INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made as of this 27th day of June, 2006 by and among
First Trust Tax-Advantaged 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 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 initial
registration statement on Form N-2 (File No. 333-132639) as
declared effective by the SEC, and as the same may thereafter be
amended from time to time. In the performance of its duties, the
Sub-Adviser will in all material respects (a) satisfy any
applicable fiduciary duties it may have to the Fund, (b) monitor
the Fund's investments, and (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 in writing, 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. The Fund or the Manager
has provided 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 of 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 an equitable manner. Nevertheless,
the Fund and 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 vote all proxies solicited by or with
respect to the issuers of securities which assets of the Fund's
investment portfolio allocated by the Manager to the Sub-Adviser
are invested, consistent with the Sub-Adviser's written Proxy
Policies and Procedures unless otherwise directed by the Manager
or the Fund's Board of Trustees. The Sub-Adviser will maintain
appropriate records in accordance with applicable law detailing
its voting of proxies on behalf of the Fund and upon request will
provide a report setting forth the proposals voted on and how the
Fund's shares were voted, including the name of the corresponding
issuers.
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 of
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.
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
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
fiduciary accounts for which it has investment
responsibilities;
(b) will conform in all material respects to all
applicable rules and regulations of the SEC and 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, in addition,
will 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 or as
otherwise reasonably requested by the Manager and will
prepare and furnish the Manager and 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 of the
Investment Advisers Act of 1940 or other applicable law.
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 0.50% 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 (which
includes 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), 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
and the liquidation preference of any outstanding Preferred
Shares of the Fund). 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 organizational 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 term
"organizational costs" and "offering costs" shall have the
meanings ascribed to them in Sections 8.18-8.25 of the AICPA
Audit and Accounting Guide, Audits for Investment Companies, with
Conforming Changes as of May 1, 2002.
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 sub-investment adviser to one or more other
investment companies that are not a series of the Fund. 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 one-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 such 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.
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. 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 Tax-Advantaged
Preferred Income Fund
First Trust Advisors
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
If by Facsimile: (000) 000-0000
Stonebridge Advisors, LLC
000 Xxxxxxx Xxxx
Xxxxxx, Xxxxxxxxxxx
Attention: Xxxxx Xxxxxxx
If by Facsimile:
______________
11. 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 are 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
and those assets belonging to the subject Fund, for the
enforcement of any claims.
12. 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.
13. Applicable Law. This Agreement shall be construed in
accordance with applicable federal law and (except as to
Section 11 hereof which shall be construed in accordance with the
laws of Massachusetts) the laws of the State of Illinois.
14. 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.
15. 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.
16. 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.
17. 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 /s/ Xxxxx X. Xxxxx By /s/ Xxxxx X. Xxxxxxx
Title: President Title: President
FIRST TRUST TAX-ADVANTAGED PREFERRED INCOME FUND
By /s/ Xxxxx X. Xxxxx
Title: President
