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With more than 800 exchange traded funds (“ETFs”) listed in Canada, it has become increasingly difficult for investors to know which ETFs to buy and to build into their portfolio. ETF providers have addressed this challenge by offering “Balanced”, “All-in-One”, or “one-ticket-solution” funds: ETFs that buy other ETFs as part of an asset allocation strategy. With one ETF purchase, Canadian ETF investors can get a full asset allocation geared towards their self-determined risk/return objectives.

These ETFs have become a popular, easy-to-use tool for investors seeking instant diversification at a comparably low effort and cost to traditional portfolio management methods. These ETFs seem to have become popular with retail investors as a great investment democratizer — with an ETF option that’s potentially suitable for almost everyone. According to National Bank, the multi-asset ETF category, which includes balanced funds, has gathered nearly $7 billion in assets under management as at June 30, 2020, the majority of which has come from self-directed investors.

Balanced ETFs have been launched by several of Canada’s leading ETF providers: iShares, BMO, Vanguard and us: Horizons ETFs. Other ETF providers offer balanced ETF solutions, but these are the top four ETF providers in Canada by assets under management. Within this larger product category, approximately $3.9 billion is invested in the global index asset allocation strategies offered by iShares, BMO, Vanguard and Horizons.

The Horizons Conservative TRI ETF Portfolio (“HCON”) and the Horizons Balanced TRI ETF Portfolio (“HBAL”) have outperformed other competitor Canadian-listed offerings in their respective categories, over multiple time frames for the period ending August 1, 2020. One distinction to note is that HBAL is categorized separately in the Global Equity Balanced Category¹, where the other balanced ETF competitors, such as iShares Core Balanced ETF Portfolio (XBAL), BMO Balanced ETF (ZBAL) and Vanguard Balanced ETF Portfolio (VBAL) are in the Global Equity Neutral category alongside the “conservative” balanced solutions. The reason for this classification by Morningstar is that balance mandates with 70% or more allocation to equities are put in the Equity Balanced category, while mandates with greater than 40% but less than or equal to 60% equity allocation are classified as Neutral Balanced.

You can see that, in either case, HBAL and HCON outperformed the other competitors in these categories by a notable margin on a one-year and (where applicable) two-year basis for the periods ending August 1, 2020. HBAL delivered a 10.93% one-year return versus a 7.60% return for XBAL, 8.07% return for ZBAL and 7.31% for VBAL for the same period. On a two-year basis for the period ending August 1, 2020, HBAL delivered an 8.11% annualized return versus 7.03% for XBAL and 6.05% for VBAL (Note: ZBAL is less than two years old as at August 1, 2020 and does not have data for this period).

HCON delivered a similar return to HBAL of 10.94% for the one-year period ended August 1, 2020 versus an 8.23% return for ZCON and a 7.41% return for VCNS for the same period (Note: XCNS is less than one year old as of August 1, 2020 and does not have data for this period).

On a two-year basis for the period ending August 1, 2020, HCON delivered an 8.78% annualized return versus a 6.72% return for VCNS (Note: XCNS and ZCON are less than two years old as at August 1, 2020, and do not have data for this period).

¹Morningstar CIFSC category. Global Neutral Balanced Funds in the Global Neutral Balanced category must invest less than 70% of total assets in a combination of equity securities domiciled in Canada and Canadian dollar-denominated fixed income securities.* In addition, they must invest greater than or equal to 40% but less than or equal to 60% of their total assets in equity securities

Global Equity Balanced Funds in the Global Equity Balanced category must invest less than 70% of total assets in a combination of equity securities domiciled in Canada and Canadian dollar-denominated fixed income securities.* In addition, they must invest greater than 60% but less than 90% of their total assets in equity securities.

Performance Tables*

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Source: Bloomberg, as at August 1, 2020. *Inception of HBAL and HCON August 1, 2018. **As at the time of writing the public disclosure on ETF provider websites.

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Source: Bloomberg, as at August 1, 2020. *Inception of HBAL and HCON August 1, 2018. **As at the time of writing the public disclosure on ETF provider websites.

Horizons ETFs pays all of the operating and administrative expenses incurred by HBAL, HCON and HGRO. Based on the historical management expense ratios of the portfolios of TRI ETFs held by each of these ETFs, the total management expense ratios of HBAL, HCON, and HGRO are expected to be 0.15%, 0.15% and 0.16%, respectively, and will not exceed 0.16%, 0.16% and 0.17%, respectively, as at any rebalance.

Based on historical trading expense ratios of the TRI ETFs held by HBAL, HCON and HGRO, the aggregate underlying trading expense ratios of the portfolios of TRI ETFs held by each of these ETFs, for the 2020 calendar year, are expected to be 0.13%, 0.13% and 0.14%, respectively, and are not expected to exceed 0.18%, 0.16% and 0.20%, respectively. As trading expense ratios include expenses outside of the control of Horizons ETFs, the trading expense ratios of the portfolios of TRI ETFs held by HBAL, HCON and HGRO are subject to change.

Potential Reasons for Outperformance

Higher Equity Allocations

One of the key differentiators with our multi-asset ETFs is that, upon launch, we made a strategic decision to increase the equity allocation of their strategies based on the long term Sharpe ratio (risk/ return profile) of owning equities versus bonds over the last two decades. Since their inception on August 1, 2018, HBAL’s higher 70/30 equity allocation vs. other balanced competitors, such as XBAL, ZBAL and VBAL, that are using more traditional 60/40 strategies, has been a significant contributor to the resulting higher returns. Similarly, HCON, our conservative multi-asset ETF strategy, with a 50/50 allocation is contrasted against the more traditional 40/60 allocation used by its competitors, ZCON and VCNS, which have the majority of their portfolios invested in fixed income.

It’s important to underscore that the respective 70/30 and 50/50 allocations were not chosen to simply capture upsize movement in the equity market; rather, it’s our firm’s belief that a 60/40 split in a balanced portfolio or a conservative 40/60 allocation places too much emphasis on fixed income in a world where the nature of capital markets has changed dramatically, with interest rates on a multi-decade downward trajectory while investor longevity is increasing.

It should be noted that having a higher equity allocation would increase the equity risk of the portfolio. We would expect that HBAL and HCON, during periods of significant equity market declines, would produce reduced returns compared to the iShares, RBC and Vanguard ETFs noted above that have higher fixed income allocations.

There are three reasons why we chose higher equity allocations in our balanced and conservative ETFs over the traditional allocations used broadly by competitors:

1. Reduced Longevity Risk: The trend of younger investors using balanced ETF portfolios has increased over the last few years, DIY investors seeking a simple way to begin saving for retirement. These investors generally have a longer investment time horizon compared to older investors. In this scenario, equities have less longevity risk for a few reasons:

a. Increased life expectancies require greater portfolio growth
b. Historically stronger long-term performance
c. Potentially small yearly withdrawal limit risk

2. Declining Interest Rates and Low Yields: With interest rates at all-time lows and negative in many countries, fixed income isn’t providing the same advantages for portfolios as it once did. On June 30, 2000, 10-year U.S. Government bonds were yielding 6.03% compared to 0.65% 20 years later.

Source: Bloomberg, as at June 30, 2020.

3. Historically Strong Equity Performance: The last decade has been favourable for equities, with the S&P/TSX Capped Composite Index returning 6.40% annualized on a total return basis for the 10-year period ending July 31, 2020. Performance for U.S. equities has been particularly favourable over the last 10 years as well, with the S&P 500 delivering a 13.84% annualized total return and the NASDAQ-100 delivering a 20.71% annualized total return for the same period.

NASDAQ Exposure

Another reason we see as to why HBAL and HCON have been category leaders in performance to date, has been their greater exposure to the NASDAQ-100 Index.

Since 2008, the NASDAQ-100 has outperformed the S&P 500 in 10 of the 12 measured years. The NASDAQ, which is more heavily weighted towards technology, consumer services and health care companies, has also recently seen strong performance with the increasing importance and relevance of these sectors, particularly during the disruptive market landscape due to the COVID-19 pandemic.

Since the inception of HBAL and HCON, we have also chosen to allocate less domestically to Canada. The average Canadian investor has a significant bias towards domestic stocks of approximately 60%, despite Canada only accounting for approximately 3% of the global stock market as represented by the MSCI World Index.

For the one-year period ending August 1, 2020, HBAL’s overweight exposure to U.S. Equities — specifically, its relatively large NASDAQ position — was a significant driver of outperformance. The S&P/TSX Capped Composite delivered a total return of 1.86% for the one-year period ending July 31, 2020, and underperformed both the S&P 500 and NASDAQ-100, which returned 11.96% and 40.37% respectively on a total return basis for the same period.

An additional reason in making the asset allocation decision to have greater foreign exposure than many competitor products, was tax-based. The underlying ETFs held by HBAL and HCON are part of our Corporate Class Total Return Index suite of ETFs‡(“TRI ETFs”) and are therefore not anticipated to pay dividends, and do not receive actual distributions that would be subject to withholding taxes. Some home bias for Canadian investors makes sense when you factor in the tax-efficiency of Canadian eligible dividends, but this consideration is altered where foreign dividend taxation is no longer a concern. Using a global asset allocation with our unique TRI ETFs, HCON and HBAL can take positions that counter the general Canadian bias without worrying about higher taxation on foreign dividends from U.S. and international stocks.

It should also be noted that having more exposure to NASDAQ-100 stocks could increase the equity risk of the portfolio. It is possible that HBAL and HCON, during periods of significant equity market declines, could produce reduced returns compared to the iShares, RBC and Vanguard ETFs noted above that have potentially less exposure to NASDAQ 100 stocks.

Potential Tax Considerations

HCON and HBAL have the added benefit of holding the Horizons ETFs family of corporate class TRI ETFs, which are not anticipated to pay out taxable distributions. While HBAL and HCON have paid out taxable distributions from their use of currency forwards and could potentially pay out capital gains distributions from rebalancing the portfolios, none of the distributions from the underlying index exposures are expected to flow through to end unitholders. More information about our suite of Total Return Index ETFs can be accessed here: https://www.horizonsetfs. com/library/Get-The-Index-Advantage.

Conclusion

Investors have gravitated towards one ticket ETF solutions as a simple way to achieve a diversified asset allocation, and in some cases, diversified geographic exposure. We believe that there are a lot of considerations even amongst this simple product class, including looking at whether the traditional 60/40 equity-fixed income allocation makes sense as a default balanced exposure.

For investors seeking long-term capital growth, the potential effectiveness of HBAL and HCON should be considered.

From HBAL’s 70/30 allocation, to both HBAL and HCON’s differentiated portfolio exposure to some of the world’s largest equity markets, their performance to date has been largely the result of a strategy we feel is built for today’s investment landscape.

Finally, with the potential tax advantages from our Corporate Class Total Return Index ETFs, the benefits of holding HBAL and HCON in taxable accounts could be even greater for investors.

Learn more about HBAL and HCON:

HBAL: www.horizonsetfs.com/hbal
HCON: www.horizonsetfs.com/hcon

The Investment Objectives of the ETFs discussed are listed below:

HCON - HCON seeks moderate long-term capital growth using a conservative portfolio of exchange traded funds. HCON invests primarily in Horizons’ Total Return Index ETFs. The portfolio targets a longterm asset allocation of approximately 50% equity securities and 50% fixed income securities at the time of any rebalance. The portfolio will be rebalanced semi-annually in order to seek a consistent level of conservative risk. HCON will use currency forwards to hedge its non-Canadian dollar currency exposure to the Canadian dollar at all times.

HCON is subject to the fees of its underlying ETFs. Horizons ETFs currently anticipates that the management expense ratio of HCON will be approximately 0.15%, and will not exceed 0.16%, while the aggregate trading expense ratio of the portfolio of Horizons TRI ETFs held by HCON will be approximately 0.13% and is not expected to exceed 0.16%. As trading expense ratios include expenses outside of the Manager’s control, the trading expense ratio of HCON is subject to change at any time.

HBAL - HBAL seeks long-term capital growth using a balanced portfolio of exchange traded funds. HBAL primarily invests in Horizons’ Total Return Index ETFs. The portfolio targets a long-term asset allocation of approximately 70% equity securities and 30% fixed income securities, and rebalances semi-annually to ensure the composition of HBAL reflects a consistent level of balanced risk. HBAL will use currency forwards to hedge its non-Canadian dollar currency exposure to the Canadian dollar at all times.

HBAL is subject to the fees of its underlying ETFs. Horizons ETFs currently anticipates that the management expense ratio of HBAL will be approximately 0.15%, and will not exceed 0.16%, while the aggregate trading expense ratio of the portfolio of Horizons TRI ETFs held by HBAL will be approximately 0.13% and is not expected to exceed 0.18%. As trading expense ratios include expenses outside of the Manager’s control, the trading expense ratio of HBAL is subject to change at any time.

VCNS - Vanguard Conservative ETF Portfolio seeks to provide a combination of income and moderate longterm capital growth by investing in equity and fixed income securities.

Seeks to achieve its investment objective by primarily investing in equity and fixed income securities. It may do so either directly or indirectly through investment in one or more exchange traded funds managed by the manager or an affiliate or certain other investment funds.

In seeking to achieve the investment objective (under normal market conditions), the sub-advisor will strive to maintain a long-term strategic asset allocation of equity (approximately 40%) and fixed income (approximately 60%) securities. The portfolio asset mix may be reconstituted and rebalanced from time to time at the discretion of the sub-advisor. The underlying funds are expected to be index funds that provide exposure to broad-based equity and fixed income markets.

VBAL - Vanguard Balanced ETF Portfolio seeks to provide long-term capital growth with a moderate level of income by investing in equity and fixed income securities.

In seeking to achieve the investment objective (under normal market conditions), the sub-advisor will strive to maintain a long-term strategic asset allocation of equity (approximately 60%) and fixed income (approximately 40%) securities. The portfolio asset mix may be reconstituted and rebalanced from time to time at the discretion of the sub-advisor.

The underlying funds are expected to be index funds that provide exposure to broad-based equity and fixed income markets.

VGRO - Vanguard Growth ETF Portfolio seeks to provide long-term capital growth by investing in equity and fixed income securities.

Seeks to achieve its investment objective by primarily investing in equity and fixed income securities. It may do so either directly or indirectly through investment in one or more exchange traded funds managed by the manager or an affiliate or certain other investment funds.

In seeking to achieve the investment objective (under normal market conditions), the sub-advisor will strive to maintain a long-term strategic asset allocation of equity (approximately 80%) and fixed income (approximately 20%) securities. The portfolio asset mix may be reconstituted and rebalanced from time to time at the discretion of the sub-advisor.

The underlying funds are expected to be index funds that provide exposure to broad-based equity and fixed income markets.

XBAL - The Fund seeks to provide long-term capital growth and income by investing primarily in one or more exchange-traded funds managed by BlackRock Canada or an affiliate that provide exposure to equity and/or fixed income securities.

The iShares ETFs in which XBAL invests are generally expected to employ indexing strategies that provide exposure to broad-based equity and fixed income markets. XBAL is managed in accordance with a long-term strategic asset allocation of approximately 60% equity exposure and approximately 40% fixed income exposure.

XGRO - The Fund seeks to provide long-term capital growth and income by investing primarily in one or more exchange-traded funds managed by Black- Rock Canada or an affiliate that provide exposure to equity and/or fixed income securities. XGRO invests primarily in one or more iShares ETFs that provide exposure to equity and/or fixed income securities.

The iShares ETFs in which XGRO invests are generally expected to employ indexing strategies that provide exposure to broad-based equity and fixed income markets. XGRO is managed in accordance with a long-term strategic asset allocation of approximately 80% equity exposure and approximately 20% fixed income exposure.

ZBAL - The BMO Balanced ETF is designed to provide moderate long-term capital appreciation and income by investing in global equity and fixed income ETFs. The ETF will rebalance quarterly to strategic index asset allocation weights. The ETF will invest in broad indexed equity and fixed income ETFs. ZBAL is a fund of fund; the management fees charged are reduced by those accrued in the underlying funds. BMO Balanced ETF will employ a strategic asset allocation strategy and is expected to primarily invest in other BMO ETFs. The BMO ETF’s asset class weightings will be approximately 60% in equity securities and 40% in fixed income securities.

ZCON - The BMO Conservative ETF is designed to provide income and moderate long-term capital appreciation by investing in global equity and fixed income ETFs. The ETF will rebalance quarterly to strategic index asset allocation weights. The ETF will invest in broad indexed equity and fixed income ETFs. ZCON is a fund of fund; the management fees charged are reduced by those accrued in the underlying funds. BMO Conservative ETF will employ a strategic asset allocation strategy and is expected to primarily invest in other BMO ETFs. The BMO ETF’s asset class weightings will be approximately 60% in fixed income securities and 40% in equity securities.

ZGRO - The BMO Growth ETF is designed to provide long-term capital appreciation by investing in global equity and fixed income ETFs. The ETF will rebalance quarterly to strategic index asset allocation weights. The ETF will invest in broad indexed equity and fixed income ETFs. ZGRO is a fund of fund; the management fees charged are reduced by those accrued in the underlying funds. BMO Growth ETF will employ a strategic asset allocation strategy and is expected to primarily invest in other BMO ETFs. The BMO ETF’s asset class weightings will be approximately 80% in equity securities and 20% in fixed income securities.

Commissions, management fees and expenses all may be associated with an investment in Horizons Balanced TRI ETF Portfolio or the Horizons Conservative TRI ETF Portfolio. (the “ETFs”) managed by Horizons ETFs Management (Canada) Inc. The ETFs are not guaranteed, their values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the ETFs. Please read the prospectus before investing.

‡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 low-cost 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 (Horizons Nasdaq-100 ® Index ETF and Horizons US Large Cap Index ETF) use physical replication instead of a total return swap. The Horizons Cash Maximizer ETF and Horizons USD Cash Maximizer ETF use cash accounts and do not track an index but rather a compounding rate of interest paid on the cash deposits 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 should consult with their tax advisors before making any investment decisions.

Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forward-looking statements are not historical facts but reflect the author’s current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other factors should be considered carefully and readers should not place undue reliance on such forward looking statements. These forward-looking statements are made as of the date hereof and the authors do not undertake to update any forward-looking statement that is contained herein, whether as a result of new information, future events or otherwise, unless required by applicable law.

The views/opinions expressed herein may not necessarily be the views of Horizons ETFs Management (Canada) Inc. 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.

“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.

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 Horizons ETFs and Horizons ETFs Management (Canada) 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).

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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 Daily Bull and Daily Bear ETFs (“Leveraged and Inverse Leveraged ETFs”), Inverse ETFs (“Inverse ETFs”) and our BetaPro S&P 500 VIX Short-Term Futures™ ETF (the “VIX ETF”). Included in the Leveraged and Inverse Leveraged 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 Leveraged and Inverse Leveraged 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 Leveraged and Inverse Leveraged ETF seeks a return, before fees and expenses, that is either up to, or equal to, 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 Leveraged and Inverse Leveraged 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 Leveraged and Inverse Leveraged ETFs, possibly direction from the performance of their respective Target(s) for the same period. For certain Leveraged and Inverse Leveraged ETFs that seek up to 200% or up to or -200% leveraged exposure, the Manager anticipates, under normal market conditions, managing the leverage ratio as close to two times (200%) as practicable however, the Manager may, at its sole discretion, change the leverage ratio based on its assessment of the current market conditions and negotiations with the respective ETF’s counterparties at that time. 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 publishes 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.

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 low-cost 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 (Horizons Nasdaq-100 ® Index ETF and Horizons US Large Cap Index ETF) use physical replication instead of a total return swap. The Horizons Cash Maximizer ETF and Horizons USD Cash Maximizer ETF use cash accounts and do not track an index but rather a compounding rate of interest paid on the cash deposits that can change over time.

*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.