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There are many ways for Canadian investors to gain exposure to Canadian and U.S. dollar exchange rate movements such as investing in domestic and foreign securities, as well as buying property on either side of the border. However, the vast majority of these transactions require an expensive currency conversion, where a bank or foreign exchange company will likely charge a significant commission as a part of the transaction. Typically, on currency exchanges of less than $10,000 dollars, non-institutional rates apply, which are less favourable.

DLR and CAN: Better Tools for Capturing Currency Movements

Horizons ETFs created the Horizons Canadian Dollar Currency ETF (“CAN”) and the Horizons U.S. Dollar Currency ETF (“DLR”) to make investing in currency movements simpler and more economical.

CAN provides investors with the opportunity to be “long” or “bullish” on the Canadian dollar, expressed in U.S. dollar terms. When the Canadian dollar appreciates relative to the U.S dollar (i.e. the Canadian dollar/U.S. dollar exchange rate increases), the value of CAN is expected to increase. Conversely, when the Canadian dollar depreciates against the U.S. dollar (i.e. the Canadian dollar/U.S. dollar exchange rate decreases), the value of CAN is expected to decrease.

DLR can be used as a tool to be “long” or “bullish” on the U.S. dollar without undergoing an expensive conversion process; or if U.S. dollars are required, it can be used as an easy and efficient way to avoid the high commissions charged on converting the loonie to the greenback.

The Horizons Canadian Dollar Currency ETF

CAN, listed on the Toronto Stock Exchange (“TSX”), seeks to reflect, in Canadian dollars and net of expenses, the performance of the Canadian dollar relative to the U.S. dollar, primarily by investments in Canadian-dollar-denominated cash and cash equivalents, and also through the use of forward currency agreements or futures contracts. When the Canadian dollar appreciates relative to the U.S. dollar (i.e. the Canadian dollar/U.S. dollar exchange rate increases), the value of CAN is expected to increase proportionately. Conversely, when the Canadian dollar depreciates against the U.S. dollar (i.e. the Canadian dollar/U.S. dollar exchange rate decreases), the value of CAN is expected to decrease proportionately.

As a hypothetical example, if there was an appreciation in the exchange rate, which caused the Canadian and U.S. dollar to reach parity (CAD$1/USD$1), an increase from CAD$0.75/US$1, this would mean the Canadian dollar appreciated 33% relative to the U.S. dollar. In this example, the price per unit of CAN would be expected to reflect a price appreciation in a proportionate amount.

The Horizons US Dollar Currency ETF
DLR, listed on the TSX, seeks to reflect the price, in Canadian dollars, of the U.S. dollar, net of expenses, by investing primarily in U.S. cash and cash equivalents. The U.S.-dollar-denominated version of this ETF, (“DLR.U”) has the same investment objective but is priced and transacted in U.S. dollars and reflects the current exchange rate. When the U.S. dollar appreciates relative to the Canadian dollar (i.e. the U.S. dollar/Canadian dollar exchange rate increases), the value of DLR is expected to increase proportionately. Conversely, when the U.S. dollar depreciates against the Canadian dollar (i.e. the U.S. dollar/Canadian dollar exchange rate decreases), the value of DLR is expected to decrease proportionately.

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All comments, opinions and views expressed are of a general nature and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors .

Cost Comparison: Hypothetical Currency Conversion of $10,000 using DLR/DLR.U

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Three Simple Steps to Converting Canadian/U.S. Dollars Using DLR/DLR.U

Step 1 – Buy DLR

Ensure that you have both CAD and USD investment accounts with the same broker. Note, they will need to be the same type of account (i.e. cash or margin) and in the same registered name. Obtain a quote on DLR. Look for a reasonable bid-ask spread (generally, two cents).

If the quote and bid-ask spread are acceptable to you and you choose to proceed, the industry recommended practice is to place a limit order at the current ask price. A limit order ensures that the trade will not be executed at a higher price.

Step 2 – Convert Units of DLR.U

Have your advisor or brokerage firm journal or transfer your DLR units from your CAD to your USD investment account. Your DLR units will become DLR.U units in your USD account. There is typically no cost associated with this transfer, however, some dealers may require three or more days for this step to settle.

Step 3 –Sell DLR.U and receive USD

Obtain a quote on DLR.U. Again, look for a reasonable bid-ask spread (generally, two cents). If the quote and bid-ask spread are acceptable to you and you choose to proceed, the industry recommended practice is to place a limit order at the current  bid price.

Once the trade settles, you will have U.S. dollars in your USD investment account, which you can then allocate as desired. While this transaction should be more cost-effective than converting currencies in a bank account, investors should be aware that the value of their holdings may change over the course of the transaction. DLR investors are subject to the price movements of the U.S. dollar relative to the Canadian dollar.

All comments, opinions and views expressed are of a general nature and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors.

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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 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.