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“ETF” stands for exchange traded fund, which, like a regular mutual fund, may invest in an underlying basket of assets such as stocks, bonds, currencies, options or commodities. Unlike regular mutual funds, however, the units of ETFs trade on a stock exchange just like common stock. This means that pricing is transparent and ETF units can be bought and sold throughout the regular trading day.

ETFs are flexible investment tools designed to be used by both individual and institutional investors. As a basket of investments, ETFs offer the diversification of mutual funds, but typically at a fraction of their cost.
Similar to mutual funds, ETFs are typically structured as an open-ended investment trust, meaning that new units of the ETF can be created (or redeemed) to meet demand as required. The liquidity of the ETF unit on the stock exchange is heavily dependent on the liquidity of the underlying holdings in the ETF portfolio. There are two important market mechanisms to ensure ETFs have adequate liquidity: 

1. They are listed on an exchange; this provides a market for them to be traded in a transparent manner.

2. Each ETF has a designated broker obligated to create and redeem its units. In addition, there are other institutional traders known as Market Makers which also participate in the market to provide units on the exchange. This enables an investor to buy and sell units of the ETF at a price that is close to the NAV, excluding any brokerage fees.

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Units of Horizons ETFs trade on the Toronto Stock Exchange (TSX). Units can be bought and sold throughout the normal trading day, using an online, discount or full-service brokerage account. 
All ETFs have two end-of-day "values". They have a closing market price per unit, as determined on the exchange, (the trading session's last trade), and a net asset value per unit (NAV), as determined by the ETF's independent fund accountant after the market closes 

The closing price is typically the last transaction price of the ETF recorded by the Toronto Stock Exchange, whereas the NAV per unit is an independent calculation created by the ETF’s fund accountant, which calculates the market value of each unit based on the underlying value of the securities held by the ETF net of all its liabilities. 

Since there may be a lag between the last time the ETF traded and changes in the underlying value of the ETF’s holdings, the NAV per unit would generally be considered a more accurate representation of the market value of the ETF. 
A premium or discount to an ETF’s NAV per unit occurs when the market price of an ETF is above or below that NAV per unit. 

The importance of understanding a premium and a discount is relevant when considering investing in an ETF. The level or size of premiums and discounts is generally greater when:
• the underlying assets of the ETF trade at different hours from the ETF (i.e. commodities)
• the underlying assets trade infrequently (i.e. bonds)
• the markets are in a greater state of instability or flux (i.e. at the Open and Close of a trading day)

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Yes, all ETFs offered by Horizons ETFs are eligible to be held within all accounts.

The Horizons ETFs are listed on the Toronto Stock Exchange pursuant to prospectuses filed with Canadian regulators, in accordance with Canadian securities laws and regulations. None of the exchange traded funds managed by Horizons ETFs Management (Canada) Inc. are regulated by nor registered with the U.S. Securities and Exchange Commission (SEC), or with any other foreign regulatory body. Generally, non-residents of Canada, including U.S. residents, may invest through a local broker in their jurisdiction that has facilities for directly or indirectly executing orders on the Toronto Stock Exchange.

However, at no time may non-residents of Canada be the beneficial owners of a majority of the Units of any one of our ETFs. If at any point the Manager expects or believes that more than 40% of the Units of an ETF are beneficially held by non-residents, the Manager may elect to send notice to one or more such non-resident holders requiring them to sell all or a portion of their units of such ETF within a stated period of time. If such Units have not been sold within the stated period of time, the Manager will suspend the voting and distribution rights associated with those Units and sell the Units on the holders behalf. The rights of affected holders in such instance are limited to receiving the net proceeds of the sale of such Units.

To find out more about Horizons ETFs, please contact your advisor or contact us directly at 1-866-641-5739 toll free or info@HorizonsETFs.com.
An electronic copy of the prospectus can be downloaded from the Horizons ETFs website ETF product page.

To receive a print copy at no charge, please contact us at 1 866 641 5739 toll free or info@HorizonsETFs.com.
As its name implies, a unit split is when an ETF increases the number of outstanding units of the ETF at a particular ratio (such as 2 for 1), and decreases the net asset per unit of the ETF, by the inverse ratio. In a unit split, there is an increase in the number of units issued accompanied by a proportional decrease in the unit price (Net Asset Value), such that the value of holdings remains the same after the split. 

Here's an example:

If on Friday, May 4, 2015, at the end of the trading day for the TSX, it was announced that units of the following ETF would be split on the basis of the ratio (the "Split Ratio") set out below, and began trading on a split adjusted basis on Monday, May 7, 2015. The split becomes effective on May 9, 2015, for unitholders of record on that date: 
 
ETF Ticker Split Ratio
BetaPro Natural Gas -2x Daily Bear ETF HND 4:1

A 4:1 unit split means each unit will be split into four units. After the split, you will have four times the number of HND shares you had previously. Additionally, the price of HND will be divided by a factor of four. Mathematically, this will not impact the value of your investment in HND. For example, if you had 100 shares worth $2,000 prior to the split, you now have 400 shares that are still worth $2,000 post-split. 

Pre-split:
Shares 100
NAV $20 (per share)
Value $2,000 

Post-split on a 4:1 basis:
Shares 400 (100 x 4)
NAV $5 (per share) ($20 ÷ 4)
Value $2,000 
As a general rule of thumb, the decision to split units of an ETF would occur with unit values greater than or equal to $40. The split makes it easier for an investor to afford and trade 100 share "board lots." Without the split, lower trading volumes may occur.
A unit consolidation is the opposite of a unit split, where there is a reduction in the number of units and an accompanying increase in the unit price (NAV), such that the value of holdings remains the same after the consolidation. 

For example, if it was announced on July 6, 20XX, after the TSX closed for trading on Thursday, July 19, 20XX, the units of the following exchange traded fund would be consolidated on the basis of the ratio (the "Consolidation Ratio") set out below, and begin trading on a consolidated basis on Friday, July 20, 20XX, the effective date of the consolidation:
 
ETF Ticker Split Ratio
BetaPro S&P 500 VIX Short-Term Futures™ 2x Daily Bull ETF HVU 1:10

Pre-consolidation:
Shares 1,000
NAV $2
Value $2,000 

Post-consolidation:
Shares 100 (1000 ÷ 10)
NAV $20 ($2 x 10)
Value $2,000 

In a 1:10 consolidation, every 10 units would be consolidated into a single unit. This means you will have one-tenth the number of HVU shares and the price of HVU will be multiplied by a factor of 10. Mathematically, this event will not impact the value of your investment in HVU. For example, if you had 100 shares prior to the consolidation, you now have 10 shares, both worth $2,000. 
As a general rule, a consolidation would occur with unit values at or lower than $4. Lower priced securities require a relatively higher number of shares to be traded to establish the same dollar value position. As a result, investors paying brokerage commissions on a per share basis would incur higher transaction costs. As well, brokerage firms typically will not allow securities trading at prices under $3 to be marginable.
Horizons ETFs Management (Canada) Inc. works very closely with reorganization departments at all the major brokerage firms to provide the complete and timely information required for these changes. However, in the normal course of business it may take 3-5 business days to update holdings for clients. Please call your brokerage firm with any questions and to confirm that your individual account has been updated.
Although infrequent, ETFs (like regular mutual funds) can be closed, usually as a result of extremely low investor interest.  Horizons ETFs is required by law to make a public disclosure of its intent to de-list and close an ETF.

After the public disclosure of an ETF closure is made, subscription activity is immediately halted.  Investors can sell their ETF units at any point up until the end of the de-listing day.

Similar to all ETFs, there are designated brokers ensuring the ETF price remains close to NAV (minus a small spread), however where an ETF is being terminated, the bid will remain tightly correlated to the NAV per unit of the ETF while the offer will widen since no new units can be subscribed for. Market Makers will typically only buy units in the market, which means investors will typically only be able to sell their units in the market. 
If a unitholder sells their units of the ETF on the exchange before the de-listing date, they will get the cash proceeds from the sale after the regular 3 day settlement period.  If they did not sell prior to the delisting of the ETF, they will typically receive the cash proceeds approximately 7 days after the de-listed date.  
More commonly known as an index-tracking or passive ETF, it is an ETF that provides one times (1x) the exposure to the underlying index or commodity. As opposed to leveraged ETFs which can provide 2x the daily exposure, or active ETFs that aim to beat a benchmark.

Horizons ETFs offers many types of single or benchmark ETFs such as single equity, single currency, and single commodity ETFs.
For any passive ETF that seeks to replicate the returns of an index or commodity benchmark, the success of the investment strategy is usually measured by how closely the ETF replicates the returns of that index or commodity benchmark. Any deviation from the return of the ETF versus the return of that index or commodity benchmark is generally considered tracking error.
 
Tracking error can be caused by a variety of factors including management fees, trading execution costs and taxes. 
Actively managed or active ETFs are similar to traditional mutual funds, but the units of the fund are listed on an exchange. As a result, active ETFs combine the benefits of active management with the traditional structural advantages of ETFs, which results in lower fees, greater flexibility, liquidity, and convenience.
Actively managed ETFs
• Managed by one or more portfolio managers
• Seeks to deliver better risk-adjusted returns than an index by selecting the portfolio securities for the ETF that meet its investment goals
• Slightly higher than index ETFs, but generally much lower than comparable actively managed regular mutual funds

Passively managed ETFs 
• Tracks an index
• Seeks to replicate the performance of an index as efficiently as possible
• Low cost, since minimal portfolio oversight is required beyond replicating the index
Almost all of our actively managed ETFs can make distributions.  The distribution frequency and amounts are available on the Horizons ETFs website ETF product page for each active ETF.
These ETFs may pay distributions annually. However, none of these ETFs have ever paid a distribution since their launch. 
For the BetaPro ETFs whose objective is to realize a multiple of 2x or -2x the daily returns of a given benchmark index in particular, an investor's investment will experience the effects of daily compounding.

• For example, if $100 is invested in a BetaPro 2x Daily Bull ETF and the underlying index rises 1% on the next day, the investor would have $200 of exposure on day 1 and earn $2. On the following day, the investor would have $102 invested and $204 (i.e. 2x) of exposure. As such, as the ETF rises on consecutive days, the investor's capital invested to realize the daily return of the underlying benchmark index will increase each day, reflecting the "compounding" effect.

• Conversely, if $100 is invested in a BetaPro 2x Daily Bull ETF and the underlying index declines 1% on the next day, the investor would lose $2. On the following day, $98 will be invested to achieve the same investment objective. As such, as the ETF drops on consecutive days, the investor's capital invested to realize the daily return of the underlying benchmark index will decrease each day, again reflecting the "compounding" effect.

• This latter phenomena explains why the investment risk is limited to the initial cost invested. You are only potentially subject to losing your original investment because the BetaPro 2x Daily Bull, -2x Daily Bear, and Daily Inverse ETFs are rebalanced daily so you cannot lose more than you invested.
Inverse and leveraged ETFs are tactical investment solutions that are primarily designed for the execution of a particular short-term investment strategy or perspective of the markets. These ETFs are designed to meet their investment objective only on a daily basis. They are not appropriate as a buy and hold investments if an investor is unable to closely monitor their performance. Because these ETFs use leverage, gains and losses are magnified and, due to compounding, the performance over periods other than one day will likely differ in amount and possibly direction, from the reference index/commodity benchmark. Please speak to an advisor or read the ETF’s prospectus before investing in them.  
Since these ETFs provide leverage, both gains and losses are magnified. Investors should anticipate a substantially higher standard deviation with these ETFs versus ETFs that do not use leverage. BetaPro ETFs are rebalanced on a daily basis, so unlike traditional leverage strategies, which tend to use lending mechanisms such as margin, BetaPro ETF unit holders will not lose more than their initial investment. These ETFs are designed to meet their investment objective only on a daily basis. Because these ETFs use leverage, gains and losses are magnified and, due to compounding, the performance over periods other than one day will likely differ in amount and possibly direction, from the reference index/commodity benchmark. Please read the prospectus and learn about all the risks associated with leveraged ETF investing.
The BetaPro ETFs track a number of key benchmarks across different asset classes. Please see the specific ETF’s website page on the Horizons ETFs’ website to obtain the benchmark for any of the BetaPro ETFs.
Date Ticker Name S / C Ratio
12/18/2008 HMU BetaPro S&P/TSX Global Base Metals™ Bull+ ETF C 1 : 4
12/18/2008 HJU BetaPro MSCI Emerging Markets Bull+ ETF C 1 : 5
01/02/2009 HOD BetaPro NYMEX® Crude Oil Bear+ ETF S 2 : 1
01/02/2009 HOU BetaPro NYMEX® Crude Oil Bull+ ETF C 1 : 5
01/02/2009 HGD BetaPro S&P/TSX Global Gold™ Bear+ ETF C 1 : 5
04/15/2009 HND BetaPro NYMEX® Natural Gas Bear+ ETF S 5 : 1
04/15/2009 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 4
09/16/2009 HND BetaPro NYMEX® Natural Gas Bear+ ETF S 2 : 1
09/16/2009 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 5
10/27/2009 HMU BetaPro S&P/TSX Global Base Metals™ Bull+ ETF S 3 : 1
10/27/2009 HMD BetaPro S&P/TSX Global Base Metals™ Bear+ ETF C 1 : 4
10/27/2009 HJU BetaPro MSCI Emerging Markets Bull+ ETF S 3 : 1
10/27/2009 HJD BetaPro MSCI Emerging Markets Bear+ ETF C 1 : 4
06/03/2010 HGD BetaPro S&P/TSX Global Gold™ Bear+ ETF C 1 : 4
11/8/2010 HZU BetaPro COMEX® Silver Bull+ ETF S 3 : 1
11/8/2010 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 2
03/16/2011 HBU BetaPro COMEX® Gold Bullion Bull+ ETF S 2 : 1
03/16/2011 HKU BetaPro Comex® Copper Bull+ ETF S 2 : 1
03/16/2011 HZD BetaPro COMEX® Silver Bear+ ETF C 1 : 4
05/10/2011 HZU BetaPro COMEX® Silver Bull+ ETF S 3 : 1
09/19/2011 HBD BetaPro COMEX® Gold Bullion Bear+ ETF C 1 : 4
11/23/2011 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 4
04/13/2012 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 4
04/13/2012 HNO BetaPro NYMEX® Long Natural Gas/Short Crude Oil Spread ETF C 1 : 4
04/13/2012 HUN Horizons NYMEX® Natural Gas ETF C 1 : 4
05/09/2012 HND BetaPro NYMEX® Natural Gas Bear+ ETF S 4 : 1
05/09/2012 HIN BetaPro NYMEX® Natural Gas Inverse ETF S 4 : 1
07/19/2012 HVU BetaPro S&P 500 VIX Short/Term Futures™ Bull+ ETF C 1 : 10
01/04/2013 DLR.U Horizons US Dollar Currency ETF C 1 : 1.009601
03/13/2013 HVU BetaPro S&P 500 VIX Short/Term Futures™ Bull+ ETF C 1 : 4
04/05/2013 HND BetaPro NYMEX® Natural Gas Bear+ ETF C 1 : 2
04/05/2013 HUV BetaPro S&P 500 VIX Short/Term Futures™ ETF C 1 : 4
05/06/2013 HZU BetaPro COMEX® Silver Bull+ ETF C 1 : 4
05/06/2013 HGU BetaPro S&P/TSX Global Gold™ Bull+ ETF C 1 : 4
05/15/2013 HEP Horizons Enhanced Income Gold Producers ETF C 1 : 2
09/09/2013 HXT Horizons S&P/TSX 60™ Index ETF C 1 : 2
11/18/2013 HXS Horizons S&P 500® Index ETF C 1 : 2
11/18/2013 HVU BetaPro S&P 500 VIX Short/Term Futures™ Bull+ ETF C 1 : 4
11/18/2013 HQD BetaPro NASDAQ/100® Bear+ ETF C 1 : 4
12/20/2013 DLR Horizons US Dollar Currency ETF C 1 : 1.005
02/13/2014 HND BetaPro NYMEX® Natural Gas Bear+ ETF C 1 : 2
06/18/2014 HED BetaPro S&P/TSX Capped Energy™ Bear+ ETF C 1 : 4
06/18/2014 HFD BetaPro S&P/TSX Capped Financials™ Bear+ ETF C 1 : 4
06/18/2014 HSD BetaPro S&P 500® Index Bear+ ETF C 1 : 4
06/18/2014 HQU BetaPro NASDAQ/100® Bull+ ETF S 2 : 1
07/30/2014 HVU BetaPro S&P 500 VIX Short/Term Futures™ Bull+ ETF C 1 : 5
11/24/2014 HOU BetaPro NYMEX® Crude Oil Bull+ ETF C 1 : 2
01/14/2015 DLR Horizons US Dollar Currency ETF C 1 : 1.005951
01/16/2015 HOU BetaPro NYMEX® Crude Oil Bull+ ETF C 1 : 4
08/24/2015 HEU BetaPro S&P/TSX Capped Energy™ Bull+ ETF C 1 : 4
08/24/2015 HUV BetaPro S&P 500 VIX Short/Term Futures™ ETF C 1 : 10
08/24/2015 HVU BetaPro S&P 500 VIX Short/Term Futures™ Bull+ ETF C 1 : 10
08/25/2015 HVI BetaPro S&P 500 VIX Short/Term Futures™ Inverse ETF S 2 : 1
11/26/2015 HGU BetaPro S&P/TSX Global Gold™ Bull+ ETF C 1: 5
11/26/2015 HIU BetaPro S&P 500® Inverse ETF C 1 : 10
11/26/2015 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 10
11/26/2015 HOU BetaPro NYMEX® Crude Oil Bull+ ETF C 1 : 2
11/26/2015 HQD BetaPro NASDAQ/100® Bear+ ETF C 1 : 5
11/26/2015 HXD BetaPro S&P/TSX 60™ Bear+ ETF C 1 : 2
11/26/2015 HZU BetaPro COMEX® Silver Bull+ ETF C 1 : 5
02/16/2016 HEE Horizons Enhanced Income Energy ETF C 1 : 5
02/16/2016 HEP Horizons Enhanced Income Gold Producers ETF C 1 : 5
02/16/2016 HNY Horizons Natural Gas Yield ETF C 1 : 5
05/30/2016 HGD BetaPro S&P/TSX Global Gold™ Bear+ ETF C 1 : 4
05/30/2016 HOU BetaPro NYMEX® Crude Oil Bull+ ETF C 1 : 2
05/30/2016 HTD BetaPro U.S. 30/Year Bond Bear+ ETF C 1 : 2
05/30/2016 HUC Horizons NYMEX® Crude Oil ETF C 1 : 2
05/30/2016 HGU BetaPro S&P/TSX Global Gold™ Bull+ ETF S 2 : 1
11/26/2016 HVU BetaPro S&P 500 VIX Short/Term Futures™ 2x Daily Bull ETF C 1 : 10
05/29/2017 HVU BetaPro S&P 500 VIX Short/Term Futures™ 2x Daily Bull ETF C 1 : 3
05/29/2017 HUV BetaPro S&P 500 VIX Short-Term Futures™ ETF C 1 : 2
05/29/2017 HVI BetaPro S&P 500 VIX Short-Term Futures™ Daily Inverse ETF S 2 : 1
01/15/2018 HVU BetaPro S&P 500 VIX Short/Term Futures™ 2x Daily Bull ETF C 1 : 5
03/04/2019 HNU BetaPro Natural Gas 2x Daily Bull ETF C 1 : 5
03/04/2019 HSD BetaPro S&P 500® -2x Daily Bear ETF C 1 : 4

The answer is yes, many of the BetaPro ETFs are available for options trading. View the list of applicable ETFs here on the TMX website where investors can also view their real time option chains.

Coming into force in January of 2018, expanded MiFID regulations (MiFID II – Markets in Financial Instruments Directive) and PRIIP (Packaged Retail and Insurance-based Investment Products) regulations within the European Union (‘EU’) are designed to regulate EU Investment Managers and Broker Dealers, and enhance disclosure for the buy and sell side regarding investment products.

Horizons ETFs Management (Canada) Inc. (Horizons ETFs) does not carry-on business activities in the EU and is not subject to these disclosure requirements. However, we note that, generally speaking, our Fact Sheet (found on the landing page of each ETF) and the Regulatory ETF Facts document (found in our Regulatory section, and also through each ETFs landing page), combined, provide comparable relevant information about each ETF. These documents, combined with all other disclosure contained on our site (such as each product’s LEI (Legal Entity Identifier) number, found on each product page), should provide sufficient information to any EU distributor in order for them to comply with regulations.

Further, while we note that Horizons ETFs does not typically engage in broker-commission soft dollar arrangements, the Financial Statements of each ETF will identify the value of any such arrangements.

Mutual funds in Canada (which includes ETFs) are typically set up using either a trust or corporate structure. First established in 1987, mutual fund corporations are structured similarly to traditional corporations. Under one corporate structure, many different investment fund mandates (series) can exist. In the case of ETFs, the different ETFs are all held within the corporate structure, where each ETF is a separate class or series.

Within a Canadian mutual fund corporation structure, only Canadian capital gains and dividends can be distributed to investors. From a tax perspective, any income and foreign dividends generated within any one series of the corporation can potentially be offset by losses and expenses incurred in other series (from a tax perspective), which generally makes the corporate class structure more tax-efficient than a traditional mutual fund trust.

According to Strategic Insight, more than $157 billion is invested in corporate class mutual funds in Canada. It is a widely used structure used by advisors and end-investors primarily for taxable accounts.

Horizons ETFs will merge all of the ETFs it offers that primarily use derivatives-based structures into a new mutual fund corporation; this would include all of the Horizons Total Return Index (TRI) ETFs and all of the BetaPro ETFs. The ETFs will all still be ETFs and have the same investment objectives, same tickers, and same fee structures, as they do currently. The primary difference is that each ETF will be a series within the corporate class structure as opposed to an individual trust, which will allow these ETFs to pool expenses and use realized losses of income and capital to offset realized gains of income and capital across all series.

Horizons is proposing to add 15 of our TRI ETFs into the corporate structure alongside four single commodity ETFs and 25 leveraged, inverse and inverse leveraged ETFs that make up our BetaPro ETF family. All of these ETFs use a synthetic derivative replication structure and no taxable distributions have ever been paid to end unitholders of these 44 ETFs. The ETFs are expected to maintain their current derivative-based structure and follow the same investment objectives as when they were mutual fund trusts. They are expected to keep the likelihood of a taxable distribution by the new mutual fund corporation extremely low.

The synthetic derivatives structure of these ETFs, which utilize swap-agreements with major Canadian Schedule 1 Banks, are designed to reduce the likelihood of taxable distributions being paid to unitholders. Instead, the value of any income or dividends generated by the underlying index securities are generally reflected in the net-asset-value of the ETF (NAV). Under the new corporate structure, nothing about this arrangement will change. However the TRI ETFs will have the added benefit of being able to aggregate future realized income and capital losses and expenses to offset any potential realized income and capital gains that could result from the settlement or partial settlement of swap contracts.

The major difference between these ETFs and other corporate class funds is that these products will use a synthetic derivatives structure as the portfolio, whereas most other corporate class mandates in Canada utilize a traditional physical strategy, where they own the physical securities of a portfolio.

By using the synthetic derivatives structure, our ETFs will typically only realize income gains and losses from downsizing the derivative contracts and will continue to have additional performance advantages, which include low-tracking error relative to other physically replicated index strategies, as well as similar tax benefits to when they were in a trust structure, since these ETFs are not expected to make regular income distributions.

The 2019 Federal Budget released by the Department of Finance on March 19, 2019, and updated on July 30, 2019, proposed several changes to the taxation of Canadian mutual fund trusts and in particular the “allocation to redeemers” methodology used by many mutual funds and exchange-traded funds. The TRI and BetaPro ETFs had utilized the “allocation to redeemers” methodology to ensure the tax-efficiency of their strategy.

With the elimination of the “allocation to redeemers” methodology as it relates to income, there was an increased likelihood that the TRI and BetaPro ETFs would have to make distributions after the 2019 tax year. By reorganizing the TRI and BetaPro ETFs into a corporate fund structure, Horizons ETFs will no longer need to use the “allocation to redeemers” methodology or the related Capital Gains Refund Mechanism (CCRM).

In our view, the corporate structure provides ample flexibility to eliminate or significantly reduce the potential for taxable distributions being made in the circumstances where there is a requirement to pre-settle any of the underlying swaps in these ETFs.

There are also significant operational efficiencies that can be achieved through a corporate structure. For example, Horizons ETFs will only need to file one-tax return for the overarching mutual fund corporation. All expenses for the corporation can also be aggregated, alongside all gains and losses, which can create more structural tax efficiency.

The ETFs will also be able to streamline their ongoing reporting requirements and how they deal with the management of the swap structures and expenses associated with that process.

In our view these operational efficiencies should result in cost-advantages for the corporation, and by extension, unit holders of the ETFs.

The government can always make legislative changes that impact any investment product structures. In the case of these corporate class ETFs, we believe the government would have to target the mechanics of the corporate class structure as a whole, which would effectively impact all $157 billion+ of corporate class mutual assets.

The currently proposed legislation changes impact our ETFs ability to use the “allocation to redeemers” methodology, which meant the federal government was concerned with how certain unit holders were deducting the income allocated to them from the TRI and BetaPro ETFs.

This new structure will not use the “allocation to redeemers” methodology, and will provide ample, well-established, corporate tax mechanisms that can be used to continue the benefits of these ETF strategies.

If all of the necessary regulatory approvals are received and the reorganization is approved by unitholder vote, there will be an automatic merger of a unitholders’ current trust units into a new series of shares of the corporate structure that would have substantially the same attributes to the ETF trust they previously owned. The proposed corporate class reorganization is not expected to be a taxable event for unitholders of the ETFs, so long as those Canadian resident unitholders who currently own units of the affected ETFs in taxable accounts, subsequent to the reorganization, make a joint election with the proposed mutual fund corporation under Section 85 of the Income Tax Act, as part of the exchange from their existing trust units into shares of a series of the corporation. Horizons ETFs is establishing a process to provide assistance to unitholders and their custodians in taking the necessary steps to file the joint election, which will be free of charge.

The reorganization of the existing ETF units into a series of shares of the new ETF corporation does, from a tax perspective, constitute a deemed disposition of the units. However, where the units are held in a taxable account, the unitholder can make a joint election with the mutual fund corporation to defer such disposition, as previously indicated.

We do not expect any tax liability to result from the built-up historical gains of any of the ETFs. The only way for a unitholder to incur a potential tax liability in this process would be to sell their units in the open market through the facilities of a stock exchange thereby realizing a capital gain or loss, or to not file a section 85 rollover documentation if they hold the units in a taxable account at the conversation/reorganization date.

Horizons ETFs does not anticipate changing the fee structure on any of these ETFs related to their reorganization, nor do we expect any additional costs for unitholders to own units of these ETFs. Horizons ETFs is covering all costs of the reorganization.

While we don’t expect these ETFs to pay any distributions, there is always the possibility that distributions could be required to be paid. However, we would expect their size and frequency to be much smaller than other types of physically replicated strategies. All distributions from a mutual fund corporation are in the form of Canadian capital gains and dividends.

No. There is no plan to create a T-class of these ETFs, since they are not expected to pay any taxable distributions, which negates most of the need to create a T-class structure at this time.

If approved at unitholder meetings expected to begin early November, 2019, the conversion of the existing mutual fund trust structure into the proposed corporate structure should occur before the end of the 2019 calendar year.

There are regulatory and unitholder approvals required to complete the proposed reorganization. Unitholders will be delivered materials by mail in the coming weeks, which will include how to vote. We fully expect to revive all necessary approvals in due course.

If unitholders do not approve the conversion, Horizons ETFs will need to examine a number of product structure alternatives on an ETF by ETF basis, including potentially terminating some of the affected ETFs. However, since the proposed changes are, in our view, clearly in the best interest of the investors, we have no reason to expect that the required approvals would not be forthcoming.

This will vary from jurisdiction to jurisdiction, however, generally, the exchange of the existing ETF units for the corresponding series of shares of the ETF corporation will be deemed as a disposition for tax purposes.

Many jurisdictions, like Canada, have elections tax payers can make in order to defer the taxable event until they dispose of the series of shares of the new ETF corporation. Investors should consult the local tax advisor for guidance.

For U.S. residents, we understand that no such deferral is expected to be available.

The determination of whether or not an investor should invest in one of these ETFs should be made after careful consideration of the client’s risk/return objectives. Investors should also always read the ETF’s prospectus before investing. In the case of ETFs from the TRI product line-up, these typically generate optimal results when held in taxable, i.e. non-registered accounts where income and dividend distributions would be taxed as earned. That said, all of these ETFs are eligible for registered accounts, including RRSP, RRIFs and TFSAs.

There are numerous risks associated with investing. Each of the individual ETFs have risk ratings associated with the inherent historical market risk of their respective investment objectives, and their prospectuses detail other risks associated with investing in them as well. However, in terms of risk associated with the corporate structure, we view there to be limited risk relative to traditional mutual fund trusts.

One key risk associated with a corporate structure relative to a traditional mutual fund trust is the fact that any income earned within the corporate structure cannot be distributed to end unitholders and is generally taxed at the corporate rate, which can be higher than an individual investor’s marginal tax rate. However, since the new mutual fund corporation is not expected to have net taxable income, we believe this risk is not significant. Since the corporation is not expected to have net taxable income, we do not expect any of the ETFs to have distributions, similar to how they operate now.

All of these ETFs are TSX-listed ETFs and can be purchased or sold through an advisor or in your self-directed brokerage account.

ETF Name Ticker   ETF Name Ticker
Horizons S&P/TSX 60™ Index ETF HXT   BetaPro Gold Bullion 2x Daily Bull ETF HBU
Horizons S&P 500® Index ETF HXS   BetaPro Gold Bullion -2x Daily Bear ETF HBD
Horizons S&P 500 CAD Hedged Index ETF HSH   BetaPro Crude Oil 2x Daily Bull ETF HOU
Horizons S&P/TSX Capped Energy Index ETF HXE   BetaPro Crude Oil -2x Daily Bear ETF HOD
Horizons S&P/TSX Capped Financials Index ETF HXF   BetaPro Natural Gas 2x Daily Bull ETF HNU
Horizons Cdn Select Universe Bond ETF HBB   BetaPro Natural Gas -2x Daily Bear ETF HND
Horizons NASDAQ-100® Index ETF HXQ   BetaPro Silver 2x Daily Bull ETF HZU
Horizons EURO STOXX 50® Index ETF HXX   BetaPro Silver -2x Daily Bear ETF HZD
Horizons Cdn High Dividend Index ETF HXH   BetaPro S&P/TSX 60™ 2x Daily Bull ETF HXU
Horizons US 7-10 Year Treasury Bond ETF HTB   BetaPro S&P/TSX 60™ -2x Daily Bear ETF HXD
Horizons US 7-10 Year Treasury Bond CAD Hedged ETF HTH   BetaPro S&P/TSX Capped Financials™ 2x Daily Bull ETF HFU
Horizons Laddered Canadian Preferred  Share  Index ETF HLPR   BetaPro S&P/TSX Capped Financials™ -2x Daily Bear ETF HFD
Horizons Intl Developed Markets Equity Index ETF HXDM   BetaPro S&P/TSX Capped Energy™  2x Daily  Bull ETF HEU
Horizons Equal Weight Canada REIT Index ETF HCRE   BetaPro S&P/TSX Capped Energy™ -2x Daily Bear ETF HED
Horizons Equal Weight Canada Banks Index ETF HEWB   BetaPro NASDAQ-100® 2x Daily Bull ETF HQU
Horizons Gold ETF HUG   BetaPro NASDAQ-100® -2x Daily Bear ETF HQD
Horizons Silver ETF HUZ   BetaPro S&P 500® 2x Daily Bull ETF HSU
Horizons Crude Oil ETF HUC   BetaPro S&P 500® -2x Daily Bear ETF HSD
Horizons Natural Gas ETF HUN   BetaPro Canadian Gold Miners 2x Daily Bull ETF HGU
    BetaPro Canadian Gold Miners -2x Daily Bear ETF HGD
  BetaPro Marijuana Companies 2x Daily Bull ETF HMJU
  BetaPro Marijuana Companies Inverse ETF HMJI
  BetaPro S&P/TSX 60™ Daily Inverse ETF HIX
  BetaPro S&P 500® Daily Inverse ETF HIU
  BetaPro S&P 500 VIX Short-Term Futures™ ETF HUV
Yes, all ETFs offered by Horizons ETFs are eligible to be held within all accounts.

The Horizons ETFs are listed on the Toronto Stock Exchange pursuant to prospectuses filed with Canadian regulators, in accordance with Canadian securities laws and regulations. None of the exchange traded funds managed by Horizons ETFs Management (Canada) Inc. are regulated by nor registered with the U.S. Securities and Exchange Commission (SEC), or with any other foreign regulatory body. Generally, non-residents of Canada, including U.S. residents, may invest through a local broker in their jurisdiction that has facilities for directly or indirectly executing orders on the Toronto Stock Exchange.

However, at no time may non-residents of Canada be the beneficial owners of a majority of the Units of any one of our ETFs. If at any point the Manager expects or believes that more than 40% of the Units of an ETF are beneficially held by non-residents, the Manager may elect to send notice to one or more such non-resident holders requiring them to sell all or a portion of their units of such ETF within a stated period of time. If such Units have not been sold within the stated period of time, the Manager will suspend the voting and distribution rights associated with those Units and sell the Units on the holders behalf. The rights of affected holders in such instance are limited to receiving the net proceeds of the sale of such Units.

An electronic copy of the prospectus can be downloaded from the Horizons ETFs website ETF product page.

To receive a print copy at no charge, please contact us at 1 866 641 5739 toll free or info@HorizonsETFs.com.
Similar to mutual funds, ETFs are typically structured as an open-ended investment trust, meaning that new units of the ETF can be created (or redeemed) to meet demand as required. The liquidity of the ETF unit on the stock exchange is heavily dependent on the liquidity of the underlying holdings in the ETF portfolio. There are two important market mechanisms to ensure ETFs have adequate liquidity: 

1. They are listed on an exchange; this provides a market for them to be traded in a transparent manner.

2. Each ETF has a designated broker obligated to create and redeem its units. In addition, there are other institutional traders known as Market Makers which also participate in the market to provide units on the exchange. This enables an investor to buy and sell units of the ETF at a price that is close to the NAV, excluding any brokerage fees.

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“ETF” stands for exchange traded fund, which, like a regular mutual fund, may invest in an underlying basket of assets such as stocks, bonds, currencies, options or commodities. Unlike regular mutual funds, however, the units of ETFs trade on a stock exchange just like common stock. This means that pricing is transparent and ETF units can be bought and sold throughout the regular trading day.

ETFs are flexible investment tools designed to be used by both individual and institutional investors. As a basket of investments, ETFs offer the diversification of mutual funds, but typically at a fraction of their cost.
Although infrequent, ETFs (like regular mutual funds) can be closed, usually as a result of extremely low investor interest.  Horizons ETFs is required by law to make a public disclosure of its intent to de-list and close an ETF.

After the public disclosure of an ETF closure is made, subscription activity is immediately halted.  Investors can sell their ETF units at any point up until the end of the de-listing day.

Similar to all ETFs, there are designated brokers ensuring the ETF price remains close to NAV (minus a small spread), however where an ETF is being terminated, the bid will remain tightly correlated to the NAV per unit of the ETF while the offer will widen since no new units can be subscribed for. Market Makers will typically only buy units in the market, which means investors will typically only be able to sell their units in the market. 
If a unitholder sells their units of the ETF on the exchange before the de-listing date, they will get the cash proceeds from the sale after the regular 3 day settlement period.  If they did not sell prior to the delisting of the ETF, they will typically receive the cash proceeds approximately 7 days after the de-listed date.  
All ETFs have two end-of-day "values". They have a closing market price per unit, as determined on the exchange, (the trading session's last trade), and a net asset value per unit (NAV), as determined by the ETF's independent fund accountant after the market closes 

The closing price is typically the last transaction price of the ETF recorded by the Toronto Stock Exchange, whereas the NAV per unit is an independent calculation created by the ETF’s fund accountant, which calculates the market value of each unit based on the underlying value of the securities held by the ETF net of all its liabilities. 

Since there may be a lag between the last time the ETF traded and changes in the underlying value of the ETF’s holdings, the NAV per unit would generally be considered a more accurate representation of the market value of the ETF. 
Units of Horizons ETFs trade on the Toronto Stock Exchange (TSX). Units can be bought and sold throughout the normal trading day, using an online, discount or full-service brokerage account. 
To find out more about Horizons ETFs, please contact your advisor or contact us directly at 1-866-641-5739 toll free or info@HorizonsETFs.com.
A premium or discount to an ETF’s NAV per unit occurs when the market price of an ETF is above or below that NAV per unit. 

The importance of understanding a premium and a discount is relevant when considering investing in an ETF. The level or size of premiums and discounts is generally greater when:
• the underlying assets of the ETF trade at different hours from the ETF (i.e. commodities)
• the underlying assets trade infrequently (i.e. bonds)
• the markets are in a greater state of instability or flux (i.e. at the Open and Close of a trading day)

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The answer is yes, many of the BetaPro ETFs are available for options trading. View the list of applicable ETFs here on the TMX website where investors can also view their real time option chains.

Coming into force in January of 2018, expanded MiFID regulations (MiFID II – Markets in Financial Instruments Directive) and PRIIP (Packaged Retail and Insurance-based Investment Products) regulations within the European Union (‘EU’) are designed to regulate EU Investment Managers and Broker Dealers, and enhance disclosure for the buy and sell side regarding investment products.

Horizons ETFs Management (Canada) Inc. (Horizons ETFs) does not carry-on business activities in the EU and is not subject to these disclosure requirements. However, we note that, generally speaking, our Fact Sheet (found on the landing page of each ETF) and the Regulatory ETF Facts document (found in our Regulatory section, and also through each ETFs landing page), combined, provide comparable relevant information about each ETF. These documents, combined with all other disclosure contained on our site (such as each product’s LEI (Legal Entity Identifier) number, found on each product page), should provide sufficient information to any EU distributor in order for them to comply with regulations.

Further, while we note that Horizons ETFs does not typically engage in broker-commission soft dollar arrangements, the Financial Statements of each ETF will identify the value of any such arrangements.

Almost all of our actively managed ETFs can make distributions.  The distribution frequency and amounts are available on the Horizons ETFs website ETF product page for each active ETF.
Actively managed or active ETFs are similar to traditional mutual funds, but the units of the fund are listed on an exchange. As a result, active ETFs combine the benefits of active management with the traditional structural advantages of ETFs, which results in lower fees, greater flexibility, liquidity, and convenience.
Actively managed ETFs
• Managed by one or more portfolio managers
• Seeks to deliver better risk-adjusted returns than an index by selecting the portfolio securities for the ETF that meet its investment goals
• Slightly higher than index ETFs, but generally much lower than comparable actively managed regular mutual funds

Passively managed ETFs 
• Tracks an index
• Seeks to replicate the performance of an index as efficiently as possible
• Low cost, since minimal portfolio oversight is required beyond replicating the index
More commonly known as an index-tracking or passive ETF, it is an ETF that provides one times (1x) the exposure to the underlying index or commodity. As opposed to leveraged ETFs which can provide 2x the daily exposure, or active ETFs that aim to beat a benchmark.

Horizons ETFs offers many types of single or benchmark ETFs such as single equity, single currency, and single commodity ETFs.
For any passive ETF that seeks to replicate the returns of an index or commodity benchmark, the success of the investment strategy is usually measured by how closely the ETF replicates the returns of that index or commodity benchmark. Any deviation from the return of the ETF versus the return of that index or commodity benchmark is generally considered tracking error.
 
Tracking error can be caused by a variety of factors including management fees, trading execution costs and taxes. 
Inverse and leveraged ETFs are tactical investment solutions that are primarily designed for the execution of a particular short-term investment strategy or perspective of the markets. These ETFs are designed to meet their investment objective only on a daily basis. They are not appropriate as a buy and hold investments if an investor is unable to closely monitor their performance. Because these ETFs use leverage, gains and losses are magnified and, due to compounding, the performance over periods other than one day will likely differ in amount and possibly direction, from the reference index/commodity benchmark. Please speak to an advisor or read the ETF’s prospectus before investing in them.  
These ETFs may pay distributions annually. However, none of these ETFs have ever paid a distribution since their launch. 
For the BetaPro ETFs whose objective is to realize a multiple of 2x or -2x the daily returns of a given benchmark index in particular, an investor's investment will experience the effects of daily compounding.

• For example, if $100 is invested in a BetaPro 2x Daily Bull ETF and the underlying index rises 1% on the next day, the investor would have $200 of exposure on day 1 and earn $2. On the following day, the investor would have $102 invested and $204 (i.e. 2x) of exposure. As such, as the ETF rises on consecutive days, the investor's capital invested to realize the daily return of the underlying benchmark index will increase each day, reflecting the "compounding" effect.

• Conversely, if $100 is invested in a BetaPro 2x Daily Bull ETF and the underlying index declines 1% on the next day, the investor would lose $2. On the following day, $98 will be invested to achieve the same investment objective. As such, as the ETF drops on consecutive days, the investor's capital invested to realize the daily return of the underlying benchmark index will decrease each day, again reflecting the "compounding" effect.

• This latter phenomena explains why the investment risk is limited to the initial cost invested. You are only potentially subject to losing your original investment because the BetaPro 2x Daily Bull, -2x Daily Bear, and Daily Inverse ETFs are rebalanced daily so you cannot lose more than you invested.
The BetaPro ETFs track a number of key benchmarks across different asset classes. Please see the specific ETF’s website page on the Horizons ETFs’ website to obtain the benchmark for any of the BetaPro ETFs.
Since these ETFs provide leverage, both gains and losses are magnified. Investors should anticipate a substantially higher standard deviation with these ETFs versus ETFs that do not use leverage. BetaPro ETFs are rebalanced on a daily basis, so unlike traditional leverage strategies, which tend to use lending mechanisms such as margin, BetaPro ETF unit holders will not lose more than their initial investment. These ETFs are designed to meet their investment objective only on a daily basis. Because these ETFs use leverage, gains and losses are magnified and, due to compounding, the performance over periods other than one day will likely differ in amount and possibly direction, from the reference index/commodity benchmark. Please read the prospectus and learn about all the risks associated with leveraged ETF investing.

Mutual funds in Canada (which includes ETFs) are typically set up using either a trust or corporate structure. First established in 1987, mutual fund corporations are structured similarly to traditional corporations. Under one corporate structure, many different investment fund mandates (series) can exist. In the case of ETFs, the different ETFs are all held within the corporate structure, where each ETF is a separate class or series.

Within a Canadian mutual fund corporation structure, only Canadian capital gains and dividends can be distributed to investors. From a tax perspective, any income and foreign dividends generated within any one series of the corporation can potentially be offset by losses and expenses incurred in other series (from a tax perspective), which generally makes the corporate class structure more tax-efficient than a traditional mutual fund trust.

According to Strategic Insight, more than $157 billion is invested in corporate class mutual funds in Canada. It is a widely used structure used by advisors and end-investors primarily for taxable accounts.

Horizons ETFs will merge all of the ETFs it offers that primarily use derivatives-based structures into a new mutual fund corporation; this would include all of the Horizons Total Return Index (TRI) ETFs and all of the BetaPro ETFs. The ETFs will all still be ETFs and have the same investment objectives, same tickers, and same fee structures, as they do currently. The primary difference is that each ETF will be a series within the corporate class structure as opposed to an individual trust, which will allow these ETFs to pool expenses and use realized losses of income and capital to offset realized gains of income and capital across all series.

Horizons is proposing to add 15 of our TRI ETFs into the corporate structure alongside four single commodity ETFs and 25 leveraged, inverse and inverse leveraged ETFs that make up our BetaPro ETF family. All of these ETFs use a synthetic derivative replication structure and no taxable distributions have ever been paid to end unitholders of these 44 ETFs. The ETFs are expected to maintain their current derivative-based structure and follow the same investment objectives as when they were mutual fund trusts. They are expected to keep the likelihood of a taxable distribution by the new mutual fund corporation extremely low.

The synthetic derivatives structure of these ETFs, which utilize swap-agreements with major Canadian Schedule 1 Banks, are designed to reduce the likelihood of taxable distributions being paid to unitholders. Instead, the value of any income or dividends generated by the underlying index securities are generally reflected in the net-asset-value of the ETF (NAV). Under the new corporate structure, nothing about this arrangement will change. However the TRI ETFs will have the added benefit of being able to aggregate future realized income and capital losses and expenses to offset any potential realized income and capital gains that could result from the settlement or partial settlement of swap contracts.

The major difference between these ETFs and other corporate class funds is that these products will use a synthetic derivatives structure as the portfolio, whereas most other corporate class mandates in Canada utilize a traditional physical strategy, where they own the physical securities of a portfolio.

By using the synthetic derivatives structure, our ETFs will typically only realize income gains and losses from downsizing the derivative contracts and will continue to have additional performance advantages, which include low-tracking error relative to other physically replicated index strategies, as well as similar tax benefits to when they were in a trust structure, since these ETFs are not expected to make regular income distributions.

The 2019 Federal Budget released by the Department of Finance on March 19, 2019, and updated on July 30, 2019, proposed several changes to the taxation of Canadian mutual fund trusts and in particular the “allocation to redeemers” methodology used by many mutual funds and exchange-traded funds. The TRI and BetaPro ETFs had utilized the “allocation to redeemers” methodology to ensure the tax-efficiency of their strategy.

With the elimination of the “allocation to redeemers” methodology as it relates to income, there was an increased likelihood that the TRI and BetaPro ETFs would have to make distributions after the 2019 tax year. By reorganizing the TRI and BetaPro ETFs into a corporate fund structure, Horizons ETFs will no longer need to use the “allocation to redeemers” methodology or the related Capital Gains Refund Mechanism (CCRM).

In our view, the corporate structure provides ample flexibility to eliminate or significantly reduce the potential for taxable distributions being made in the circumstances where there is a requirement to pre-settle any of the underlying swaps in these ETFs.

There are also significant operational efficiencies that can be achieved through a corporate structure. For example, Horizons ETFs will only need to file one-tax return for the overarching mutual fund corporation. All expenses for the corporation can also be aggregated, alongside all gains and losses, which can create more structural tax efficiency.

The ETFs will also be able to streamline their ongoing reporting requirements and how they deal with the management of the swap structures and expenses associated with that process.

In our view these operational efficiencies should result in cost-advantages for the corporation, and by extension, unit holders of the ETFs.

The government can always make legislative changes that impact any investment product structures. In the case of these corporate class ETFs, we believe the government would have to target the mechanics of the corporate class structure as a whole, which would effectively impact all $157 billion+ of corporate class mutual assets.

The currently proposed legislation changes impact our ETFs ability to use the “allocation to redeemers” methodology, which meant the federal government was concerned with how certain unit holders were deducting the income allocated to them from the TRI and BetaPro ETFs.

This new structure will not use the “allocation to redeemers” methodology, and will provide ample, well-established, corporate tax mechanisms that can be used to continue the benefits of these ETF strategies.

If all of the necessary regulatory approvals are received and the reorganization is approved by unitholder vote, there will be an automatic merger of a unitholders’ current trust units into a new series of shares of the corporate structure that would have substantially the same attributes to the ETF trust they previously owned. The proposed corporate class reorganization is not expected to be a taxable event for unitholders of the ETFs, so long as those Canadian resident unitholders who currently own units of the affected ETFs in taxable accounts, subsequent to the reorganization, make a joint election with the proposed mutual fund corporation under Section 85 of the Income Tax Act, as part of the exchange from their existing trust units into shares of a series of the corporation. Horizons ETFs is establishing a process to provide assistance to unitholders and their custodians in taking the necessary steps to file the joint election, which will be free of charge.

The reorganization of the existing ETF units into a series of shares of the new ETF corporation does, from a tax perspective, constitute a deemed disposition of the units. However, where the units are held in a taxable account, the unitholder can make a joint election with the mutual fund corporation to defer such disposition, as previously indicated.

We do not expect any tax liability to result from the built-up historical gains of any of the ETFs. The only way for a unitholder to incur a potential tax liability in this process would be to sell their units in the open market through the facilities of a stock exchange thereby realizing a capital gain or loss, or to not file a section 85 rollover documentation if they hold the units in a taxable account at the conversation/reorganization date.

Horizons ETFs does not anticipate changing the fee structure on any of these ETFs related to their reorganization, nor do we expect any additional costs for unitholders to own units of these ETFs. Horizons ETFs is covering all costs of the reorganization.

While we don’t expect these ETFs to pay any distributions, there is always the possibility that distributions could be required to be paid. However, we would expect their size and frequency to be much smaller than other types of physically replicated strategies. All distributions from a mutual fund corporation are in the form of Canadian capital gains and dividends.

No. There is no plan to create a T-class of these ETFs, since they are not expected to pay any taxable distributions, which negates most of the need to create a T-class structure at this time.

If approved at unitholder meetings expected to begin early November, 2019, the conversion of the existing mutual fund trust structure into the proposed corporate structure should occur before the end of the 2019 calendar year.

There are regulatory and unitholder approvals required to complete the proposed reorganization. Unitholders will be delivered materials by mail in the coming weeks, which will include how to vote. We fully expect to revive all necessary approvals in due course.

If unitholders do not approve the conversion, Horizons ETFs will need to examine a number of product structure alternatives on an ETF by ETF basis, including potentially terminating some of the affected ETFs. However, since the proposed changes are, in our view, clearly in the best interest of the investors, we have no reason to expect that the required approvals would not be forthcoming.

This will vary from jurisdiction to jurisdiction, however, generally, the exchange of the existing ETF units for the corresponding series of shares of the ETF corporation will be deemed as a disposition for tax purposes.

Many jurisdictions, like Canada, have elections tax payers can make in order to defer the taxable event until they dispose of the series of shares of the new ETF corporation. Investors should consult the local tax advisor for guidance.

For U.S. residents, we understand that no such deferral is expected to be available.

The determination of whether or not an investor should invest in one of these ETFs should be made after careful consideration of the client’s risk/return objectives. Investors should also always read the ETF’s prospectus before investing. In the case of ETFs from the TRI product line-up, these typically generate optimal results when held in taxable, i.e. non-registered accounts where income and dividend distributions would be taxed as earned. That said, all of these ETFs are eligible for registered accounts, including RRSP, RRIFs and TFSAs.

There are numerous risks associated with investing. Each of the individual ETFs have risk ratings associated with the inherent historical market risk of their respective investment objectives, and their prospectuses detail other risks associated with investing in them as well. However, in terms of risk associated with the corporate structure, we view there to be limited risk relative to traditional mutual fund trusts.

One key risk associated with a corporate structure relative to a traditional mutual fund trust is the fact that any income earned within the corporate structure cannot be distributed to end unitholders and is generally taxed at the corporate rate, which can be higher than an individual investor’s marginal tax rate. However, since the new mutual fund corporation is not expected to have net taxable income, we believe this risk is not significant. Since the corporation is not expected to have net taxable income, we do not expect any of the ETFs to have distributions, similar to how they operate now.

All of these ETFs are TSX-listed ETFs and can be purchased or sold through an advisor or in your self-directed brokerage account.

ETF Name Ticker   ETF Name Ticker
Horizons S&P/TSX 60™ Index ETF HXT   BetaPro Gold Bullion 2x Daily Bull ETF HBU
Horizons S&P 500® Index ETF HXS   BetaPro Gold Bullion -2x Daily Bear ETF HBD
Horizons S&P 500 CAD Hedged Index ETF HSH   BetaPro Crude Oil 2x Daily Bull ETF HOU
Horizons S&P/TSX Capped Energy Index ETF HXE   BetaPro Crude Oil -2x Daily Bear ETF HOD
Horizons S&P/TSX Capped Financials Index ETF HXF   BetaPro Natural Gas 2x Daily Bull ETF HNU
Horizons Cdn Select Universe Bond ETF HBB   BetaPro Natural Gas -2x Daily Bear ETF HND
Horizons NASDAQ-100® Index ETF HXQ   BetaPro Silver 2x Daily Bull ETF HZU
Horizons EURO STOXX 50® Index ETF HXX   BetaPro Silver -2x Daily Bear ETF HZD
Horizons Cdn High Dividend Index ETF HXH   BetaPro S&P/TSX 60™ 2x Daily Bull ETF HXU
Horizons US 7-10 Year Treasury Bond ETF HTB   BetaPro S&P/TSX 60™ -2x Daily Bear ETF HXD
Horizons US 7-10 Year Treasury Bond CAD Hedged ETF HTH   BetaPro S&P/TSX Capped Financials™ 2x Daily Bull ETF HFU
Horizons Laddered Canadian Preferred  Share  Index ETF HLPR   BetaPro S&P/TSX Capped Financials™ -2x Daily Bear ETF HFD
Horizons Intl Developed Markets Equity Index ETF HXDM   BetaPro S&P/TSX Capped Energy™  2x Daily  Bull ETF HEU
Horizons Equal Weight Canada REIT Index ETF HCRE   BetaPro S&P/TSX Capped Energy™ -2x Daily Bear ETF HED
Horizons Equal Weight Canada Banks Index ETF HEWB   BetaPro NASDAQ-100® 2x Daily Bull ETF HQU
Horizons Gold ETF HUG   BetaPro NASDAQ-100® -2x Daily Bear ETF HQD
Horizons Silver ETF HUZ   BetaPro S&P 500® 2x Daily Bull ETF HSU
Horizons Crude Oil ETF HUC   BetaPro S&P 500® -2x Daily Bear ETF HSD
Horizons Natural Gas ETF HUN   BetaPro Canadian Gold Miners 2x Daily Bull ETF HGU
    BetaPro Canadian Gold Miners -2x Daily Bear ETF HGD
  BetaPro Marijuana Companies 2x Daily Bull ETF HMJU
  BetaPro Marijuana Companies Inverse ETF HMJI
  BetaPro S&P/TSX 60™ Daily Inverse ETF HIX
  BetaPro S&P 500® Daily Inverse ETF HIU
  BetaPro S&P 500 VIX Short-Term Futures™ ETF HUV
A unit consolidation is the opposite of a unit split, where there is a reduction in the number of units and an accompanying increase in the unit price (NAV), such that the value of holdings remains the same after the consolidation. 

For example, if it was announced on July 6, 20XX, after the TSX closed for trading on Thursday, July 19, 20XX, the units of the following exchange traded fund would be consolidated on the basis of the ratio (the "Consolidation Ratio") set out below, and begin trading on a consolidated basis on Friday, July 20, 20XX, the effective date of the consolidation:
 
ETF Ticker Split Ratio
BetaPro S&P 500 VIX Short-Term Futures™ 2x Daily Bull ETF HVU 1:10

Pre-consolidation:
Shares 1,000
NAV $2
Value $2,000 

Post-consolidation:
Shares 100 (1000 ÷ 10)
NAV $20 ($2 x 10)
Value $2,000 

In a 1:10 consolidation, every 10 units would be consolidated into a single unit. This means you will have one-tenth the number of HVU shares and the price of HVU will be multiplied by a factor of 10. Mathematically, this event will not impact the value of your investment in HVU. For example, if you had 100 shares prior to the consolidation, you now have 10 shares, both worth $2,000. 
As a general rule, a consolidation would occur with unit values at or lower than $4. Lower priced securities require a relatively higher number of shares to be traded to establish the same dollar value position. As a result, investors paying brokerage commissions on a per share basis would incur higher transaction costs. As well, brokerage firms typically will not allow securities trading at prices under $3 to be marginable.
As its name implies, a unit split is when an ETF increases the number of outstanding units of the ETF at a particular ratio (such as 2 for 1), and decreases the net asset per unit of the ETF, by the inverse ratio. In a unit split, there is an increase in the number of units issued accompanied by a proportional decrease in the unit price (Net Asset Value), such that the value of holdings remains the same after the split. 

Here's an example:

If on Friday, May 4, 2015, at the end of the trading day for the TSX, it was announced that units of the following ETF would be split on the basis of the ratio (the "Split Ratio") set out below, and began trading on a split adjusted basis on Monday, May 7, 2015. The split becomes effective on May 9, 2015, for unitholders of record on that date: 
 
ETF Ticker Split Ratio
BetaPro Natural Gas -2x Daily Bear ETF HND 4:1

A 4:1 unit split means each unit will be split into four units. After the split, you will have four times the number of HND shares you had previously. Additionally, the price of HND will be divided by a factor of four. Mathematically, this will not impact the value of your investment in HND. For example, if you had 100 shares worth $2,000 prior to the split, you now have 400 shares that are still worth $2,000 post-split. 

Pre-split:
Shares 100
NAV $20 (per share)
Value $2,000 

Post-split on a 4:1 basis:
Shares 400 (100 x 4)
NAV $5 (per share) ($20 ÷ 4)
Value $2,000 
As a general rule of thumb, the decision to split units of an ETF would occur with unit values greater than or equal to $40. The split makes it easier for an investor to afford and trade 100 share "board lots." Without the split, lower trading volumes may occur.
Horizons ETFs Management (Canada) Inc. works very closely with reorganization departments at all the major brokerage firms to provide the complete and timely information required for these changes. However, in the normal course of business it may take 3-5 business days to update holdings for clients. Please call your brokerage firm with any questions and to confirm that your individual account has been updated.
Date Ticker Name S / C Ratio
12/18/2008 HMU BetaPro S&P/TSX Global Base Metals™ Bull+ ETF C 1 : 4
12/18/2008 HJU BetaPro MSCI Emerging Markets Bull+ ETF C 1 : 5
01/02/2009 HOD BetaPro NYMEX® Crude Oil Bear+ ETF S 2 : 1
01/02/2009 HOU BetaPro NYMEX® Crude Oil Bull+ ETF C 1 : 5
01/02/2009 HGD BetaPro S&P/TSX Global Gold™ Bear+ ETF C 1 : 5
04/15/2009 HND BetaPro NYMEX® Natural Gas Bear+ ETF S 5 : 1
04/15/2009 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 4
09/16/2009 HND BetaPro NYMEX® Natural Gas Bear+ ETF S 2 : 1
09/16/2009 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 5
10/27/2009 HMU BetaPro S&P/TSX Global Base Metals™ Bull+ ETF S 3 : 1
10/27/2009 HMD BetaPro S&P/TSX Global Base Metals™ Bear+ ETF C 1 : 4
10/27/2009 HJU BetaPro MSCI Emerging Markets Bull+ ETF S 3 : 1
10/27/2009 HJD BetaPro MSCI Emerging Markets Bear+ ETF C 1 : 4
06/03/2010 HGD BetaPro S&P/TSX Global Gold™ Bear+ ETF C 1 : 4
11/8/2010 HZU BetaPro COMEX® Silver Bull+ ETF S 3 : 1
11/8/2010 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 2
03/16/2011 HBU BetaPro COMEX® Gold Bullion Bull+ ETF S 2 : 1
03/16/2011 HKU BetaPro Comex® Copper Bull+ ETF S 2 : 1
03/16/2011 HZD BetaPro COMEX® Silver Bear+ ETF C 1 : 4
05/10/2011 HZU BetaPro COMEX® Silver Bull+ ETF S 3 : 1
09/19/2011 HBD BetaPro COMEX® Gold Bullion Bear+ ETF C 1 : 4
11/23/2011 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 4
04/13/2012 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 4
04/13/2012 HNO BetaPro NYMEX® Long Natural Gas/Short Crude Oil Spread ETF C 1 : 4
04/13/2012 HUN Horizons NYMEX® Natural Gas ETF C 1 : 4
05/09/2012 HND BetaPro NYMEX® Natural Gas Bear+ ETF S 4 : 1
05/09/2012 HIN BetaPro NYMEX® Natural Gas Inverse ETF S 4 : 1
07/19/2012 HVU BetaPro S&P 500 VIX Short/Term Futures™ Bull+ ETF C 1 : 10
01/04/2013 DLR.U Horizons US Dollar Currency ETF C 1 : 1.009601
03/13/2013 HVU BetaPro S&P 500 VIX Short/Term Futures™ Bull+ ETF C 1 : 4
04/05/2013 HND BetaPro NYMEX® Natural Gas Bear+ ETF C 1 : 2
04/05/2013 HUV BetaPro S&P 500 VIX Short/Term Futures™ ETF C 1 : 4
05/06/2013 HZU BetaPro COMEX® Silver Bull+ ETF C 1 : 4
05/06/2013 HGU BetaPro S&P/TSX Global Gold™ Bull+ ETF C 1 : 4
05/15/2013 HEP Horizons Enhanced Income Gold Producers ETF C 1 : 2
09/09/2013 HXT Horizons S&P/TSX 60™ Index ETF C 1 : 2
11/18/2013 HXS Horizons S&P 500® Index ETF C 1 : 2
11/18/2013 HVU BetaPro S&P 500 VIX Short/Term Futures™ Bull+ ETF C 1 : 4
11/18/2013 HQD BetaPro NASDAQ/100® Bear+ ETF C 1 : 4
12/20/2013 DLR Horizons US Dollar Currency ETF C 1 : 1.005
02/13/2014 HND BetaPro NYMEX® Natural Gas Bear+ ETF C 1 : 2
06/18/2014 HED BetaPro S&P/TSX Capped Energy™ Bear+ ETF C 1 : 4
06/18/2014 HFD BetaPro S&P/TSX Capped Financials™ Bear+ ETF C 1 : 4
06/18/2014 HSD BetaPro S&P 500® Index Bear+ ETF C 1 : 4
06/18/2014 HQU BetaPro NASDAQ/100® Bull+ ETF S 2 : 1
07/30/2014 HVU BetaPro S&P 500 VIX Short/Term Futures™ Bull+ ETF C 1 : 5
11/24/2014 HOU BetaPro NYMEX® Crude Oil Bull+ ETF C 1 : 2
01/14/2015 DLR Horizons US Dollar Currency ETF C 1 : 1.005951
01/16/2015 HOU BetaPro NYMEX® Crude Oil Bull+ ETF C 1 : 4
08/24/2015 HEU BetaPro S&P/TSX Capped Energy™ Bull+ ETF C 1 : 4
08/24/2015 HUV BetaPro S&P 500 VIX Short/Term Futures™ ETF C 1 : 10
08/24/2015 HVU BetaPro S&P 500 VIX Short/Term Futures™ Bull+ ETF C 1 : 10
08/25/2015 HVI BetaPro S&P 500 VIX Short/Term Futures™ Inverse ETF S 2 : 1
11/26/2015 HGU BetaPro S&P/TSX Global Gold™ Bull+ ETF C 1: 5
11/26/2015 HIU BetaPro S&P 500® Inverse ETF C 1 : 10
11/26/2015 HNU BetaPro NYMEX® Natural Gas Bull+ ETF C 1 : 10
11/26/2015 HOU BetaPro NYMEX® Crude Oil Bull+ ETF C 1 : 2
11/26/2015 HQD BetaPro NASDAQ/100® Bear+ ETF C 1 : 5
11/26/2015 HXD BetaPro S&P/TSX 60™ Bear+ ETF C 1 : 2
11/26/2015 HZU BetaPro COMEX® Silver Bull+ ETF C 1 : 5
02/16/2016 HEE Horizons Enhanced Income Energy ETF C 1 : 5
02/16/2016 HEP Horizons Enhanced Income Gold Producers ETF C 1 : 5
02/16/2016 HNY Horizons Natural Gas Yield ETF C 1 : 5
05/30/2016 HGD BetaPro S&P/TSX Global Gold™ Bear+ ETF C 1 : 4
05/30/2016 HOU BetaPro NYMEX® Crude Oil Bull+ ETF C 1 : 2
05/30/2016 HTD BetaPro U.S. 30/Year Bond Bear+ ETF C 1 : 2
05/30/2016 HUC Horizons NYMEX® Crude Oil ETF C 1 : 2
05/30/2016 HGU BetaPro S&P/TSX Global Gold™ Bull+ ETF S 2 : 1
11/26/2016 HVU BetaPro S&P 500 VIX Short/Term Futures™ 2x Daily Bull ETF C 1 : 10
05/29/2017 HVU BetaPro S&P 500 VIX Short/Term Futures™ 2x Daily Bull ETF C 1 : 3
05/29/2017 HUV BetaPro S&P 500 VIX Short-Term Futures™ ETF C 1 : 2
05/29/2017 HVI BetaPro S&P 500 VIX Short-Term Futures™ Daily Inverse ETF S 2 : 1
01/15/2018 HVU BetaPro S&P 500 VIX Short/Term Futures™ 2x Daily Bull ETF C 1 : 5
03/04/2019 HNU BetaPro Natural Gas 2x Daily Bull ETF C 1 : 5
03/04/2019 HSD BetaPro S&P 500® -2x Daily Bear ETF C 1 : 4

Commissions, management fees and expenses all may be associated with an investment in exchange traded products managed by Horizons ETFs Management (Canada) Inc. (the "Horizons Exchange Traded Products"). The Horizons Exchange Traded Products are not guaranteed, their values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the Horizons Exchange Traded Products. Please read the relevant prospectus before investing.

The Horizons Exchange Traded Products include our BetaPro products (the “BetaPro Products”). The BetaPro Products are alternative mutual funds within the meaning of National Instrument 81-102 Investment Funds, and are permitted to use strategies generally prohibited by conventional mutual funds: the ability to invest more than 10% of their net asset value in securities of a single issuer, to employ leverage, and engage in short selling to a greater extent than is permitted in conventional mutual funds. While these strategies will only be used in accordance with the investment objectives and strategies of the BetaPro Products, during certain market conditions they may accelerate the risk that an investment in units of a BetaPro Product decreases in value. The BetaPro Products consist of our 2x Daily Bull and 2x Daily Bear ETFs (“2x Daily ETFs”), Inverse ETFs (“Inverse ETFs”) and our BetaPro S&P 500 VIX Short-Term Futures™ ETF (the “VIX ETF”). Included in the 2x Daily ETFs and the Inverse ETFs are the BetaPro Marijuana Companies 2x Daily Bull ETF (“HMJU”) and BetaPro Marijuana Companies Inverse ETF (“HMJI”), which track the North American MOC Marijuana Index (NTR) and North American MOC Marijuana Index (TR), respectively. The 2x Daily ETFs and certain other BetaPro Products use leveraged investment techniques that can magnify gains and losses and may result in greater volatility of returns. These BetaPro Products are subject to leverage risk and may be subject to aggressive investment risk and price volatility risk, among other risks, which are described in their respective prospectuses. Each 2x Daily ETF seeks a return, before fees and expenses, that is either 200% or –200% of the performance of a specified underlying index, commodity futures index or benchmark (the “Target”) for a single day. Each Inverse ETF seeks a return that is –100% of the performance of its Target. Due to the compounding of daily returns a 2x Daily ETF’s or Inverse ETF’s returns over periods other than one day will likely differ in amount and, particularly in the case of the 2x Daily ETFs, possibly direction from the performance of their respective Target(s) for the same period. Hedging costs charged to BetaPro Products reduce the value of the forward price payable to that ETF. Due to the high cost of borrowing the securities of marijuana companies in particular, the hedging costs charged to HMJI are expected to be material and are expected to materially reduce the returns of HMJI to unitholders and materially impair the ability of HMJI to meet its investment objectives. Currently, the manager expects the hedging costs to be charged to HMJI and borne by unitholders will be between 15.00% and 35.00% per annum of the aggregate notional exposure of HMJI’s forward documents. The hedging costs may increase above this range. The manager will publish, on its website, the updated monthly fixed hedging cost for HMJI for the upcoming month as negotiated with the counterparty to the forward documents, based on the then current market conditions. The VIX ETF, which is a 1x ETF, as described in the prospectus, is a speculative investment tool that is not a conventional investment. The VIX ETF’s Target is highly volatile. As a result, the VIX ETF is not intended as a stand-alone long-term investment. Historically, the VIX ETF’s Target has tended to revert to a historical mean. As a result, the performance of the VIX ETF’s Target is expected to be negative over the longer term and neither the VIX ETF nor its target is expected to have positive long-term performance. Investors should monitor their holdings in BetaPro Products and their performance at least as frequently as daily to ensure such investment(s) remain consistent with their investment strategies.

*The indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The rates of return shown in the table are not intended to reflect future values of the ETF or returns on investment in the ETF. Only the returns for periods of one year or greater are annualized returns.