0001445546-11-002454.txt : 20120501
0001445546-11-002454.hdr.sgml : 20120501
20110628101300
ACCESSION NUMBER: 0001445546-11-002454
CONFORMED SUBMISSION TYPE: CORRESP
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20110628
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FIRST TRUST STRATEGIC HIGH INCOME FUND II
CENTRAL INDEX KEY: 0001329388
IRS NUMBER: 000000000
STATE OF INCORPORATION: MA
FILING VALUES:
FORM TYPE: CORRESP
BUSINESS ADDRESS:
STREET 1: 120 EAST LIBERTY DRIVE, SUITE 400
CITY: WHEATON
STATE: IL
ZIP: 60187
BUSINESS PHONE: 630-765-8000
MAIL ADDRESS:
STREET 1: 120 EAST LIBERTY DRIVE, SUITE 400
CITY: WHEATON
STATE: IL
ZIP: 60187
FORMER COMPANY:
FORMER CONFORMED NAME: First Trust Dow Select MicroCap Index Fund
DATE OF NAME CHANGE: 20050607
CORRESP
1
filename1.txt
CHAPMAN AND CUTLER LLP 111 WEST MONROE STREET
CHICAGO, ILLINOIS 60603
June 28, 2011
Houghton R. Hallock Jr., Esq.
Division of Investment Management
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: First Trust Strategic High Income Fund II (the "Acquiring Fund" or "FHY")
(File No. 333-174259)
Dear Mr. Hallock:
On June 9, 2011, we received your comments to the Registration Statement
on Form N-14 filed by the above captioned fund (the "Registration Statement")
relating to each respective Agreement and Plan of Reorganization, pursuant to
which First Trust Strategic High Income Fund ("FHI") and First Trust Strategic
High Income Fund III ("FHO," together with FHI, the "Acquired Funds" and
collectively with FHI and FHY, the "Funds") would transfer all of their
respective assets to the Acquiring Fund in exchange solely for common shares of
beneficial interest of the Acquiring Fund and the Acquiring Fund's assumption of
all the liabilities of the Acquired Fund (each, a "Reorganization" and together,
the "Reorganizations"). This letter serves to respond to your comments on behalf
of the Funds. For your convenience, we have structured the Funds' responses to
address each of your comments in the order in which they were presented in your
review.
1. PLEASE CONFIRM AS TO WHETHER EACH OF THE FUNDS PROVIDES THE DISCLOSURES
REQUIRED BY SECTION 19 AND RULE 19A-1 OF THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (THE "INVESTMENT COMPANY ACT") RELATING TO
THE PAYMENT OF DISTRIBUTIONS OTHER THAN FROM NET INCOME OF THE APPLICABLE
FUND.
Response: Each Fund posts on its website and delivers to the transfer
agent on behalf of the shareholders a monthly "Rule 19a-1 Notice," which
discloses certain information about the sources of the Fund's distributions.
Such notice provides a table that sets forth the estimated amounts of the
current distributions and the cumulative distributions paid in the applicable
fiscal year to date for each Fund from the following sources: net investment
income, net realized short-term capital gains, net realized long-term capital
gains and return of capital. These estimates are calculated in accordance with
generally accepted accounting principles ("GAAP") and are expressed on a per
share basis.
2. IN CONNECTION WITH THE CLASS ACTION COMPLAINT DESCRIBED BEGINNING ON
PAGE 4 OF THE PROXY STATEMENT/PROSPECTUS, GOSSELIN VS. FIRST TRUST ADVISORS L.P.
ET AL. (FILED APRIL 30, 2009), THAT NAMES FIRST TRUST ADVISORS L.P., FIRST TRUST
Houghton R. Hallock Jr., Esq.
June 28, 2011
Page 2 of 5
PORTFOLIOS L.P. AND EACH OF THE FUNDS AS DEFENDANTS (HEREINAFTER, THE "GOSSELIN
LITIGATION"), PLEASE CONFIRM THE ANTICIPATED TIMING OF THE FINAL SETTLEMENT AND
PROVIDE ADDITIONAL DISCLOSURE RELATING TO THE EFFECT OF THIS TIMING ON THE
CLOSING OF THE PROPOSED REORGANIZATIONS.
Response: In the Registration Statement under "Summary - Comparison of the
Acquiring Fund and the Acquired Funds - Litigation," the Funds disclose that the
Settlement Fairness Hearing relating to the Gosselin Litigation is scheduled for
July 28, 2011 to hear any objections to the proposed settlement and consider
whether final approval should be granted. The Funds will provide supplemental
disclosure in this section stating that, while there can be no guarantee about
the timing of the grant of final court approval, the Funds expect the court to
grant final approval at the July 28, 2011 hearing or shortly thereafter with
final judgment terminating the litigation becoming effective 30 days later, when
the time for any objecting shareholder to appeal the grant of approval expires.
The Funds will additionally provide in this section and in the Registration
Statement under "Proposal 1 - The Reorganizations (Acquired Fund
Shareholders Only) - Terms of the Reorganization - Conditions" the following
disclosure relating to the effect of the Gosselin Litigation on the timing of
the closing of the proposed Reorganizations:
"If significant objections to the settlement are received
prior to the Settlement Fairness Hearing, thus affecting the final
approval of the Settlement, or if an objecting shareholder appeals
the grant of approval, thereby delaying termination of the
litigation, the Funds might be unable to comply with certain
covenants or representations and warranties in the Reorganization
Agreement as conditions to completing the Reorganizations. See "Risk
Factors - Risks Relating to the Reorganizations"".
3. PLEASE UPDATE THE REGISTRATION STATEMENT ON PAGE 5 TO CONFIRM THE
ALLOCATION OF THE ESTIMATED $500,000 INSURANCE DEDUCTIBLE EXPENSES TO EACH OF
THE FUNDS IN CONNECTION WITH THE GOSSELIN LITIGATION.
Response: Pursuant to your request, we have updated the Registration
Statement on page 5 to clarify that the estimated $500,000 insurance deductible
payment has been allocated $200,000 to First Trust Advisors L.P., $75,000 to
First Trust Portfolios L.P., and $225,000 among the Acquiring Fund and Acquired
Funds on a pro rata basis, based upon the net asset value of each Fund.
4. IN ACCORDANCE WITH THE SECURITIES AND EXCHANGE COMMISSION'S NO-ACTION
LETTER, NORTH AMERICAN SECURITY TRUST (PUBLICLY AVAILABLE AUGUST 5, 1994),
PLEASE FURTHER DISCLOSE THE FACTORS THAT EACH OF THE FUNDS UTILIZED IN
DETERMINING THE ACCOUNTING SURVIVOR OF EACH OF THE REORGANIZATIONS.
Houghton R. Hallock Jr., Esq.
June 28, 2011
Page 3 of 5
Response: As set forth in Note 2 to the Pro Forma Financial Statements of
the Registration Statement contained in Appendix A to the Statement of
Additional Information, the Acquiring Fund will be the accounting survivor
following each Reorganization. Pursuant to your request, the Funds will provide
additional disclosure in the Registration Statement under the captions "Summary
- Comparison of the Acquiring Fund and the Acquiring Funds" and "Proposal 1
- The Reorganizations (Acquired Fund Shareholders Only)," which specifies that
the Acquiring Fund will be the accounting survivor of each of the
Reorganizations and, as such, the performance history set forth in future
financial statements of the combined fund will be that of the Acquiring Fund.
The Funds will additionally disclose, in accordance with the Securities and
Exchange Commission's North American Security Trust no-action letter, the
factors that each of the Funds utilized in determining the accounting survivor
of the Reorganizations under the caption "Proposal 1 - The Reorganizations
(Acquired Fund Shareholders Only)," as follows:
"In designating the Acquiring Fund as the accounting survivor
for each of the Reorganizations, the Funds compared the following
attributes of each Fund: the Funds' investment advisor and
sub-advisor, investment objectives, strategies and restrictions,
expense structures and expense ratios, asset size and portfolio
composition. Because each of the Funds has an identical investment
advisor and sub-advisor, identical investment objectives and
substantially similar investment strategies and restrictions,
expense structures and portfolio compositions, the Funds determined
that the Acquiring Fund should be designated as the accounting
survivor primarily due to the fact that it has the highest net
assets and lowest expense ratio as of the date the Board of Trustees
of each Fund approved the applicable Reorganization. In addition,
the pro forma expense ratio of the combined fund is anticipated to
most closely resemble that of the Acquiring Fund. See Additional
Information About the Funds - Financial Highlights" for each of the
Funds."
5. PLEASE DESCRIBE WHETHER THE ANTICIPATED 1-FOR-3 REVERSE SHARE SPLIT OF
THE ACQUIRING FUND IS EXPECTED TO OCCUR IF ONLY ONE OF THE TWO PROPOSED
REORGANIZATIONS IS CONSUMMATED. IF POSSIBLE, PLEASE ALSO PROVIDE ADDITIONAL
DISCLOSURE OF THE ACQUIRING FUND'S BOARD OF TRUSTEES CONSIDERATIONS RELATING TO
THE APPROVAL OF THE 1-FOR-3 REVERSE SHARE SPLIT.
Response: Pursuant to your request, we will clarify in the Registration
Statement on page (iii) of the "Questions and Answers" section that the
Acquiring Fund expects to complete the 1-for-3 reverse share split even if only
one of the two proposed Reorganizations is consummated. We will provide
additional disclosure in this section relating to the Acquiring Fund's Board of
Trustees considerations relating to approval of the 1-for-3 reverse share split,
as follows:
Houghton R. Hallock Jr., Esq.
June 28, 2011
Page 4 of 5
"The net effect of the Acquiring Fund's reverse share split
will be to decrease the number of Acquiring Fund outstanding common
shares and increase the net asset value per common share by a
proportionate amount. Although no assurances can be given, based
upon information provided by the Acquiring Fund's investment
advisor, the Acquiring Fund's Board believes that a reverse share
split may have the effect of increasing the Fund's market price per
common share and trading volume."
6. THE PROXY STATEMENT/PROSPECTUS STATES ON PAGE (IV) OF THE "QUESTIONS
AND ANSWERS" SECTION THAT THE EXPENSES ASSOCIATED WITH THE REORGANIZATIONS WILL
BE ALLOCATED AMONG THE FUNDS AND PAID OUT OF THE FUNDS' NET ASSETS. PLEASE
PROVIDE ADDITIONAL DISCLOSURE IN THIS SECTION DESCRIBING HOW THESE EXPENSES ARE
EXPECTED TO BE ALLOCATED AND THE ANTICIPATED AMOUNT OF TIME FOR THE FUNDS' TO
RECOUP THESE EXPENSES BY THE WAY OF SAVINGS ANTICIPATED IN THE REORGANIZATIONS.
Response: Pursuant to your request, we will provide additional information
in this section relating to Reorganization expenses, as follows:
"These expenses, estimated to be approximately $446,500, are
to be allocated among the Acquiring Fund and Acquired Funds on a pro
rata basis, based upon the net asset value of each Fund prior to the
Closing Date. Management of the Funds expects that reduced operating
expenses resulting from the Reorganizations should allow the
recovery of the projected costs of the Reorganizations within
approximately eight months after the Closing Date with respect to
the Acquiring Fund and each Acquired Fund, assuming each of the
Reorganizations are consummated. See "Proposal 1 - The
Reorganizations (Acquired Fund Shareholders Only) - Expenses
Associated with the Reorganizations."
7. IN THE COMPARATIVE FEE TABLE OF THE REGISTRATION STATEMENT BEGINNING ON
PAGE 7, PLEASE PROVIDE THE FULL NAME OF THE APPLICABLE FUND IN EACH OF THE
COLUMNS. PLEASE ADDITIONALLY PROVIDE IN THE "EXAMPLE" DISCLOSURE THE ANTICIPATED
EXPENSES OF THE APPLICABLE FUNDS FOR THE ONE, THREE, FIVE AND TEN YEAR PERIODS
ASSUMING ONLY (I) THE REORGANIZATION OF FHI WITH AND INTO FHY AND (II) THE
REORGANIZATION OF FHO WITH AND INTO FHY.
Response: Pursuant to your request, we have provided the full name of each
applicable Fund in the comparative fee table of the Registration Statement. We
have additionally provided in the "Example" disclosure of the anticipated
expenses of the applicable Funds for the one, three, five and ten year periods
assuming only (i) the Reorganization of FHI with and into FHY and (ii) the
Reorganization of FHO with and into FHY.
Houghton R. Hallock Jr., Esq.
June 28, 2011
Page 5 of 5
8. IN THE PRO FORMA FINANCIAL STATEMENTS FOR THE REORGANIZATIONS BEGINNING
ON APPENDIX A, PLEASE INDICATE WHICH OF THE SECURITY HOLDINGS, IF ANY, ARE
ANTICIPATED TO BE LIQUIDATED AS A RESULT OF THE APPLICABLE REORGANIZATION.
Response: As set forth in the "Summary" section of the Registration
Statement under the caption "Comparison of the Acquiring Fund and the Acquired
Funds," because each of the Funds has the same investment objective and
substantially similar investment strategies, the Sub-Advisor does not expect to
dispose of a material amount of portfolio securities of any of the Funds in
connection with the Reorganizations. Each of the Funds confirms that none of the
security holdings listed in the pro forma financial statements beginning on
Appendix A are required to be liquidated as a result of the Reorganization in
connection with any of the investment policies or restrictions of the Acquiring
Fund.
The Fund hereby acknowledges that:
o should the Securities and Exchange Commission or the staff, acting
pursuant to delegated authority, declare the filing effective, it
does not foreclose the Securities and Exchange Commission from
taking any action with respect to the filing;
o the action of the Securities and Exchange Commission or the staff,
acting pursuant to delegated authority, in declaring the filing
effective, does not relieve the Fund from its full responsibility
for the adequacy and accuracy of the disclosure in the filings; and
o the Fund may not assert this action as defense in any proceeding
initiated by the Securities and Exchange Commission or any person
under the federal securities laws of the United States.
We appreciate your prompt attention to this Registration Statement. If you
have any questions or comments or would like to discuss our responses to your
questions please feel free to contact Eric F. Fess at (312) 845-3781 or the
undersigned at (312) 845-3273.
Very truly yours,
CHAPMAN AND CUTLER LLP
By /s/ Walter L. Draney
------------------------------
Walter L. Draney