First Trust Strategic High Income Fund
APRIL 2011 - According to the Notice:
Statement of Plaintiff Recovery: Pursuant to the Settlement described herein, settlement funds totaling up to $5,150,000 in cash have been established. $5,000,000 of this amount is allocable to Class Members who purchased shares of the FHI Fund between July 26, 2005 and July 7, 2008, inclusive, shares of the FHY Fund between March 28, 2006 and July 7, 2008, inclusive, and/or shares of the FHO Fund between March 28, 2007 and July 7, 2008, inclusive (the “Class Shares” purchased during the “Class Periods”). The remaining $150,000 will be used to pay certain notice and administration expenses of the Settlement; some portion of the $150,000 may be returned to the Defendants. Plaintiffs estimate that the average recovery per damaged Class Share under the Settlement is 50¢. This per share amount is before deduction of attorneys’ fees and expenses that may be awarded by the Court. Depending on the number of claims submitted, when during the Class Periods a Class Member purchased shares of the FHI Fund, the FHY Fund, and/or the FHO Fund (collectively, the “Funds”), the purchase price paid, and if they were sold, when they were sold and the amount received, an individual Class Member may receive more or less than this average amount. See the Plan of Allocation beginning on page 10 for more information on your Recognized Claim.
Reasons for the Settlement: For Plaintiffs, the principal reason for the Settlement is the benefit to be provided to the Class now. This benefit must be compared to the risk that no recovery might be achieved after a contested trial and likely appeals, possibly years into the future.
SEPTEMBER 2008 - According to a press release by a law firm a shareholder has filed a class action in the United States District Court for the Northern District of Illinois on behalf of all persons or entities who purchased or otherwise acquired the shares of certain mutual funds offered by First Trust Portfolios L.P., including shares of the First Trust Strategic High Income Fund (the “FHI Fund”), First Trust Strategic High Income Fund II (the “FHY Fund”) and First Trust Strategic High Income Fund III (the “FHO Fund”) (collectively referred to as the “Funds”) (NYSE:FHI, NYSE:FHY, NYSE:FHO), between July 26, 2005 and July 7, 2008, inclusive (the “Class Period”), and on behalf of all persons or entities who purchased or otherwise acquired shares of the Funds issued in connection with the Funds’ initial public offerings (“IPOs”).
The complaint charges the Funds and the Funds’ registrants, the Funds’ adviser, First Trust Advisors L.P., the Funds’ sub-advisers, and certain of the Funds’ officers and/or directors with violations of the Securities Exchange Act of 1934 and the Securities Act of 1933.
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding the Funds’ portfolios and financial results. As a result of defendants’ false statements, the Funds’ shares traded at artificially inflated prices during the Class Period. Beginning in August 2007 and continuing through July 2008, the Funds began to acknowledge the serious deterioration in the Funds’ portfolios. As a result of these disclosures, the price of the Funds’ shares collapsed.
According to the complaint, the true facts which were omitted from the Registration Statements/Prospectuses or were known by the defendants but concealed from the investing public during the Class Period were as follows: (a) the Funds lacked effective controls and hedges to minimize the risk of loss from mortgage delinquencies which affected a large part of their portfolios; (b) the Funds lacked effective internal controls to ensure that the Funds would remain in compliance with restrictions and limitations related to their investment portfolios and strategies; (c) the extent of the Funds’ liquidity risk due to the illiquid nature of a large portion of the Funds’ portfolios was omitted; (d) the extent of the Funds’ risk exposure to mortgage-backed assets was misstated; and (e) the extent to which the Funds’ portfolios were subject to fair value procedures was misstated.
Plaintiff seeks to recover damages on behalf of all purchasers of shares of the Funds during the Class Period, including shares issued in the Funds’ IPOs (the “Class”).