NP 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- approval granted for indirect change of control of mutual fund manager under s. 5.5(2) of NI 81-012 and approval for abridgement of the related 60 day notice requirement to 7 days under s. 5.8(1)(a) of NI 81-102 -- abridgement requested as a result of the manager being given late notice by its' ultimate parent of the proposed indirect change of control -- minimal impact on the Filer and Funds -- approval conditional on at least 7 days notice to securityholders and no changes being made to the management and administration of the Funds for at least 60 days after notice delivered.
Applicable Legislative Provisions
NI 81-102, ss. 5.5(2), 5.8(1)(a), 19.1.
October 1, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
FIRST DEFINED PORTFOLIO MANAGEMENT CO.
("FDPM" OR THE "MANAGER")
THE FUNDS LISTED IN SCHEDULE A
The principal regulator in the Jurisdiction has received an application from First Defined Portfolio Management Co. (the "Manager") for a decision under the securities legislation of the Jurisdiction (the "Legislation") for
(a) approval pursuant to subsection 5.5(2) of National Instrument 81-102 -- Mutual Funds ("NI 81-102") of a change of control of the Manager (the "Change of Control"); and
(b) an abridgement of the 60-day securityholder notice requirement in subsection 5.8(1)(a) of NI 81-102 to 7 days (the "Notice Requirement").
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application; and
(b) the Manager has provided notice that section 4.7(1) of Multilateral Instrument 11-102 -- Passport System ("MI 11-102") is intended to be relied upon in each province and territory of Canada other than Ontario.
Defined terms contained in National Instrument 14-101 -- Definitions and MI 11-102 have the same meaning in this decision unless they are otherwise defined in this decision.
The decision is based on the following facts represented by the Manager:
1. The Manager is a corporation incorporated under the Companies Act (Nova Scotia) and has its head office in Toronto, Ontario.
2. The Manager is the investment fund manager of the Funds.
3. The Manager is registered in Ontario as a mutual fund dealer and has applied to be registered as an investment fund manager in accordance with National Instrument 31-103 -- Registration Requirements and Exemptions.
4. The Funds are reporting issuers in all of the provinces and territories of Canada and distribute their securities pursuant to a simplified prospectus pursuant to applicable securities legislation.
5. First Trust Advisors, L.P. ("First Trust Advisors"), an affiliate of the Manager, is the investment advisor of the Funds.
6. Neither the Manager nor any of the Funds is in default of applicable securities legislation in any province or territory of Canada.
7. The indirect parent of the Manager is considering a transaction (the "Transaction") whereby the ultimate beneficial shareholder of the Manager, the Robert Donald Van Kampen family, will sell its holdings to Mr. James Bowen, an executive officer of First Trust Advisors. The Transaction is effectively a management buy-out. Mr. Bowen currently is the Senior Vice President of an indirect parent of the Manager, The Charger Corporation, and was vested by the Vendor with significant independent authority to operate First Trust Advisors and the Manager in the past. Following the Transaction, while Mr. Bowen would become the new ultimate (indirect) parent of the Manager, there would be no change in the immediate legal parent of the Manager. The only change to the organization after the completion of the Transaction would be the ultimate shareholder.
8. The Transaction is expected to close on or about October 7, 2010 or such later date upon which all conditions precedent have been satisfied, but no later than October 15, 2010.
9. The stock purchase agreement regarding the Change of Control was entered into on August 24, 2010, in response to a sudden willingness of the Robert Donald Van Kampen family and Mr. James Bowen (collectively, the "Parties"), and resulting opportunity for the Parties, to enter into the Transaction. Each of the Parties is located in the U.S. In the U.S., this type of transaction is not subject to regulatory approval, but rather approval of the shareholders can be sought post-closing. Under the circumstances, the Parties to the Transaction did not have an opportunity to consult with the Manager regarding the Transaction or the proposed closing date given the timing of events that preceded the Parties' agreement. As a result, the Manager was not able to submit the application requesting the approval of the Change of Control sufficiently in advance of the proposed closing date of the Transaction. The Manager filed the application in respect of the Change of Control as soon as possible after receiving the necessary information regarding the proposed Transaction.
10. In respect of the impact of the Change of Control on the management and administration of the Funds:
(a) the Change of Control is not expected to have any material impact on the Funds or on the securityholders of the Funds as there are no current plans to change, as a result of the Change of Control, the current directors and officers of the Manager or the portfolio advisor of the Funds and the Manager represents that no changes to the management and administration of the Funds will be initiated by it for at least 60 days following September 30, 2010;
(b) although the current members of the Funds' independent review committee (the "IRC") will automatically cease to be members of the IRC by operation of section 3.10(1)(c) of National Instrument 81-107 -- Independent Review Committee for Investment Funds upon the closing of the Change of Control, the Manager intends to reappoint them immediately after the closing of the Transaction;
(c) the investment objectives and strategies of the Funds and the management fees and operating expenses of the Funds will not change as a result of the Transaction; and
(d) the proposed Transaction is not expected to impact the financial stability of the Manager.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that
(a) the Change of Control is approved pursuant to subsection 5.5(2) of NI 81-102; and
(b) the period prescribed by paragraph 5.8(1)(a) of the Legislation is abridged to 7 days provided that the Filer does not initiate any changes to the Funds for at least 60 days following the date of the notice.