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
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First Trust Intermediate Duration Preferred & Income
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Fund (Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(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
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(Name and address of agent for service)
registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: October 31
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Date of reporting period: April 30, 2016
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
FIRST TRUST
INTERMEDIATE DURATION
PREFERRED & INCOME
FUND
(FPF)
SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
APRIL 30, 2016
FIRST TRUST
STONEBRIDGE
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ADVISORS LLC
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TABLE OF CONTENTS
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FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
SEMI-ANNUAL REPORT
APRIL 30, 2016
Shareholder Letter.......................................................... 1
At a Glance................................................................. 2
Portfolio Commentary........................................................ 4
Portfolio of Investments.................................................... 6
Statement of Assets and Liabilities......................................... 13
Statement of Operations..................................................... 14
Statements of Changes in Net Assets......................................... 15
Statement of Cash Flows..................................................... 16
Financial Highlights........................................................ 17
Notes to Financial Statements............................................... 18
Additional Information...................................................... 24
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Stonebridge Advisors LLC ("Stonebridge" or the
"Sub-Advisor") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
First Trust Intermediate Duration Preferred & Income Fund (the "Fund") to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. When evaluating the
information included in this report, you are cautioned not to place undue
reliance on these forward-looking statements, which reflect the judgment of the
Advisor and its representatives only as of the date hereof. We undertake no
obligation to publicly revise or update these forward-looking statements to
reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objectives. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money by investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of certain other risks of
investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and common share price will fluctuate and Fund shares,
when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at http://www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment. It
includes details about the Fund and presents data and analysis that provide
insight into the Fund's performance and investment approach.
By reading the portfolio commentary by the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of relevant market
benchmarks.
It is important to keep in mind that the opinions expressed by personnel of the
Sub-Advisor are just that: informed opinions. They should not be considered to
be promises or advice. The opinions, like the statistics, cover the period
through the date on the cover of this report. The material risks of investing in
the Fund are spelled out in the prospectus, the statement of additional
information, this report and other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
APRIL 30, 2016
Dear Shareholders:
Thank you for your investment in First Trust Intermediate Duration Preferred &
Income Fund (the "Fund").
First Trust Advisors L.P. ("First Trust") is pleased to provide you with the
semi-annual report which contains detailed information about your investment for
the six months ended April 30, 2016, including a market overview and a
performance analysis for the period. We encourage you to read this report and
discuss it with your financial advisor.
While markets were up and down during 2015, we believe there are three important
things to remember. First, the U.S. economy grew, despite the massive decline in
oil prices, and second, the tapering that began in 2014 by the Federal Reserve
(the "Fed") did not stop growth in the U.S. economy. Finally, the
long-anticipated rate hike by the Fed in December had little effect on the money
supply, and the stock market was not shocked by the hike. Early in 2016, many
investors were concerned that the volatility we saw in the market in 2015 would
continue, and it did. From December 31, 2015 through February 11, 2016, the S&P
500(R) Index declined by 10.27%. Since then, the market has made a steady
comeback, and as of April 30, 2016, the S&P 500(R) Index was up 13.39%.
First Trust believes that having a long-term investment horizon and being
invested in quality products can help you reach your goals, despite how the
market behaves. We have always maintained perspective about the markets and
believe investors should as well. We will continue to strive to provide quality
investments each and every day, which has been one of the hallmarks of our firm
since its inception 25 years ago.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value our relationship with you and will continue to focus on helping
investors like you reach your financial goals.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
"AT A GLANCE"
APRIL 30, 2016 (UNAUDITED)
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FUND STATISTICS
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Symbol on New York Stock Exchange FPF
Common Share Price $23.02
Common Share Net Asset Value ("NAV") $22.95
Premium (Discount) to NAV 0.31%
Net Assets Applicable to Common Shares $1,393,122,561
Current Monthly Distribution per Common Share (1) $0.1625
Current Annualized Distribution per Common Share $1.9500
Current Distribution Rate on Closing Common Share Price (2) 8.47%
Current Distribution Rate on NAV (2) 8.50%
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COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
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NAV Common Share Price
4/15 22.99 24.43
22.94 24.28
22.44 24.25
22.58 24.29
22.47 24.33
5/15 22.68 24.33
22.26 24.13
21.84 24.07
22.01 23.98
6/15 21.50 24.08
21.38 23.88
21.52 23.86
21.88 24.05
21.77 24.04
7/15 21.60 24.05
21.44 23.86
21.62 23.85
21.67 23.70
8/15 21.66 23.70
21.64 23.52
21.62 23.55
21.96 23.55
9/15 21.63 23.53
21.18 23.18
21.58 23.36
21.78 23.44
21.72 23.61
10/15 21.95 23.69
21.88 23.60
21.58 23.62
21.58 23.69
11/15 21.67 23.73
21.69 23.50
21.36 23.33
21.18 23.31
21.21 23.39
12/15 21.27 23.48
21.42 23.35
21.29 23.07
21.75 22.97
1/16 21.83 23.01
21.49 22.52
20.34 21.58
21.04 22.07
2/16 21.51 22.16
21.54 22.22
21.68 22.47
22.04 22.55
3/16 21.79 22.58
22.37 22.49
22.44 22.53
22.40 22.69
22.53 22.91
4/16 23.02 22.95
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PERFORMANCE
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Average Annual Total Returns
6 Months Ended 1 Year Ended Inception (5/23/13)
4/30/16 4/30/16 to 4/30/16
FUND PERFORMANCE (3)
NAV 1.35% 2.72% 7.39%
Market Value 9.71% 9.49% 5.84%
INDEX PERFORMANCE
BofA Merrill Lynch Fixed Rate
Preferred Securities Index 3.69% 6.69% 5.65%
BofA Merrill Lynch U.S. Capital
Securities Index 1.71% -0.19% 4.24%
Blended Index(4) 2.70% 3.21% 4.96%
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(1) Most recent distribution paid or declared through 4/30/2016. Subject to
change in the future.
(2) Distribution rates are calculated by annualizing the most recent
distribution paid or declared through the report date and then dividing by
Common Share price or NAV, as applicable, as of 4/30/16. 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 less
than one year. Past performance is not indicative of future results.
(4) The blended index consists of the following: BofA Merrill Lynch Fixed Rate
Preferred Securities Index (50%) and BofA Merrill Lynch U.S. Capital
Securities Index (50%). The Blended Index was added to reflect the diverse
allocation of institutional preferred and hybrid securities in the in the
Fund's portfolio. The Indexes do not charge management fees or brokerage
expenses, and no such fees or expenses were deducted from the performance
shown. Indexes are unmanaged and an investor cannot invest directly in an
Index.
Page 2
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
"AT A GLANCE" (CONTINUED)
APRIL 30, 2016 (UNAUDITED)
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% OF TOTAL
INDUSTRY CLASSIFICATION INVESTMENTS
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Banks 45.7%
Insurance 27.1
Food Products 4.7
Capital Markets 3.8
Electric Utilities 3.6
Diversified Telecommunication Services 3.6
Real Estate Investment Trusts 2.5
Diversified Financial Services 2.2
Independent Power Producers and Renewable
Electricity Producers 1.2
Consumer Finance 1.2
Oil, Gas & Consumable Fuels 1.0
Industrial Conglomerates 0.8
IT Services 0.7
Multi-Utilities 0.7
Metals & Mining 0.5
Wireless Telecommunication Services 0.3
Thrifts & Mortgage Finance 0.3
Energy Equipment & Services 0.1
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Total 100.0%
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% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
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Aquarius + Investments PLC for Swiss
Reinsurance Co., Ltd. 2.2%
Fuerstenberg Capital International Sarl & Cie SECS 2.2
Enel SpA 2.0
Cooperatieve Rabobank UA 1.9
Credit Agricole S.A. 1.8
Banco Bilbao Vizcaya Argentaria S.A. 1.8
American International Group, Inc. 1.6
Friends Life Holdings PLC 1.5
Farm Credit Bank of Texas 1.5
Aviva PLC 1.5
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Total 18.0%
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% OF TOTAL
CREDIT QUALITY (5) INVESTMENTS
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AA- 0.8%
A 0.1
A- 4.1
BBB+ 12.7
BBB 17.9
BBB- 24.2
BB+ 17.1
BB 9.5
BB- 7.3
B+ 1.7
B- 0.7
NR 3.9
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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 Standard & Poor's Ratings Group, a
division of the McGraw Hill Companies, Inc., 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 ratings are 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 credit
worthiness of the issuers of the underlying securities in the Fund, and
not to the Fund or its shares. Credit ratings are subject to change.
NR Not Rated.
Page 3
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PORTFOLIO COMMENTARY
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FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
SEMI-ANNUAL REPORT
APRIL 30, 2016 (UNAUDITED)
SUB-ADVISOR
Stonebridge Advisors LLC ("Stonebridge" or the "Sub-Advisor") is the sub-advisor
to First Trust Intermediate Duration Preferred & Income Fund (the "Fund" or
"FPF") and is a registered investment advisor based in Wilton, Connecticut.
Stonebridge specializes in the management of preferred securities and North
American equity income securities.
PORTFOLIO MANAGEMENT TEAM
SCOTT T. FLEMING - PRESIDENT AND CHIEF INVESTMENT OFFICER OF STONEBRIDGE
ADVISORS LLC ROBERT WOLF - SENIOR VICE PRESIDENT AND SENIOR PORTFOLIO MANAGER
DANIELLE SALTERS, CFA - PORTFOLIO MANAGER AND CREDIT ANALYST
COMMENTARY
MARKET RECAP
The preferred and hybrid securities markets experienced positive performance
during the six months ended April 30, 2016. This performance was primarily due
to the persistently accommodative policy amongst central banks around the world,
particularly in Europe, Japan, and the United States. As global interest rates
remain near historic lows, the demand for income-producing asset classes such as
preferred and hybrid securities has been very strong, especially in the retail
$25 par securities market. The retail preferred securities market, as measured
by The BofA Merrill Lynch Fixed Rate Preferred Securities Index, P0P1, earned a
total return of 3.69% during the six month period, while the institutional
market, as measured by the BofA Merrill Lynch U.S. Capital Securities Index,
C0CS, earned 1.71%. This performance was accomplished despite market volatility
in January and February that caused credit spread widening in all risk assets.
However, improving economic growth and receding fears regarding bank and credit
markets allowed the period to end on a high note.
After raising short-term interest rates in December and signaling an intent to
raise rates several more times in 2016, the U.S. Federal Reserve ("Fed") shifted
gears substantially in early 2016, following increased macroeconomic instability
in January and sharply weaker equity markets early in the first quarter. The Fed
is now signaling a more dovish posture on rates and we believe the general
market expects at most 1-2 rate hikes in 2016 depending mostly upon factors
outside of the United States. The 10-year and 30-year Treasuries rallied during
the period, with the 10-year Treasury yield ending the period 0.31% lower at
1.83% and the 30-year Treasury yield 0.24% lower at 2.68%. Also, the European
Central Bank ("ECB") ramped up its own quantitative easing program during the
period as it announced an expansion of its bond buying program and introduced
negative interest rates. The low interest rate environment domestically and
abroad has fueled strong demand in the preferred and hybrid market. New deals,
particularly in the $25 par retail market, have been met with strong demand from
long-term investors in search of yield and attractive structures, many of which
offered a component of rate protection such as floating back-end spreads.
Overall, we believe central banks will remain the focus of investors. However,
we believe an improving U.S. economy, stable to improving credit fundamentals,
and limited new supply should continue to be supportive of the preferred and
hybrid securities markets.
PERFORMANCE ANALYSIS
For the six-month period ending April 30, 2016, the total return on FPF's market
price ("MP") was 9.71% and the total return on net asset value ("NAV") was
1.35%. The MP return outpaced that of the blended index, a 50% weighting in both
P0P1 and C0CS, which had a total return for the period of 2.70%. Much of this
outperformance is due to the discount to NAV declining during the period.
The NAV underperformance was largely due to our conservative duration stance.
The effective duration on the portfolio as of April 30, 2016 was 3.94 years
without leverage and 5.75 years with leverage, while the blended index's
duration was 4.78 years. The Fund's relatively low duration is due to a
combination of a continued overweight in variable rate securities and other
lower duration securities, along with a hedge executed in January 2015 to fix
approximately 25% of the leverage for 10 years. This conservative strategy
hindered the Fund's relative performance during the period, as longer duration
securities continue to be the best performers and the U. S. Treasuries rally
hurt the swap.
Page 4
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PORTFOLIO COMMENTARY (CONTINUED)
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FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
SEMI-ANNUAL REPORT
APRIL 30, 2016 (UNAUDITED)
Offsetting some of the relative underperformance of the Fund was its superior
security selection within U.S. and European issuers and Dividend Received
Deduction ("DRD") eligible securities. However, the Fund's 12.54% average
allocation to contingent capital securities (CoCos) underperformed during the
period as well.
MARKET AND FUND OUTLOOK
With recent economic data in the U.S. showing modest strength and low inflation
while the rest of the world continues to show weak growth, we expect that
interest rates in the U.S. will remain historically low despite several very
gradual and tepid moves by the Fed to increase front-end rates. Since its
December 2015 increase in the Fed Funds rate by 0.25%, the Fed has increasingly
tempered its timetable for interest rate increases which is now dependent upon
factors outside of the U.S. where rates are generally much lower. Also, market
and credit risk has increased in other fixed-income sectors such as energy,
commodities, and emerging markets debt. In contrast to those sectors, we believe
credit fundamentals in the financial sector should continue to support the
preferred and hybrid securities market over the next year. In this environment,
we continue to see attractive yields on preferred and hybrid securities relative
to other parts of the fixed-income market.
Volatility in preferred and hybrid securities in the first part of 2016 was due
mostly to bank equity profitability concerns and regulatory uncertainty
surrounding European CoCo structures and coupon risk. However, in our opinion,
the relatively brief sell-off in February is likely to result in a change to
those regulations and reduce uncertainty which should prove supportive to hybrid
investors. We expect that most banks and insurance companies will continue to
strengthen their capital ratios and reduce balance sheet risk in 2016.
Although current market conditions are favorable for preferred and hybrid
securities, we have chosen to take a conservative stance as it relates to
potential interest rate risk by increasing exposure to less interest rate
sensitive securities. We currently favor structures with good rate protection
and high current yields, such as 10-year non-call fixed-to-floats with high
reset rates. Fixed-rate securities with high current yields, which we believe
the issuer could refinance at a substantially lower cost of capital and that
have attractive yield-to-calls (varies depending on the call date), are also
attractive. We also like legacy tier 1 capital securities issued by banks that
are likely to be called in the next few years that are trading at discounts or
have attractive yields. With the potential for rate volatility, we believe it is
prudent to maintain durations shorter than the blended index, particularly if we
can do so while earning income comparable to the blended index.
Page 5
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
PORTFOLIO OF INVESTMENTS
APRIL 30, 2016 (UNAUDITED)
STATED STATED
SHARES DESCRIPTION RATE MATURITY VALUE
---------------- --------------------------------------------------- ----------- ---------- --------------
$25 PAR PREFERRED SECURITIES 31.5%
Banks 11.1%
100,000 Banc Of California, Inc., Series E................. 7.00% (a) $ 2,588,000
702,419 Citigroup Capital XIII (b) (c)..................... 7.01% 10/30/40 18,368,257
290,000 Citigroup, Inc., Series K (d)...................... 6.88% (a) 8,001,100
220,000 Citigroup, Inc., Series S (b)...................... 6.30% (a) 5,689,200
400,000 Fifth Third Bancorp, Series I (b) (d).............. 6.63% (a) 11,720,000
288,573 First Niagara Financial Group, Inc.,
Series B (b) (d)................................ 8.63% (a) 7,725,099
272,988 FNB Corp. (b) (d).................................. 7.25% (a) 8,001,278
899,200 GMAC Capital Trust I, Series 2 (b) (c)............. 6.41% 02/15/40 22,542,944
196,862 HSBC USA, Inc., Series H (b)....................... 6.50% (a) 5,124,318
80,000 Huntington Bancshares Inc., Series D............... 6.25% (a) 2,106,400
226,235 ING Groep N.V. (b)................................. 6.20% (a) 5,832,338
500,000 ING Groep N.V. (b)................................. 6.38% (a) 12,990,000
250,000 JPMorgan Chase & Co., Series W (b)................. 6.30% (a) 6,587,500
198,230 MB Financial, Inc., Series A (b) (e)............... 8.00% (a) 5,322,475
287,914 Royal Bank Of Scotland Group PlC, Series R (b)..... 6.13% (a) 7,088,443
424,591 Royal Bank Of Scotland Group PLC, Series S (b)..... 6.60% (a) 10,669,972
49,050 Synovus Financial Corp., Series C (d).............. 7.88% (a) 1,395,473
60,779 Texas Capital Bancshares, Inc., Series A........... 6.50% (a) 1,444,717
129,641 Valley National Bancorp, Series A (b) (d).......... 6.25% (a) 3,629,948
100,000 Wells Fargo & Co., Series W........................ 5.70% (a) 2,567,000
122,521 Wintrust Financial Corp., Series D (b) (d)......... 6.50% (a) 3,398,733
67,992 Zions Bancorporation, Series G (b) (d)............. 6.30% (a) 1,824,225
--------------
154,617,420
--------------
Capital Markets 3.4%
150,000 Apollo Investment Corp. (b)........................ 6.88% 07/15/43 3,913,500
50,000 Charles Schwab Corp., Series C..................... 6.00% (a) 1,348,000
100,000 Charles Schwab Corp., Series D..................... 5.95% (a) 2,597,000
145,631 Goldman Sachs Group, Inc., Series K (d)............ 6.38% (a) 4,077,668
130,400 Goldman Sachs Group, Inc., Series N................ 6.30% (a) 3,396,920
307,974 Morgan Stanley, Series E (b) (d)................... 7.13% (a) 8,854,252
461,249 Morgan Stanley, Series F (b) (d)................... 6.88% (a) 12,656,673
200,000 Morgan Stanley, Series I (b) (d)................... 6.38% (a) 5,304,000
200,000 State Street Corp., Series G (d)................... 5.35% (a) 5,258,000
--------------
47,406,013
--------------
Consumer Finance 1.1%
5,100 Ally Financial, Inc., Series A (d)................. 8.50% (a) 127,398
200,000 Capital One Financial Corp., Series C (b).......... 6.25% (a) 5,296,000
341,302 Capital One Financial Corp., Series D (b).......... 6.70% (a) 9,365,327
--------------
14,788,725
--------------
Diversified Financial Services 1.8%
40,000 KKR Financial Holdings LLC......................... 8.38% 11/15/41 1,052,800
391,656 KKR Financial Holdings LLC, Series A (b)........... 7.38% (a) 10,241,804
32,984 RBS Capital Funding Trust V, Series E.............. 5.90% (a) 804,810
19,582 RBS Capital Funding Trust VI, Series F............. 6.25% (a) 481,325
504,065 RBS Capital Funding Trust VII, Series G (b)........ 6.08% (a) 12,374,796
--------------
24,955,535
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Page 6 See Notes to Financial Statements
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2016 (UNAUDITED)
STATED STATED
SHARES DESCRIPTION RATE MATURITY VALUE
---------------- --------------------------------------------------- ----------- ---------- --------------
$25 PAR PREFERRED SECURITIES (Continued)
Diversified Telecommunication Services 1.7%
250,400 Qwest Corp. (b).................................... 7.38% 06/01/51 $ 6,400,224
251,594 Qwest Corp. (b).................................... 7.50% 09/15/51 6,468,481
100,000 Qwest Corp......................................... 6.88% 10/01/54 2,555,000
240,940 Qwest Corp. (b).................................... 6.63% 09/15/55 6,064,460
97,724 Qwest Corp......................................... 7.00% 02/01/56 2,504,666
--------------
23,992,831
--------------
Electric Utilities 0.4%
200,000 SCE Trust V, Series K (b) (d)...................... 5.45% (a) 5,404,000
--------------
Food Products 3.2%
919,304 CHS, Inc., Series 2 (b) (d)........................ 7.10% (a) 25,501,493
582,059 CHS, Inc., Series 3 (b) (d)........................ 6.75% (a) 15,540,975
114,692 CHS, Inc., Series 4 (b)............................ 7.50% (a) 3,175,822
--------------
44,218,290
--------------
Insurance 4.3%
917 Allstate Corp., Series E........................... 6.63% (a) 25,263
164,318 Amtrust Financial Services, Inc.................... 7.25% 06/15/55 4,075,086
204,030 Amtrust Financial Services, Inc. (b)............... 7.50% 09/15/55 5,102,790
328,607 Aspen Insurance Holdings Ltd. (b) (d).............. 5.95% (a) 8,757,377
203,483 Aspen Insurance Holdings Ltd. (b).................. 7.25% (a) 5,378,056
124,806 Axis Capital Holdings Ltd., Series C (b)........... 6.88% (a) 3,291,134
200,000 Endurance Specialty Holdings Ltd., Series B........ 7.50% (a) 5,090,000
137,012 Endurance Specialty Holdings Ltd., Series C (b).... 6.35% (a) 3,656,850
146,640 Global Indemnity PLC (b)........................... 7.75% 08/15/45 3,519,360
90,729 Maiden Holdings North America Ltd.................. 8.25% 06/15/41 2,304,517
98,326 PartnerRe Ltd., Series D (b)....................... 6.50% (a) 2,505,346
322,179 PartnerRe Ltd., Series E (b)....................... 7.25% (a) 8,412,094
181,405 Torchmark Corp. (b)................................ 6.13% 06/15/56 4,634,898
100,000 W.R. Berkley Corporation........................... 5.90% 03/01/56 2,557,000
--------------
59,309,771
--------------
Internet & Software Services 1.0%
535,030 eBay, Inc. (b)..................................... 6.00% 02/01/56 13,750,271
--------------
Multi-Utilities 0.9%
502,571 Integrys Holding, Inc. (b) (d)..................... 6.00% 08/01/73 13,113,987
--------------
Real Estate Investment Trusts 2.1%
194,302 Digital Realty Trust, Inc., Series E (b)........... 7.00% (a) 4,978,017
100,000 Digital Realty Trust, Inc., Series H............... 7.38% (a) 2,780,000
219,385 Dupont Fabros Technology, Inc., Series A (b)....... 7.88% (a) 5,543,859
54,604 Equity Commonwealth, Series E...................... 7.25% (a) 1,365,100
228,980 National Retail Properties, Inc., Series D (b)..... 6.63% (a) 6,003,856
99,794 Taubman Centers, Inc., Series J (b)................ 6.50% (a) 2,679,469
250,000 VEREIT, Inc., Series F (b)......................... 6.70% (a) 6,432,500
--------------
29,782,801
--------------
Wireless Telecommunication Services 0.5%
100,000 United States Cellular Corp. (b)................... 7.25% 12/01/63 2,609,000
169,424 United States Cellular Corp. (b)................... 7.25% 12/01/64 4,320,312
--------------
6,929,312
--------------
TOTAL $25 PAR PREFERRED SECURITIES............................................ 438,268,956
(Cost $424,611,573) --------------
See Notes to Financial Statements Page 7
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2016 (UNAUDITED)
STATED STATED
SHARES DESCRIPTION RATE MATURITY VALUE
---------------- --------------------------------------------------- ----------- ---------- --------------
$50 PAR PREFERRED SECURITIES 0.1%
Consumer Finance 0.1%
38,765 SLM Corp., Series A (b)............................ 6.97% (a) $ 1,831,646
(Cost $1,903,672) --------------
$100 PAR PREFERRED SECURITIES 4.1%
Banks 3.7%
80,000 Agribank FCB (d) (e)............................... 6.88% (a) 8,502,504
179,000 Cobank ACB, Series F (b) (d)....................... 6.25% (a) 18,425,812
82,220 Cobank ACB, Series G (b)........................... 6.13% (a) 7,780,068
54,250 Cobank ACB, Series H (d)........................... 6.20% (a) 5,425,000
100,000 Farm Credit Bank Of Texas (b) (d) (e).............. 6.75% (a) 10,790,630
--------------
50,924,014
--------------
Consumer Finance 0.4%
140,000 SLM Corp., Series B (c)............................ 2.33% (a) 6,160,000
--------------
TOTAL $100 PAR PREFERRED SECURITIES........................................... 57,084,014
(Cost $55,867,346) --------------
$1,000 PAR PREFERRED SECURITIES 6.8%
Banks 3.0%
12,000 Agstar Financial Services ACA (b) (d) (e) (f)...... 6.75% (a) 13,349,250
23,859 Farm Credit Bank Of Texas, Series 1 (b) (e)........ 10.00% (a) 29,376,394
--------------
42,725,644
--------------
Diversified Financial Services 0.3%
4,000 Pitney Bowes International Holdings, Inc.,
Series F (b) (e) (f)............................ 6.13% (a) 4,061,250
--------------
Diversified Telecommunication Services 1.4%
16,000 Centaur Funding Corp. (e) (f)...................... 9.08% 04/21/20 19,100,000
--------------
Insurance 0.3%
5,000 XLIT Ltd., Series D (c)............................ 3.75% (a) 4,031,250
--------------
Real Estate Investment Trusts 1.3%
15,364 Sovereign Real Estate Investment Trust (e) (f)..... 12.00% (a) 18,801,695
--------------
Thrifts & Mortgage Finance 0.5%
5,000 Flagstar Bancorp, Inc., Series C (e) (g)........... 9.00% (a) 6,607,888
--------------
TOTAL $1,000 PAR PREFERRED SECURITIES......................................... 95,327,727
(Cost $96,671,500) --------------
Page 8 See Notes to Financial Statements
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2016 (UNAUDITED)
STATED STATED
PAR AMOUNT DESCRIPTION RATE MATURITY VALUE
---------------- --------------------------------------------------- ----------- ---------- --------------
CAPITAL PREFERRED SECURITIES 98.3%
Banks 46.6%
$ 33,200,000 Banco Bilbao Vizcaya Argentaria SA (b) (d) (i)..... 9.00% (a) $ 34,424,084
18,000,000 Banco do Brasil S.A. (d) (h) (i)................... 9.00% (a) 13,005,000
18,000,000 Bank Of America Corp., Series DD (b) (d)........... 6.30% (a) 18,900,000
23,000,000 Bank Of America Corp., Series Z (b) (d)............ 6.50% (a) 24,236,250
40,000 Barclays Bank PLC (h).............................. 10.18% 06/12/21 50,950
15,000,000 Barclays PLC (b) (d) (i)........................... 8.25% (a) 15,090,705
3,510,000 BBVA Global Finance Ltd............................ 7.00% 12/01/25 3,867,041
23,750,000 BNP Paribas (b) (d) (h) (i)........................ 7.63% (a) 24,343,750
7,500,000 BPCE S.A. (b) (d) (h).............................. 12.50% (a) 9,339,000
800,000 Citigroup, Inc., Series E (d) (e).................. 8.40% (a) 878,000
25,000,000 Citigroup, Inc., Series R (b) (d).................. 6.13% (a) 25,437,500
9,000,000 Citigroup, Inc., Series T (b) (d).................. 6.25% (a) 9,270,000
7,500,000 Citizens Financial Group, Inc. (d) (h)............. 5.50% (a) 7,181,250
25,000,000 CoBank ACB, Series I (b) (d)....................... 6.25% (a) 25,812,500
4,000,000 Commerzbank AG (b)................................. 8.13% 09/19/23 4,710,400
2,000,000 Cooperatieve Rabobank UA (d) (i)................... 8.38% (a) 2,027,502
15,000,000 Cooperatieve Rabobank UA (b) (d) (i)............... 8.40% (a) 15,826,875
30,104,000 Cooperatieve Rabobank UA (b) (d) (h)............... 11.00% (a) 36,802,140
3,033,000 Countrywide Capital III, Series B.................. 8.05% 06/15/27 3,732,398
33,500,000 Credit Agricole S.A. (b) (d) (h) (i)............... 8.13% (a) 34,704,090
5,975,000 Credit Agricole S.A. (b) (d)....................... 8.38% (a) 6,796,562
22,000,000 Credit Agricole S.A. (b) (d) (h)................... 8.38% (a) 25,025,000
25,000,000 Dresdner Funding Trust I (b) (h)................... 8.15% 06/30/31 29,047,000
42,000,000 Fuerstenberg Capital International Sarl & Cie
SECS (b) (d).................................... 10.25% (a) 42,521,346
1,464,000 HSBC Capital Funding L.P. (d)...................... 10.18% (a) 2,153,910
15,000,000 Intesa Sanpaolo SpA (b) (d) (h) (i)................ 7.70% (a) 13,893,750
15,000,000 JPMorgan Chase & Co., Series S (b) (d)............. 6.75% (a) 16,614,000
7,000,000 KBC Bank N.V. (d) (i).............................. 8.00% 01/25/23 7,622,125
14,150,000 Lloyds Bank PLC (b) (d)............................ 12.00% (a) 18,731,062
14,000,000 Lloyds Bank PLC (b) (d) (h)........................ 12.00% (a) 18,532,500
5,000,000 Lloyds Banking Group PLC (d) (i)................... 7.50% (a) 4,970,000
5,575,000 Natixis S.A. (b) (d)............................... 10.00% (a) 6,158,256
23,264,000 Natixis S.A. (b) (d) (h)........................... 10.00% (a) 25,697,880
11,290,000 NIBC Bank N.V. (b)................................. 7.63% (a) 11,320,235
10,000,000 Royal Bank Of Scotland Group PLC (b) (d) (i)....... 7.50% (a) 9,350,000
19,700,000 Royal Bank Of Scotland Group PLC (b) (d)........... 7.65% (a) 23,049,000
20,000,000 Royal Bank Of Scotland Group PLC (b) (d) (i)....... 8.00% (a) 19,218,740
9,500,000 Societe Generale S.A. (b) (d) (i).................. 8.25% (a) 9,749,375
12,000,000 Societe Generale S.A. (b) (d) (h) (i).............. 8.00% (a) 11,910,000
21,500,000 Wells Fargo & Co., Series K (b) (d)................ 7.98% (a) 22,386,875
1,169,000 Zions Bancorporation (d)........................... 5.80% (a) 1,119,318
12,670,000 Zions Bancorporation, Series J (b) (d)............. 7.20% (a) 13,461,875
--------------
648,968,244
--------------
Capital Markets 2.0%
5,000,000 Aberdeen Asset Management (b)...................... 7.00% (a) 5,178,015
4,150,000 Charles Schwab Corp. (b) (d)....................... 7.00% (a) 4,756,937
2,500,000 Deutsche Bank Capital Trust IV (d) (e)............. 4.59% (a) 2,503,750
15,000,000 UBS Group AG (b) (d) (i)........................... 7.13% (a) 15,271,800
--------------
27,710,502
--------------
See Notes to Financial Statements Page 9
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2016 (UNAUDITED)
STATED STATED
PAR AMOUNT DESCRIPTION RATE MATURITY VALUE
---------------- --------------------------------------------------- ----------- ---------- --------------
CAPITAL PREFERRED SECURITIES (CONTINUED)
Diversified Financial Services 1.0%
$ 18,418,000 Glen Meadow Pass-Through Trust (b) (d) (h)......... 6.51% 02/12/67 $ 13,537,230
--------------
Diversified Telecommunication Services 1.9%
24,150,000 Koninklijke KPN N.V. (b) (d) (h)................... 7.00% 03/28/73 25,867,065
1,000,000 Koninklijke KPN N.V. (d)........................... 7.00% 03/28/73 1,071,100
--------------
26,938,165
--------------
Electric Utilities 4.7%
34,750,000 Enel SpA (b) (d) (h)............................... 8.75% 09/24/73 40,179,687
3,000,000 Nextera Energy Capital Holdings, Inc.,
Series D (b) (d)................................ 7.30% 09/01/67 2,827,500
22,900,000 PPL Capital Funding, Inc., Series A (b) (d)........ 6.70% 03/30/67 17,722,196
4,179,000 Southern California Edison Co., Series E (b) (d)... 6.25% (a) 4,584,363
--------------
65,313,746
--------------
Energy Equipment & Services 0.1%
2,500,000 Enterprise Products Operating LLC, Series A (d).... 8.38% 08/01/66 2,085,275
--------------
Food Products 3.4%
13,211,000 Land O'Lakes Capital Trust I (b) (h)............... 7.45% 03/15/28 14,300,908
23,000,000 Land O'Lakes, Inc. (b) (e) (f)..................... 8.00% (a) 23,776,250
10,000,000 Land O'Lakes, Inc. (b) (h)......................... 8.00% (a) 10,200,000
--------------
48,277,158
--------------
Independent Power and Renewable Electricity
Producers 1.7%
12,150,000 AES Gener S.A. (d)................................. 8.38% 12/18/73 12,696,750
9,850,000 AES Gener S.A. (d) (h)............................. 8.38% 12/18/73 10,293,250
--------------
22,990,000
--------------
Industrial Conglomerates 1.1%
15,000,000 General Electric Co., Series D (b) (d)............. 5.00% (a) 15,600,000
--------------
Insurance 33.6%
2,500,000 Aegon N.V. (c)..................................... 1.74% (a) 1,552,378
9,600,000 AG Insurance S.A./N.V. (b) (d)..................... 6.75% (a) 10,311,792
25,320,000 American International Group, Inc. (b) (d)......... 8.18% 05/15/58 31,903,200
40,000,000 Aquarius + Investments PLC for Swiss Reinsurance
Co., Ltd. (b) (d)............................... 8.25% (a) 43,711,800
30,000,000 Assured Guaranty Municipal Holdings,
Inc. (d) (h).................................... 6.40% 12/15/66 20,700,000
27,000,000 Aviva PLC (b)...................................... 8.25% (a) 29,176,767
32,000,000 Catlin Insurance Co., Ltd. (d) (h)................. 7.25% (a) 22,496,000
2,050,000 Cloverie PLC Zurich Insurance Co., Ltd. (d)........ 8.25% (a) 2,266,601
10,600,000 CNP Assurances (b) (d)............................. 6.88% (a) 11,557,095
10,600,000 CNP Assurances (b) (d)............................. 7.50% (a) 11,674,003
12,500,000 Dai-Ichi Life Insurance Co., Ltd.
(The) (b) (d) (h)............................... 7.25% (a) 14,945,312
27,375,000 Friends Life Holdings PLC (b) (d).................. 7.88% (a) 30,112,965
11,782,000 Hartford Financial Services Group, Inc. (b) (d).... 8.13% 06/15/38 12,754,015
24,016,000 La Mondiale SAM (b) (d)............................ 7.63% (a) 25,833,891
14,000,000 Liberty Mutual Group, Inc. (b) (d) (h)............. 7.00% 03/15/37 12,355,000
5,492,000 Liberty Mutual Group, Inc. (b) (h)................. 7.80% 03/15/37 6,013,740
2,000,000 Liberty Mutual Group, Inc. (b) (d)................. 10.75% 06/15/58 2,925,000
15,000,000 Metlife Capital Trust X (b) (h).................... 9.25% 04/08/38 20,512,500
17,180,000 Metlife, Inc. (b).................................. 10.75% 08/01/39 26,242,450
Page 10 See Notes to Financial Statements
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2016 (UNAUDITED)
STATED STATED
PAR AMOUNT DESCRIPTION RATE MATURITY VALUE
---------------- --------------------------------------------------- ----------- ---------- --------------
CAPITAL PREFERRED SECURITIES (Continued)
Insurance (Continued)
$ 20,000,000 Mitsui Sumitomo Insurance Co., Ltd. (b) (d) (h).... 7.00% 03/15/72 $ 23,825,000
3,000,000 Nationwide Financial Services Capital
Trust (b) (e)................................... 7.90% 03/01/37 3,424,722
19,700,000 Nationwide Financial Services, Inc. (b)............ 6.75% 05/15/37 20,044,750
6,825,000 Prudential Financial, Inc. (b) (d)................. 8.88% 06/15/38 7,558,688
22,000,000 QBE Capital Funding III Ltd. (b) (d) (h)........... 7.25% 05/24/41 24,117,280
20,250,000 QBE Insurance Group Ltd. (b) (d)................... 6.75% 12/02/44 21,819,375
25,000,000 Sirius International Group Ltd. (b) (d) (e) (f).... 7.51% (a) 24,625,000
6,800,000 Stancorp Financial Group, Inc. (b) (d)............. 6.90% 06/01/67 5,202,000
--------------
467,661,324
--------------
Metals & Mining 0.8%
10,500,000 BHP Billiton Finance USA Ltd. (b) (d) (h).......... 6.75% 10/19/75 10,904,250
--------------
Oil, Gas & Consumable Fuels 1.4%
13,000,000 Enbridge Energy Partners L.P. (d).................. 8.05% 10/01/37 9,230,000
10,000,000 Enterprise Products Operating LLC,
Series B (b) (d)................................ 7.03% 01/15/68 10,275,000
--------------
19,505,000
--------------
TOTAL CAPITAL PREFERRED SECURITIES............................................ 1,369,490,894
(Cost $1,413,668,519) --------------
TOTAL INVESTMENTS - 140.8%.................................................... 1,962,003,237
(Cost $1,992,722,610) (j)
OUTSTANDING LOAN - (44.8%).................................................... (625,000,000)
NET OTHER ASSETS AND LIABILITIES - 4.0%....................................... 56,119,324
--------------
NET ASSETS - 100.0%........................................................... $1,393,122,561
==============
-----------------------------
(a) Perpetual maturity.
(b) All or a portion of this security serves as collateral on the outstanding
loan.
(c) Floating rate security. The interest rate shown reflects the rate in
effect at April 30, 2016.
(d) Fixed-to-floating or fixed-to-variable rate security. The interest rate
shown reflects the fixed rate in effect at April 30, 2016. At a
predetermined date, the fixed rate will change to a floating rate or a
variable rate.
(e) Pursuant to procedures adopted by the Fund's Board of Trustees, this
security has been determined to be illiquid by Stonebridge Advisors, LLC
(the "Sub-Advisor").
(f) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under the Securities
Act of 1933, as amended (the "1933 Act"), and may be resold in
transactions exempt from registration, normally to qualified institutional
buyers (see Note 2C - Restricted Securities in the Notes to Financial
Statements).
(g) Step-up security. A security where the coupon increases or steps up at a
predetermined date. Interest rate shown reflects the rate in effect at
April 30, 2016.
(h) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A under 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 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 April 30, 2016, securities noted as such
amounted to $519,779,532 or 37.3% of net assets.
(i) This security is a contingent convertible capital security. At April 30,
2016, securities noted as such amounted to $231,407,796 or 11.5% of
managed assets. 14.9% of these securities originated in emerging markets,
and 85.1% originated in foreign markets.
(j) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of April 30, 2016, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $38,489,747 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $69,209,120.
See Notes to Financial Statements Page 11
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
PORTFOLIO OF INVESTMENTS (CONTINUED)
APRIL 30, 2016 (UNAUDITED)
INTEREST RATE SWAP AGREEMENTS:
COUNTERPARTY FLOATING RATE(1) EXPIRATION DATE NOTIONAL AMOUNT FIXED RATE(1) VALUE
--------------------------------------------------------------------------------------------------------------
Bank of Nova Scotia 1 month LIBOR 1/23/25 $ 165,000,000 1.786% $ (4,633,673)
------------- ------------
(1) The Fund pays the fixed rate and receives the floating rate. The floating
rate on April 30, 2016 was 0.439%.
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of April 30,
2016 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2016 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
$25 Par Preferred Securities:
Multi-Utilities................................ $ 13,113,987 $ -- $ 13,113,987 $ --
Other industry categories*..................... 425,154,969 425,154,969 -- --
$50 Par Preferred Securities*..................... 1,831,646 1,831,646 -- --
$100 Par Preferred Securities:
Banks.......................................... 50,924,014 -- 50,924,014 --
Consumer Finance .............................. 6,160,000 6,160,000 -- --
$1,000 Par Preferred Securities*.................. 95,327,727 -- 95,327,727 --
Capital Preferred Securities*..................... 1,369,490,894 -- 1,369,490,894 --
--------------- --------------- --------------- ---------------
Total Investments................................. $ 1,962,003,237 $ 433,146,615 $ 1,528,856,622 $ --
=============== =============== =============== ===============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
4/30/2016 PRICES INPUTS INPUTS
--------------- --------------- --------------- ---------------
Interest Rate Swaps**............................. $ (4,633,673) $ -- $ (4,633,673) $ --
=============== =============== =============== ===============
* See Portfolio of Investments for industry breakout.
** See Interest Rate Swap Agreements for contract detail.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. As of April
30, 2016, the Fund transferred $25 Par Preferred Securities valued at $2,304,517
from Level 2 to Level 1. The preferred security that transferred from Level 2 to
Level 1 did so as a result of the preferred security being priced on the primary
exchange.
Page 12 See Notes to Financial Statements
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2016 (UNAUDITED)
ASSETS:
Investments, at value
(Cost $1,992,722,610)........................................................................ $ 1,962,003,237
Cash............................................................................................ 27,919,476
Cash segregated as collateral for open swap contracts........................................... 11,472,589
Prepaid expenses................................................................................ 67,216
Receivables:
Interest..................................................................................... 28,697,849
Investment securities sold................................................................... 22,173,233
Dividends.................................................................................... 2,568,427
Tax reclaims................................................................................. 89,019
Other assets................................................................................. 2,339
----------------
Total Assets................................................................................. 2,054,993,385
----------------
LIABILITIES:
Outstanding Loan................................................................................ 625,000,000
Swap contracts, at value........................................................................ 4,633,673
Payables:
Investment securities purchased.............................................................. 29,961,556
Interest and fees due on loan................................................................ 657,966
Investment advisory fees..................................................................... 1,381,395
Administrative fees.......................................................................... 112,345
Legal fees................................................................................... 42,083
Custodian fees............................................................................... 32,095
Audit and tax fees........................................................................... 20,558
Printing fees................................................................................ 16,398
Trustees' fees and expenses.................................................................. 7,586
Transfer agent fees.......................................................................... 4,424
Financial reporting fees..................................................................... 745
----------------
Total Liabilities............................................................................ 661,870,824
----------------
NET ASSETS...................................................................................... $ 1,393,122,561
================
NET ASSETS CONSIST OF:
Paid-in capital................................................................................. $ 1,446,884,359
Par value....................................................................................... 607,042
Accumulated net investment income (loss)........................................................ 5,649,539
Accumulated net realized gain (loss) on investments, futures and swap contracts................. (24,665,333)
Net unrealized appreciation (depreciation) on investments and swap contracts.................... (35,353,046)
----------------
NET ASSETS...................................................................................... $ 1,393,122,561
================
NET ASSET VALUE, per share...................................................................... $ 22.95
================
Number of Common Shares outstanding (unlimited number of Common Shares
has been authorized)......................................................................... 60,704,189
================
See Notes to Financial Statements Page 13
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2016 (UNAUDITED)
INVESTMENT INCOME:
Interest........................................................................................ $ 50,759,973
Dividends....................................................................................... 20,319,297
Other........................................................................................... 9,473
----------------
Total investment income...................................................................... 71,088,743
----------------
EXPENSES:
Investment advisory fees........................................................................ 8,527,756
Interest and fees on loan....................................................................... 3,534,648
Administrative fees............................................................................. 335,281
Excise tax expense.............................................................................. 257,333
Printing fees................................................................................... 105,480
Custodian fees.................................................................................. 88,185
Legal fees...................................................................................... 44,865
Audit and tax fees.............................................................................. 16,509
Trustees' fees and expenses..................................................................... 12,863
Transfer agent fees............................................................................. 10,431
Financial reporting fees........................................................................ 4,599
Other........................................................................................... 25,222
----------------
Total expenses............................................................................... 12,963,172
----------------
NET INVESTMENT INCOME (LOSS).................................................................... 58,125,571
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.................................................................................. 465,731
Swap Contracts............................................................................... (1,214,524)
----------------
(748,793)
----------------
Net change in unrealized appreciation (depreciation) on:
Investments.................................................................................. (37,890,333)
Swap contracts............................................................................... (5,537,846)
----------------
Net change in unrealized appreciation (depreciation)............................................ (43,428,179)
----------------
NET REALIZED AND UNREALIZED GAIN (LOSS)......................................................... (44,176,972)
----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS................................. $ 13,948,599
================
Page 14 See Notes to Financial Statements
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE
SIX MONTHS FOR THE
ENDED YEAR
4/30/2016 ENDED
(UNAUDITED) 10/31/2015
-------------- --------------
OPERATIONS:
Net investment income (loss)...................................................... $ 58,125,571 $ 118,894,137
Net realized gain (loss).......................................................... (748,793) (13,571,457)
Net change in unrealized appreciation (depreciation).............................. (43,428,179) (21,627,325)
-------------- --------------
Net increase (decrease) in net assets resulting from operations................... 13,948,599 83,695,355
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................. (59,186,584) (127,934,078)
-------------- --------------
Total distributions to shareholders............................................... (59,186,584) (127,934,078)
-------------- --------------
SHAREHOLDER TRANSACTIONS:
Offering costs.................................................................... -- 109,603
-------------- --------------
Net increase (decrease) in net assets resulting from shareholder transactions..... -- 109,603
-------------- --------------
Total increase (decrease) in net assets........................................... (45,237,985) (44,129,120)
NET ASSETS:
Beginning of period............................................................... 1,438,360,546 1,482,489,666
-------------- --------------
End of period..................................................................... $1,393,122,561 $1,438,360,546
============== ==============
Accumulated net investment income (loss) at end of period......................... $ 5,649,539 $ 6,710,552
============== ==============
CHANGES IN SHARES OUTSTANDING:
Shares outstanding, beginning of period........................................... 60,704,189 60,704,189
-------------- --------------
Shares outstanding, end of period................................................. 60,704,189 60,704,189
============== ==============
See Notes to Financial Statements Page 15
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2016 (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations................... $ 13,948,599
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash used by operating activities:
Purchases of investments..................................................... (436,120,870)
Sales, maturities and paydowns of investments................................ 474,124,667
Net amortization/accretion of premium/discount on investments................ 551,750
Net realized gain/loss on investments........................................ (465,731)
Net change in unrealized appreciation/depreciation on investments............ 37,890,333
Net change in unrealized appreciation/depreciation on swap contracts......... 5,537,846
Increase in cash segregated as collateral for open swap contracts............ (5,278,091)
Changes in assets and liabilities:
Increase in interest receivable.............................................. (3,234,355)
Increase in dividends receivable............................................. (363,428)
Decrease in tax reclaim receivable........................................... 172,825
Increase in prepaid expenses................................................. (39,910)
Decrease in other assets..................................................... 14,410
Increase in interest and fees on loan payable................................ 114,389
Decrease in investment advisory fees payable................................. (112,447)
Decrease in audit and tax fees payable....................................... (12,642)
Increase in legal fees payable............................................... 37,416
Decrease in printing fees payable............................................ (50,834)
Decrease in administrative fees payable...................................... (232,999)
Decrease in custodian fees payable........................................... (66,127)
Increase in transfer agent fees payable...................................... 2,920
Increase in Trustees' fees and expenses payable.............................. 4,883
Decrease in financial reporting fees payable................................. (26)
--------------
CASH PROVIDED BY OPERATING ACTIVITIES............................................. $ 86,422,578
--------------
Cash flows from financing activities:
Distributions to Common Shareholders from net investment income.............. (59,186,584)
Proceeds from borrowings..................................................... 25,000,000
Repayment of borrowing....................................................... (45,000,000)
--------------
CASH USED BY FINANCING ACTIVITIES................................................. (79,186,584)
--------------
Increase in cash.................................................................. 7,235,994
Cash at beginning of period....................................................... 20,683,482
--------------
Cash at end of period............................................................. $ 27,919,476
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees................................. $ 3,420,259
==============
Page 16 See Notes to Financial Statements
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS FOR THE PERIOD
ENDED YEAR ENDED OCTOBER 31, 5/23/2013 (a)
4/30/2016 ------------------------------ THROUGH
(UNAUDITED) 2015 2014 10/31/2013
------------- ------------- ------------- -------------
Net asset value, beginning of period............ $ 23.69 $ 24.42 $ 23.51 $ 23.88 (b)
----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss).................... 0.96 1.96 1.85 0.70
Net realized and unrealized gain (loss)......... (0.72) (0.58) 0.97 (0.64)
----------- ----------- ----------- -----------
Total from investment operations................ 0.24 1.38 2.82 0.06
----------- ----------- ----------- -----------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income........................... (0.98) (2.11) (1.91) (0.46)
----------- ----------- ----------- -----------
Common Shares offering costs charged to
paid-in capital.............................. -- 0.00 (c) -- (0.03)
----------- ----------- ----------- -----------
Capital reduction resulting from issuance of
common shares................................ -- -- -- 0.06
----------- ----------- ----------- -----------
Net asset value, end of period.................. $ 22.95 $ 23.69 $ 24.42 $ 23.51
=========== =========== =========== ===========
Market value, end of period..................... $ 23.02 $ 21.95 $ 21.94 $ 21.01
=========== =========== =========== ===========
TOTAL RETURN BASED ON NET ASSET VALUE (d)....... 1.35% 6.68% 13.37% 0.60%
=========== =========== =========== ===========
TOTAL RETURN BASED ON MARKET VALUE (d).......... 9.71% 10.02% 13.98% (14.13)%
=========== =========== =========== ===========
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)............ $ 1,393,123 $ 1,438,361 $ 1,482,490 $ 1,427,164
Ratio of total expenses to average net assets... 1.87% (e) 1.76% 1.69% 1.53% (e)
Ratio of net expenses to average net assets
excluding interest expense................... 1.36% (e) 1.34% 1.33% 1.24% (e)
Ratio of net investment income (loss) to average
net assets................................... 8.40% (e) 8.15% 7.66% 7.01% (e)
Portfolio turnover rate......................... 23% 48% 62% 11%
INDEBTEDNESS:
Total loan outstanding (in 000's)............... $ 625,000 $ 645,000 $ 665,000 $ 584,000
Asset coverage per $1,000 of indebtedness (f)... $ 3,229 $ 3,230 $ 3,229 $ 3,444
-----------------------------
(a) The Fund was seeded on April 16, 2013 and commenced operations on May 23,
2013.
(b) Beginning net asset value is net of sales load of $1.125 per share from
the initial offering.
(c) Amount represents less than $0.01 per share.
(d) 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 Shares price for market
value returns. Total returns do not reflect sales load and are not
annualized for periods less than one year. Past performance is not
indicative of future results.
(e) Annualized.
(f) Calculated by taking the Fund's total assets less the Fund's total
liabilities (not including the loan outstanding) and dividing by the loan
balance in 000's.
See Notes to Financial Statements Page 17
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
APRIL 30, 2016 (UNAUDITED)
1. ORGANIZATION
First Trust Intermediate Duration Preferred & Income Fund (the "Fund") is a
non-diversified closed-end management investment company organized as a
Massachusetts business trust on February 4, 2013, and is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund trades under the ticker symbol "FPF" on the
New York Stock Exchange ("NYSE").
The primary investment objective is to seek a high level of current income. The
Fund has a secondary objective of capital appreciation. The Fund seeks to
achieve its objectives by investing, under normal market conditions, at least
80% of its managed assets in preferred securities and other income producing
securities issued by U.S. and non-U.S. companies, including traditional
preferred securities, hybrid preferred securities that have investment and
economic characteristics of both preferred securities and debt securities,
floating rate and fixed-to-floating rate preferred securities, debt securities,
convertible securities and contingent convertible securities. There can be no
assurance that the Fund will achieve its investment objectives. The Fund seeks
to maintain, under normal market conditions, a duration of between three and
eight years. The Fund may not be appropriate for all investors.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund, which is an investment company within the scope of Financial
Accounting Standards Board ("FASB") Accounting Standards Update 2013-08, follows
accounting and reporting guidance under FASB Accounting Standards Codification
Topic 946, "Financial Services-Investment Companies." The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of the financial statements. The preparation of the financial
statements in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The Fund's net asset value ("NAV") is determined daily as of the close of
regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the
NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV
is determined as of that time. Domestic debt securities and foreign securities
are priced using data reflecting the earlier closing of the principal markets
for those securities. The Fund's NAV is calculated by dividing the value of all
assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses and dividends declared but unpaid, and
any borrowings of the Fund), by the total number of shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are obtained from a third-party
pricing service or are determined by the Pricing Committee of the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Fund's Board of Trustees,
and in accordance with provisions of the 1940 Act. Investments valued by the
Advisor's Pricing Committee are footnoted as such in the footnotes to the
Portfolio of Investments. The Fund's investments are valued as follows:
Preferred stocks and other equity securities listed on any national or
foreign exchange (excluding The Nasdaq National Market LLC ("Nasdaq") and
the London Stock Exchange Alternative Investment Market ("AIM")), are
valued at the last sale price on the exchange on which they are
principally traded or, for Nasdaq and AIM securities, the official closing
price. Securities traded on one or more than one securities exchange are
valued at the last sale price or official closing price, as applicable, at
the close of the securities exchange representing the principal market for
such securities.
Corporate bonds, notes and other debt securities are valued on the basis
of valuations provided by dealers who make markets in such securities or
by an independent pricing service approved by the Fund's Board of
Trustees, which may use the following valuation inputs when available:
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.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked price, if available, and otherwise
at their closing bid price.
Page 18
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
APRIL 30, 2016 (UNAUDITED)
Exchange-traded futures contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded futures contracts are fair valued at the mean
of the most recent bid and asked price, if available, and otherwise at
their closing bid price. Over-the-counter options contracts are fair
valued at the mean of the most recent bid and asked price, if available,
and otherwise at their closing bid price.
Swaps are fair valued utilizing quotations provided by a third-party
pricing service or, if the pricing service does not provide a value, by
quotes provided by the selling dealer or financial institution.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Board of Trustees or its delegate,
the Advisor's Pricing Committee, at fair value. These securities generally
include, but are not limited to, restricted securities (securities which may not
be publicly sold without registration under the Securities Act of 1933, as
amended) for which a pricing service is unable to provide a market price;
securities whose trading has been formally suspended; a security whose market
price is not available from a pre-established pricing source; a security with
respect to which an event has occurred that is likely to materially affect the
value of the security after the market has closed but before the calculation of
the Fund's NAV or make it difficult or impossible to obtain a reliable market
quotation; and a security whose price, as provided by the pricing service, does
not reflect the security's fair value.
As a general principle, the current fair value of a security would appear to be
the amount which the owner might reasonably expect to receive for the security
upon its current sale. When fair value prices are used, generally they will
differ from market quotations or official closing prices on the applicable
exchanges. A variety of factors may be considered in determining the fair value
of such securities, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
If the securities in question are foreign securities, the following additional
information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund trading of similar securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o 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.
o 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.
o 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.
Page 19
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
APRIL 30, 2016 (UNAUDITED)
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of April 30, 2016, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income, is
recorded on the accrual basis. Amortization of premiums and the accretion of
discounts are recorded using the effective interest method.
The Fund may hold the securities of real estate investments trusts ("REITs").
Distributions from such investments may include income, capital gains and return
of capital. The actual character of amounts received during the year is not
known until after the REITs' fiscal year end. The Fund records the character of
distributions received from the REITs during the year based on estimates
available. The characterization of distributions received by the Fund may be
subsequently revised based on information received from the REITs after their
tax reporting periods conclude.
C. RESTRICTED SECURITIES
The Fund invests in restricted securities, which are securities that may not be
offered for public sale without first being registered under the 1933 Act. Prior
to registration, restricted securities may only be resold in transactions exempt
from registration under Rule 144A under the 1933 Act, normally to qualified
institutional buyers. As of April 30, 2016, the Fund held restricted securities
as shown in the following table that Stonebridge Advisors LLC ("Stonebridge" or
the "Sub-Advisor") has deemed illiquid pursuant to procedures adopted by the
Fund's Board of Trustees. 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. The Fund does not have the right to demand that such securities be
registered. These securities are valued according to the valuation procedures as
stated in the Portfolio Valuation note (Note 2A) and are not expressed as a
discount to the carrying value of a comparable unrestricted security. There are
no unrestricted securities with the same maturity dates and yields for these
issuers.
PAR % OF
ACQUISITION AMOUNT/ CURRENT CARRYING NET
SECURITY DATE SHARES PRICE COST VALUE ASSETS
---------------------------------- --------------- ----------- ---------- ------------ ------------ ------
Centaur Funding Corp., 9.08%,
04/21/20 5/29/13-5/31/13 16,000 $ 1,193.75 $ 20,528,750 $ 19,100,000 1.37%
Sovereign Real Estate Investment
Trust, 12.00% 6/11/13-3/22/16 15,364 1,223.75 20,231,885 18,801,695 1.35
AgStar Financial Services ACA,
6.75% 5/29/13-7/31/15 12,000 1,112.44 12,105,000 13,349,250 0.96
Pitney Bowes International
Holdings Inc., Series F, 6.13% 6/27/13 4,000 1,015.31 3,935,000 4,061,250 0.29
Sirius International Group, Ltd.,
7.51% 8/06/14-4/24/15 $25,000,000 98.50 26,480,164 24,625,000 1.77
Land O'Lakes Inc., 8.00% 7/9/15-3/18/16 $23,000,000 103.38 23,032,500 23,776,250 1.71
----------------------------------
$106,313,299 $103,713,445 7.45%
==================================
D. FUTURES CONTRACTS
The Fund purchases or sells (i.e., is long or short) futures contracts to hedge
against changes in interest rates (interest rate risk). Futures contracts are
agreements between the Fund and a counterparty to buy or sell a specific
quantity of an underlying instrument at a specified price and at a specified
date. Depending on the terms of the contract, futures contracts are settled
either through physical delivery of the underlying instrument on the settlement
date or by payment of a cash settlement amount on the settlement date. Open
futures contracts can also be closed out prior to settlement by entering into an
offsetting transaction in a matching futures contract. If the Fund is not able
to enter into an offsetting transaction, the Fund will continue to be required
to maintain margin deposits on the futures contract. When the contract is closed
or expires, the Fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed or expired. This gain or loss is included in "Net realized
gain (loss) on futures contracts" on the Statement of Operations.
Upon entering into a futures contract, the Fund must deposit funds, called
margin, with its custodian in the name of the clearing broker equal to a
specified percentage of the current value of the contract. Open futures contacts
are marked to market daily. Pursuant to the contract, the Fund agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as variation margin
and are included in "Variation margin payable or variation margin receivable" on
the Statement of Assets and Liabilities.
Page 20
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
APRIL 30, 2016 (UNAUDITED)
If market conditions change unexpectedly, the Fund may not achieve the
anticipated benefits of the futures contract and may realize a loss. The use of
futures contracts involves the risk of imperfect correlation in movements in the
price of the futures contracts, interest rates and the underlying instruments.
The Fund did not hold any futures contracts as of April 30, 2016.
E. SWAP AGREEMENTS
The Fund may enter into interest rate swap agreements. A swap is a financial
instrument that typically involves the exchange of cash flows between two
parties ("Counterparties") on specified dates (settlement dates) where the cash
flows are based on agreed upon prices, rates, etc. Payments received or made by
the Fund for interest rate swaps are recorded in the Statement of Operations as
"Net realized gain (loss) on swap contracts." When an interest rate swap is
terminated, the Fund will record a realized gain or loss equal to the difference
between the proceeds form (or cost of) the closing transaction and the Fund's
basis in the contract, if any. Generally, the basis of the contracts, if any, is
the premium received or paid. Swap agreements are individually negotiated and
involve the risk of the potential inability of the Counterparties to meet the
terms of the agreement. In connection with these agreements, cash and securities
may be identified as collateral in accordance with the terms of the respective
swap agreements to provide assets of value and recourse in the event of default
under the swap agreement or bankruptcy/insolvency of a party to the swap
agreement. In the event of a default by the Counterparty, the Fund will seek
withdrawal of this collateral and may incur certain costs exercising its right
with respect to the collateral. If a Counterparty becomes bankrupt or otherwise
fails to perform its obligations due to financial difficulties, the Fund may
experience significant delays in obtaining any recovery in a bankruptcy or other
reorganization proceeding. The Fund may obtain only limited recovery or may
obtain no recovery in such circumstances.
Swap agreements may increase or decrease the overall volatility of the
investments of the Fund. The performance of swap agreements may be affected by a
change in the specific interest rate, security, currency, or other factors that
determine the amounts of payments due to and from the Fund. The Fund's maximum
equity price risk to meet its future payments under swap agreements outstanding
at April 30, 2016 is equal to the total notional amount as shown on the
Portfolio of Investments. The notional amount represents the U.S. dollar value
of the contract as of the day of the opening transaction or contract reset. When
the Fund enters into a swap agreement, any premium paid is included in "Swap
contracts, at value" on the Statement of Assets and Liabilities.
The Fund held interest rate swap agreements at April 30, 2016. An interest rate
swap agreement involves the Fund's agreement to exchange a stream of interest
payments for another party's stream of cash flows. Interest rate swaps do not
involve the delivery of securities or other underlying assets or principal.
Accordingly, the risk of loss with respect to interest rate swaps is limited to
the net amount of interest payments that the Fund is contractually obligated to
make.
Cash segregated as collateral for open swap contracts in the amount of
$11,472,589 is shown on the Statement of Assets and Liabilities.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income, if any, are declared and paid monthly, or
as the Board of Trustees may determine from time to time. Distributions of net
realized capital gains earned by the Fund, if any, will be distributed at least
annually.
Distributions from income and capital gains are determined in accordance with
federal income tax regulations, which may differ from U.S. GAAP. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These permanent differences
are primarily due to the varying treatment of income and gain/loss on portfolio
securities held by the Fund and have no impact on net assets or NAV per share.
Temporary differences, which arise from recognizing certain items of income,
expense and gain/loss in different periods for financial statement and tax
purposes, will reverse at some time in the future.
The tax character of distributions paid during the fiscal period ended October
31, 2015, was as follows:
Distributions paid from:
Ordinary income............................... $ 127,934,078
As of October 31, 2015, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income................. $ 5,139,718
Undistributed capital gains................... --
---------------
Total undistributed earnings.................. 5,139,718
Accumulated capital and other losses.......... (21,641,950)
Net unrealized appreciation (depreciation).... 7,371,377
---------------
Total accumulated earnings (losses)........... (9,130,855)
Other......................................... --
Paid in Capita................................ 1,447,491,401
---------------
Net Assets.................................... $ 1,438,360,546
===============
Page 21
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
APRIL 30, 2016 (UNAUDITED)
G. INCOME TAXES
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended, which includes distributing substantially all of its net
investment income and net realized gains to shareholders. Accordingly, no
provision has been made for federal or state income taxes. However, due to the
timing and amount of distributions, the Fund may be subject to an excise tax of
4% of the amount by which approximately 98% of the Fund's taxable income exceeds
the distributions from such taxable income for the calendar year.
The Fund intends to utilize provisions of the federal income tax laws, which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in-losses. These limitations
apply when there has been a 50% change in ownership. At October 31, 2015, the
Fund had capital loss carryforward for federal income tax purposes of
$21,641,950.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. The taxable years ended 2013,
2014 and 2015 remain open to federal and state audit. As of April 30, 2016,
management has evaluated the application of these standards to the Fund, and has
determined that no provision for income tax is required in the Fund's financial
statements for uncertain tax positions.
H. EXPENSES
The Fund will pay all expenses directly related to its operations.
I. ORGANIZATION AND OFFERING COSTS
Organization costs consisted of costs incurred to establish the Fund and enable
it to legally conduct business. These costs included filing fees, listing fees,
legal services pertaining to the organization of the business and audit fees
relating to the initial registration and auditing the initial statement of
assets and liabilities, among other fees. Offering costs consisted of legal fees
pertaining to the Fund's shares offered for sale, registration fees,
underwriting fees, and printing of the initial prospectus, among other fees.
First Trust paid all organization expenses. The Fund's Common Share offering
costs of $1,704,000 were recorded as a reduction of the proceeds from the sale
of Common Shares during the period ended October 31, 2013. During the fiscal
year ended October 31, 2015, it was determined that actual offering costs were
less than the estimated offering costs by $109,063. Therefore, paid-in-capital
was increased by that amount in the current fiscal year, as reflected in the
offering costs line item on the Statement of Changes in Net Assets.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the ongoing monitoring of the Fund's investment
portfolio, managing the Fund's business affairs and providing certain
administrative services necessary for the management of the Fund. For these
investment management services, First Trust is entitled to a monthly fee
calculated at an annual rate of 0.85% of the Fund's average daily net assets.
First Trust also provides fund reporting services to the Fund for a flat annual
fee in the amount of $9,250.
Stonebridge, a majority-owned affiliate of First Trust, serves as the Fund's
sub-advisor and manages the Fund's portfolio subject to First Trust's
supervision. The Sub-Advisor receives a monthly portfolio management fee
calculated at an annual rate of 0.425% of average daily net assets that is paid
by First Trust out of its investment advisory fee.
Brown Brothers Harriman & Co. ("BBH") serves as the Fund's administrator, fund
accountant and custodian in accordance with certain fee arrangements. As
administrator and fund accountant, BBH is responsible for providing certain
administrative and accounting services to the Fund, including maintaining the
Fund's books of account, records of the Fund's securities transactions, and
certain other books and records. As custodian, BBH is responsible for custody of
the Fund's assets.
Computershare, Inc. serves as the Fund's transfer agent in accordance with
certain fee arrangements. As transfer agent, Computershare, Inc. is responsible
for maintaining shareholder records for the Fund.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated equally among each fund in the First Trust Fund
Complex. Prior to January 1, 2016, the fixed annual retainer was allocated pro
rata based on each Fund's net assets. Each Independent Trustee is also paid an
annual per fund fee that varies based on whether the fund is a closed-end or
other actively managed fund, or is an index fund.
Page 22
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
APRIL 30, 2016 (UNAUDITED)
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
additional annual fees to serve in such capacities, with such compensation
allocated pro rata among each fund in the First Trust Fund Complex based on net
assets. Trustees are reimbursed for travel and out-of-pocket expenses in
connection with all meetings. The Lead Independent Trustee and Committee
Chairmen rotate every three years. The officers and "Interested" Trustee receive
no compensation from the Fund for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
For the period ended April 30, 2016, the cost of purchases and proceeds from
sales of investment securities, excluding short-term investments, for the Fund
was $457,741,199 and $491,833,922, respectively.
5. DERIVATIVE TRANSACTIONS
The following table presents the types of derivatives held by the Fund at April
30, 2016, the primary underlying risk exposure and the location of these
instruments as presented on the Statement of Assets and Liabilities.
ASSET DERIVATIVES LIABILITY DERIVATIVES
----------------------------------------- --------------------------------------
DERIVATIVE RISK STATEMENT OF ASSETS AND FAIR STATEMENT OF ASSETS AND FAIR
INSTRUMENTS EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
------------------ ------------------ --------------------------- ----------- ------------------------ -----------
Interest Rate Swap
Agreement Interest Rate Risk Swap Contracts, at Value $ -- Swap Contracts, at Value $ 4,633,673
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the six months
ended April 30, 2016, on derivative instruments as well as the primary
underlying risk exposure associated with each instrument.
STATEMENT OF OPERATIONS LOCATION
------------------------------------------------------------------------------------------
INTEREST RATE RISK
Net realized gain (loss) on swap contracts................................. $ (1,214,524)
Net change in unrealized appreciation (depreciation) on swap contracts...... (5,537,846)
The average volume of interest rate swaps was $165,000,000 for the six months
ended April 30, 2016.
The Fund does not have the right to offset financial assets and financial
liabilities related to swap contracts on the Statement of Assets and
Liabilities.
6. BORROWINGS
The Fund entered into a credit agreement with The Bank of Nova Scotia that has a
maximum commitment amount of $725,000,000. The borrowing rate under the facility
is equal to the 1-month LIBOR plus 75 basis points. In addition, under the
facility, the Fund pays a commitment fee of 0.15% on the undrawn amount of such
facility on any date that the loan balance is less than 50% of the total
commitment amount. The average amount outstanding between November 1, 2015 and
April 30, 2016 was $626,236,264 with a weighted average interest rate of 1.13%.
As of April 30, 2016, the Fund had outstanding borrowings of $625,000,000 under
this committed facility agreement. The high and low annual interest rates for
the six months ended April 30, 2016, were 1.19% and 0.90%, respectively. The
interest rate at April 30, 2016, was 1.19%.
7. INDEMNIFICATION
The Fund has a variety of indemnification obligations under contracts with its
service providers. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Fund through
the date the financial statements were issued, and has determined that there was
the following subsequent event:
On May 19, 2016, the Fund declared a dividend of $0.1625 per share to Common
Shareholders of record on June 3, 2016, payable June 15, 2016.
Page 23
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
APRIL 30, 2016 (UNAUDITED)
DIVIDEND REINVESTMENT PLAN
If your Common Shares are registered directly with the Fund or if you hold your
Common Shares with a brokerage firm that participates in the Fund's Dividend
Reinvestment Plan (the "Plan"), unless you elect, by written notice to the Fund,
to receive cash distributions, all dividends, including any capital gain
distributions, on your Common Shares will be automatically reinvested by
Computershare Trust Company, N.A. (the "Plan Agent"), in additional Common
Shares under the Plan. If you elect to receive cash distributions, you will
receive all distributions in cash paid by check mailed directly to you by the
Plan Agent, as the dividend paying agent.
If you decide to participate in the Plan, the number of Common Shares you will
receive will be determined as follows:
(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.
You may elect to opt-out of or withdraw from the Plan at any time by giving
written notice to the Plan Agent, or by telephone at (866) 340-1104, in
accordance with such reasonable requirements as the Plan Agent and the Fund may
agree upon. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan, and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions.
The Plan Agent maintains all Common Shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. The Plan Agent will forward to each
participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund. Any proxy you receive will
include all Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.
Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
Capital gains and income are realized although cash is not received by you.
Consult your financial advisor for more information.
If you hold your Common Shares with a brokerage firm that does not participate
in the Plan, you will not be able to participate in the Plan and any dividend
reinvestment may be effected on different terms than those described above.
The Fund reserves the right to amend or terminate the Plan if in the judgment of
the Board of Trustees the change is warranted. There is no direct service charge
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable by the participants. Additional
information about the Plan may be obtained by writing Computershare, Inc., P.O.
Box 30170, College Station, TX 77842-3170.
--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies and information on how the Fund voted proxies relating to
portfolio investments during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website located at
http://www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available (1) by calling (800) 988-5891; (2) on the Fund's website located
at http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov;
and (4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.
Page 24
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
APRIL 30, 2016 (UNAUDITED)
SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Joint Annual Meeting of Shareholders of the Common Shares of Macquarie/First
Trust Global Infrastructure/Utilities Dividend & Income Fund, First Trust Energy
Income and Growth Fund, First Trust Enhanced Equity Income Fund, First
Trust/Aberdeen Global Opportunity Income Fund, First Trust Mortgage Income Fund,
First Trust Strategic High Income Fund II, First Trust/Aberdeen Emerging
Opportunity Fund, First Trust Specialty Finance and Financial Opportunities
Fund, First Trust High Income Long/Short Fund, First Trust Energy Infrastructure
Fund, First Trust MLP and Energy Income Fund, First Trust New Opportunities MLP
& Energy Fund and First Trust Intermediate Duration Preferred & Income Fund was
held on April 22, 2016 (the "Annual Meeting"). At the Annual Meeting, James A.
Bowen and Niel B. Nielson were elected by the Common Shareholders of the First
Trust Intermediate Duration Preferred & Income Fund as Class III Trustees for a
three-year term expiring at the Fund's annual meeting of shareholders in 2019.
The number of votes cast in favor of Mr. Bowen was 50,947,217, the number of
votes against Mr. Bowen was 900,637, and the number of broker non-votes was
8,856,335. The number of votes cast in favor of Mr. Nielson was 50,924,726, the
number of votes against Mr. Nielson was 923,128, and the number of broker
non-votes was 8,856,335. Richard E. Erickson, Thomas R. Kadlec and Robert F.
Keith are the other current and continuing Trustees.
RISK CONSIDERATIONS
Risks are inherent in all investing. The following summarizes some, but not all,
of the risks that should be considered for the Fund. For additional information
about the risks associated with investing in the Fund, please see the Fund's
prospectus and statement of additional information, as well as other Fund
regulatory filings.
INVESTMENT AND MARKET RISK: An investment in the Fund's common shares ("Common
Shares") is subject to investment risk, including the possible loss of the
entire principal invested. Common Shares at any point in time may be worth less
than the original investment, even after taking into account the reinvestment of
Fund dividends and distributions. The Fund utilizes leverage, which magnifies
investment risk.
PREFERRED/HYBRID PREFERRED AND DEBT SECURITIES RISK: Preferred/hybrid preferred
and debt securities in which the Fund invests are subject to various risks,
including credit risk, interest rate risk, call/prepayment risk and reinvestment
risk, as described below. In addition, preferred and hybrid preferred securities
are subject to certain other risks, including deferral and omission risk,
subordination risk, limited voting rights risk and special redemption rights
risk.
CREDIT AND BELOW INVESTMENT GRADE SECURITIES RISK: The Fund is subject to credit
risk, which 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 invests in below investment grade securities, which involve
greater risks than investment grade securities, including the possibility of
dividend or interest deferral, default or bankruptcy.
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 leverage 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 risks and special considerations for holders of Common Shares
including the likelihood of greater volatility of net asset value and market
price of the Common Shares than a comparable portfolio without leverage, and the
risk that fluctuations in interest rates on reverse repurchase agreements,
borrowings and short-term debt or in the dividend rates on any preferred shares
of the Fund that the Fund may pay will reduce the return to the holders of
Common Shares or will result in fluctuations in the dividends paid on the Common
Shares. There is no assurance that a leveraging strategy will be successful.
Although the Fund seeks to maintain a duration under normal market
circumstances, excluding the effects of leverage, of between three and eight
years, if the effect of the Fund's use of leverage was included in calculating
duration, it could result in a longer duration for the Fund.
CALL/PREPAYMENT AND REINVESTMENT RISK: If an issuer of a security exercises an
option to redeem its issue at par or prepay principal earlier than scheduled,
the Fund may be forced to reinvest in lower yielding securities. A decline in
income could affect the Common Shares' market price or the overall return of the
Fund.
DURATION RISK: The Fund seeks to maintain, under normal market conditions, a
duration, excluding the effects of leverage, of between three and eight years.
Various techniques may be used to shorten or lengthen the Fund's duration.
Securities with longer durations tend to be more sensitive to interest rate (or
yield) changes than securities with shorter durations. The duration of a
security will be expected to change over time with changes in market factors and
time to maturity.
RISKS OF CONCENTRATION IN THE FINANCIALS SECTOR: Because the Fund invests 25% or
more of its managed assets in the financial sector, it will be more susceptible
to adverse economic or regulatory occurrences affecting this sector, such as
changes in interest rates, loan concentration and competition.
INTEREST RATE RISK: The Fund is subject to interest rate risk, which is the risk
that the preferred and debt securities in which the Fund invests will decline in
value because of rising market interest rates.
Page 25
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND (FPF)
APRIL 30, 2016 (UNAUDITED)
FLOATING RATE AND FIXED-TO-FLOATING RATE SECURITIES 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. 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.
CONVERTIBLE SECURITIES/CONTINGENT CONVERTIBLE SECURITIES RISK: The market value
of convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stock.
Contingent convertible securities ("CoCos") provide for mandatory conversion
into common stock of the issuer under certain circumstances. Since the common
stock of the issuer may not pay a dividend, investors in these instruments could
experience a reduced income rate, potentially to zero; and conversion would
deepen the subordination of the investor, hence worsening standing in a
bankruptcy. In addition, some such instruments have a set stock conversion rate
that would cause a reduction in value of the security if the price of the stock
is below the conversion price on the conversion date. CoCos may be considered to
be high yield securities (a.k.a. "junk" bonds) and, to the extent a CoCo held by
the Fund undergoes a write down, the Fund may lose some or all of its original
investment in the CoCo. Performance of a CoCo issuer may, in general, be
correlated with the performance of other CoCo issuers. As a result, negative
information regarding one CoCo issuer may cause a decline in value of other CoCo
issuers. Subordinate securities such as CoCos are more likely to experience
credit loss than non-subordinate securities of the same issuer - even if the
CoCos do not convert to equity securities. Any losses incurred by subordinate
securities, such as CoCos, are likely to be proportionately greater than
non-subordinate securities and any recovery of principal and interest of
subordinate securities may take more time. As a result, any perceived decline in
credit worthiness of a CoCo issuer is likely to have a greater impact on the
CoCo, as a subordinate security.
FOREIGN (NON-U.S.) SECURITIES RISK: Investing in securities of non-U.S. issuers
may involve certain risks not typically associated with investing in securities
of U.S. issuers. These risks include: (i) there may be less publicly available
information about non-U.S. issuers or markets due to less rigorous disclosure or
accounting standards or regulatory practices; (ii) non-U.S. markets may be
smaller, less liquid and more volatile than the U.S. market; (iii) potential
adverse effects of fluctuations in currency exchange rates or controls on the
value of the Fund's investments; (iv) the economies of non U.S. countries may
grow at slower rates than expected or may experience a downturn or recession;
(v) the impact of economic, political, social or diplomatic events; (vi) certain
non-U.S. countries may impose restrictions on the ability of non U.S. issuers to
make payments of principal and interest to investors located in the United
States due to blockage of non-U.S. currency exchanges or otherwise; and (vii)
withholding and other non-U.S. taxes may decrease the Fund's return.
ILLIQUID AND RESTRICTED SECURITIES RISK: The Fund may invest up to 25% of its
Managed Assets in illiquid securities and may also invest, without limit, in
unregistered or otherwise restricted securities. Investment of the Fund's assets
in illiquid and restricted securities may restrict the Fund's ability to take
advantage of market opportunities. Illiquid and restricted securities may be
difficult to dispose of at a fair price at the times when the Fund believes it
is desirable to do so. The market price of illiquid and restricted securities
generally is more volatile than that of more liquid securities, which may
adversely affect the price that the Fund pays for or recovers upon the sale of
such securities. Illiquid and restricted securities are also more difficult to
value, especially in challenging markets. The risks associated with illiquid and
restricted securities may be particularly acute in situations in which the
Fund's operations require cash and could result in the Fund borrowing to meet
its short-term needs or incurring losses on the sale of illiquid or restricted
securities.
Page 26
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This Page Left Blank Intentionally.
FIRST TRUST
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
Stonebridge Advisors LLC
10 Westport Road
Suite C101
Wilton, CT 06897
ADMINISTRATOR,
FUND ACCOUNTANT &
CUSTODIAN
Brown Brothers Harriman & Co.
50 Milk Street
Boston, MA 02109
TRANSFER AGENT
Computershare, Inc.
P.O. Box 30170
College Station, TX 77842-3170
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
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.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
There has been no change, as of the date of this filing, in any of the
portfolios managers identified in response to paragraph (a)(1) of this Item in
the Registrant's most recently filed annual report on Form N-CSR.
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 registrant's second fiscal quarter
of 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. EXHIBITS.
(a)(1) Not Applicable.
(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.
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: June 20, 2016
-----------------
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: June 20, 2016
-----------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: June 20, 2016
-----------------
* Print the name and title of each signing officer under his or her signature.