INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 16th day of May, 2013 by and among FIRST
TRUST INTERMEDIATE DURATION PREFERRED & INCOME FUND, a Massachusetts business
trust (the "Fund"), FIRST TRUST ADVISORS L.P., an Illinois limited partnership
(the "Manager") and a registered investment adviser with the Securities and
Exchange Commission ("SEC"), and STONEBRIDGE ADVISORS LLC, a Delaware limited
liability company and a registered investment adviser with the SEC (the
"Sub-Adviser").
WHEREAS, the Fund is a closed-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund has retained the Manager to serve as the investment
manager for the Fund pursuant to an Investment Management Agreement between the
Manager and the Fund (as such agreement may be modified from time to time, the
"Management Agreement");
WHEREAS, the Management Agreement provides that the Manager may, subject
to the initial and periodic approvals required under Section 15 of the 1940 Act,
appoint a sub-adviser at its own cost and expense for the purpose of furnishing
certain services required under the Management Agreement;
WHEREAS, the Fund and the Manager desire to retain the Sub-Adviser to
furnish investment advisory services for the Fund's investment portfolio, upon
the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. The Fund and the Manager hereby appoint the Sub-Adviser
to provide certain sub-investment advisory services to the Fund for the period
and on the terms set forth in this Agreement. The Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided. The Sub-Adviser shall, for all purposes herein
provided, be deemed an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for nor represent the
Fund or the Manager in any way, nor otherwise be deemed an agent of the Fund or
the Manager.
2. Services to Be Performed. Subject always to the supervision of the
Fund's Board of Trustees (the "Board of Trustees" or the "Board") and the
Manager, the Sub-Adviser will act as sub-adviser for, and manage on a
discretionary basis the investment and reinvestment of the assets of the Fund,
furnish an investment program in respect of, make investment decisions for, and
place all orders for the purchase and sale of securities for the Fund's
investment portfolio, all on behalf of the Fund and as described in the Fund's
most recent effective registration statement on Form N-2 (File No. 333-186412),
and as the same and such investment policies described therein may thereafter be
amended from time to time. In the performance of its duties, the Sub-Adviser
will (a) satisfy any applicable fiduciary duties it may have to the Fund, (b)
monitor the Fund's investments, (c) comply with the provisions of the Fund's
Declaration of Trust and By-laws, as amended from time to time and communicated
by the Fund or the Manager to the Sub-Adviser, and the stated investment
objectives, policies and restrictions of the Fund as such objectives, policies
and restrictions may subsequently be changed by the Fund's Board of Trustees and
communicated by the Fund or the Manager to the Sub-Adviser in writing and (d)
assist in the valuation of portfolio securities held by the Fund as requested by
the Manager of the Fund. The Fund or the Manager will provide the Sub-Adviser
with current copies of the Fund's Declaration of Trust, By-laws, prospectus,
statement of additional information and any amendments thereto, and any
objectives, policies or limitations not appearing therein as they may be
relevant to the Sub-Adviser's performance under this Agreement.
The Sub-Adviser is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio investments for the Fund, and is
directed to use its commercially reasonable efforts to obtain best execution,
which includes most favorable net results and execution of the Fund's orders,
taking into account all appropriate factors, including price, dealer spread or
commission, size and difficulty of the transaction and research or other
services provided. Subject to approval by the Fund's Board of Trustees and
compliance with the policies and procedures adopted by the Board of Trustees for
the Fund and to the extent permitted by and in conformance with applicable law
(including Rule 17e-1 under the 1940 Act), the Sub-Adviser may select brokers or
dealers affiliated with the Sub-Adviser. It is understood that the Sub-Adviser
will not be deemed to have acted unlawfully, or to have breached a fiduciary
duty to the Fund, or be in breach of any obligation owing to the Fund under this
Agreement, or otherwise, solely by reason of its having caused the Fund to pay a
member of a securities exchange, a broker or a dealer a commission for effecting
a securities transaction for the Fund in excess of the amount of commission
another member of an exchange, broker or dealer would have charged if the
Sub-Adviser determined in good faith that the commission paid was reasonable in
relation to the brokerage or research services provided by such member, broker
or dealer, viewed in terms of that particular transaction or the Sub-Adviser's
overall responsibilities with respect to its accounts, including the Fund, as to
which it exercises investment discretion.
In addition, the Sub-Adviser may, to the extent permitted by applicable
law, aggregate purchase and sale orders of securities placed with respect to the
assets of the Fund with similar orders being made simultaneously for other
accounts managed by the Sub-Adviser or its affiliates, if in the Sub-Adviser's
reasonable judgment such aggregation shall result in an overall economic benefit
to the Fund, taking into consideration the selling or purchase price, brokerage
commissions and other expenses. In the event that a purchase or sale of an asset
of the Fund occurs as part of any aggregate sale or purchase orders, the
objective of the Sub-Adviser and any of its affiliates involved in such
transaction shall be to allocate the securities so purchased or sold, as well as
expenses incurred in the transaction, among the Fund and other accounts in a
fair and equitable manner. Nevertheless, the Fund and the Manager acknowledge
that under some circumstances, such allocation may adversely affect the Fund
with respect to the price or size of the securities positions obtainable or
salable. Whenever the Fund and one or more other investment advisory clients of
the Sub-Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in a manner believed by the Sub-Adviser
to be equitable to each, although such allocation may result in a delay in one
or more client accounts being fully invested that would not occur if such an
allocation were not made. Moreover, it is possible that due to differing
investment objectives or for other reasons, the Sub-Adviser and its affiliates
may purchase securities of an issuer for one client and at approximately the
same time recommend selling or sell the same or similar types of securities for
another client.
The Sub-Adviser will not arrange purchases or sales of securities between
the Fund and other accounts advised by the Sub-Adviser or its affiliates unless
(a) such purchases or sales are in accordance with applicable law (including
Rule 17a-7 under the 0000 Xxx) and the Fund's policies and procedures, (b) the
Sub-Adviser determines the purchase or sale is in the best interests of the
Fund, and (c) the Fund's Board of Trustees has approved these types of
transactions.
The Fund may adopt policies and procedures that modify or restrict the
Sub-Adviser's authority regarding the execution of the Fund's portfolio
transactions provided herein.
For purposes of complying with Rule 10f-3, Rule 12d3-1, Rule 17a-10 and
Rule 17e-1 under the 1940 Act, the Sub-Adviser hereby agrees that it will not
consult with any other sub-adviser of an investment company or a series of an
investment company that is advised by the Manager (the "First Trust Fund
complex") or an affiliated person of a sub-adviser (including any sub-adviser
that is a principal underwriter or an affiliated person of such principal
underwriter), concerning transactions for the Fund or any fund in the First
Trust Fund complex in securities or other fund assets. In addition, with respect
to a fund in the First Trust Fund complex with multiple sub-advisers, the
Sub-Adviser shall be limited to providing investment advice with respect to only
the discrete portion of the fund's portfolio as may be determined from
time-to-time by the Board of Trustees or the Manager, and shall not consult with
any other First Trust Fund complex sub-adviser (including any sub-adviser that
is a principal underwriter or an affiliated person of such principal
underwriter) as to any other portion of the fund's portfolio concerning
transactions for the fund in securities or other assets.
The Sub-Adviser will communicate to the officers and Trustees of the Fund
such information relating to transactions for the Fund as they may reasonably
request. In no instance will the Fund's portfolio securities be purchased from
or sold to the Manager, the Sub-Adviser or any affiliated person of either the
Fund, the Manager, or the Sub-Adviser, except as may be permitted under the 1940
Act.
The Sub-Adviser further agrees that it:
(a) will use the same degree of skill and care in providing such
services as it uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) will (i) conform in all material respects to all applicable
rules and regulations of the SEC, (ii) comply in all material respects
with all policies and procedures adopted by the Board of Trustees for the
Fund and communicated to the Sub-Adviser in writing and (iii) conduct its
activities under this Agreement in all material respects in accordance
with any applicable law and regulations of any governmental authority
pertaining to its investment advisory activities;
(c) will report to the Manager and to the Board of Trustees of the
Fund on a quarterly basis and will make appropriate persons available for
the purpose of reviewing with representatives of the Manager and the Board
of Trustees on a regular basis at such times as the Manager or the Board
of Trustees may reasonably request in writing regarding the management of
the Fund, including, without limitation, review of the general investment
strategies of the Fund, the performance of the Fund's investment portfolio
in relation to relevant standard industry indices and general conditions
affecting the marketplace and will provide various other reports from time
to time as reasonably requested by the Manager or the Board of Trustees of
the Fund; and
(d) will prepare and maintain such books and records with respect
to the Fund's securities and other transactions for the Fund's investment
portfolio as required for registered investment advisers under applicable
law, the Fund's policies and procedures or as otherwise requested by the
Manager or the Board and will prepare and furnish the Manager and the
Fund's Board of Trustees such periodic and special reports as the Board or
the Manager may reasonably request. The Sub-Adviser further agrees that
all records that it maintains for the Fund are the property of the Fund
and the Sub-Adviser will surrender promptly to the Fund any such records
upon the request of the Manager or the Fund (provided, however, that the
Sub-Adviser shall be permitted to retain copies thereof); and shall be
permitted to retain originals (with copies to the Fund) to the extent
required under Rule 204-2 under the Investment Advisers Act of 1940 or
other applicable law; and
(e) will monitor the pricing of portfolio securities, and events
relating to the issuers of those securities and the markets in which the
securities trade in the ordinary course of managing the portfolio
securities of the Fund, and will notify Manager promptly of any
issuer-specific or market events or other situations that occur
(particularly those that may occur after the close of a foreign market in
which the securities may primarily trade but before the time at which the
Fund's securities are priced on a given day) that may materially impact
the pricing of one or more securities in Sub-Adviser's portion of the
portfolio. In addition, Sub-Adviser will at the Manager's request assist
Manager in evaluating the impact that such an event may have on the net
asset value of the Fund and in determining a recommended fair value of the
affected security or securities.
3. Expenses. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities and other assets (including
brokerage commissions, if any) purchased for the Fund.
4. Additional Sub-Advisers. Subject to obtaining the initial and periodic
approvals required under Section 15 of the 1940 Act and the approval of the
Manager, the Sub-Adviser may retain one or more additional sub-advisers at the
Sub-Adviser's own cost and expense for the purpose of furnishing one or more of
the services described in Section 2 hereof with respect to the Fund. Retention
of a sub-adviser hereunder shall in no way reduce the responsibilities or
obligations of the Sub-Adviser under this Agreement and the Sub-Adviser shall be
responsible to the Fund for all acts or omissions of any sub-adviser in
connection with the performance of the Sub-Adviser's duties hereunder.
5. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, the Manager will pay the Sub-Adviser, and the
Sub-Adviser agrees to accept as full compensation therefor, a portfolio
management fee (the "Management Fee") equal to the annual rate of 0.425% of the
Fund's Managed Assets (as defined below), subject to paragraph 6 below. For
purposes of calculating the Management Fee, Managed Assets means the average
daily gross asset value of the Fund (including assets attributable to the Fund's
Preferred Shares (as such term is defined in the Fund's prospectus), if any, and
the principal amount of borrowings, if any), minus the sum of the Fund's accrued
and unpaid dividends on any outstanding Preferred Shares and accrued liabilities
(other than the principal amount of any borrowings incurred, commercial paper or
notes issued by the Fund). For purposes of determining Managed Assets, the
liquidation preference of any outstanding Preferred Shares of the Fund is not
treated as a liability. The Management Fee shall be payable in arrears on or
about the first day of each month during the term of this Agreement.
For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year, respectively.
6. Expense Reimbursement. The Sub-Adviser agrees to pay the Manager
one-half of (i) all organization costs and (ii) all offering costs of the Fund
(other than sales load, but including the reimbursement of underwriting expenses
as described in the Fund's prospectus) that exceed $0.04 per Common Share (as
such term is defined in the Fund's prospectus). The terms "organization costs"
and "offering costs" shall have the meanings ascribed to them in Sections
8.23-8.31 of the AICPA Audit and Accounting Guide, Audits for Investment
Companies, with Conforming Changes as of May 1, 2010.
7. Services to Others. The Fund and the Manager acknowledge that the
Sub-Adviser now acts, or may in the future act, as an investment adviser to
other managed accounts and as investment adviser or investment sub-adviser to
one or more other investment companies. In addition, the Fund and the Manager
acknowledge that the persons employed by the Sub-Adviser to assist in the
Sub-Adviser's duties under this Agreement will not devote their full time to
such efforts. It is also agreed that the Sub-Adviser may use any supplemental
research obtained for the benefit of the Fund in providing investment advice to
its other investment advisory accounts and for managing its own accounts.
8. Limitation of Liability. The Sub-Adviser shall not be liable for, and
the Fund and the Manager will not take any action against the Sub-Adviser to
hold the Sub-Adviser liable for, any error of judgment or mistake of law or for
any loss suffered by the Fund or the Manager (including, without limitation, by
reason of the purchase, sale or retention of any security) in connection with
the performance of the Sub-Adviser's duties under this Agreement, except for a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser in the performance of its duties under this Agreement,
or by reason of its reckless disregard of its obligations and duties under this
Agreement.
9. Term; Termination; Amendment. This Agreement shall become effective
with respect to the Fund on the same date as the Management Agreement between
the Fund and the Manager becomes effective (it being understood that the Manager
shall notify the Sub-Adviser of the date of effectiveness of the Management
Agreement as soon as reasonably practical after effectiveness), provided that it
has been approved in the manner required by the 1940 Act, and shall remain in
full force until the two-year anniversary of the date of its effectiveness
unless sooner terminated as hereinafter provided. This Agreement shall continue
in force from year to year thereafter, but only as long as such continuance is
specifically approved for the Fund at least annually in the manner required by
the 1940 Act and the rules and regulations thereunder; provided, however, that
if the continuation of this Agreement is not approved for the Fund, the
Sub-Adviser may continue to serve in such capacity for the Fund in the manner
and to the extent permitted by the 1940 Act and the rules and regulations
thereunder.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Manager or the Sub-Adviser upon sixty (60) days' written notice to the
other parties. This Agreement may also be terminated by the Fund by action of
the Board of Trustees of the Fund or by a vote of a majority of the outstanding
voting securities of the Fund upon sixty (60) days' written notice to the
Sub-Adviser by the Fund without payment of any penalty.
This Agreement may be terminated at any time without the payment of any
penalty by the Manager, the Board of Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the Fund in the event that it
shall have been established by a court of competent jurisdiction that the
Sub-Adviser or any officer or director of the Sub-Adviser has taken any action
that results in a breach of the material covenants of the Sub-Adviser set forth
herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event the Management
Agreement between the Manager and the Fund is terminated, assigned or not
renewed.
Termination of this Agreement shall not affect the right of the
Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 5 earned prior to such termination and for any additional
period during which the Sub-Adviser serves as such for the Fund, subject to
applicable law.
10. Compliance Certification. From time to time the Sub-Adviser shall
provide such certifications with respect to Rule 38a-1 under the 1940 Act as are
reasonably requested by the Fund or the Manager. In addition, the Sub-Adviser
will, from time to time, provide a written assessment of its compliance program
in conformity with current industry standards that is reasonably acceptable to
the Fund to enable the Fund to fulfill its obligations under Rule 38a-1 under
the 1940 Act.
11. Notice. Any notice under this Agreement shall be sufficient in all
respects if given in writing and delivered by commercial courier providing proof
of delivery and addressed as follows or addressed to such other person or
address as such party may designate for receipt of such notice.
If to the Manager or the Fund: If to the Sub-Adviser:
First Trust Intermediate Duration Stonebridge Advisors LLC
Preferred & Income Fund 000 Xxxxxxx Xxxx
First Trust Advisors L.P. Xxxxxx, XX 00000
000 X. Xxxxxxx Xxxxx, Xxxxx 000 Xxxxxxxxx: Xxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Secretary
12. Limitations on Liability. All parties hereto are expressly put on
notice of the Fund's Declaration of Trust and all amendments thereto, a copy of
which is on file with the Secretary of the Commonwealth of Massachusetts, and
the limitation of shareholder and trustee liability contained therein and a copy
of which has been provided to the Sub-Adviser prior to the date hereof. This
Agreement is executed on behalf of the Fund by the Fund's officers in their
capacity as officers and not individually and is not binding upon any of the
Trustees, officers or shareholders of the Fund individually but the obligations
imposed upon the Fund by this Agreement are binding only upon the assets and
property of the Fund, and persons dealing with the Fund must look solely to the
assets of the Fund for the enforcement of any claims.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement will be binding upon and shall inure to the benefit of the parties
hereto and their respective successors.
14. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 12 hereof, which shall be
construed in accordance with the laws of the Commonwealth of Massachusetts) the
laws of the State of Illinois.
15. Amendment, Etc. This Agreement may only be amended, or its provisions
modified or waived, in a writing signed by the party against which such
amendment, modification or waiver is sought to be enforced.
16. Authority. Each party represents to the others that it is duly
authorized and fully empowered to execute, deliver and perform this Agreement.
The Fund represents that engagement of the Sub-Adviser has been duly authorized
by the Fund and is in accordance with the Fund's Declaration of Trust and other
governing documents of the Fund.
17. Severability. Each provision of this Agreement is intended to be
severable from the others so that if any provision or term hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remaining provisions and terms hereof; provided,
however, that the provisions governing payment of the Management Fee described
in Section 5 are not severable.
18. Entire Agreement. This Agreement constitutes the sole and entire
agreement of the parties hereto with respect to the subject matter expressly set
forth herein.
IN WITNESS WHEREOF, the Fund, the Manager and the Sub-Adviser have caused
this Agreement to be executed as of the day and year first above written.
FIRST TRUST ADVISORS L.P. STONEBRIDGE ADVISORS LLC
By___________________________________ By___________________________________
Title:__________________________ Title:___________________________
FIRST TRUST INTERMEDIATE DURATION
PREFERRED & INCOME FUND
By_________________________________
Title:________________________________________
