FT Portfolios Canada Co. et al.

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- approval of mutual fund merger -- approval required because merger does not meet the criteria for pre-approved reorganizations and transfer in National Instrument 81-102 -- terminating fund and continuing fund do not have substantially similar fee structure -- merger is not a "qualifying exchange" or a tax-deferred transaction under the Income Tax Act -- securityholders provided with timely and adequate disclosure regarding the merger.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, ss. 5.5(1)(b), 5.5(3), 5.6, 5.7(1)(b), 19.1.

February 19, 2013

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

FT PORTFOLIOS CANADA CO.

(the Filer)

AND

IN THE MATTER OF

FIRST TRUST CANADIAN CAPITAL STRENGTH PORTFOLIO

(the Continuing Fund)

AND

FIRST TRUST CANADIAN QUANTITATIVE EQUITY PORTFOLIO

(FORMERLY TD CANADIAN QUANTITATIVE RESEARCH PORTFOLIO)

(the Terminating Fund)

DECISION

Background

The principal regulator in Ontario has received an application from the Filer on behalf of the Terminating Fund and the Continuing Fund (each individually referred to herein as a Fund and together the Funds) for a decision under the securities legislation of Ontario granting approval, pursuant to section 5.5(1)(b) of National Instrument 81-102 Mutual Funds (NI 81-102) of the proposed merger (the Merger) of the Terminating Fund into the Continuing Fund (the Approval Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

1. the Ontario Securities Commission (the OSC) is the principal regulator for this application; and,

2. the Filer 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 British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Northwest Territories, Yukon Territory and Nunavut (together, with Ontario, the Jurisdictions).

Interpretation

Terms defined in NI 81-102, National Instrument 14-101 Definitions or MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

The Filer and Fund Information

1. The Filer is an unlimited liability corporation governed by the laws of Nova Scotia. The Filer is registered under the Securities Act (Ontario) as an investment fund manager and mutual fund dealer. The Filer is the manager of the Terminating Fund and the Continuing Fund.

2. The head office of the Filer is located at 330 Bay Street, Suite 1300, Toronto, Ontario M5H 2S8.

3. The Terminating Fund was launched on January 13, 2006 and is a mutual fund trust governed by a trust agreement.

4. The Continuing Fund was launched on November 30, 2001 and is a mutual fund trust governed by a trust agreement.

5. The Terminating Fund and the Continuing Fund are reporting issuers (or the equivalent) under the securities legislation (the Legislation) of each Jurisdiction.

6. Neither the Filer nor the Funds are in default of any of the requirements of the Legislation.

7. The Terminating Fund currently distributes its securities in all the Jurisdictions pursuant to a simplified prospectus, annual information form and fund facts each dated January 27, 2012 (the Terminating Fund Documents). The Terminating Fund Documents will lapse on January 27, 2013 (the Lapse Date). The Filer does not anticipate filing a renewal prospectus on behalf of the Terminating Fund in accordance with the Legislation and therefore, purchases of, and switches to, units of the Terminating Fund will cease and no longer be permitted as of the Lapse Date.

8. The Continuing Fund currently distributes its securities in all of the Jurisdictions pursuant to a simplified prospectus, annual information form and fund facts each dated September 28, 2012 (the Continuing Fund Documents).

Details of the Merger

9. The proposed Merger was announced in:

(a) a press release dated December 5, 2012;

(b) a material change report relating to the Terminating Fund dated December 14, 2012; and

(c) amendments to the Terminating Fund Documents dated December 14, 2012,

each of which has been filed on SEDAR.

10. The specific steps to implement the Merger are described below. The result of the Merger will be that investors in the Terminating Fund will cease to be unitholders in the Terminating Fund and will become unitholders in the Continuing Fund.

11. The proposed Merger will be structured as follows:

(a) The value of the Terminating Fund's portfolio and other assets will be determined at the close of business on the effective date of the Merger, which, if approved, is expected to be on or about February 21, 2013 (the Effective Date).

(b) The Continuing Fund will acquire the investment portfolio and other assets of the Terminating Fund in exchange for units of the Continuing Fund.

(c) The Continuing Fund will not assume liabilities of the Terminating Fund and the Terminating Fund will retain sufficient assets to satisfy its estimated liabilities, if any, as of the Effective Date.

(d) The Terminating Fund will distribute a sufficient amount of its net income and net realized capital gains, if any, to unitholders to ensure that it will not be subject to tax for its current tax year.

(e) The units of the Continuing Fund received by the Terminating Fund will have an aggregate net asset value equal to the value of the portfolio assets and other assets that the Continuing Fund is acquiring from the Terminating Fund, and the units of the Continuing Fund will be issued at the applicable series net asset value per unit as of the close of business on the Effective Date.

(f) Immediately thereafter, units of the Continuing Fund received by the Terminating Fund will be distributed to unitholders of the Terminating Fund in exchange for their units in the Terminating Fund on a dollar-for-dollar and series by series basis.

(g) As soon as reasonably possible following the Merger the Terminating Fund will be wound up.

12. If the Merger is approved, unitholders of the Terminating Fund will receive units of an equivalent series of the Continuing Fund, as shown opposite in the table below:

Terminating Fund	Continuing Fund
Series A units	Series A units
Series F units	Series F units

13. In the opinion of the Filer, the Merger will be beneficial to unitholders of the Funds for the following reasons:

(a) The Merger will reduce the duplication of administrative and regulatory costs involved in operating the Terminating Fund and the Continuing Fund as separate mutual funds.

(b) There is significant overlap between portfolio holdings of the Funds and the Merger would therefore eliminate a degree of redundancy and result in a more streamlined and simplified product line-up that is easier for investors to understand.

(c) The Continuing Fund will have a greater level of assets which is expected to allow for increased portfolio diversification opportunities and greater liquidity of investments.

(d) Unitholders of the Terminating Fund and the Continuing Fund may enjoy increased economies of scale for operating expenses as part of a larger combined Continuing Fund.

(e) The Continuing Fund, as a result of its greater size, may benefit from its larger profile in the marketplace.

14. As required by National Instrument 81-107 -- Independent Review Committee for Investment Funds, the Filer presented the terms of the Merger to the independent review committee of the Terminating Fund (the IRC). The IRC determined, after reasonable inquiry, that the proposed Merger achieves a fair and reasonable result for the Terminating Fund.

15. The Filer will convene a special meeting (the Meeting) of the unitholders of the Terminating Fund in order to seek the approval of the unitholders to complete the Merger, as required by subsection 5.1(f) of NI 81-102. The Meeting will be held on or about February 20, 2013. In connection with the Meeting, the Filer has sent to such unitholders a management information circular (the Circular), a related form of proxy and the fund facts of the Continuing Fund (collectively, the Meeting Materials). The Meeting Materials were subsequently filed on SEDAR.

16. If all required approvals for a Merger are obtained, it is intended that the Merger will occur after the close of business on the Effective Date. The Filer therefore anticipates that each unitholder of the Terminating Fund will become a unitholder of the Continuing Fund after the close of business on the Effective Date. The Terminating Fund will be wound-up as soon as reasonably possible following the Merger.

17. The cost of effecting the Merger (consisting primarily of proxy solicitation, printing, mailing, legal and regulatory fees) will be borne by the Filer.

18. The right of the unitholders of the Terminating Fund to redeem, or switch from, units of the Terminating Fund will cease as of the close of business on the day prior to the Effective Date. Unitholders of the Terminating Fund will subsequently be able to redeem, in the ordinary course, the units of the Continuing Fund that they will acquire upon the Merger. Unitholders of the Terminating Fund with systematic investment plans will have their plans automatically switched over to the Continuing Fund unless the Filer receives notice to the contrary.

19. If any assets of the Terminating Fund are sold to effect the Merger, the Filer will pay for brokerage charges associated with trades that occur relating to the Merger.

20. In the opinion of the Filer the Merger satisfies all of the criteria for pre-approved reorganizations and transfers set forth in section 5.6(1) of NI 81-102 except that:

(a) the Merger will not be implemented as either a "qualifying exchange" within the meaning of section 132.2 of the Income Tax Act (Canada) (the Tax Act) or a tax-deferred transaction under section 85(1), 85.1(1), 86(1) or 87(1) of the Tax Act (in each case, a Prescribed Rollover). Consequently, the Merger will not meet the criteria for pre-approved reorganizations and transfers under subsection 5.6(1)(b) of NI 81-102; and

(b) In the opinion of the Filer, a reasonable person may not consider the fee structure of the Terminating Fund to be substantially similar to the fee structure of the Continuing Fund. Accordingly, such Merger may not meet the criteria for pre-approved reorganizations and transfers under subsection 5.6(1)(a)(ii) of NI 81-102.

21. The Circular provides:

(a) a summary of the anticipated tax implications to unitholders of the Terminating Fund and the Continuing Fund; and

(b) a comparison of the fee structures of the Funds.

Decision

The principal regulator is satisfied that the decision meets the test set out in the securities legislation of Ontario for the principal regulator to make the decision.

The decision of the principal regulator under the securities legislation of Ontario is that the Approval Sought is granted.