief Investment Officer at Knott Capital. From 1996 to 2005, he was a Portfolio Manager at Sovereign Asset Management. Prior to Sovereign Asset Management, he was a portfolio manager at Geewax, Terker & Company. Mr. Schofield holds the Chartered Financial Analyst designation and is a member of the CFA (Chartered Financial Analysts) Institute and the CFA Society of Philadelphia. Mr. Schofield earned a Bachelor's degree in History from the University of Pennsylvania.

COMPARISON OF THE NEW SUB-ADVISORY AGREEMENT AND AVIANCE SUB-ADVISORY AGREEMENT

Below is a brief comparison of certain terms of the Aviance Sub-Advisory Agreement to the corresponding terms of the New Sub-Advisory Agreement. The form of the New Sub-Advisory Agreement is attached to this Proxy Statement as Exhibit A and the description of the New Sub-Advisory Agreement is qualified in its entirety by reference to such Exhibit.

Sub-Advisory Services. Under the Aviance Sub-Advisory Agreement, the sub-adviser agreed to furnish an investment program in respect of, make investment decisions for, and place all orders for the purchase and sale of securities for the Fund's investment portfolio, all on behalf of the Fund and subject to the supervision of the Fund's Board and the Advisor. Similarly, under the New Sub-Advisory Agreement, the sub-adviser agrees to furnish an investment program in respect of, make investment decisions for, and place all orders for the purchase and sale of securities and other instruments for the Fund's investment portfolio, all on behalf of the Fund and subject to the supervision of the Fund's Board and the Advisor. In addition, as was the case under the Aviance Sub-Advisory Agreement, under the New Sub-Advisory Agreement, the sub-adviser is required to monitor the Fund's investments and to comply with the provisions of the Fund's Declaration of Trust and By-Laws and the stated investment objectives, policies and restrictions of the Fund.

Additional Sub-Advisers. The Aviance Sub-Advisory Agreement included a provision that, subject to certain conditions, permitted the sub-adviser to retain one or more additional sub-advisers at its own cost and expense. The New Sub-Advisory Agreement does not include a corresponding provision.

Brokerage. As was the case under the Aviance Sub-Advisory Agreement, the New Sub-Advisory Agreement authorizes the sub-adviser to select the brokers or dealers that will execute the purchases and sales of portfolio investments for the Fund, and directs the sub-adviser to use its commercially reasonable efforts to obtain best execution, which includes most favorable net results and execution of the Fund's orders, taking into account all appropriate factors, including price, dealer spread or commission, size and difficulty of the transaction and research or other services provided.

Fees. As was the case under the Aviance Sub-Advisory Agreement, under the New Sub-Advisory Agreement, the Advisor will pay the sub-adviser a portfolio management fee on a monthly basis. Under the Aviance Sub-Advisory Agreement, for services provided and expenses assumed, the Advisor agreed to pay the sub-adviser a fee equal to the annual rate of 0.50% of the Fund's "managed assets." Under the New Sub-Advisory Agreement, in light of the Repositioning and the addition of the Senior Loan/High Yield Debt Component, which will be allocated to the Advisor's Leveraged Finance Investment Team, the Advisor agrees to pay the sub-adviser a fee equal to the annual rate of 0.50% of the Fund's "managed assets" allocated to the sub-adviser. For purposes of the compensation provisions included in both the Aviance Sub-Advisory Agreement and the New Sub-Advisory Agreement, the term "managed assets" is defined to mean the average daily gross asset value of the Fund (including assets attributable to the Fund's Preferred Shares, if any, and the principal amount of borrowings, if any), minus the sum of the Fund's accrued and unpaid dividends on any outstanding Preferred Shares and accrued liabilities (other than the principal amount of any borrowings incurred, commercial paper or notes issued by the Fund). For purposes of determining "managed assets," the liquidation preference of any outstanding Preferred Shares of the Fund is not treated as a liability.

As indicated above, because less than all of the Fund's managed assets will be allocated to the sub-adviser under the New Sub-Advisory Agreement, the Advisor will retain a greater portion of its advisory fee if the New Sub-Advisory Agreement is approved. James A. Bowen, a Trustee of the Fund who is an "interested person" as defined in the 1940 Act (the "Interested Trustee"), is the Chief Executive Officer of, and controls, the Advisor. See "Additional Information -- Information about the Advisor" below.

Payment of Expenses. Under the Aviance Sub-Advisory Agreement, the sub-adviser agreed to pay all expenses incurred by it in connection with its activities under the agreement other than the cost of securities and other assets (including brokerage commissions, if any) purchased for the Fund. Similarly, under the New Sub-Advisory Agreement, the sub-adviser will agree to pay all expenses it incurs in connection with its activities under such Agreement other than (i) the cost of securities and other assets purchased for the Fund and (ii) the costs directly associated with purchasing and selling securities and other assets for the Fund, if any, including, but not limited to, brokerage commissions, stamps, duties, taxes and custody fees related to transfers.

Limitation on Liability. As was the case under the Aviance Sub-Advisory Agreement, the New Sub-Advisory Agreement provides that the sub-adviser will not be liable for, and the Fund and the Advisor will not take any action against the sub-adviser to hold the sub-adviser liable for, any error of judgment or mistake of law or for any loss suffered by the Fund or the Advisor in connection with the performance of the sub-adviser's duties under the Agreement, except for a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the sub-adviser in the performance of its duties under the Agreement, or by reason of its reckless disregard of its obligations and duties under the Agreement.

Continuance. Consistent with the terms of the Aviance Sub-Advisory Agreement, if the New Sub-Advisory Agreement is approved by shareholders, if not terminated earlier, it will expire on the two-year anniversary of the date of its effectiveness unless continued. Thereafter, it may be continued for successive one-year periods if such continuance is specifically approved, at least annually, in the manner required by the 1940 Act and the rules and regulations thereunder.

Termination. As was the case under the Aviance Sub-Advisory Agreement, the New Sub-Advisory Agreement provides that it (a) will automatically terminate in the event of its assignment (as defined in the 1940 Act and the rules and regulations thereunder), (b) may be terminated at any time without the payment of any penalty by the Advisor or the sub-adviser upon 60 days' written notice to the other parties, and (c) may be terminated by the Fund by action of the Board or by a vote of a majority of the outstanding voting securities (as defined in the 1940 Act and the rules and regulations thereunder) of the Fund upon 60 days' written notice to the sub-adviser by the Fund without the payment of any penalty. In addition, the Aviance Sub-Advisory Agreement was, and the New Sub-Advisory Agreement is, terminable at any time without the payment of any penalty by the Advisor, the Board or by vote of a majority of the outstanding voting securities (as defined in the 1940 Act and the rules and regulations thereunder) of the Fund in the event that it is established by a court of competent jurisdiction that the sub-adviser or any of its officers or directors has taken any action that results in a breach of the material covenants of the sub-adviser set forth in the Agreement.

Related Agreement

On June 10, 2013, Chartwell and the Advisor entered into an agreement separate from the Interim Sub-Advisory Agreement to address certain matters pertaining to the Fund (such agreement, the "Related Agreement"). Among other things, under the Related Agreement, Chartwell is obligated to reimburse the Advisor for a portion of certain "services fee" payments payable by the Advisor to the lead underwriter of the Fund's initial public offering ("Reimbursement Payments"). If the Interim Sub-Advisory Agreement terminates and the New Sub-Advisory Agreement does not become effective, Chartwell will have no obligation to make Reimbursement Payments to the Advisor following the termination of the Interim Sub-Advisory Agreement.

Board Considerations

The Board of the Fund, including the Independent Trustees, approved the Interim Sub-Advisory Agreement and the New Sub-Advisory Agreement (collectively, the "Agreements") among the Fund, First Trust Advisors and Chartwell at the Board Meeting. The Board determined that the Agreements are in the best interests of the Fund in light of the extent and quality of the services to be provided and such other matters as the Board considered to be relevant in the exercise of its reasonable business judgment.

At the Board Meeting, the Advisor recommended various actions to be taken with respect to the Fund to address the Fund's underperformance (in terms of both share price and net asset value) relative to its benchmarks and peer group average and to narrow its trading discount, including replacing Aviance with Chartwell and effecting the Repositioning. The Advisor proposed that Chartwell manage the Fund's Equity Component and Options Strategy (the latter of which was being managed by the Alternatives Group at First Trust Advisors), but also proposed that the Fund use leverage to add the Senior Loan/High Yield Debt Component to be managed by the Advisor's Leveraged Finance Investment Team. The Advisor had previously discussed with the Board these proposed actions, along with various other alternatives for addressing the Fund's underperformance and trading discount, at meetings held in March and April 2013. At the Board Meeting and at the April 2013 meeting, Chartwell made presentations to the Board regarding its proposed investment strategy for the Fund and how it would implement its proposed strategy. Prior to the Board Meeting, Chartwell also provided to the Board written responses to questions posed by independent legal counsel on behalf of the Independent Trustees. The Board considered all the information provided and noted its familiarity with Chartwell as sub-adviser to the Equity Income Fund. At the Board Meeting, the Independent Trustees met separately with their independent legal counsel to discuss the information provided by Chartwell and the Advisor. After reviewing the various alternatives for the Fund, the Board determined to approve the Advisor's proposed course of action for the Fund and, at the Board Meeting, did not renew the Aviance Sub-Advisory Agreement and appointed Chartwell to serve as the interim sub-adviser to the Fund pursuant to the Interim Sub-Advisory Agreement, effective following the termination of the Aviance Sub-Advisory Agreement with First Trust Advisors and the Fund on June 30, 2013. The Board also approved the New Sub-Advisory Agreement and determined to recommend it to shareholders of the Fund for their approval.

To reach its determinations as to the Agreements, the Board considered its duties under the 1940 Act, as well as under the general principles of state law in reviewing and approving advisory contracts; the requirements of the 1940 Act in such matters; the fiduciary duty of investment advisors with respect to advisory agreements and compensation; the standards used by courts in determining whether investment company boards have fulfilled their duties; and the factors to be considered by the Board in voting on such agreements. In its evaluation of the Agreements, the Board considered a report from Chartwell responding to a request for information from counsel to the Independent Trustees. The report, among other things, outlined the services to be provided by Chartwell to the Fund (including the relevant personnel responsible for these services and their experience); the proposed sub-advisory fee for the Fund as compared to fees charged to other clients of Chartwell; the potential for economies of scale, if any; financial data on Chartwell; fall-out benefits to Chartwell; and information regarding Chartwell's compliance program. The Board applied its business judgment to determine whether the proposed arrangements between the Fund, the Advisor and Chartwell are reasonable business arrangements from the Fund's perspective as well as from the perspective of shareholders.

In reviewing the Agreements, the Board considered the nature, extent and quality of services to be provided by Chartwell under the Agreements. The Board considered Chartwell's investment style and the backgrounds of the investment personnel who would be responsible for the day-to-day management of the Fund,

noting that they also serve as portfolio managers of the Equity Income Fund. The Board considered that Chartwell intended to manage the Fund in a manner that combined aspects of its Premium Yield Equity strategy and its Covered Call strategy and the Board reviewed the returns of Chartwell's Premium Yield Equity composite and also the returns of the Equity Income Fund, which is sub-advised by Chartwell using its Covered Call strategy. The Board also discussed with the prospective portfolio managers the approach Chartwell planned to take in transitioning the Fund's portfolio. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of services to be provided to the Fund by Chartwell under the Agreements are expected to be satisfactory.

The Board considered the sub-advisory fees to be paid under the Agreements. The Board considered that the sub-advisory fee rate under the Agreements would be the same as the sub-advisory fee rate under the Aviance Sub-Advisory Agreement, but noted that Chartwell will only receive a fee on the portion of the Fund's assets allocated to it by the Advisor. The Board considered that the sub-advisory fee was negotiated at arm's length between the Advisor and Chartwell, an unaffiliated third party, and noted that the fees to be paid to Chartwell would be paid by the Advisor from its advisory fee. The Board considered the sub-advisory fee rate charged by Chartwell for sub-advising the Equity Income Fund, noting that it was the same as the Fund's. The Board also considered information provided by Chartwell as to the fees it charges to other non-fund clients with investment objectives and policies similar to the Fund's, noting that the sub-advisory fee rate is within the range of the fee rates charged by Chartwell to these other clients, and that services provided to registered investment companies are more extensive. On the basis of all the information provided, the Board concluded that the sub-advisory fees to be paid under the Agreements were reasonable and appropriate in light of the nature, extent and quality of services expected to be provided by Chartwell under the Agreements.

The Board considered Chartwell's statement that it had continually reinvested its capital to build a large, experienced group of professionals to serve its clients, including the Fund, and noted Chartwell's statements about potential economies of scale in providing services to the Fund. The Board also considered data provided by Chartwell as to the estimated profitability of the Agreements to Chartwell, noting that it appeared to be not excessive in light of the services expected to be provided to the Fund. The Board considered potential fall-out benefits identified by Chartwell from its relationship with the Fund, including soft-dollar arrangements, and considered a summary of such arrangements.

Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreements are fair and reasonable and that the approval of the Agreements is in the best interests of the Fund. No single factor was determinative in the Board's analysis.

Shareholder Approval and Required Vote

To become effective, the New Sub-Advisory Agreement must be approved by a vote of a majority of the outstanding voting securities of the Fund. The "vote of a majority of the outstanding voting securities" is defined in the 1940 Act as the vote of the lesser of (i) 67% or more of the Shares of the Fund present at the Meeting if the holders of more than 50% of the outstanding Shares of the Fund are present in person or represented by proxy; or (ii) more than 50% of the outstanding Shares of the Fund. For purposes of determining the approval of the New Sub-Advisory Agreement, abstentions and broker non-votes will have the effect of a vote against the Proposal.

THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS THAT SHAREHOLDERS VOTE FOR

THE PROPOSAL. IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE

PROPOSAL OR HOW TO VOTE YOUR SHARES, PLEASE CALL THE FUND'S PROXY SOLICITOR, AST FUND SOLUTIONS, LLC, AT (___) _________ WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN TIME.

ADDITIONAL INFORMATION

Information about the Advisor

First Trust Advisors L.P., 120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187, serves as the Fund's investment adviser and will continue to serve as such after the approval by shareholders of the New Sub-Advisory Agreement. In addition, the Advisor is responsible for providing certain clerical, bookkeeping and other administrative services to the Fund and also provides fund reporting services to the Fund for a flat annual fee.

The Advisor, an Illinois limited partnership formed in 1991 and an investment adviser registered with the SEC under the Investment Advisers Act of 1940, as amended, has one limited partner, Grace Partners of DuPage L.P. ("Grace Partners"), and one general partner, The Charger Corporation. Grace Partners is a limited partnership with one general partner, The Charger Corporation, and a number of limited partners. Grace Partners' and The Charger Corporation's primary business is investment advisory and broker-dealer services through their ownership interests. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of the Advisor and the sole Interested Trustee of the Fund. The Advisor is controlled by Grace Partners and The Charger Corporation.

Information about the Administrator, Accounting Agent and Transfer Agent

BNY Mellon Investment Servicing (US) Inc., located at 301 Bellevue Parkway, Wilmington, Delaware 19809, acts as the administrator, accounting agent and transfer agent to the Fund.