UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-21876
FIRST TRUST TAX-ADVANTAGED PREFERRED INCOME FUND
--------------------------------------------------------
(Exact name of registrant as specified in charter)
1001 Warrenville Road, Suite 300
LISLE, IL 60532
--------------------------------------------------------
(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
1001 Warrenville Road, Suite 300
LISLE, IL 60532
--------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area
code: 630-241-4141
Date of fiscal year end: OCTOBER 31
Date of reporting period: JANUARY 31, 2008
Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of
this chapter), to file reports with the Commission, not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use
the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q 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 the
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. SCHEDULE OF INVESTMENTS.
The Schedule(s) of Investments is attached herewith.
FIRST TRUST TAX-ADVANTAGED PREFERRED INCOME FUND
PORTFOLIO OF INVESTMENTS (a)
JANUARY 31, 2008 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------- --------------
PREFERRED SECURITIES - 130.8%
CAPITAL MARKETS - 5.4%
9,600 Bear Stearns Inc., Series G, 5.49% ...................................... $ 382,080
40,000 Goldman Sachs Group Inc., Series B, 6.20% ............................... 988,000
15,700 Merrill Lynch & Company, Series H, 5.70% (b) ............................ 288,409
39,400 Morgan Stanley, Series A, 4.96% (b) ..................................... 880,196
--------------
2,538,685
--------------
COMMERCIAL BANKS - 44.9%
6,000 Heartland Financial, 8.26% (c) (e) ...................................... 6,025,896
42,000 HSBC Holdings PLC, Series A, 6.20% ...................................... 1,003,800
6,000 Irwin Financial Corporation, Series A, 8.61% (b) (c) (e) (f) ............ 5,114,496
40,000 National City Corp., 9.88% .............................................. 1,046,000
20,000 Royal Bank of Scotland PLC, Series Q, 6.75% ............................. 496,000
29,000 Royal Bank of Scotland PLC, Series R, 6.13% ............................. 682,080
60,000 Santander Finance Preferred SA Unipersonal, 6.80% ....................... 1,401,000
5,000 Santander Finance Preferred SA Unipersonal, Series 6, 5.66% (b) ......... 93,000
19,900 SunTrust Banks, 5.52% (b) ............................................... 419,094
101,400 U.S. Bancorp, Series B, 4.86% (b) ....................................... 2,228,772
51,000 Wachovia Corp., 8.00% ................................................... 1,344,870
62,000 Zions Bancorporation, Series A, 5.51% (b) ............................... 1,354,700
--------------
21,209,708
--------------
CONSUMER FINANCE - 1.3%
10,000 SLM Corp., Series B, 5.69% (b) .......................................... 608,000
--------------
DIVERSIFIED FINANCIAL SERVICES - 7.5%
750 Bank of America Corp., 8.00% ............................................ 780,402
19,800 Bank of America Corp., Series D, 6.20% .................................. 466,092
40,000 Citigroup Inc., Series AA, 8.13% ........................................ 1,048,800
38,500 ING Groep NV, 6.13% ..................................................... 908,215
12,900 ING Groep NV, 7.38% ..................................................... 330,756
--------------
3,534,265
--------------
ELECTRIC UTILITIES - 10.7%
40,000 Alabama Power Company, 5.63% ............................................ 971,252
49,400 Alabama Power Company, 6.45% ............................................ 1,197,950
80,000 PPL Electric Utilities Corp., 6.25% ..................................... 1,930,000
10,000 Southern California Edison Company, 6.13% ............................... 980,313
--------------
5,079,515
--------------
INSURANCE - 28.2%
10,000 Ace Ltd., Series C, 7.80% ............................................... 250,200
10,000 Aegon NV, 6.88% ......................................................... 246,600
94,000 Aspen Insurance Holdings Ltd., 7.40% (b) ................................ 2,138,500
96,300 Axis Capital Holdings Ltd., Series A, 7.25% ............................. 2,388,240
60,000 Endurance Specialty Holdings Ltd., Series A, 7.75% ...................... 1,484,400
40,000 PartnerRe Ltd., Series C, 6.75% ......................................... 978,000
10,000 PartnerRe Ltd., Series D, 6.50% ......................................... 242,500
40,400 Prudential PLC, 6.50% ................................................... 987,780
See Notes to Quarterly Portfolio of Investments Page 1
FIRST TRUST TAX-ADVANTAGED PREFERRED INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JANUARY, 31, 2008 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------------- --------------
PREFERRED SECURITIES - (CONTINUED)
INSURANCE - (CONTINUED)
20,000 RenaissanceRe Holdings Ltd., Series B, 7.30% ............................ $ 480,200
80,000 RenaissanceRe Holdings Ltd., Series D, 6.60% ............................ 1,809,600
2,500 Zurich RegCaps Funding Trust VI, 5.58% (b) (c) .......................... 2,329,688
--------------
13,335,708
--------------
OIL, GAS & CONSUMABLE FUELS - 12.0%
120,000 Double Eagle Petroleum Corp., Series A, 9.25% ........................... 3,046,800
100,000 GMX Resources Inc., Series B, 9.25% ..................................... 2,645,000
--------------
5,691,800
--------------
THRIFTS & MORTGAGE FINANCE - 15.6%
16,700 Countrywide Capital V, 7.00% ............................................ 285,236
20,000 Fannie Mae, 8.25% ....................................................... 528,400
20,000 Fannie Mae, Series O, 7.00% (b) ......................................... 996,250
77,200 Franklin Bank Corp., Series A, 7.50% .................................... 1,316,260
5,800 FreddieMac, Series W, 5.66% ............................................. 125,802
200,000 IndyMac Bank FSB, 8.50% (c) ............................................. 1,612,500
36,600 Sovereign Bancorp, Inc., Series C, 7.30% ................................ 878,034
97,200 Washington Mutual, Inc., 5.69% (b) ...................................... 1,646,568
--------------
7,389,050
--------------
TRADING COMPANIES & DISTRIBUTORS - 5.2%
250,400 Willis Lease Finance Corp., Series A, 9.00% ............................. 2,478,960
--------------
TOTAL PREFERRED SECURITIES .............................................. 61,865,691
(Cost $69,407,745) --------------
CANADIAN INCOME TRUSTS - 13.8%
110,000 Atlantic Power Corp., IPS ............................................... 1,162,392
21,800 BFI Canada Income Fund .................................................. 522,827
60,000 Crescent Point Energy Trust ............................................. 1,464,071
60,900 Energy Savings Income Fund .............................................. 918,913
17,500 Newalta Income Fund ..................................................... 279,045
115,000 Teranet Income Fund ..................................................... 1,085,802
90,000 Yellow Pages Income Fund ................................................ 1,076,540
--------------
TOTAL CANADIAN INCOME TRUSTS ............................................ 6,509,590
(Cost $6,055,814) --------------
TOTAL INVESTMENTS - 144.6% .............................................. 68,375,281
(Cost $75,463,559) (d) --------------
NET OTHER ASSETS AND LIABILITIES - 1.9% ................................. 922,326
AUCTION PREFERRED SHARES, AT LIQUIDATION VALUE - (46.5)% ................ (22,000,000)
--------------
NET ASSETS (APPLICABLE TO COMMON SHAREHOLDERS) - 100.0% ................. $ 47,297,607
==============
Page 2 See Notes to Quarterly Portfolio of Investments
FIRST TRUST TAX-ADVANTAGED PREFERRED INCOME FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JANUARY 31, 2008 (UNAUDITED)
----------
(a) All percentages shown in the Portfolio of Investments are based on
net assets.
(b) Variable rate security. The interest rate shown reflects the rate in
effect at January 31, 2008.
(c) This security is restricted and cannot be offered for public sale
without first being registered under the Securities Act of 1933, as
amended. Prior to registration, restricted securities may only be
resold in transactions exempt from registration, normally to
qualified institutional buyers. At January 31, 2008, the value of
securities noted as such amounted to $15,082,580, or 31.9% of net
assets (See Note 1E).
(d) Aggregate cost for federal income tax and financial reporting
purposes.
(e) Security is fair valued in accordance with procedures adopted by the
Fund's Board of Trustees.
(f) This security suspended its dividend resulting in a significant
decline in the Fund's NAV (See Note 3).
IPS Income Participating Securities
SCHEDULE OF FOREIGN CURRENCY FUTURES CONTRACTS:
NUMBER OF UNREALIZED
CONTRACTS DESCRIPTION VALUE APPRECIATION
----------- ------------------------------------- ----------- -------------
FUTURES CONTRACTS - SHORT POSITION
33 Canadian Dollar March 2008 ........ $ 3,283,830 $ 990
----------- -------------
$ 3,283,830 $ 990
=========== =============
See Notes to Quarterly Portfolio of Investments Page 3
--------------------------------------------------------------------------------
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS
--------------------------------------------------------------------------------
FIRST TRUST TAX-ADVANTAGED PREFERRED INCOME FUND
JANUARY 31, 2008 (UNAUDITED)
1. VALUATION AND INVESTMENT PRACTICES
A. PORTFOLIO VALUATION:
The net asset value ("NAV") of the Common Shares of First Trust Tax-Advantaged
Preferred Income Fund (the "Fund") is determined daily as of the close of
regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m.
Eastern time, on each day the NYSE is open for trading. Domestic debt securities
and foreign securities are priced using data reflecting the earlier closing of
the principal markets for those securities. The NAV per Common Share is
calculated by subtracting the Fund's liabilities (including accrued expenses,
dividends payable and any borrowings of the Fund) and the liquidation value of
any outstanding Preferred Shares from the Fund's Total Assets (the value of the
securities and other investments the Fund holds plus cash or other assets,
including interest accrued but not yet received) and dividing the result by the
total number of Common 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 according
to procedures adopted by the Fund's Board of Trustees. A majority of the Fund's
assets are valued using market information supplied by third parties. In the
event that market quotations are not readily available, the pricing service does
not provide a valuation for a particular asset, or the valuations are deemed
unreliable, or if events occurring after the close of the principal markets for
particular securities (e.g., domestic debt and foreign securities), but before
the Fund values its assets, would materially affect NAV, First Trust Advisors
L.P. may use a fair value method to value the Fund's securities and investments.
The use of fair value pricing by the Fund is governed by valuation procedures
adopted by the Fund's Board of Trustees, and in accordance with the provisions
of the Investment Company Act of 1940, as amended. Short-term investments that
mature in less than 60 days are valued at amortized cost.
B. SECURITIES TRANSACTIONS:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on an identified cost basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income on such securities
is not accrued until settlement date. The Fund maintains liquid assets with a
current value at least equal to the amount of its when-issued or
delayed-delivery purchase commitments. At January 31, 2008, the Fund had no
when-issued or delayed-delivery purchase commitments.
C. FUTURES CONTRACTS:
Upon entering into a futures contract, the Fund is required to deposit with the
broker an amount of cash or cash equivalents equal to a certain percentage of
the contract amount (known as an initial margin deposit). Subsequent payments
(known as variation margin) are made or received by the Fund each day, depending
on the daily fluctuation of the value of the contract. The daily changes in
contract value are recorded as unrealized gains or losses, and the Fund
recognizes a realized gain or loss when the contract is closed. Should market
conditions change unexpectedly, the Fund may not achieve the anticipated
benefits of the futures contracts and may realize a loss. The use of futures
transactions involves the risk of imperfect correlation in movements in the
price of futures contracts, interest rates and the underlying hedged assets.
D. FOREIGN CURRENCY:
The books and records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investment securities are translated on the respective
dates of such transactions. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security, foreign currency transactions and
interest and dividends received.
E. RESTRICTED SECURITIES:
The Fund invests in restricted securities, which are securities that cannot be
offered for public sale without first being registered under the Securities Act
of 1933, as amended. Prior to registration, restricted securities may only be
resold in transactions exempt from registration. As of January 31, 2008, the
Fund held restricted securities as shown in the following table. 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 footnote (Note 1A) and are not expressed as a discount to
the carrying value of a comparable unrestricted security.
Page 4
--------------------------------------------------------------------------------
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST TAX-ADVANTAGED PREFERRED INCOME FUND
JANUARY 31, 2008 (UNAUDITED)
CARRYING
ACQUISITION VALUE MARKET % OF
SECURITY DATE SHARES PER UNIT CARRYING COST VALUE NET ASSETS
----------------------------- ----------- -------- ---------- ------------- ------------ ----------
Heartland Financial, 8.26% 12/21/06 6,000 $ 1,004.32 $ 6,000,000 $ 6,025,896 12.74%
IndyMac Bank FSB, 8.50% 05/22/07 200,000 8.06 5,000,000 1,612,500 3.41
Irwin Financial Corporation,
Series A, 8.61% 12/22/06 6,000 852.42 5,940,000 5,114,496 10.81
Zurich RegCaps Funding
Trust IV, 5.58% 02/06/07 2,500 931.88 2,575,000 2,329,688 4.93
-------- ------------- ------------ ----------
214,500 $ 19,515,000 $ 15,082,580 31.89%
======== ============= ============ ==========
2. UNREALIZED APPRECIATION (DEPRECIATION)
As of January 31, 2008, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $1,706,534
and the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $8,794,812.
3. SUBSEQUENT EVENT
Irwin Financial Corporation ("Irwin") announced on March 3, 2008 that it is
suspending all dividends on its preferred and trust preferred securities. Such
action caused a significant decline in the price of the Irwin Series A Floating
Rate Non-Cumulative Perpetual Preferred Shares held by the Fund resulting in a
significant decline in the Fund's NAV. Additionally, on March 10, 2008, the
Fund's quarterly distribution was decreased from $0.375 to $0.300 per share,
principally as a result of Irwin's decision to suspend its dividends.
Page 5
ITEM 2. 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 last fiscal
quarter that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 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 TAX-ADVANTAGED PREFERRED INCOME FUND
By (Signature and Title)* /S/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date March 20, 2008
----------------------------------------------------------------------------
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 A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date March 20, 2008
----------------------------------------------------------------------------
By (Signature and Title)* /S/ MARK R. BRADLEY
-------------------------------------------------------
Mark R. Bradley, Treasurer, Controller,
Chief Financial Officer and Chief Accounting Officer
(principal financial officer)
Date March 20, 2008
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.