FT Portfolios Canada Co. Announcement

TORONTO, ONTARIO--(Marketwired - June 25, 2015) - FT Portfolios Canada Co. (the "Manager"), the manager of each of First Trust Advantaged Short Duration High Yield Bond Fund (TSX:FSD) ("FSD") and First Trust Short Duration High Yield Bond ETF (TSX:FHY) ("FHY"), is pleased to announce that the board of directors of the Manager has approved a proposal (the "FSD Proposal") to:

• convert FSD from a closed-end investment fund into an exchange-traded fund or "ETF" (the "Conversion"); and
  
  
• change the investment objectives and investment strategies of FSD so that they align with the investment objectives and investment strategies of FHY (while maintaining FSD's forward agreement structure for as long as FSD may derive benefits from it under Canadian tax laws) and make such other changes as are necessary for FSD to operate like a First Trust ETF going forward.
  

In addition, in connection with the Conversion, it is proposed that FHY will merge into FSD (the "Merger") in order to combine FHY and FSD into one high-yield bond fund that will be an ETF, with FSD being the continuing fund (the "Continuing Fund") to be called First Trust Short Duration High Yield Bond ETF II.

The Conversion should provide holders of units in FSD with several benefits, including the following:

• Lower management fee and lower management expense ratio - As a result of the fee structure and expense structure of an ETF under which the manager pays most of the operating expenses of the fund, the overall management expense ratio of the FSD as the Continuing Fund will be reduced. In particular, the management expense ratio on the Class A Units in FSD (which will be redesignated the "Advisor Class Units" in the Continuing Fund) and on the Class F Units in FSD (which will be redesignated the "Common Units" in the Continuing Fund) is expected to be reduced by over 1.00% per annum.
  
  
• Lower trading discount - The trading discount, or the extent to which the Continuing Fund's listed units trade at a discount to their net asset value, is expected to be significantly reduced. This is consistent with more efficient trading associated with ETFs as the market price of an ETF's units should be closer to net asset value.
  
  
• Greater portfolio transparency - The portfolio of the Continuing Fund, as an ETF, will be disclosed daily, as opposed to quarterly under the current closed-end fund structure. This will allow unitholders to see the Continuing Fund's portfolio holdings on a daily basis.
  
  
• Opportunity for FSD asset growth - As a closed-end fund, FSD has experienced a decline in assets since its launch as a result of annual redemptions. As an ETF is in continuous distribution, FSD will have the opportunity to continue to grow its asset base once it converts to an ETF, because it will be able to continuously offer its units through designated brokers and dealers providing the Continuing Fund with the opportunity to increase in size.
  
  
• No disposition for tax purposes - The implementation of the Conversion will not result in a disposition of the units of FSD to unitholders of FSD and accordingly any imbedded gain will not be realized as a result of the Conversion. This differs from the treatment that would occur on a redemption or termination of a fund which would result in a disposition of the units and the realization of any capital gains for tax purposes.
  

If the Merger is implemented, holders of units in FHY will own units in FSD, as the Continuing Fund. As a result of the Merger, holders of units in FHY may experience a lower management expense ratio as a result of the combined FSD and FHY asset base. In addition, as FSD has existing non-capital tax losses and will also own directly portfolio assets after the Merger, FSD should be able to use such losses which will benefit all unitholders of the Continuing Fund. In all other respects, the attributes of FSD will be changed to align with FHY, and as a result, holders of units in FHY should experience no additional changes (other than short-term benefits, if any, that may be associated with FSD's forward agreement arrangements).

Each of FSD and FHY (collectively, the "Funds") has called and will hold a special meeting of its unitholders on August 10, 2015 to consider and vote upon the proposal. A joint management information circular (the "Circular") describing the proposals is being prepared and will be mailed to the unitholders of the Funds. The Circular will also be available on SEDAR at www.sedar.com and posted on the Manager's website at www.firstrust.ca. Implementation of the Conversion and the Merger is subject to all required regulatory approvals. If approved, the Conversion is expected to be implemented in mid to late August 2015 and the Merger is expected to be implemented in late August to early September 2015.

About First Trust

The First Trust companies are a well-respected global enterprise with a history in the U.S. market since 1991 and in Canada since 1996. As of May 29, 2015, First Trust Advisors L.P., the portfolio advisor for the First Trust AlphaDEX™ ETFs, has approximately US$43 billion in ETF assets under management and more than US$53 billion total assets under supervision or management. First Trust is the enterprise name used for the various businesses conducted in Europe, Mexico, Canada and the U.S.

Further information about FT Portfolios Canada's ETFs can be found at www.firsttrust.ca.