UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22795
First Trust Intermediate Duration Preferred & Income Fund
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(Address of principal executive offices) (Zip code)
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)
Registrant’s telephone number, including area code: 630-765-8000
Date of fiscal year end: October 31
Date of reporting period: October 31, 2023
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, NW, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) | The Report to Shareholders is attached herewith. |
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Fund Statistics | |
Symbol on New York Stock Exchange | FPF |
Common Share Price | $14.23 |
Common Share Net Asset Value (“NAV”) | $16.77 |
Premium (Discount) to NAV | (15.15)% |
Net Assets Applicable to Common Shares | $1,020,665,266 |
Current Distribution per Common Share(1) | $0.1075 |
Current Annualized Distribution per Common Share | $1.2900 |
Current Distribution Rate on Common Share Price(2) | 9.07% |
Current Distribution Rate on NAV(2) | 7.69% |
Performance | ||||
Average Annual Total Returns | ||||
1 Year Ended 10/31/23 | 5 Years Ended 10/31/23 | 10 Years Ended 10/31/23 | Inception (5/23/13) to 10/31/23 | |
Fund Performance(3) | ||||
NAV | -1.56% | 1.19% | 4.68% | 4.54% |
Market Value | -5.86% | 0.10% | 4.15% | 2.46% |
Index Performance | ||||
ICE BofA US Investment Grade Institutional Capital Securities Index | 5.89% | 3.20% | 3.99% | 3.76% |
Blended Index(4) | 1.27% | 1.61% | N/A | N/A |
(1) | Most recent distribution paid through October 31, 2023. Subject to change in the future. |
(2) | Distribution rates are calculated by annualizing the most recent distribution paid through the report date and then dividing by Common Share Price or NAV, as applicable, as of October 31, 2023. Subject to change in the future. |
(3) | Total return is based on the combination of reinvested dividend, capital gain, and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
(4) | The Blended Index consists of a 30/30/30/10 blend of the ICE BofA Core Plus Fixed Rate Preferred Securities Index, the ICE BofA US Investment Grade Institutional Capital Securities Index, the ICE USD Contingent Capital Index and the ICE BofA US High Yield Institutional Capital Securities Index. The Blended Index is intended to reflect the proportional market cap of each segment of the preferred and hybrid securities market. The Blended Index returns are calculated by using the monthly returns of the indices listed above during each period shown. At the beginning of each month the indices are rebalanced to a 30/30/30/10 ratio to account for divergence from that ratio that occurred during the course of each month. The monthly returns are then compounded for each period shown above, giving the performance for the Blended Index for each period shown above. Since the ICE USD Contingent Capital Index had an inception date of December 31, 2013, the performance of the Blended Index is not available for all of the periods disclosed. |
Industry Classification | % of Total Investments |
Banks | 45.2% |
Insurance | 19.8 |
Oil, Gas & Consumable Fuels | 9.2 |
Capital Markets | 5.4 |
Financial Services | 4.5 |
Food Products | 3.4 |
Trading Companies & Distributors | 3.2 |
Multi-Utilities | 3.2 |
Electric Utilities | 1.5 |
Mortgage Real Estate Investment Trusts | 0.9 |
Real Estate Management & Development | 0.8 |
Construction Materials | 0.5 |
Retail REITs | 0.4 |
Wireless Telecommunication Services | 0.4 |
Consumer Finance | 0.4 |
Independent Power & Renewable Electricity Producers | 0.4 |
Diversified Telecommunication Services | 0.2 |
Gas Utilities | 0.2 |
Diversified REITs | 0.2 |
Automobiles | 0.2 |
Specialized REITs | 0.0* |
Total | 100.0% |
* | Amount is less than 0.1%. |
Top Ten Holdings | % of Total Investments |
AerCap Holdings N.V. | 2.2% |
Barclays PLC | 2.0 |
Land O’Lakes, Inc. | 1.9 |
Highlands Holdings Bond Issuer Ltd./Highlands Holdings Bond Co-Issuer, Inc. | 1.9 |
Bank of America Corp., Series TT | 1.8 |
Wells Fargo & Co., Series L | 1.8 |
Intesa Sanpaolo S.p.A. | 1.7 |
Hartford Financial Services Group (The), Inc. | 1.6 |
HSBC Holdings PLC | 1.6 |
Enbridge, Inc. | 1.6 |
Total | 18.1% |
Country Allocation | % of Total Investments |
United States | 48.7% |
Canada | 10.2 |
United Kingdom | 9.9 |
France | 6.2 |
Netherlands | 4.6 |
Bermuda | 4.1 |
Italy | 3.0 |
Australia | 3.0 |
Mexico | 2.8 |
Spain | 2.7 |
Multinational | 1.9 |
Germany | 1.5 |
Switzerland | 0.6 |
Denmark | 0.6 |
Sweden | 0.2 |
Total | 100.0% |
Credit Quality(5) | % of Total Fixed-Income Investments |
A+ | 0.4% |
A- | 0.5 |
BBB+ | 9.7 |
BBB | 23.8 |
BBB- | 31.8 |
BB+ | 17.2 |
BB | 9.0 |
BB- | 3.4 |
B+ | 0.9 |
Not Rated | 3.3 |
Total | 100.0% |
Fund Allocation | % of Net Assets |
Capital Preferred Securities | 123.8% |
$25 Par Preferred Securities | 20.3 |
$1,000 Par Preferred Securities | 4.2 |
Foreign Corporate Bonds and Notes | 2.8 |
$1,000,000 Par Preferred Securities | 1.2 |
Reverse Repurchase Agreements | (9.8) |
Outstanding Loan | (44.4) |
Net Other Assets and Liabilities | 1.9 |
Total | 100.0% |
(5) | The credit quality and ratings information presented above reflect the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including S&P Global Ratings, Moody’s Investors Service, Inc., Fitch Ratings or a comparably rated NRSRO. For situations in which a security is rated by more than one NRSRO and the ratings are not equivalent, the highest rating is used. Sub-investment grade ratings are those rated BB+/Ba1 or lower. Investment grade ratings are those rated BBB-/Baa3 or higher. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change. |
Performance | ||||
Average Annual Total Returns | ||||
1 Year Ended 10/31/23 | 5 Years Ended 10/31/23 | 10 Years Ended 10/31/23 | Inception (5/23/13) to 10/31/23 | |
Fund Performance(1) | ||||
NAV | -1.56% | 1.19% | 4.68% | 4.54% |
Market Value | -5.86% | 0.10% | 4.15% | 2.46% |
Index Performance | ||||
ICE BofA US Investment Grade Institutional Capital Securities Index | 5.89% | 3.20% | 3.99% | 3.76% |
Blended Index(2) | 1.27% | 1.61% | N/A | N/A |
(1) | Total return is based on the combination of reinvested dividend, capital gain, and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan and changes in NAV per share for NAV returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. |
(2) | The Blended Index consists of a 30/30/30/10 blend of the ICE BofA Core Plus Fixed Rate Preferred Securities Index, the ICE BofA US Investment Grade Institutional Capital Securities Index, the ICE USD Contingent Capital Index and the ICE BofA US High Yield Institutional Capital Securities Index. The Blended Index is intended to reflect the proportional market cap of each segment of the preferred and hybrid securities market. The Blended Index returns are calculated by using the monthly returns of the indices listed above during each period shown. At the beginning of each month the indices are rebalanced to a 30/30/30/10 and 50-50 ratio respectively to account for divergence from that ratio that occurred during the course of each month. The monthly returns are then compounded for each period shown above, giving the performance for the Blended Index for each period shown above. Since the ICE USD Contingent Capital Index had an inception date of December 31, 2013, the performance of the Blended Index is not available for all of the periods disclosed. |
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund’s past performance does not predict future performance.
Shares | Description | Stated Rate | Stated Maturity | Value | ||||
$25 PAR PREFERRED SECURITIES – 20.3% | ||||||||
Automobiles – 0.3% | ||||||||
134,551 | Ford Motor Co. (a) | 6.50% | 08/15/62 | $2,814,807 | ||||
Banks – 2.6% | ||||||||
227,073 | Bank of America Corp., Series KK (b) | 5.38% | (c) | 4,691,328 | ||||
49,151 | Bank of America Corp., Series SS (b) | 4.75% | (c) | 878,328 | ||||
20,101 | Citizens Financial Group, Inc., Series D (b) (d) | 6.35% | (c) | 462,122 | ||||
2,028 | Citizens Financial Group, Inc., Series E | 5.00% | (c) | 32,428 | ||||
77,002 | JPMorgan Chase & Co., Series LL (b) | 4.63% | (c) | 1,445,328 | ||||
177,126 | KeyCorp (b) (d) | 6.20% | (c) | 2,959,775 | ||||
250,531 | Pinnacle Financial Partners, Inc., Series B (b) | 6.75% | (c) | 5,559,283 | ||||
85,686 | US Bancorp, Series K | 5.50% | (c) | 1,688,014 | ||||
26,333 | Wells Fargo & Co., Series AA (b) | 4.70% | (c) | 465,304 | ||||
39,302 | Wells Fargo & Co., Series Z | 4.75% | (c) | 699,576 | ||||
133,769 | WesBanco, Inc., Series A (b) (d) | 6.75% | (c) | 3,082,038 | ||||
174,262 | Wintrust Financial Corp., Series E (b) (d) | 6.88% | (c) | 4,171,832 | ||||
26,135,356 | ||||||||
Capital Markets – 1.4% | ||||||||
29,434 | Affiliated Managers Group, Inc. | 4.75% | 09/30/60 | 480,657 | ||||
173,946 | Affiliated Managers Group, Inc. | 4.20% | 09/30/61 | 2,668,332 | ||||
476,799 | Carlyle Finance LLC | 4.63% | 05/15/61 | 7,790,896 | ||||
182,488 | KKR Group Finance Co., IX LLC | 4.63% | 04/01/61 | 3,022,001 | ||||
6,178 | Oaktree Capital Group LLC, Series A | 6.63% | (c) | 118,679 | ||||
4,751 | Oaktree Capital Group LLC, Series B | 6.55% | (c) | 89,699 | ||||
14,170,264 | ||||||||
Consumer Finance – 0.1% | ||||||||
5,099 | Capital One Financial Corp., Series I | 5.00% | (c) | 83,063 | ||||
90,291 | Capital One Financial Corp., Series J (b) | 4.80% | (c) | 1,420,277 | ||||
1,503,340 | ||||||||
Diversified REITs – 0.3% | ||||||||
168,343 | Global Net Lease, Inc., Series A (a) | 7.25% | (c) | 2,888,766 | ||||
Diversified Telecommunication Services – 0.4% | ||||||||
208,086 | AT&T, Inc., Series C (b) | 4.75% | (c) | 3,599,888 | ||||
Electric Utilities – 0.4% | ||||||||
89,789 | SCE Trust IV, Series J (b) (d) | 5.38% | (c) | 1,764,354 | ||||
73,377 | SCE Trust V, Series K (b) (d) | 5.45% | (c) | 1,617,963 | ||||
38,321 | SCE Trust VI | 5.00% | (c) | 671,384 | ||||
4,053,701 | ||||||||
Financial Services – 1.6% | ||||||||
180,130 | Apollo Global Management, Inc. (b) (d) | 7.63% | 09/15/53 | 4,712,201 | ||||
468,779 | Equitable Holdings, Inc., Series A (b) | 5.25% | (c) | 8,452,085 | ||||
47,724 | Jackson Financial, Inc. (b) (d) | 8.00% | (c) | 1,168,761 | ||||
102,133 | Voya Financial, Inc., Series B (b) (d) | 5.35% | (c) | 2,113,132 | ||||
16,446,179 | ||||||||
Food Products – 0.3% | ||||||||
119,691 | CHS, Inc., Series 3 (b) (d) | 6.75% | (c) | 2,830,692 | ||||
Gas Utilities – 0.3% | ||||||||
281,492 | South Jersey Industries, Inc. | 5.63% | 09/16/79 | 3,536,947 |
Shares | Description | Stated Rate | Stated Maturity | Value | ||||
$25 PAR PREFERRED SECURITIES (Continued) | ||||||||
Independent Power & Renewable Electricity Producers – 0.6% | ||||||||
245,850 | Brookfield BRP Holdings Canada, Inc. | 4.63% | (c) | $3,360,769 | ||||
161,321 | Brookfield Renewable Partners, L.P., Series 17 (b) | 5.25% | (c) | 2,595,655 | ||||
5,956,424 | ||||||||
Insurance – 7.8% | ||||||||
456,764 | Aegon Funding Co., LLC (b) | 5.10% | 12/15/49 | 8,509,513 | ||||
470,186 | American Equity Investment Life Holding Co., Series A (b) (d) | 5.95% | (c) | 9,944,434 | ||||
259,357 | American Equity Investment Life Holding Co., Series B (b) (d) | 6.63% | (c) | 5,944,462 | ||||
193,648 | AmTrust Financial Services, Inc. | 7.25% | 06/15/55 | 3,040,274 | ||||
210,480 | AmTrust Financial Services, Inc. | 7.50% | 09/15/55 | 3,402,409 | ||||
192,000 | Arch Capital Group Ltd., Series G (b) | 4.55% | (c) | 3,321,600 | ||||
15,137 | Argo Group International Holdings Ltd. (d) | 7.00% | (c) | 332,711 | ||||
66,549 | Aspen Insurance Holdings Ltd. (b) | 5.63% | (c) | 1,131,998 | ||||
346,650 | Aspen Insurance Holdings Ltd. (b) | 5.63% | (c) | 5,497,869 | ||||
85,573 | Athene Holding Ltd., Series A (b) (d) | 6.35% | (c) | 1,808,158 | ||||
52,936 | Athene Holding Ltd., Series D | 4.88% | (c) | 856,504 | ||||
566,049 | Athene Holding Ltd., Series E (b) (d) | 7.75% | (c) | 14,094,620 | ||||
133,393 | CNO Financial Group, Inc. | 5.13% | 11/25/60 | 2,040,913 | ||||
584,250 | Delphi Financial Group, Inc., 3 Mo. CME Term SOFR + CSA + 3.19% (a) (b) (e) | 8.82% | 05/15/37 | 13,072,594 | ||||
51,991 | Lincoln National Corp., Series D (b) | 9.00% | (c) | 1,377,762 | ||||
193,528 | Phoenix Cos. (The), Inc. | 7.45% | 01/15/32 | 3,450,604 | ||||
2 | Reinsurance Group of America, Inc. (d) | 7.13% | 10/15/52 | 51 | ||||
114,588 | RenaissanceRe Holdings Ltd., Series G | 4.20% | (c) | 1,768,093 | ||||
79,594,569 | ||||||||
Mortgage Real Estate Investment Trusts – 0.1% | ||||||||
32,675 | AGNC Investment Corp., Series F (d) | 6.13% | (c) | 653,173 | ||||
Multi-Utilities – 0.7% | ||||||||
124,631 | Algonquin Power & Utilities Corp., Series 19-A (a) (b) (d) | 6.20% | 07/01/79 | 3,064,677 | ||||
195,763 | Brookfield Infrastructure Finance ULC | 5.00% | 05/24/81 | 2,993,216 | ||||
84,780 | Brookfield Infrastructure Partners, L.P., Series 13 | 5.13% | (c) | 1,288,656 | ||||
5,032 | Sempra | 5.75% | 07/01/79 | 113,220 | ||||
7,459,769 | ||||||||
Oil, Gas & Consumable Fuels – 1.6% | ||||||||
1,879 | Energy Transfer, L.P., Series D (d) | 10.36% | (c) | 47,088 | ||||
410,156 | Energy Transfer, L.P., Series E (b) (d) | 7.60% | (c) | 10,139,056 | ||||
230,511 | NuStar Energy, L.P., Series A, 3 Mo. CME Term SOFR + CSA + 6.77% (b) (e) | 12.44% | (c) | 5,871,115 | ||||
1,370 | NuStar Energy, L.P., Series C, 3 Mo. LIBOR + 6.88% (e) | 12.55% | (c) | 34,497 | ||||
16,091,756 | ||||||||
Real Estate Management & Development – 1.2% | ||||||||
307,185 | Brookfield Property Partners, L.P., Series A | 5.75% | (c) | 3,010,413 | ||||
388,145 | Brookfield Property Partners, L.P., Series A2 | 6.38% | (c) | 4,257,951 | ||||
392,902 | Brookfield Property Preferred, L.P. | 6.25% | 07/26/81 | 4,714,824 | ||||
23,528 | DigitalBridge Group, Inc., Series I (b) | 7.15% | (c) | 494,323 | ||||
1,939 | DigitalBridge Group, Inc., Series J | 7.13% | (c) | 40,447 | ||||
12,517,958 | ||||||||
Specialized REITs – 0.0% | ||||||||
17,466 | National Storage Affiliates Trust, Series A (b) | 6.00% | (c) | 365,214 |
Shares | Description | Stated Rate | Stated Maturity | Value | ||||
$25 PAR PREFERRED SECURITIES (Continued) | ||||||||
Wireless Telecommunication Services – 0.6% | ||||||||
124,977 | United States Cellular Corp. | 6.25% | 09/01/69 | $2,062,121 | ||||
26,817 | United States Cellular Corp. | 5.50% | 03/01/70 | 398,501 | ||||
264,391 | United States Cellular Corp. | 5.50% | 06/01/70 | 3,865,396 | ||||
6,326,018 | ||||||||
Total $25 Par Preferred Securities | 206,944,821 | |||||||
(Cost $262,529,736) | ||||||||
$1,000 PAR PREFERRED SECURITIES – 4.2% | ||||||||
Banks – 3.5% | ||||||||
7,587 | Bank of America Corp., Series L | 7.25% | (c) | 7,990,628 | ||||
26,113 | Wells Fargo & Co., Series L | 7.50% | (c) | 27,583,162 | ||||
35,573,790 | ||||||||
Financial Services – 0.7% | ||||||||
7,000 | Compeer Financial ACA (e) (f) | 10.20% | (c) | 6,976,187 | ||||
Total $1,000 Par Preferred Securities | 42,549,977 | |||||||
(Cost $52,212,599) | ||||||||
$1,000,000 PAR PREFERRED SECURITIES – 1.2% | ||||||||
Mortgage Real Estate Investment Trusts – 1.2% | ||||||||
12 | FT Real Estate Securities Co., Inc. (g) (h) (i) | 9.50% | (c) | 12,480,000 | ||||
(Cost $15,990,000) | ||||||||
Par Amount | Description | Stated Rate | Stated Maturity | Value | ||||
CAPITAL PREFERRED SECURITIES – 123.8% | ||||||||
Banks – 62.8% | ||||||||
$12,935,000 | Australia & New Zealand Banking Group Ltd. (b) (d) (f) (j) | 6.75% | (c) | 12,560,336 | ||||
7,900,000 | Banco Bilbao Vizcaya Argentaria S.A. (d) (j) | 9.38% | (c) | 7,637,333 | ||||
14,100,000 | Banco Bilbao Vizcaya Argentaria S.A., Series 9 (b) (d) (j) | 6.50% | (c) | 13,319,117 | ||||
5,700,000 | Banco Mercantil del Norte S.A. (d) (f) (j) | 7.50% | (c) | 4,923,655 | ||||
8,000,000 | Banco Mercantil del Norte S.A. (d) (f) (j) | 7.63% | (c) | 7,255,335 | ||||
7,400,000 | Banco Mercantil del Norte S.A. (d) (f) (j) | 8.38% | (c) | 6,755,752 | ||||
10,800,000 | Banco Santander S.A. (d) (j) | 4.75% | (c) | 7,793,608 | ||||
13,400,000 | Banco Santander S.A. (b) (d) (j) (k) | 7.50% | (c) | 13,035,118 | ||||
29,385,000 | Bank of America Corp., Series TT (b) (d) | 6.13% | (c) | 27,701,832 | ||||
1,360,000 | Bank of America Corp., Series X (b) (d) | 6.25% | (c) | 1,340,051 | ||||
16,920,000 | Bank of Nova Scotia (The) (d) | 8.63% | 10/27/82 | 16,594,207 | ||||
1,300,000 | Barclays PLC (d) (j) | 4.38% | (c) | 891,759 | ||||
22,600,000 | Barclays PLC (b) (d) (j) | 8.00% | (c) | 22,160,301 | ||||
34,670,000 | Barclays PLC (b) (d) (j) | 8.00% | (c) | 30,752,290 | ||||
8,550,000 | BBVA Bancomer S.A. (a) (d) (f) (j) | 5.88% | 09/13/34 | 7,415,246 | ||||
9,900,000 | BBVA Bancomer S.A. (b) (d) (f) (j) | 8.45% | 06/29/38 | 9,450,878 | ||||
12,000,000 | BNP Paribas S.A. (d) (f) (j) | 4.63% | (c) | 8,351,678 | ||||
17,710,000 | BNP Paribas S.A. (b) (d) (f) (j) | 7.75% | (c) | 16,464,514 | ||||
23,200,000 | BNP Paribas S.A. (b) (d) (f) (j) | 8.50% | (c) | 22,287,978 | ||||
4,000,000 | BNP Paribas S.A. (b) (d) (f) (j) | 9.25% | (c) | 4,075,956 | ||||
2,314,000 | Citigroup, Inc. (b) (d) | 3.88% | (c) | 1,945,878 | ||||
21,800,000 | Citigroup, Inc. (b) (d) | 7.38% | (c) | 20,846,895 | ||||
6,200,000 | Citigroup, Inc. (b) (d) | 7.63% | (c) | 5,985,748 | ||||
9,351,000 | Citigroup, Inc., Series M (b) (d) | 6.30% | (c) | 9,102,862 | ||||
8,600,000 | Citigroup, Inc., Series P (b) (d) | 5.95% | (c) | 8,187,206 | ||||
6,500,000 | Citizens Financial Group, Inc., Series F (b) (d) | 5.65% | (c) | 5,637,958 | ||||
607,000 | Citizens Financial Group, Inc., Series G (d) | 4.00% | (c) | 414,805 |
Par Amount | Description | Stated Rate | Stated Maturity | Value | ||||
CAPITAL PREFERRED SECURITIES (Continued) | ||||||||
Banks (Continued) | ||||||||
$25,000,000 | CoBank ACB, Series I (b) (d) | 6.25% | (c) | $23,621,322 | ||||
9,695,000 | CoBank ACB, Series K (b) (d) | 6.45% | (c) | 9,030,013 | ||||
2,800,000 | Commerzbank AG (d) (j) (k) | 7.00% | (c) | 2,534,210 | ||||
5,000,000 | Credit Agricole S.A. (b) (d) (f) (j) | 6.88% | (c) | 4,864,649 | ||||
8,940,000 | Danske Bank A.S. (b) (d) (j) (k) | 7.00% | (c) | 8,555,267 | ||||
3,450,000 | Farm Credit Bank of Texas, Series 3 (a) (d) (f) | 6.20% | (c) | 3,122,250 | ||||
7,500,000 | Farm Credit Bank of Texas, Series 4 (b) (d) (f) | 5.70% | (c) | 7,087,500 | ||||
4,706,000 | Fifth Third Bancorp, Series L (b) (d) | 4.50% | (c) | 4,012,041 | ||||
25,100,000 | HSBC Holdings PLC (b) (d) (j) | 8.00% | (c) | 24,692,125 | ||||
15,092,000 | ING Groep N.V. (b) (d) (j) | 5.75% | (c) | 13,286,695 | ||||
10,920,000 | ING Groep N.V. (b) (d) (j) | 6.50% | (c) | 10,227,286 | ||||
12,900,000 | ING Groep N.V. (d) (j) (k) | 7.50% | (c) | 11,592,791 | ||||
28,550,000 | Intesa Sanpaolo S.p.A. (b) (d) (f) (j) | 7.70% | (c) | 26,733,335 | ||||
9,600,000 | Lloyds Banking Group PLC (b) (d) (j) | 6.75% | (c) | 8,856,555 | ||||
17,912,000 | Lloyds Banking Group PLC (b) (d) (j) | 7.50% | (c) | 16,663,534 | ||||
20,067,000 | Lloyds Banking Group PLC (b) (d) (j) | 8.00% | (c) | 17,671,143 | ||||
648,000 | M&T Bank Corp., Series F (d) | 5.13% | (c) | 491,102 | ||||
5,100,000 | NatWest Group PLC (b) (d) (j) | 6.00% | (c) | 4,684,903 | ||||
10,150,000 | NatWest Group PLC (b) (d) (j) | 8.00% | (c) | 9,864,582 | ||||
7,594,000 | PNC Financial Services Group (The), Inc., Series U (b) (d) | 6.00% | (c) | 6,384,732 | ||||
10,976,000 | PNC Financial Services Group (The), Inc., Series V (b) (d) | 6.20% | (c) | 9,792,627 | ||||
14,390,000 | PNC Financial Services Group (The), Inc., Series W (b) (d) | 6.25% | (c) | 11,878,957 | ||||
24,100,000 | Societe Generale S.A. (d) (f) (j) | 5.38% | (c) | 17,344,919 | ||||
20,300,000 | Societe Generale S.A. (b) (d) (f) (j) | 9.38% | (c) | 19,647,834 | ||||
18,565,000 | Standard Chartered PLC (d) (f) (j) | 4.30% | (c) | 13,037,661 | ||||
65,000 | Standard Chartered PLC (d) (k) | 7.01% | (c) | 59,813 | ||||
5,300,000 | Standard Chartered PLC (b) (d) (f) (j) | 7.75% | (c) | 5,098,293 | ||||
3,200,000 | Svenska Handelsbanken AB (d) (j) (k) | 4.75% | (c) | 2,400,426 | ||||
1,000,000 | Swedbank AB (d) (j) (k) | 7.63% | (c) | 930,873 | ||||
2,779,000 | Texas Capital Bancshares, Inc. (b) (d) | 4.00% | 05/06/31 | 2,294,742 | ||||
19,000,000 | Toronto-Dominion Bank (The) (a) (d) | 8.13% | 10/31/82 | 18,687,680 | ||||
15,601,000 | UniCredit S.p.A. (b) (d) (j) (k) | 8.00% | (c) | 15,408,328 | ||||
5,000,000 | UniCredit S.p.A. (a) (d) (f) | 5.46% | 06/30/35 | 4,104,073 | ||||
13,000,000 | Wells Fargo & Co. (b) (d) | 7.63% | (c) | 13,049,360 | ||||
640,599,917 | ||||||||
Capital Markets – 6.9% | ||||||||
12,296,000 | Apollo Management Holdings, L.P. (a) (b) (d) (f) | 4.95% | 01/14/50 | 10,930,435 | ||||
9,300,000 | Ares Finance Co. III LLC (a) (b) (d) (f) | 4.13% | 06/30/51 | 6,972,499 | ||||
15,772,000 | Charles Schwab (The) Corp., Series G (b) (d) | 5.38% | (c) | 15,055,290 | ||||
1,500,000 | Charles Schwab (The) Corp., Series H (d) | 4.00% | (c) | 1,025,502 | ||||
660,000 | Charles Schwab (The) Corp., Series I (d) | 4.00% | (c) | 524,648 | ||||
2,200,000 | Charles Schwab (The) Corp., Series K (b) (d) | 5.00% | (c) | 1,743,036 | ||||
28,250,000 | Credit Suisse Group AG, Claim (l) (m) | 3,107,500 | ||||||
6,400,000 | Credit Suisse Group AG, Claim (l) (m) | 704,000 | ||||||
15,730,000 | Credit Suisse Group AG, Claim (l) (m) | 1,730,300 | ||||||
19,220,000 | Credit Suisse Group AG, Claim (l) (m) | 2,114,200 | ||||||
18,300,000 | Deutsche Bank AG, Series 2020 (b) (d) (j) | 6.00% | (c) | 14,825,853 | ||||
2,540,000 | EFG International AG (d) (j) (k) | 5.50% | (c) | 1,926,565 | ||||
7,900,000 | Goldman Sachs Group (The), Inc., Series W (b) (d) | 7.50% | (c) | 7,767,697 | ||||
2,000,000 | Macquarie Bank Ltd. (d) (f) (j) | 6.13% | (c) | 1,771,936 | ||||
70,199,461 | ||||||||
Construction Materials – 0.8% | ||||||||
7,800,000 | Cemex SAB de CV (d) (f) | 9.13% | (c) | 8,005,803 |
Par Amount | Description | Stated Rate | Stated Maturity | Value | ||||
CAPITAL PREFERRED SECURITIES (Continued) | ||||||||
Consumer Finance – 0.5% | ||||||||
$5,639,000 | Ally Financial, Inc., Series B (d) | 4.70% | (c) | $3,677,890 | ||||
1,835,000 | Ally Financial, Inc., Series C (d) | 4.70% | (c) | 1,075,878 | ||||
4,753,768 | ||||||||
Electric Utilities – 1.9% | ||||||||
7,950,000 | American Electric Power Co., Inc. (a) (b) (d) | 3.88% | 02/15/62 | 6,283,079 | ||||
1,377,000 | Edison International, Series A (b) (d) | 5.38% | (c) | 1,237,471 | ||||
6,976,000 | Emera, Inc., Series 16-A (a) (d) | 6.75% | 06/15/76 | 6,586,649 | ||||
5,110,000 | Southern California Edison Co., Series E, 3 Mo. LIBOR + 4.20% (b) (e) | 9.83% | (c) | 5,102,838 | ||||
19,210,037 | ||||||||
Financial Services – 4.5% | ||||||||
15,000,000 | American AgCredit Corp. (b) (d) (f) | 5.25% | (c) | 13,800,000 | ||||
9,350,000 | Capital Farm Credit ACA, Series 1 (b) (d) (f) | 5.00% | (c) | 8,461,750 | ||||
3,800,000 | Compeer Financial ACA (b) (d) (f) | 4.88% | (c) | 3,439,000 | ||||
22,150,000 | Corebridge Financial, Inc. (a) (b) (d) | 6.88% | 12/15/52 | 20,489,944 | ||||
46,190,694 | ||||||||
Food Products – 4.8% | ||||||||
6,000,000 | Dairy Farmers of America, Inc. (b) (g) | 7.13% | (c) | 5,445,000 | ||||
7,329,000 | Land O’Lakes Capital Trust I (a) (b) (g) | 7.45% | 03/15/28 | 6,779,325 | ||||
10,000,000 | Land O’Lakes, Inc. (a) (b) (f) | 7.25% | (c) | 7,850,000 | ||||
33,000,000 | Land O’Lakes, Inc. (b) (f) | 8.00% | (c) | 29,370,000 | ||||
49,444,325 | ||||||||
Insurance – 19.5% | ||||||||
3,000,000 | Aegon N.V. (a) (d) | 5.50% | 04/11/48 | 2,716,417 | ||||
5,800,000 | Allianz SE (a) (d) (f) | 6.35% | 09/06/53 | 5,545,892 | ||||
17,585,000 | Assurant, Inc. (a) (b) (d) | 7.00% | 03/27/48 | 16,916,348 | ||||
5,150,000 | Assured Guaranty Municipal Holdings, Inc. (a) (d) (f) | 6.40% | 12/15/66 | 4,404,770 | ||||
9,932,000 | AXIS Specialty Finance LLC (a) (b) (d) | 4.90% | 01/15/40 | 7,862,861 | ||||
2,000,000 | CNP Assurances SACA (d) (k) | 4.88% | (c) | 1,450,820 | ||||
8,704,000 | Enstar Finance LLC (a) (d) | 5.75% | 09/01/40 | 7,694,306 | ||||
17,149,000 | Enstar Finance LLC (a) (b) (d) | 5.50% | 01/15/42 | 13,698,724 | ||||
15,300,000 | Fortegra Financial Corp. (a) (b) (d) (g) | 8.50% | 10/15/57 | 14,510,586 | ||||
4,400,000 | Global Atlantic Fin Co. (a) (f) | 7.95% | 06/15/33 | 4,095,871 | ||||
25,121,000 | Global Atlantic Fin Co. (a) (d) (f) | 4.70% | 10/15/51 | 17,523,342 | ||||
29,237,000 | Hartford Financial Services Group (The), Inc., 3 Mo. CME Term SOFR + CSA + 2.13% (a) (b) (e) (f) | 7.75% | 02/12/47 | 25,067,792 | ||||
8,183,000 | Kuvare US Holdings, Inc. (b) (d) (f) | 7.00% | 02/17/51 | 8,264,830 | ||||
2,000,000 | La Mondiale SAM (b) (d) (k) | 5.88% | 01/26/47 | 1,858,080 | ||||
9,500,000 | Lancashire Holdings Ltd. (b) (d) (k) | 5.63% | 09/18/41 | 7,652,782 | ||||
11,204,000 | Liberty Mutual Group, Inc. (a) (b) (d) (f) | 4.13% | 12/15/51 | 8,914,464 | ||||
3,295,000 | Liberty Mutual Group, Inc. (b) (f) | 4.30% | 02/01/61 | 1,724,268 | ||||
4,125,000 | Lincoln National Corp., Series C (b) (d) | 9.25% | (c) | 4,162,113 | ||||
2,442,000 | Nationwide Financial Services Capital Trust (a) (m) | 7.90% | 03/01/37 | 2,446,589 | ||||
2,910,000 | Nationwide Financial Services, Inc. (a) (b) | 6.75% | 05/15/37 | 2,638,443 | ||||
16,684,000 | Prudential Financial, Inc. (a) (d) | 6.00% | 09/01/52 | 14,957,601 | ||||
14,500,000 | QBE Insurance Group Ltd. (b) (d) (f) | 5.88% | (c) | 13,894,199 | ||||
9,765,000 | QBE Insurance Group Ltd. (b) (d) (k) | 6.75% | 12/02/44 | 9,621,522 | ||||
2,000,000 | QBE Insurance Group Ltd. (b) (d) (k) | 5.88% | 06/17/46 | 1,897,419 | ||||
199,520,039 |
Par Amount | Description | Stated Rate | Stated Maturity | Value | ||||
CAPITAL PREFERRED SECURITIES (Continued) | ||||||||
Multi-Utilities – 4.1% | ||||||||
$28,281,000 | Algonquin Power & Utilities Corp. (a) (b) (d) | 4.75% | 01/18/82 | $22,356,272 | ||||
24,890,000 | Sempra (b) (d) | 4.13% | 04/01/52 | 19,202,272 | ||||
41,558,544 | ||||||||
Oil, Gas & Consumable Fuels – 12.5% | ||||||||
9,000,000 | Buckeye Partners, L.P., 3 Mo. LIBOR + 4.02% (b) (e) | 9.69% | 01/22/78 | 7,360,245 | ||||
27,810,000 | Enbridge, Inc. (a) (b) (d) | 6.25% | 03/01/78 | 24,405,775 | ||||
8,800,000 | Enbridge, Inc. (b) (d) | 8.50% | 01/15/84 | 8,434,563 | ||||
20,262,000 | Enbridge, Inc., Series 16-A (a) (b) (d) | 6.00% | 01/15/77 | 17,667,096 | ||||
15,150,000 | Enbridge, Inc., Series 20-A (b) (d) | 5.75% | 07/15/80 | 12,646,606 | ||||
2,543,000 | Energy Transfer, L.P., Series B (b) (d) | 6.63% | (c) | 1,974,004 | ||||
11,909,000 | Energy Transfer, L.P., Series F (b) (d) | 6.75% | (c) | 10,796,280 | ||||
14,694,000 | Energy Transfer, L.P., Series G (b) (d) | 7.13% | (c) | 12,239,042 | ||||
2,000,000 | Energy Transfer, L.P., Series H (b) (d) | 6.50% | (c) | 1,816,360 | ||||
494,000 | Enterprise Products Operating LLC (d) | 5.38% | 02/15/78 | 420,749 | ||||
2,551,000 | Enterprise Products Operating LLC, 3 Mo. LIBOR + 2.78% (b) (e) | 8.27% | 06/01/67 | 2,359,570 | ||||
4,151,000 | Enterprise Products Operating LLC, Series D, 3 Mo. CME Term SOFR + CSA + 2.99% (b) (e) | 8.62% | 08/16/77 | 4,064,540 | ||||
990,000 | Enterprise Products Operating LLC, Series E (b) (d) | 5.25% | 08/16/77 | 852,114 | ||||
21,650,000 | Transcanada Trust (a) (b) (d) | 5.50% | 09/15/79 | 17,234,571 | ||||
6,450,000 | Transcanada Trust (a) (b) (d) | 5.60% | 03/07/82 | 4,986,315 | ||||
127,257,830 | ||||||||
Retail REITs – 0.6% | ||||||||
1,200,000 | Scentre Group Trust 2 (a) (d) (f) | 4.75% | 09/24/80 | 1,078,771 | ||||
6,450,000 | Scentre Group Trust 2 (a) (b) (d) (f) | 5.13% | 09/24/80 | 5,326,079 | ||||
6,404,850 | ||||||||
Trading Companies & Distributors – 4.9% | ||||||||
35,945,000 | AerCap Holdings N.V. (b) (d) | 5.88% | 10/10/79 | 33,773,668 | ||||
4,863,000 | Air Lease Corp., Series B (b) (d) | 4.65% | (c) | 4,151,263 | ||||
15,335,000 | Aircastle Ltd. (b) (d) (f) | 5.25% | (c) | 12,101,575 | ||||
50,026,506 | ||||||||
Total Capital Preferred Securities | 1,263,171,774 | |||||||
(Cost $1,441,303,934) | ||||||||
Principal Value | Description | Stated Coupon | Stated Maturity | Value | ||||
FOREIGN CORPORATE BONDS AND NOTES – 2.8% | ||||||||
Insurance – 2.8% | ||||||||
29,795,925 | Highlands Holdings Bond Issuer Ltd./Highlands Holdings Bond Co-Issuer, Inc. (a) (b) (f) (n) | 7.63% | 10/15/25 | 29,065,031 | ||||
(Cost $30,050,053) |
Total Investments – 152.3% | 1,554,211,603 | |||
(Cost $1,802,086,322) | ||||
Shares | Description | Value | ||
REVERSE REPURCHASE AGREEMENT – (9.8)% | ||||
(100,000,000) | Scotia Bank, due 1/29/24, 1 month CME Term SOFR + CSA + 65bps | (100,000,000) | ||
Outstanding Loan – (44.4)% | (453,200,000) | |||
Net Other Assets and Liabilities – 1.9% | 19,653,663 | |||
Net Assets – 100.0% | $1,020,665,266 |
(a) | This security or a portion of this security is segregated as collateral for reverse repurchase agreements. All of these securities are corporate bonds. The remaining contractual maturity of the agreements is between 30-90 days. At October 31, 2023, securities noted as such are valued at $223,923,210. |
(b) | All or a portion of this security serves as collateral on the outstanding loan. At October 31, 2023, the segregated value of these securities amounts to $939,937,132. |
(c) | Perpetual maturity. |
(d) | Fixed-to-floating or fixed-to-variable rate security. The interest rate shown reflects the fixed rate in effect at October 31, 2023. At a predetermined date, the fixed rate will change to a floating rate or a variable rate. |
(e) | Floating or variable rate security. |
(f) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the Securities Act of 1933, as amended (the “1933 Act”), and may be resold in transactions exempt from registration, normally to qualified institutional buyers. Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be liquid by Stonebridge Advisors LLC (the “Sub-Advisor”). Although market instability can result in periods of increased overall market illiquidity, liquidity for each security is determined based on security specific factors and assumptions, which require subjective judgment. At October 31, 2023, securities noted as such amounted to $435,166,336 or 42.6% of net assets. |
(g) | This security, sold within the terms of a private placement memorandum, is exempt from registration upon resale under Rule 144A of the 1933 Act, and may be resold in transactions exempt from registration, normally to qualified institutional buyers (see Note 2D - Restricted Securities in the Notes to Financial Statements). |
(h) | This security is fair valued by the Advisor’s Pricing Committee in accordance with procedures approved by the Fund’s Board of Trustees, and in accordance with the provisions of the Investment Company Act of 1940 and rules thereunder, as amended. At October 31, 2023, securities noted as such are valued at $12,480,000 or 1.2% of net assets. |
(i) | This security’s value was determined using significant unobservable inputs. (see Note 2A - Portfolio Valuation in the Notes to Financial Statements). |
(j) | This security is a contingent convertible capital security which may be subject to conversion into common stock of the issuer under certain circumstances. At October 31, 2023, securities noted as such amounted to $447,750,617 or 28.5% of managed assets. Of these securities, 8.0% originated in emerging markets, and 92.0% originated in foreign markets. |
(k) | This security may be resold to qualified foreign investors and foreign institutional buyers under Regulation S of the 1933 Act. |
(l) | Claim pending with the administrative court of Switzerland. |
(m) | Pursuant to procedures adopted by the Fund’s Board of Trustees, this security has been determined to be illiquid by the Sub-Advisor. |
(n) | These notes are Senior Payment-in-kind (“PIK”) Toggle Notes whereby the issuer may, at its option, elect to pay interest on the notes (1) entirely in cash or (2) entirely in PIK interest. Interest paid in cash will accrue on the notes at a rate of 7.63% per annum (“Cash Interest Rate”) and PIK interest will accrue on the notes at a rate per annum equal to the Cash Interest Rate plus 75 basis points. For the fiscal year ended October 31, 2023, this security paid all of its interest in cash. |
Abbreviations throughout the Portfolio of Investments: | |
CME | – Chicago Mercantile Exchange |
CSA | – Credit Spread Adjustment |
LIBOR | – London Interbank Offered Rate |
SOFR | – Secured Overnight Financing Rate |
ASSETS TABLE | ||||
Total Value at 10/31/2023 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
$25 Par Preferred Securities: | ||||
Gas Utilities | $ 3,536,947 | $ — | $ 3,536,947 | $ — |
Insurance | 79,594,569 | 56,628,688 | 22,965,881 | — |
Other Industry Categories* | 123,813,305 | 123,813,305 | — | — |
$1,000 Par Preferred Securities: | ||||
Banks | 35,573,790 | 35,573,790 | — | — |
Financial Services | 6,976,187 | — | 6,976,187 | — |
$1,000,000 Par Preferred Securities* | 12,480,000 | — | — | 12,480,000 |
Capital Preferred Securities* | 1,263,171,774 | — | 1,263,171,774 | — |
Foreign Corporate Bonds and Notes* | 29,065,031 | — | 29,065,031 | — |
Total Investments | $ 1,554,211,603 | $ 216,015,783 | $ 1,325,715,820 | $ 12,480,000 |
LIABILITIES TABLE | ||||
Total Value at 10/31/2023 | Level 1 Quoted Prices | Level 2 Significant Observable Inputs | Level 3 Significant Unobservable Inputs | |
Reverse Repurchase Agreement | $ (100,000,000) | $ — | $ (100,000,000) | $ — |
* | See Portfolio of Investments for industry breakout. |
Beginning Balance at October 31, 2022 | |
$1,000,000 Par Preferred Securities | $13,440,000 |
Net Realized Gain (Loss) | — |
Net Change in Unrealized Appreciation/Depreciation | (960,000) |
Purchases | — |
Sales | — |
Transfers In | — |
Transfers Out | — |
Ending Balance at October 31, 2023 | |
$1,000,000 Par Preferred Securities | 12,480,000 |
Total Level 3 holdings | $12,480,000 |
ASSETS: | |
Investments, at value | $ 1,554,211,603 |
Cash | 5,822,487 |
Receivables: | |
Interest | 19,263,337 |
Dividends | 539,904 |
Investment securities sold | 367,938 |
Reclaims | 111,234 |
Total Assets | 1,580,316,503 |
LIABILITIES: | |
Outstanding loan | 453,200,000 |
Reverse repurchase agreement | 100,000,000 |
Payables: | |
Interest and fees on loan and repurchase agreement | 3,084,390 |
Investment securities purchased | 1,648,583 |
Investment advisory fees | 1,144,070 |
Administrative fees | 434,477 |
Shareholder reporting fees | 58,264 |
Audit and tax fees | 38,637 |
Custodian fees | 27,948 |
Legal fees | 2,249 |
Transfer agent fees | 1,627 |
Financial reporting fees | 771 |
Other liabilities | 10,221 |
Total Liabilities | 559,651,237 |
NET ASSETS | $1,020,665,266 |
NET ASSETS consist of: | |
Paid-in capital | $ 1,412,699,698 |
Par value | 608,478 |
Accumulated distributable earnings (loss) | (392,642,910) |
NET ASSETS | $1,020,665,266 |
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share) | $16.77 |
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized) | |
Investments, at cost | $1,802,086,322 |
INVESTMENT INCOME: | ||
Interest | $ 93,102,866 | |
Dividends | 24,298,773 | |
Foreign withholding tax | (297,473) | |
Other | 2,522 | |
Total investment income | 117,106,688 | |
EXPENSES: | ||
Interest and fees on loan and repurchase agreement | 32,087,782 | |
Investment advisory fees | 14,136,337 | |
Administrative fees | 604,074 | |
Shareholder reporting fees | 230,934 | |
Legal fees | 227,299 | |
Custodian fees | 179,912 | |
Listing expense | 61,137 | |
Audit and tax fees | 41,744 | |
Transfer agent fees | 20,433 | |
Trustees’ fees and expenses | 20,027 | |
Financial reporting fees | 9,250 | |
Other | 39,818 | |
Total expenses | 47,658,747 | |
NET INVESTMENT INCOME (LOSS) | 69,447,941 | |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on: | ||
Investments | (91,750,693) | |
Foreign currency transactions | 1,588 | |
Net realized gain (loss) | (91,749,105) | |
Net change in unrealized appreciation (depreciation) on investments | (1,209,669) | |
NET REALIZED AND UNREALIZED GAIN (LOSS) | (92,958,774) | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $(23,510,833) |
Year Ended 10/31/2023 | Year Ended 10/31/2022 | ||
OPERATIONS: | |||
Net investment income (loss) | $ 69,447,941 | $ 86,952,196 | |
Net realized gain (loss) | (91,749,105) | (11,458,089) | |
Net change in unrealized appreciation (depreciation) | (1,209,669) | (377,373,900) | |
Net increase (decrease) in net assets resulting from operations | (23,510,833) | (301,879,793) | |
DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||
Investment operations | (66,905,271) | (85,119,106) | |
Return of capital | (12,805,383) | (6,147,414) | |
Total distributions to shareholders | (79,710,654) | (91,266,520) | |
CAPITAL TRANSACTIONS: | |||
Proceeds from Common Shares reinvested | — | 669,324 | |
Net increase (decrease) in net assets resulting from capital transactions | — | 669,324 | |
Total increase (decrease) in net assets | (103,221,487) | (392,476,989) | |
NET ASSETS: | |||
Beginning of period | 1,123,886,753 | 1,516,363,742 | |
End of period | $ 1,020,665,266 | $ 1,123,886,753 | |
CAPITAL TRANSACTIONS were as follows: | |||
Common Shares at beginning of period | 60,847,827 | 60,820,579 | |
Common Shares issued as reinvestment under the Dividend Reinvestment Plan | — | 27,248 | |
Common Shares at end of period | 60,847,827 | 60,847,827 |
Cash flows from operating activities: | ||
Net increase (decrease) in net assets resulting from operations | $(23,510,833) | |
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities: | ||
Purchases of investments | (643,860,935) | |
Sales, maturities and paydown of investments | 654,562,770 | |
Net amortization/accretion of premiums/discounts on investments | 86,494 | |
Net realized gain/loss on investments | 91,750,693 | |
Net change in unrealized appreciation/depreciation on investments | 1,209,669 | |
Changes in assets and liabilities: | ||
Increase in interest receivable | (256,060) | |
Decrease in interest reclaims receivable | 361,797 | |
Increase in dividend reclaims receivable | (1) | |
Decrease in dividends receivable | 297,416 | |
Decrease in prepaid expenses | 328 | |
Increase in interest and fees payable on loan and reverse repurchase agreement | 1,067,616 | |
Decrease in investment advisory fees payable | (65,155) | |
Decrease in audit and tax fees payable | (10,526) | |
Decrease in legal fees payable | (591) | |
Decrease in shareholder reporting fees payable | (1,630) | |
Increase in administrative fees payable | 91,389 | |
Decrease in custodian fees payable | (3,353) | |
Decrease in transfer agent fees payable | (1,236) | |
Increase in other liabilities payable | 10,221 | |
Cash provided by operating activities | $81,728,073 | |
Cash flows from financing activities: | ||
Distributions to Common Shareholders from investment operations | (66,905,271) | |
Distributions to Common Shareholders from return of capital | (12,805,383) | |
Repayment of borrowing | (92,800,000) | |
Proceeds from borrowing | 96,400,000 | |
Cash used in financing activities | (76,110,654) | |
Increase in cash | 5,617,419 | |
Cash at beginning of period | 205,068 | |
Cash at end of period | $5,822,487 | |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest and fees | $31,020,166 |
Year Ended October 31, | |||||||||
2023 | 2022 | 2021 | 2020 | 2019 | |||||
Net asset value, beginning of period | $ 18.47 | $ 24.93 | $ 22.66 | $ 24.40 | $ 22.84 | ||||
Income from investment operations: | |||||||||
Net investment income (loss) | 1.14 (a) | 1.43 | 1.58 | 1.56 | 1.65 | ||||
Net realized and unrealized gain (loss) | (1.53) | (6.39) | 2.22 | (1.71) | 1.61 | ||||
Total from investment operations | (0.39) | (4.96) | 3.80 | (0.15) | 3.26 | ||||
Distributions paid to shareholders from: | |||||||||
Net investment income | (1.10) | (1.40) | (1.48) | (1.45) | (1.64) | ||||
Return of capital | (0.21) | (0.10) | (0.05) | (0.14) | (0.06) | ||||
Total distributions paid to Common Shareholders | (1.31) | (1.50) | (1.53) | (1.59) | (1.70) | ||||
Net asset value, end of period | $ | $18.47 | $24.93 | $22.66 | $24.40 | ||||
Market value, end of period | $ | $16.39 | $25.48 | $21.56 | $24.07 | ||||
Total return based on net asset value (b) | (1.56)% | (20.30)% | 17.25% | (0.05)% | 15.44% | ||||
Total return based on market value (b) | (5.86)% | (30.77)% | 25.89% | (3.60)% | 27.06% | ||||
Ratios to average net assets/supplemental data: | |||||||||
Net assets, end of period (in 000’s) | $ 1,020,665 | $ 1,123,887 | $ 1,516,364 | $ 1,376,701 | $ 1,482,428 | ||||
Ratio of total expenses to average net assets | 4.34% | 2.22% | 1.72% | 1.98% | 2.70% | ||||
Ratio of total expenses to average net assets excluding interest expense | 1.42% | 1.35% | 1.33% | 1.31% | 1.33% | ||||
Ratio of net investment income (loss) to average net assets | 6.32% | 6.59% | 6.44% | 6.93% | 7.14% | ||||
Portfolio turnover rate | 39% | 25% | 39% | 45% | 40% | ||||
Indebtedness: | |||||||||
Total loan and reverse repurchase agreement outstanding (in 000’s) | $ 553,200 | $ 549,600 | $ 676,000 | $ 616,000 | $ 646,000 | ||||
Asset coverage per $1,000 of indebtedness (c) | $ 2,845 | $ 3,045 | $ 3,243 | $ 3,235 | $ 3,295 | ||||
Total loan outstanding (in 000’s) | $ 453,200 | $ 449,600 | $ 576,000 | $ 516,000 | $ 646,000 | ||||
Asset coverage per $1,000 of indebtedness (d) | $ 3,252 | $ 3,500 | $ 3,633 | $ 3,668 | $ 3,295 |
(a) | Based on average shares outstanding. |
(b) | Total return is based on the combination of reinvested dividend, capital gain and return of capital distributions, if any, at prices obtained by the Dividend Reinvestment Plan, and changes in net asset value per share for net asset value returns and changes in Common Share Price for market value returns. Total returns do not reflect sales load and are not annualized for periods of less than one year. Past performance is not indicative of future results. |
(c) | Calculated by subtracting the Fund’s total liabilities (not including the loan and reverse repurchase agreement outstanding) from the Fund’s total assets, and dividing by the outstanding loan and reverse repurchase agreement balances in 000’s. |
(d) | Calculated by subtracting the Fund’s total liabilities (not including the loan outstanding) from the Fund’s total assets, and dividing by the outstanding loan balance in 000’s. |
1) | benchmark yields; |
2) | reported trades; |
3) | broker/dealer quotes; |
4) | issuer spreads; |
5) | benchmark securities; |
6) | bids and offers; and |
7) | reference data including market research publications. |
1) | the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price; |
2) | the type of security; |
3) | the size of the holding; |
4) | the initial cost of the security; |
5) | transactions in comparable securities; |
6) | price quotes from dealers and/or third-party pricing services; |
7) | relationships among various securities; |
8) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
9) | an analysis of the issuer’s financial statements; |
10) | the existence of merger proposals or tender offers that might affect the value of the security; and |
11) | other relevant factors. |
1) | the last sale price on the exchange on which they are principally traded; |
2) | the value of similar foreign securities traded on other foreign markets; |
3) | ADR trading of similar securities; |
4) | closed-end fund or exchange-traded fund trading of similar securities; |
5) | foreign currency exchange activity; |
6) | the trading prices of financial products that are tied to baskets of foreign securities; |
7) | factors relating to the event that precipitated the pricing problem; |
8) | whether the event is likely to recur; |
9) | whether the effects of the event are isolated or whether they affect entire markets, countries or regions; and |
10) | other relevant factors. |
• | Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
• | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
o | Quoted prices for similar investments in active markets. |
o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
• | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
Security | Acquisition Date | Par Amount/ Shares | Current Price | Carrying Cost | Value | % of Net Assets | ||
Dairy Farmers of America, Inc., 7.13% | 9/15/16 | $ 6,000,000 | 90.75 | $6,000,000 | $5,445,000 | 0.53% | ||
Fortegra Financial Corp., 8.50%, 10/15/57 | 10/12/17 - 3/12/18 | $ 15,300,000 | 94.84 | 15,343,577 | 14,510,586 | 1.42 | ||
FT Real Estate Securities Co., Inc., 9.50% | 6/15/16 | 12 | 1,040,000.00 | 15,990,000 | 12,480,000 | 1.22 | ||
Land O’Lakes Capital Trust I, 7.45%, 03/15/28 | 3/20/15 - 2/25/19 | $ 7,329,000 | 92.50 | 7,621,707 | 6,779,325 | 0.66 | ||
$44,955,284 | $39,214,911 | 3.83% |
Gross Amounts not Offset in the Statement of Assets and Liabilities | |||||||||||
Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts of Liabilities Presented in the Statement of Assets and Liabilities | Financial Instruments | Cash Segregated as Collateral | Net Amount | ||||||
Reverse Repurchase Agreements | $ (100,000,000) | $ — | $ (100,000,000) | $ 100,000,000 | $ — | $ — |
Distributions paid from: | 2023 | 2022 |
Ordinary income | $66,905,271 | $85,119,106 |
Capital gains | — | — |
Return of capital | 12,805,383 | 6,147,414 |
Undistributed ordinary income | $— |
Undistributed capital gains | — |
Total undistributed earnings | — |
Accumulated capital and other losses | (151,030,217) |
Net unrealized appreciation (depreciation) | (241,612,693) |
Total accumulated earnings (losses) | (392,642,910) |
Other | — |
Paid-in capital | 1,413,308,176 |
Total net assets | $1,020,665,266 |
Tax Cost | Gross Unrealized Appreciation | Gross Unrealized (Depreciation) | Net Unrealized Appreciation (Depreciation) | |||
$1,795,824,296 | $11,970,742 | $(253,583,435) | $(241,612,693) |
(1) | If Common Shares are trading at or above net asset value (“NAV”) at the time of valuation, the Fund will issue new shares at a price equal to the greater of (i) NAV per Common Share on that date or (ii) 95% of the market price on that date. |
(2) | If Common Shares are trading below NAV at the time of valuation, the Plan Agent will receive the dividend or distribution in cash and will purchase Common Shares in the open market, on the NYSE or elsewhere, for the participants’ accounts. It is possible that the market price for the Common Shares may increase before the Plan Agent has completed its purchases. Therefore, the average purchase price per share paid by the Plan Agent may exceed the market price at the time of valuation, resulting in the purchase of fewer shares than if the dividend or distribution had been paid in Common Shares issued by the Fund. The Plan Agent will use all dividends and distributions received in cash to purchase Common Shares in the open market within 30 days of the valuation date except where temporary curtailment or suspension of purchases is necessary to comply with federal securities laws. Interest will not be paid on any uninvested cash payments. |
Dividends Received Deduction | Qualified Dividend Income | |
37.84% | 88.91% |
• | The Fund invests at least 80% of its managed assets in a portfolio of preferred and other income-producing securities issued by U.S. and non-U.S. companies. These securities include traditional preferred securities, hybrid preferred securities and debt securities, floating rate and fixed-to-floating rate preferred securities, debt securities, convertible securities and contingent convertible securities. |
• | The Fund also invests at least 25% of its managed assets in the group of industries that are part of the financials sector as classified under the Global Industry Classification Standards, developed by MSCI, Inc. and S&P Dow Jones Indices. |
• | The Fund seeks to invest in a portfolio of securities that has an average weighted investment grade credit quality. |
• | The Fund may invest up to 20% of its managed assets in common stocks, which represent residual ownership interest in issuers and include rights or warrants to purchase common stocks. The Fund may invest in common stocks of companies of any market capitalization. |
• | The Fund may invest up to 20% of its managed assets in debt securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities or by a non-U.S. Government or its agencies or instrumentalities. The Fund may invest up to 20% of its managed assets in municipal securities, which include debt obligations of states, territories or possessions of the United States and the District of Columbia and their political subdivisions, agencies and instrumentalities. |
• | The Fund may invest up to 25% of its managed assets in securities that, at the time of investment, are illiquid. The Fund also may invest, without limit, in restricted securities. |
• | The Fund seeks to maintain a weighted average effective duration of between three and eight years, excluding the effects of leverage. However, under certain market conditions, the Fund’s duration may be longer than eight years or shorter than three years. |
• | Issuer Risk. The value of these securities may decline for a number of reasons which directly relate to the issuer, such as management performance, leverage and reduced demand for the issuer’s goods and services. |
• | Interest Rate Risk. Interest rate risk is the risk that fixed rate securities will decline in value because of changes in market interest rates. When market interest rates rise, the market value of fixed rate securities generally will fall. Market value generally falls further for fixed rate securities with longer duration. During periods of rising interest rates, the average life of certain types of securities may be extended because of slower than expected prepayments. This may lock in a below-market yield, increase the security’s duration and further reduce the value of the security. Investments in fixed rate securities with long-term maturities may experience significant price declines if long-term interest rates increase. |
• | Floating Rate and Fixed-to-Floating Rate Risk. The market value of floating rate and fixed-to-floating rate securities may fall in a declining interest rate environment and may also fall in a rising interest rate environment if there is a lag between the |
rise in interest rates and the interest rate reset. Securities with a floating or variable interest rate component can be less sensitive to interest rate changes than securities with fixed interest rates. A secondary risk associated with declining interest rates is the risk that income earned by the Fund on floating rate and fixed-to-floating rate securities may decline due to lower coupon payments on floating rate securities. | |
• | Prepayment Risk. Prepayment risk is the risk that the issuer of a debt security will repay principal prior to the scheduled maturity date. 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, which may result in a decline in the Fund’s income and distributions to common shareholders. |
• | Reinvestment Risk. Reinvestment risk is the risk that income from the Fund’s portfolio will decline if the Fund invests the proceeds from matured, traded or called securities at market interest rates that are below the Fund portfolio’s current earnings rate. |
• | Subordination Risk. Preferred securities are typically subordinated to bonds and other debt instruments in a company’s capital structure, in terms of priority to corporate income and liquidation payments, and therefore will be subject to greater credit risk than those debt instruments. |
NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE |
Assumed Portfolio Total Return (Net of Expenses) | -10% | -5% | 0% | 5% | 10% |
Common Share Total Return | -17.18% | -9.96% | -2.74% | 4.48% | 11.70% |
Name, Year of Birth and Position with the Fund | Term of Office and Year First Elected or Appointed(1) | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
INDEPENDENT TRUSTEES | ||||
Richard E. Erickson, Trustee (1951) | • Three Year Term• Since Fund Inception | Retired; Physician, Edward-Elmhurst Medical Group (2021 to September 2023); Physician and Officer, Wheaton Orthopedics (1990 to 2021) | 254 | None |
Thomas R. Kadlec, Trustee (1957) | • Three Year Term• Since Fund Inception | Retired; President, ADM Investor Services, Inc. (Futures Commission Merchant) (2010 to July 2022) | 254 | Director, National Futures Association and ADMIS Singapore Ltd.; Formerly, Director of ADM Investor Services, Inc., ADM Investor Services International, ADMIS Hong Kong Ltd., and Futures Industry Association |
Denise M. Keefe, Trustee (1964) | • Three Year Term• Since 2021 | Executive Vice President, Advocate Aurora Health and President, Advocate Aurora Continuing Health Division (Integrated Healthcare System) | 254 | Director and Board Chair of Advocate Home Health Services, Advocate Home Care Products and Advocate Hospice; Director and Board Chair of Aurora At Home (since 2018); Director of Advocate Physician Partners Accountable Care Organization; Director of RML Long Term Acute Care Hospitals; Director of Senior Helpers (since 2021); and Director of MobileHelp (since 2022) |
Robert F. Keith, Trustee (1956) | • Three Year Term• Since Fund Inception | President, Hibs Enterprises (Financial and Management Consulting) | 254 | Formerly, Director of Trust Company of Illinois |
Niel B. Nielson, Trustee (1954) | • Three Year Term• Since Fund Inception | Senior Advisor (2018 to Present), Managing Director and Chief Operating Officer (2015 to 2018), Pelita Harapan Educational Foundation (Educational Products and Services) | 254 | None |
(1) | Currently, Denise M. Keefe and Robert F. Keith, as Class I Trustees, are serving as trustees until the Fund’s 2026 annual meeting of shareholders. Richard E. Erickson, Thomas R. Kadlec and Bronwyn Wright as Class II Trustees, are serving as trustees until the Fund’s 2024 annual meeting of shareholders. James A. Bowen, Niel B. Nielson, as a Class III Trustees, are serving as trustees until the Fund’s 2025 annual meeting of shareholders. |
Name, Year of Birth and Position with the Fund | Term of Office and Year First Elected or Appointed(1) | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During Past 5 Years |
Bronwyn Wright, Trustee (1971) | • Three Year Term• Since 2023 | Independent Director to a number of Irish collective investment funds (2009 to Present); Various roles at international affiliates of Citibank (1994 to 2009), including Managing Director, Citibank Europe plc and Head of Securities and Fund Services, Citi Ireland (2007 to 2009) | 229 | None |
INTERESTED TRUSTEE | ||||
James A. Bowen(2), Trustee and Chairman of the Board (1955) | • Three Year Term• Since Fund Inception | Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) | 254 | None |
Name and Year of Birth | Position and Offices with Fund | Term of Office and Length of Service | Principal Occupations During Past 5 Years |
OFFICERS(3) | |||
James M. Dykas (1966) | President and Chief Executive Officer | • Indefinite Term • Since 2016 | Managing Director and Chief Financial Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) |
Derek D. Maltbie (1972) | Treasurer, Chief Financial Officer and Chief Accounting Officer | • Indefinite Term • Since 2023 | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P., July 2021 to Present. Previously, Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P., 2014 to 2021. |
W. Scott Jardine (1960) | Secretary and Chief Legal Officer | • Indefinite Term • Since Fund Inception | General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC; Secretary, Stonebridge Advisors LLC |
Daniel J. Lindquist (1970) | Vice President | • Indefinite Term • Since Fund Inception | Managing Director, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Kristi A. Maher (1966) | Chief Compliance Officer and Assistant Secretary | • Indefinite Term • Since Fund Inception | Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P. |
(2) | Mr. Bowen is deemed an “interested person” of the Fund due to his position as CEO of First Trust Advisors L.P., investment advisor of the Fund. |
(3) | The term “officer” means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. |
• | Information we receive from you and your broker-dealer, investment professional or financial representative through interviews, applications, agreements or other forms; |
• | Information about your transactions with us, our affiliates or others; |
• | Information we receive from your inquiries by mail, e-mail or telephone; and |
• | Information we collect on our website through the use of “cookies.” For example, we may identify the pages on our website that your browser requests or visits. |
• | In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. |
• | We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). |
FUND ACCOUNTANT &
CUSTODIAN
PUBLIC ACCOUNTING FIRM
Item 2. Code of Ethics.
(a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
(c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
(d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
(e) | Not applicable. |
(f) | A copy of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller is filed as an exhibit pursuant to Item 13(a)(1). |
Item 3. Audit Committee Financial Expert.
As of the end of the period covered by the report, the registrant’s board of trustees has determined that Thomas R. Kadlec, Robert F. Keith and Bronwyn Wright are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is “independent,” as defined by Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) | Audit Fees (Registrant) -- The aggregate fees billed for the last fiscal year for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $30,000 for the fiscal year ended October 31, 2022 and $30,000 for the fiscal year ended October 31, 2023. |
(b) | Audit-Related Fees (Registrant) -- The aggregate fees billed in the last fiscal year for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023. |
Audit-Related Fees (Investment Advisor) -- The aggregate fees billed in the last fiscal year for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023.
Audit-Related Fees (Investment Sub-Advisor) -- The aggregate fees billed in the last fiscal year for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023.
(c) | Tax Fees (Registrant) -- The aggregate fees billed in the last fiscal year for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $14,000 for the fiscal year ended October 31, 2022 and $21,211 for the fiscal year ended October 31, 2023. These fees were for tax consultation and/or tax return preparation and professional services for PFIC (Passive Foreign Investment Company) Identification Services. |
Tax Fees (Investment Advisor) -- The aggregate fees billed in the last fiscal year for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023.
Tax Fees (Investment Sub-Advisor) -- The aggregate fees billed in the last fiscal year for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023.
(d) | All Other Fees (Registrant) -- The aggregate fees billed in the last fiscal year for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023. |
All Other Fees (Investment Advisor) The aggregate fees billed in the last fiscal year for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023.
All Other Fees (Investment Sub-Advisor) The aggregate fees billed in the last fiscal year for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for the fiscal year ended October 31, 2022 and $0 for the fiscal year ended October 31, 2023.
(e)(1) | Disclose the audit committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. |
Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the “Committee”) is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee.
The Committee is also responsible for the pre-approval of the independent auditor’s engagements for non-audit services with the registrant’s advisor (not including a sub-advisor whose role is primarily portfolio management and is sub-contracted or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant’s advisor (other than any sub-advisor whose role is primarily portfolio management and is sub-contracted with or overseen by another investment advisor) and any entity controlling, controlled by or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor’s independence.
(e)(2) | The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant’s investment advisor of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows: |
(b) 0%
(c) 0%
(d) 0%
(f) | The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was less than fifty percent. |
(g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the advisor that provides ongoing services to the registrant for the fiscal year ended October 31, 2022 were $14,000 for the registrant, $0 for the registrant’s investment advisor and $0 for the registrant’s investment sub-advisor and for the registrant’s fiscal year ended October 31, 2023 were $0 for the registrant, $44,000 for the registrant’s investment advisor and $16,000 for the registrant’s investment sub-advisor. |
(h) | The registrant’s audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant’s investment advisor (not including any sub-advisor whose role is primarily portfolio management and is subcontracted with or overseen by another investment advisor), and any entity controlling, controlled by, or under common control with the investment advisor that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
(i) | Not applicable. |
(j) | Not applicable. |
Item 5. Audit Committee of Listed Registrants.
(a) | The registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 consisting of all the independent directors of the registrant. The audit committee of the registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Denise M. Keefe, Robert F. Keith, Niel B. Nielson and Bronwyn Wright. |
Item 6. Investments.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
A description of the policies and procedures used to vote proxies on behalf of the Fund is attached as an exhibit.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) Identification of Portfolio Managers or Management Team Members and Description of Role of Portfolio Managers or Management Team Members
Information provided as of November 20, 2023
Stonebridge Advisors LLC is a registered investment advisor based in Wilton, Connecticut. Stonebridge specializes in the management of preferred and hybrid securities.
Scott T. Fleming, President and CEO of Stonebridge Advisors LLC
Mr. Fleming leads the Investment Team at Stonebridge and oversees and takes lead role over Investment Team decisions. Prior to founding Stonebridge, Mr. Fleming co-founded Spectrum Asset Management, Inc., an investment advisor that specializes in preferred securities asset management for institutional clients and mutual funds. During his 13-year tenure there, he served as Chairman of the Board of Directors, Chief Financial Officer and Chief Investment Officer. Under his leadership, Spectrum grew to be the largest preferred securities manager in the country. As Chief Investment Officer at Spectrum, Mr. Fleming established and implemented custom investment strategies for the firm’s clients. In this capacity he was instrumental in growing assets under management to over $2 billion by consistently outperforming stated benchmarks by solid margins. Mr. Fleming previously served as Vice President, Portfolio Manager for DBL Preferred Management, Inc. in New York City. There he managed over $300 million of institutional assets with a strategy specializing in preferred securities. Mr. Fleming received a BS in Accounting from Bentley College in Waltham, MA and his MBA in Finance from Babson College in Wellesley, MA.
Robert Wolf, CIO and Executive Vice President
Mr. Wolf is a member of the firm’s Investment Committee and oversees investment strategies and portfolio management activities across funds and separately managed accounts. He analyzes both investment grade and non-investment grade securities and makes security recommendations. Mr. Wolf brings 17 years of fixed-income experience to Stonebridge in both portfolio management and credit research. Prior to joining Stonebridge in 2006, Mr. Wolf was a high-yield fixed-income research analyst at Lehman Brothers. In this role, his responsibilities included detailed credit analysis across multiple sectors, relative value analysis, and developing trade recommendations for Lehman’s High-Yield proprietary trading effort. Mr. Wolf previously worked for Lehman Brothers Commercial Mortgage-Backed Securities (CMBS) trading desk as a credit analyst where he provided in-depth analysis of CMBS transactions and the underlying Commercial Real Estate. Mr. Wolf received his B.S. degree in Chemistry from Villanova University in 1999 and his MBA in Finance from the New York University Stern School of Business in 2004.
Eric Weaver, Chief Strategist and Executive Vice President
Mr. Weaver is a senior member of Stonebridge Advisors LLC’s Investment Committee and oversees the investment strategy across all fund products and separately managed accounts. In addition, Mr. Weaver leads the development of proprietary portfolio management, security selection, trading, and operational tools. Mr. Weaver has thirteen years of investment management experience in portfolio management, trading, risks analysis, and research. Mr. Weaver joined Stonebridge Advisors LLC in 2013. Prior to joining Stonebridge in 2013, Mr. Weaver worked at a private proprietary trading firm as a senior derivatives trader, with OTC and electronic trading experience on the NASDAQ OMX PHLX and CBOE options exchanges. In this role, Mr. Weaver focused on trading, portfolio and risk management, and pricing complex derivatives in a large and diverse portfolio of equities, options, and futures. Mr. Weaver received a B.A. degree in Economics and Mathematics and an MS degree in Economics from Lehigh University in Bethlehem, PA.
Angelo Graci, CFA, Executive Vice President and Head of Credit Research
Mr. Graci is a senior member of the Investment Committee and manages a team of analysts that oversees all of Stonebridge’s portfolio investments. Mr. Graci has over 25 years of credit and equity research experience with a focus on financials. His extensive knowledge of global banking, insurance, non-bank finance and REITs brings an impressive level of analytical depth to the Stonebridge research team.
Prior to joining Stonebridge in 2018, Mr. Graci was a global financials credit strategist at Stifel Financial, with a particular focus on hybrid/preferred strategy. At Stifel, he incorporated a multi-asset and cross-currency approach to analyzing global financials, which encompassed global banking systems (developed and emerging markets), insurance, non-bank finance and REITs. Before Stifel, he was a senior analyst at Caxton Associates, responsible for financial sector credit and equity analysis and portfolio management. Prior roles included global financials and hybrid strategy at Citadel Securities and credit analysis and trading at Merrill Lynch. Mr. Graci received a BS in Finance from SUNY Albany and an MBA in Finance from New York University. He holds the CFA® designation awarded by CFA Institute.
(a)(2) | Other Accounts Managed by Portfolio Managers or Management Team Member and Potential Conflicts of Interest |
Information provided as of October 31, 2023.
Name of Portfolio Manager or Team Member | Type of Accounts* | Total # of Accounts Managed | Total Assets | # of Accounts Managed for which Advisory Fee is Based on Performance | Total Assets for which Advisory Fee is Based on Performance |
1. Scott T. Fleming | Registered Investment Companies | 3 | $6.109Bil | 0 | 0 |
Other Pooled Investment Vehicles | 0 | $0 | 0 | $0 | |
Other Accounts | 9,793 | $3.094Bil | 0 | $0 | |
2. Robert Wolf | Registered Investment Companies | 3 | $6.109Bil | 0 | $0 |
Other Pooled Investment Vehicles | 0 | $0 | 0 | $0 | |
Other Accounts | 9,793 | $3.094Bil | 0 | $0 | |
3. Eric Weaver | Registered Investment Companies: | 3 | $6.109Bil | 0 | $0 |
Other Pooled Investment Vehicles | 0 | $0 | 0 | $0 | |
Other Accounts: | 9,793 | $3.094Bil | 0 | $0 | |
4. Angelo Graci | Registered Investment Companies: | 3 | $6.109Bil | 0 | $0 |
Other Pooled Investment Vehicles | 0 | $0 | 0 | $0 | |
Other Accounts: | 9,793 | $3.094Bil | 0 | $0 |
*Information excludes the registrant
Portfolio Manager Potential Conflicts of Interests
Stonebridge Advisors LLC (“Stonebridge”) avoids material conflicts that may arise from side-by-side management of the CEF and other account strategies, including other FT funds and Separately Managed Accounts by policies and procedures that are designed to ensure that each client is treated fairly. Stonebridge’s investment team considers every investment opportunity for each of our portfolios based on the portfolio or fund guidelines, restrictions and compliance rules. Trades are pre-allocated to those client portfolios for which the trade is suitable, given the portfolio’s goals and guidelines. Partial fills are governed by allocation rules that are designed to treat each client fairly.
(a)(3) Compensation Structure of Portfolio Managers or Management Team Members
Portfolio Manager Compensation
Information provided as of October 31, 2023.
Stonebridge employees receive an annual salary, mid- and year-end bonuses based on company performance, medical benefits and a 401(k) plan.
Compensation consists of base salaries with upside potential in the form of mid-year and year-end performance bonuses. These bonuses are based on a number of factors: profitability of the firm, employee value to the firm success, investment performance and servicing of clients, employee ability to fit into the team, employee commitment, work ethic and effectiveness in carrying out assigned duties, employee dedication above and beyond expectations.
(a)(4) Disclosure of Securities Ownership
Information provided as of October 31, 2023.
Name | Dollar Range of Fund Shares Beneficially Owned |
Scott T. Fleming | $500,001-1,000,000 |
Robert Wolf | $10,001-$50,000 |
Eric Weaver | $10,001-50,000 |
Angelo Graci | $100,001-500,000 |
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.
Item 11. Controls and Procedures.
(a) | The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
(a) | Not applicable. |
(b) | Not applicable. |
Item 13. Exhibits.
(a)(1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a)(3) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(c) | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies as required by Item 7 is attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(registrant) | First Trust Intermediate Duration Preferred & Income Fund |
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | January 8, 2024 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer (principal executive officer) |
Date: | January 8, 2024 |
By (Signature and Title)* | /s/ Derek D. Maltbie | |
Derek D. Maltbie, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) |
Date: | January 8, 2024 |
* Print the name and title of each signing officer under his or her signature.