Horizons ETFs believes that investors should be able to access passive index strategies in the most cost and tax-efficient way possible. For this reason, each of Horizons Total Return Index ETFs (Horizons TRI ETFs) provides passive exposure to an index or benchmark from within a corporate class structure. Each Horizons TRI ETF is a separate corporate class, meaning its shares represent a specific class within a corporate structure. This structure allows these ETFs to seek to deliver greater tax-efficiency with less tracking error than traditional passive index or benchmark ETFs. Horizons TRI ETFs primarily utilize total return swaps, and are not expected to make taxable distributions.

The Horizons TRI ETFs that utilize total return swaps achieve tax-efficiency primarily by receiving the total return of the underlying index (before fees) – the value of the underlying index constituent distributions get reflected in the ETF’s share price and are not distributed to share holders. This means that an investor is generally only expected to be taxed on any capital appreciation of the ETF if, and when, the shares of their ETF are sold.

How Does a Horizons TRI ETF Work?

The majority of Horizons TRI ETFs utilize a synthetic structure, known as a total return swap.

Unlike a traditional physical replication ETF that typically purchases the securities found in the relevant index in the same proportions as the index, most Horizons TRI ETFs use a synthetic structure that never buys the securities of an index directly. Instead, the Horizons TRI ETFs receive the total return of the relevant index by entering into Total Return Swap agreements with one or more counterparties, typically large Canadian financial institutions, which provide the ETFs with the total return of the relevant index.

The Horizons TRI ETFs that utilize total return swaps achieve tax-efficiency primarily by receiving the total return of the underlying index (before fees) – the value of the underlying index constituent distributions get reflected in the ETF’s share price and are not distributed to shareholders. This means that an investor is generally only expected to be taxed on any capital appreciation of their ETF shares if, and when, their shares of the ETF are sold.

To gain exposure to certain indices through a total return swap, counterparties may charge the Horizons TRI ETF a swap fee (depending on the underlying asset). The Horizons TRI ETFs that provide exposure to foreign equities and fixed income securities will typically be charged a swap fee. None of the Horizons TRI ETFs that provide exposure to Canadian equities and preferred shares currently have a swap fee associated with their total return swap.

Total-Return-Chart.png 

Tax-Efficient Investing

Each of the Horizons TRI ETFs is a class of shares in a corporate class structure, the Horizons ETF Corp. This simply means the ETFs are collectively structured as a single corporation, rather than individually as trusts, which was the traditional structure used by Canadian-listed ETFs and mutual funds.

NOTE: While the corporate class structure used by Horizons TRI ETFs is generally referred to as a mutual fund corporation, that is simply how it is classified for tax authorities. All of the products offered by Horizons ETFs are exchange traded funds, and not mutual funds offered via FundServ.

First established in 1987, mutual fund corporations are structured similarly to traditional corporations. Under one corporate structure, many different investment fund mandates (series or classes) can exist. In the case of Horizons ETF Corp., the different Horizons TRI ETFs are all held within the corporate structure, where each is a separate class of shares.

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

According to research, more than $160 billion is invested in corporate class mutual funds in Canada as at November 30, 2019. It is a structure widely-used by advisors in Canada and end-investors, primarily in taxable accounts, to achieve more tax-efficient returns.

What Makes the Horizons TRI ETFs Corporate Class Different?

The major difference between the Horizons TRI ETFs and other corporate class funds is that our ETFs primarily hold derivatives to achieve their investment returns, although physically-replicated Index ETFs can also be held within Horizons ETF Corp.

Within Horizons ETF Corp., the Horizons TRI ETFs offer distinct tax-efficiencies for investors. The tax-efficiency to investors is primarily achieved through our proprietary, synthetic Total Return structure, which is used by most of the Horizons TRI ETFs. There are also tax-efficiencies realized by Horizons ETF Corp. itself, when compared to a mutual fund trust structure, since the corporation can use widely-accepted corporate tax accounting options, such as the ability to use losses and expenses to offset income across all classes.

The Horizons Tax Advantage: How Our Corporate Class Works For You

The Canadian ETF universe has a large variety of traditional, physically-replicated benchmark index products that can offer investors comparatively low-cost exposure to major indices and benchmarks. However, distributions from these investment funds generally result in taxable events for investors. These taxable distributions can reduce an investor’s potential after-tax return, when compared to the potential after-tax return on investment from owning a comparable Horizons TRI ETF.

Performance Comparison Between a Horizons TRI Bond ETF and a Traditional Index Bond ETF

Horizons TRI ETFs can offer a greater after-tax return on investment when held in a non-registered account, compared to a traditional, physically-replicated index ETF.

As an illustrative example only, assuming a 3% annual distribution yield, paid quarterly, on an initial investment of $1 million, our Horizons TRI ETFs’ tax-efficient strategy could generate as much as $77,463 in after-tax savings over a 10-year period, for an Ontario investor in the highest marginal tax bracket.

It is important to note that no Horizons TRI ETFs re-characterize investment income as capital gains.

Comparison Assumption

Investment Amount $1,000,000
Annualized Yield of Underlying 3.00%
Applicable Income Tax Rate 53.53%
Foreign Withholding Tax Rate 0.00%
Distribution Frequency (Physical) Quarterly
Annualized Investment Return 0.00%
Capital Gains Tax Rate 26.76%
Total Investment Horizon (Years) 10
 
Annual Management Fees and Expenses  
Total Return Index ETF 0.23%
Physical Investment ETF 0.09%
 

Canadian Bond Horizons TRI ETF vs. Traditional Physically-Replicated Canadian Bond Index ETF Tax Analysis (Illustrative Example)

  Corporate
Class
Traditional Corporate Class
minus Traditional
Original Investment $1,000,000.00 $1,000,000.00 -
Constituent Net Distributions (3.0%) N/A $336,313.13 -$336,313.13
Compounded Pre-tax Investment Value $1,319,152.51 $1,336,313.13 -$17,160.62
 
Cumulative Pre-tax Investment Return 31.92% 33.63% -1.72%
Annualized Pre-tax Investment Return 2.81% 2.94% -0.13%
 
Capital Gain (Loss Carry Forward) $319,152.51 - $319,152.51
Capital Gains Tax Payable $85,405.21 - $85,405.21
Distribution Tax Payable - $180,028.42 -$180,028.42
Total Tax Paid $85,405.21 $180,028.42 -$94,623.21
 
After Tax Proceeds $1,233,747.30 $1,156,284.71 $77,462.58
Cumulative After Tax Investment Return 23.37% 15.63% 7.75%
Annualized After Tax Investment Return 2.12% 1.46% 0.75%
 

FOR ILLUSTRATIVE PURPOSES ONLY. The above example is for Illustrative Purposes Only, over a 10-year period, using the assumptions noted in the prior page and highlights the expected after-tax performance benefits of holding a Horizons TRI ETF (HBB) versus another Canadian-domiciled physically replicated Canadian bond ETF in a non-registered account, assuming both ETFs earned/ reflected a net 3% income distribution yield (in CAD) and track the exact same universe of bonds and assumes no changes to the market value of the Index constituents. This example does not take into account any fees or expenses of the ETFs, (aside from the stated investment fees and expenses) nor any commissions, fees or expenses that would be associated with a purchase or sale of ETF units/shares. The example does contemplate the sale of the ETF units/shares at the end of the period and the expected tax liability that would result. *Both ETFs are held by an Ontario resident investor in the highest tax bracket, who would have a marginal tax rate of 53.53% in 2020.

Who Should Consider Corporate Class?

Investors using a Non-Registered Account - Enjoy the Benefits of Tax Deferral

Canadian investors that have already made the maximum allowable contributions to their registered investment accounts and tax-free savings accounts (TSFAs) who are seeking to invest more, will likely have to do so through a non-registered account.

Unlike registered accounts and TFSAs, nonregistered accounts generally don’t provide the same taxation benefits and require you to pay taxes on any distributions you’ve received on an annual basis. As the Horizons TRI ETFs are not expected to make distributions, an investor is generally only expected to be taxed on any capital appreciation if their shares of the ETF are sold.

Seniors - Preventing Income from Impacting Old Age Security

For seniors receiving Old Age Security (OAS), “clawback” on OAS payments can occur if the individual is receiving income, including dividend income, greater than $77,580 (2019).

With Horizons TRI ETFs, constituent distributions are instead reflected as part of the ETF’s total return. This means that seniors seeking to ensure their OAS payments aren’t impacted by the income they receive from their investments can alternatively consider using our Horizons TRI ETFs.

In-trust Accounts - Ensure Your Nest Egg Stays Strong for Generations

For those investing for minor dependents or relatives through an in-trust account, it’s important to know that in-trust investments are typically subject to income attribution, meaning the onus to pay taxes on the income the trust generates will be on the contributor to the trust rather than the beneficiary of the trust. However, this doesn’t apply to capital gains. As the Horizons TRI ETFs are not expected to make distributions, an investor is generally only expected to be taxed on any capital appreciation if their shares of the ETF are sold.

Small Business Owners - Tax-Efficiency for Corporate Accounts

If you’re a small business owner looking to invest with your corporate account, it’s important to know that passive investment income can reduce your Small Business Deduction (SBD) tax credit, at a rate of $5 for every $1 of investment income above the $50,000 threshold.

Horizons TRI ETFs offer small business owners a way to potentially grow their corporate account portfolios without negatively affecting their SBD tax credit.

Corporate Class Total Return Index ETF List

Canadian Equity

Horizons S&P/TSX 60™ Index ETF† (HXT)
Management Fee: 0.07% rebated by 0.04% to an effective management fee of 0.03%, until at least January 1, 2021 (Plus applicable sales taxes)
Investment Objective: HXT seeks to replicate, to the extent possible, the performance of the S&P/TSX 60™ Index (Total Return), net of expenses. The S&P/TSX 60™ Index (Total Return) is designed to measure the performance of the large-cap market segment of the Canadian equity market.

Horizons Cdn High Dividend Index ETF† (HXH)
Management Fee: 0.10% (Plus applicable sales taxes)
Investment Objective: HXH seeks to replicate, to the extent possible, the performance of the Solactive Canadian High Dividend Yield Index (Total Return), net of expenses. The Solactive Canadian High Dividend Yield Index (Total Return) is designed to measure the performance of Canadian-listed equity securities characterized by high dividend yield.

Horizons S&P/TSX Capped Energy Index ETF† (HXE)
Management Fee: 0.25% (Plus applicable sales taxes)
Investment Objective: HXE seeks to replicate, to the extent possible, the performance of the S&P/TSX Capped Energy Index (Total Return), net of expenses. The S&P/TSX Capped Energy Index (Total Return) is designed to measure the performance of Canadian energy sector equity securities included in the S&P/TSX Composite Index. The relative weight of any single index constituent security is capped.

Horizons S&P/TSX Capped Financials Index ETF† (HXF)
Management Fee: 0.25% (Plus applicable sales taxes)
Investment Objective: HXF seeks to replicate, to the extent possible, the performance of the S&P/TSX Capped Financials Index (Total Return), net of expenses. The S&P/TSX Capped Financials Index is designed to measure the performance of Canadian financial sector equity securities included in the S&P/TSX Composite Index. The relative weight of any single index constituent security is capped.

Horizons Equal Weight Canada Banks Index ETF† (HEWB)
Management Fee: 0.30% (Plus applicable sales taxes)
Investment Objective: HEWB seeks to replicate, to the extent possible, the performance of the Solactive Equal Weight Canada Banks Index (Total Return), net of expenses. The Solactive Equal Weight Canada Banks Index (Total Return) is an equal weight index of equity securities of diversified Canadian banks.

Horizons Equal Weight Canada REIT Index ETF† (HCRE)
Management Fee: 0.30% (Plus applicable sales taxes)
Investment Objective: HCRE seeks to replicate, to the extent possible, the performance of the Solactive Equal Weight Canada REIT Index (Total Return), net of expenses. The Solactive Equal Weight Canada REIT Index (Total Return) is an equal weight index of Canadian-listed real estate investment trust equity securities.

Horizons S&P/TSX Capped Composite Index ETF† (HXCN)
Management Fee: 0.05% (Plus applicable sales taxes)
Investment Objective: HXCN seeks to replicate, to the extent possible, the performance of the S&P/TSX Capped Composite Index (Total Return) (the “Index”), net of expenses. The Index is designed to measure the performance of the broad large-cap market segment of the Canadian equity market, with a capped weight of 10% on all constituent issuers.

Foreign Equity

Horizons S&P 500® Index ETF† (HXS)
Management Fee: 0.10% (Plus applicable sales taxes)
Swap Fee: No more than 0.30%
Investment Objective: HXS seeks to replicate, to the extent possible, the performance of the S&P 500® Index (Total Return), net of expenses. The S&P 500® Index (Total Return) is designed to measure the performance of the large-cap market segment of the U.S. equity market.

Horizons S&P 500 CAD Hedged Index ETF† (HSH)
Management Fee: 0.10% (Plus applicable sales taxes)
Swap Fee: No more than 0.30%
Investment Objective: HSH seeks to replicate, to the extent possible, the performance of the S&P 500® CAD Hedged Index (Total Return), net of expenses. The S&P 500® CAD Hedged Index (Total Return) is designed to measure the performance of the large-cap market segment of the U.S. equity market, hedged to the Canadian dollar.

Horizons NASDAQ-100® Index ETF (HXQ)
Management Fee: 0.25% (Plus applicable sales taxes)
Investment Objective: HXQ seeks to replicate, to the extent possible, the performance of the NASDAQ-100® Index (Total Return), net of expenses. The NASDAQ-100® Index (Total Return) includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market.

Horizons Intl Developed Markets Equity Index ETF† (HXDM)
Management Fee: 0.20% (Plus applicable sales taxes)
Swap Fee: 0.30%
Investment Objective: HXDM seeks to replicate, to the extent possible, the performance of the Horizons EAFE Futures Roll Index (Total Return), net of expenses. The Horizons EAFE Futures Roll Index (Total Return) is designed to measure the performance of large and mid-cap securities across 21 developed markets including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada.

Horizons EURO STOXX 50® Index ETF† (HXX)
Management Fee: 0.17% (Plus applicable sales taxes)
Swap Fee: No more than 0.30%
Investment Objective: HXX seeks to replicate, to the extent possible, the performance of the EURO STOXX 50® Futures Roll Index (Total Return), net of expenses. The EURO STOXX 50® Futures Roll Index (Total Return) is designed to measure the performance of 50 of the largest companies that are sector leaders in the Eurozone.

Horizons US Large Cap Index ETF (HXX)
Management Fee: 0.08% (Plus applicable sales taxes)
Investment Objective: HULC seeks to replicate, to the extent possible, the performance of the Solactive US Large Cap Index (CA NTR) (the “Index”), net of expenses. The Index is designed to measure the performance of the large-cap market segment of the U.S. equity market.

Fixed Income

Horizons Laddered Canadian Preferred Share Index ETF† (HLPR)
Management Fee: 0.30% (Plus applicable sales taxes)
Investment Objective: HLPR seeks to replicate, to the extent possible, the performance of the Solactive Laddered Canadian Preferred Share Index (Total Return), net of expenses. The Solactive Canadian Preferred Share Index (Total Return) is an index of Canadian preferred shares that generally have an adjustable dividend rate.

Horizons Cdn Select Universe Bond ETF† (HBB)
Management Fee: 0.09% (Plus applicable sales taxes)
Swap Fee: No more than 0.14%
Investment Objective: HBB seeks to replicate, to the extent possible, the performance of the Solactive Canadian Select Universe Bond Index (Total Return), net of expenses. The Solactive Canadian Select Universe Bond Index (Total Return) is designed to measure the performance of the Canadian investment-grade fixed income market. The ETF uses derivatives, such as a swap agreement or multiple swap agreements, to obtain exposure to its underlying index without investing directly in the securities that make up its underlying index.

Horizons US 7-10 Year Treasury Bond ETF† (HTB)
Management Fee: 0.15% (Plus applicable sales taxes)
Swap Fee: No more than 0.05%
Investment Objective: HTB seeks to replicate, to the extent possible, the performance of the Solactive US 7-10 Year Treasury Bond Index (Total Return), net of expenses. The Solactive US 7-10 Year Treasury Bond Index (Total Return) is designed to measure the performance of the US 7-10 Year Treasury Bond market. The ETF uses derivatives, such as a swap agreement or multiple swap agreements, to obtain exposure to its underlying index without investing directly in the securities that make up its underlying index.

Horizons US 7-10 Year Treasury Bond CAD Hedged ETF† (HTH)
Management Fee: 0.15% (Plus applicable sales taxes)
Swap Fee: No more than 0.05%
Investment Objective: HTH seeks to replicate, to the extent possible, the performance of the Solactive US 7-10 Year Treasury Bond CAD Hedged Index (Total Return), net of expenses. The Solactive US 7-10 Year Treasury Bond CAD Hedged Index (Total Return) is designed to measure the performance of the large-cap market segment of the U.S. equity market, hedged to the Canadian dollar. The ETF uses derivatives, such as a swap agreement or multiple swap agreements, to obtain exposure to its underlying index without investing directly in the securities that make up its underlying index.

Horizons Cash Maximizer ETF‡ (HSAV)
Management Fee: 0.18% (Plus applicable sales taxes)
Investment Objective: HSAV seeks to generate modest capital growth by investing primarily in high interest deposit accounts with Canadian banks. While any decision to pay dividends or other distributions is within the discretion of the Manager, HSAV is not currently expected to make any regular distributions.

†This ETF uses derivatives, such as a swap agreement or multiple swap agreements, to obtain exposure to its underlying index without investing directly in the securities that make up the underlying index.

‡The Horizons Cash Maximizer ETF does not track a traditional benchmark but rather a compounding rate of interest paid on a cash deposit that can change over time.

The information contained herein reflects general tax rules only and does not constitute, and should not be construed as, tax advice. Investors situations may differ from those illustrated. Investors should consult with their tax advisors before making any investment decisions.

Horizons Total Return Index ETFs (“Horizons TRI ETFs”) are generally index-tracking ETFs that use an innovative investment structure known as a Total Return Swap to deliver index returns in a lowcost and tax-efficient manner. Unlike a physical replication ETF that typically purchases the securities found in the relevant index in the same proportions as the index, most Horizons TRI ETFs use a synthetic structure that never buys the securities of an index directly. Instead, the ETF receives the total return of the index through entering into a Total Return Swap agreement with one or more counterparties, typically large financial institutions, which will provide the ETF with the total return of the index in exchange for the interest earned on the cash held by the ETF. Any distributions which are paid by the index constituents are reflected automatically in the net asset value (NAV) of the ETF. As a result, the Horizons TRI ETF receives the total return of the index (before fees), which is reflected in the ETF’s share price, and investors are not expected to receive any taxable distributions. Certain Horizons TRI ETFs use physical replication instead of a total return swap. The Horizons Cash Maximiz er ETF does not track an index but rather a compounding rate of interest paid on a cash deposit that can change over time.

If HSAV experiences a significant increase in total NAV, the Manager may, at its sole discretion and if determined to be in the best interests of shareholders, decide to suspend subscriptions for new ETF shares if considered necessary or desirable in order to manage potential tax implications and/or to permit HSAV to achieve, or continue to achieve, its investment objectives. During a period of suspended subscriptions, if any, investors should note that ETF shares of HSAV would be expected to trade at a premium or substantial premium to the NAV per ETF Share of HSAV. During such periods, investors are strongly discouraged from purchasing ETF shares of HSAV on a stock exchange. Any suspension of subscriptions or resumption of subscriptions will be announced by press release and announced on the Manager’s website. A suspension of subscriptions, if any, will not affect the ability of existing Shareholders to sell their ETF Shares in the secondary market at a price reflective, or potentially higher than, the NAV per ETF Share.

“Standard & Poor’s®” and “S&P®” are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and “TSX®” is a registered trademark of the TSX Inc. (“TSX”). These marks have been licensed for use by Horizons ETFs Management (Canada) Inc. The ETF is not sponsored, endorsed, sold, or promoted by the S&P, TSX or their affiliated companies and none of these parties make any representation, warranty or condition regarding the advisability of buying, selling or holding units/shares of the ETF.

The EURO STOXX 50® Futures Roll Index (Total Return) is the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland (“STOXX”), Deutsche Börse Group or their licensors, which is used under license. Horizons EURO STOXX 50® Index ETF is neither sponsored nor promoted, distributed or in any manner supported by STOXX, Deutsche Börse Group or their licensors, research partners or data providers and STOXX, Deutsche Börse Group and their licensors, research partners or data providers do not give any warranty, and exclude any liability (whether in negligence or otherwise) with respect thereto generally or specifically in relation to any errors, omissions or interruptions in the EURO STOXX 50® Futures Roll Index (Total Return) or its data.

Nasdaq®,Nasdaq-100®,and Nasdaq-100 Index®, are trademarks of The NASDAQ OMX Group, Inc.(which with its affiliates is referred to as the “Corporations”) and are licensed for use by BetaPro Funds and BetaPro Management Inc.. The Fund(s)have not been passed on by the Corporations as to their legality or suitability. The Fund(s) are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND(S).

The financial instrument is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade name or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade name for the purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.

EAFE is a trademark or service mark of MSCI Inc. or its affiliates and is used herein subject to license from MSCI. All goodwill and use of EAFE inures to the benefit of MSCI and its affiliates. No other use of EAFE is permitted without a license from MSCI. All trademarks/service marks are registered by their respective owners. None of the owners thereof or any of their affiliates sponsor, endorse, sell, promote or make any representation regarding the advisability of investing in the Horizons Exchange Traded Products.

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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 shares 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 10.00% and 45.00% 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.