Horizons Managed Global Opportunities ETF (HGM:TSX) · Horizons Managed Global Opportunities ETF...

Horizons Managed Global Opportunities ETF(HGM:TSX)

Interim Report | June 30, 2017

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ContentsMANAGEMENT REPORT OF FUND PERFORMANCE

Management Discussion of Fund Performance . . . . . . . . . . . . . . . . . . . . . 1

Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Past Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Summary of Investment Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

MANAGER’S RESPONSIBILITY FOR FINANCIAL REPORTING . . . . . . . . . . . . 16

FINANCIAL STATEMENTS

Statements of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Statements of Changes in Financial Position . . . . . . . . . . . . . . . . . . . . . . . 19

Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Schedule of Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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Letter from the President and Co-CEO:

The first six months of 2017 have been full of important developments for both the global capital markets, ETFs generally and, in particular, for Horizons ETFs Management (Canada) Inc.

Much of the momentum for the world’s equity markets from late 2016 has carried into the first half of 2017. From an economic perspective, the global economy seems to finally be in-sync in its recovery from the global financial crisis. While U.S. equities continued to rise, previously underperforming regions of the world – such as Europe and a China-led recovery in emerging markets – saw even stronger returns.

Now with 77 ETFs listed, Horizons ETFs offers a breadth of actively and passively managed products to benefit from this global surge in equity prices. To date, Horizons ETFs has raised more than CAD$1.1 billion in net new assets this year, which are dispersed widely across a number of asset classes.

Of particular note, more than half of these inflows have come into our benchmark family of ETFs, which are predominantly comprised of our innovative family of Total Return Index (TRI) ETFs. This is an important development for our firm because, although more than half of our assets are in our actively managed family of ETFs, we are becoming an important player in Canada in offering tax-efficient index ETF strategies.

On the Canadian equity side, Horizons ETFs offers arguably the lowest-cost family of index ETFs in Canada. The Horizons S&P/TSX 60™ Index ETF (HXT) is the lowest-cost ETF in Canada and the Horizons Cdn High Dividend Index ETF (HXH) is one of the lowest-cost Canadian dividend focused ETFs. For investors seeking more specific sector exposure, the Horizons S&P/TSX Capped Energy Index ETF (HXE) and the Horizons S&P/TSX Capped Financials Index ETF (HXF) are the lowest-cost ETFs in Canada offering exposure to these two large segments of the Canadian economy. We are quickly becoming a go-to ETF provider for investors looking for tax efficient core equity allocations to add to their portfolios.

Of course, we have also continued our tradition of being Canada’s leading provider of innovative ETF solutions. April saw the most noteworthy ETF launch in our firm’s history, with the listing of the Horizons Marijuana Life Sciences Index ETF (“HMMJ”). As the world’s first marijuana-focused ETF, we received global news coverage from such publications as the Wall Street Journal and The Economist. It was also one of the fastest-growing ETFs in Canadian history, as HMMJ surpassed more than $100 million in assets a mere three days after its launch.

Our undertaking to you is to continue to bring forward new and innovative ETF solutions to the Canadian market. The one constant about the Canadian investment landscape is that it is always evolving. We work hard to be the ETF provider of choice for investors looking for ETF strategies to take advantage of all market conditions.

For more information on all our strategies, please visit our website at www.HorizonsETFs.com where we offer a range of resources designed to help you become a more skilled ETF investor.

Thank you for your continued support and wishing you strong returns for the rest of 2017.

Steven J. Hawkins, President & Co-CEOHorizons ETFs Management (Canada) Inc.

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Horizons Managed Global Opportunities ETF

MANAGEMENT REPORT OF FUND PERFORMANCE

This interim management report of fund performance for Horizons Managed Global Opportunities ETF (“HGM” or the “ETF”) contains financial highlights and is included with the unaudited interim financial statements for the investment fund. You may request a copy of the ETF’s unaudited interim or audited annual financial statements, interim or annual management report of fund performance, current proxy voting policies and procedures, proxy voting disclosure record, or quarterly portfolio disclosures, at no cost, from the ETF’s manager, AlphaPro Management Inc. (“AlphaPro” or the “Man-ager”), by calling toll free 1-866-641-5739, or locally (416) 933-5745, by writing to us at: 26 Wellington Street East, Suite 700, Toronto ON, M5E 1S2, or by visiting our website at www.horizonsetfs.com or SEDAR at www.sedar.com.

This document may contain forward-looking statements relating to anticipated future events, results, circumstances, per-formance, or expectations that are not historical facts but instead represent our beliefs regarding future events. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed or implied in the forward-looking statements.

Actual results may differ materially from management expectations as projected in such forward-looking statements for a variety of reasons, including but not limited to market and general economic conditions, interest rates, regulatory and statutory developments, and the effects of competition in the geographic and business areas in which the ETF may invest and the risks detailed from time to time in the ETF’s prospectus. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors. We caution that the foregoing list of factors is not exhaustive, and that when relying on forward-looking statements to make decisions with respect to investing in the ETF, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Due to the potential impact of these factors, the Manager does not under-take, and specifically disclaims, any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

Management Discussion of Fund Performance

Investment Objective and Strategies

The investment objectives of HGM are to use flexible tactical asset allocation among multiple global asset classes to seek long term growth, while also seeking to protect against downside risk. HGM invests primarily in exchange traded prod-ucts that are listed on North American stock exchanges and may be exposed to equity securities, fixed-income securities or currencies around the world, or to gold.

To achieve HGM’s investment objectives, the ETF’s portfolio sub-advisor, Forstrong Global Asset Management Inc. (“For-strong” or the “Sub-Advisor”), employs a proprietary differentiated risk-based approach to asset allocation. Compared to traditional asset allocation approaches that are typically backward looking and statistically driven, Forstrong’s approach is forward looking and driven by global macro trends. Forstrong constructs and maintains a portfolio that is highly diversi-fied not only across asset classes, but also across risk categories. The investment strategy also incorporates a form of tail risk hedging, which seeks to protect against sudden market shocks.

Please refer to the ETF’s most recent prospectus for a complete description of HGM’s investment restrictions.

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Risk

The Manager performs a review of the ETF’s risk rating at least annually, as well as when there is a material change in the ETF’s investment objective or investment strategies. The current risk rating for the ETF is: low to medium.

Risk ratings are determined based on the historical volatility of the ETF as measured by the standard deviation of its per-formance against its mean. The risk categorization of the ETF may change over time and historical volatility is not indica-tive of future volatility. Generally, a risk rating is assigned to the ETF based on a blend of the historical rolling 3-year and 5-year standard deviations of its return, the return of an underlying index, or of an applicable proxy index. In cases where the Manager believes that this methodology produces a result that is not indicative of the ETF’s future volatility, the risk rating may be determined by the ETF’s category. Risk ratings are not intended for use as a substitute for undertaking a proper and complete suitability or financial assessment by an investment advisor.

The Manager, as a summary for existing investors, is providing the list below of the risks to which an investment in the ETF may be subject. Prospective investors should read the ETF’s most recent prospectus and consider the full descrip-tion of the risks contained therein before purchasing units.

The risks to which an investment in the ETF is subject are listed below and have not changed from the list of risks found in the ETF’s most recent prospectus. A full description of each risk listed below may also be found in the most recent prospectus. The most recent prospectus is available at www.horizonsetfs.com or from www.sedar.com, or by contacting AlphaPro Management Inc. directly via the contact information on the back page of this document.

• Stock market risk• Specific issuer risk• Legal and regulatory risk• Exchange traded funds risk• Reliance on historical data risk• Corresponding net asset value risk• Designated broker/dealer risk• Cease trading of securities risk• Exchange risk• Early closing risk• No assurance of meeting investment objective• Tax risk• Securities lending, repurchase and reverse repurchase transaction risk• Loss of limited liability• Reliance on key personnel• Distributions risk• Conflicts of interest• No ownership interest• Market for units

• Redemption price• Net asset value fluctuation• Restrictions on certain unitholders• Highly volatile markets• Multi-class risk (up to April 28, 2017)• No guaranteed return• Derivatives and counterparty risk• Interest rate risk• Foreign currency risk• Emerging markets risk• Credit risk• Leveraged ETFs risk• Income trust investment risk• Foreign stock exchange risk• High yield bond risk and risk of other lower rated investments• Call risk• Risk of difference between quoted and actionable market price• Commodity price volatility risk

Management Discussion of Fund Performance (continued)

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Results of Operations

For the six-month period ended June 30, 2017, the Class E and Class F units of the ETF returned 7.08% and 7.27%, respec-tively, when including distributions paid to unitholders. By comparison, a composite index comprised of 60% of the S&P Global 1200 Index (the “Equity Index”) and 40% of the Bank of America Merrill Lynch Global Broad Bond Index (the “Bond Index”), which returned 7.59% and 0.82%, respectively, posted a return of 4.89% for the same period, all figures presented on a total return basis in Canadian dollars.

For the period from January 1 to their termination on April 28, 2017, Advisor Class units of the ETF returned 8.56%. For the same period, the Equity Index, Bond Index and composite returns were 10.05%, 4.70% and 7.91%, respectively, in Cana-dian dollars on a total return basis.

The Equity Index provides efficient exposure to the global equity market, capturing approximately 70% of global market capitalization.

The Bond Index tracks the performance of investment grade debt publicly issued in the major domestic and eurobond markets, including sovereign, quasi-government, corporate, securitized and collateralized securities.

General Market Review

Global equity markets climbed higher in the first quarter of 2017, in what has been dubbed the “Trumpflation” rally. Eco-nomic data worldwide continued to surprise to the upside, although “soft” survey data widely outpaced “hard” statistical releases. Bond yields generally stabilized after spiking in the fourth quarter of 2016, with the U.S. 10-year Treasury bond (the “U.S. 10-Year”) decreasing 5 basis points (“bps”) to finish the quarter at 2.39%.

While markets continued to digest a slew of macro events from late 2016 such as: the Organization of the Petroleum Exporting Countries (OPEC) deal to limit production, Trump’s election, the Italian referendum and the second interest rate hike in the current cycle by the U.S. Federal Reserve (the “Fed”) - the bulk of the first quarter’s most closely watched developments were back-loaded towards the end of March. First, the perceived failure of Geert Wilders’ far-right Free-dom Party in the March 14 Dutch general election was well received by Europhiles worried about the rise of populism on the continent. The Fed’s second rate hike in three months on March 15 was somewhat anticlimactic, as the market had essentially fully priced in the move. However, a less hawkish than expected outlook did weigh somewhat on the dollar. Lastly, the failure of the Republican Party to garner support for their health care bill cast doubt on Donald Trump’s ability to implement his political agenda.

The political turbulence continued into the second quarter, as the ongoing investigation into Russian interference in the 2016 U.S. federal election (and potential collusion with members of the Republican Party) came to the forefront following the termination of FBI Director James Comey and his subsequent testimony. These events pushed the White House into a defensive posture and further deteriorated the administration’s ability to focus on enacting legislation. With inflation cooling off somewhat and increasing skepticism towards Washington, interest rates accelerated downwards, with the U.S. 10-Year dropping as low as 2.13% before recovering in late-June.

In Europe, politics were also front and center. Emmanuel Macron’s newly formed République En Marche party secured a historic victory in the French presidential elections. European equities rallied sharply on the news, as Macron’s reform-minded and pro-Euro platform helped to further alleviate European Union (“EU”) disintegration fears and gave rise to hopes of an improving alliance between France and Germany. Attention then shifted to the U.K., where incumbent Prime Minister Theresa May called a snap election with hopes of consolidating power in advance of Brexit negotiations begin-

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ning with the EU. The gamble backfired, as May’s Conservative Party lost 13 seats and were forced to strike a deal with Northern Ireland’s Democratic Unionist Party in order to form a government. Investors funneled their wrath into currency markets, as the British pound sold off sharply in the aftermath of the election.

The Fed continued its rate hike cycle in mid-June, lifting the Fed Funds target to 1.25%. While the hike had once again been largely priced in, financial markets fixated on the Fed’s plans to begin tapering their balance sheet. The Bank of Canada, Bank of England and European Central Bank all made statements in June perceived to be hawkish (or less dov-ish), which contributed additional upwards pressure on global bond yields into the end of the quarter.

Portfolio Review

Performance was benefitted by overweight positioning in equities relative to fixed income; specifically in global markets outside of North America. Emerging market assets (both equities and fixed income) outperformed, as foreign inflows picked up alongside improving trade data and corporate earnings. A position in Indian equities rallied sharply following a lopsided victory for Prime Minister Modi’s Bharatiya Janata Party in the critical Uttar Pradesh state elections. The vote was widely considered a referendum on the controversial demonetization implemented in November 2016. Additionally, a position in frontier market (FM) equities rallied; led by its second largest constituent nation Argentina, which continued to benefit from re-integration into global markets and optimism surrounding President Macri’s reform agenda.

In terms of negative attribution, a position in U.S. senior leveraged loans underperformed global bond indices. The loans’ floating rate payment structure fared poorly as interest rates trended lower over the period. Additionally, a position in Japanese large cap equities underperformed, as the yen strengthened against the U.S. dollar and marginally eroded cor-porate Japan’s export competitiveness.

Outlook

A global rotation from tight fiscal/loose monetary to loose fiscal/tight monetary conditions has been a key theme we’ve been monitoring since early 2016. On the monetary side, we expected that central banks worldwide would seek to emu-late the Fed’s “policy normalization” leadership.

However, the abrupt hawkish commentary of late from central bankers in the Eurozone, Britain and Canada has startled investors. Fears have emerged that higher rates coupled with a potentially chaotic unwinding of unorthodox policies could derail the nascent global growth momentum.

While cognizant of the risks, we expect central banks to adopt a gradualist approach to tightening policy. Economic growth and reflation have been encouragingly synchronized across global regions this year, but are still relatively modest in historical terms. The recovery remains vulnerable to a shift in consumer and business expectations and “escape veloc-ity” will likely be impossible given structural impediments such as aging demographics and high debt levels.

All things considered, a slow and steady recovery would be a favourable backdrop for equity markets; providing a stable operating environment for businesses while limiting prospects for aggressive tightening. With central banks eager to re-stock their monetary toolkits, European financial sector equities are well positioned to benefit. Bank net interest margins should slowly widen alongside higher rates, while the orderly resolution of insolvent banks recently in Spain and Italy should help bolster sentiment.



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Other Operating Items and Changes in Net Assets Attributable to Holders of Redeemable Units

For the six-month period ended June 30, 2017, the ETF generated gross comprehensive income (loss) from invest-ments and derivatives of $6,133,639. This compares to ($5,259,141) for the six-month period ended June 30, 2016. The ETF incurred management, operating and transaction expenses of $438,975 (2016 – $591,377) of which $98,559 (2016 – $90,025) was either paid or absorbed by the Manager on behalf of the ETF. The waiving and/or absorption of such fees and/or expenses by the Manager may be terminated at any time, or continued indefinitely, at the discretion of the Manager.

The ETF distributed $265,441 to Class E unitholders, nil to Advisor Class unitholders and $1,380,689 to Class F unitholders during the period (2016 – Class E: $80,810, Advisor Class: $1,943, Class F: $961,283).

Unitholder Activity

An “ETF” is a stock exchange listed, open-ended, continuously offered fund. All orders to purchase units directly from the ETF must be placed by designated brokers and/or underwriters. On any trading day, a designated broker or an under-writer may place a subscription order for a prescribed number of units (“PNU”) or integral multiple PNU. The ETF reserves the absolute right to reject any subscription order placed by a designated broker and/or an underwriter. No fees will be payable by the ETF to a designated broker or an underwriter in connection with the issuance of units. On the issuance of units, the Manager may, at its discretion, charge an administrative fee to an underwriter or designated broker to offset any expenses incurred in issuing the units.

All unitholders of the ETF may exchange the applicable PNU (or an integral multiple thereof ) of the ETF on any trading day for a prescribed basket of securities (as determined by the investment manager) and/or cash, subject to the require-ment that a minimum PNU be exchanged. The Manager may, in its complete discretion, pay exchange proceeds consist-ing of cash only in an amount equal to the net asset value of the applicable PNU of the ETF next determined following the receipt of the exchange request. The Manager will, upon receipt of the exchange request, advise the unitholder submit-ting the request as to whether cash and/or a basket of securities will be delivered to satisfy the request.

Investors are able to trade units of the ETF in the same way as other securities traded on the Toronto Stock Exchange (“TSX”), including by using market orders and limit orders. An investor may buy or sell units of the ETF on the TSX only through a registered broker or dealer in the province or territory where the investor resides. Investors may incur custom-ary brokerage commissions when buying or selling units.

Subject to regulatory and other necessary third party approvals, a stock exchange sponsored execution program may become available which would allow investors to purchase and sell Class E units of the ETF based on transaction prices calculated as at the end-of-day net asset value, plus any fee payable to the investor’s dealer for the dealer’s facilitation of the purchase or sale. The Manager will issue a news release announcing the details of any such stock exchange sponsored execution program.

Presentation

The attached financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Any mention of total net assets, net assets, net asset value or increase (decrease) in net assets in the financial statements and/or management report of fund performance, is referring to net assets or increase (decrease) in net assets attributable to holders of redeemable units as reported under IFRS.


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Class F units of Horizons HGM are only available for purchase to certain investors who qualify as “accredited investors”. The Class F units are subject to the terms and conditions of a Confidential Offering Memorandum. These units are not traded publicly on a stock exchange.

Recent Developments

Other than indicated below, there are no recent industry, management or ETF related developments that are pertinent to the present and future of the ETF.

Conversion and Termination of Advisor Class units

The Manager completed the previously announced conversion (the “Conversion”) of the ETF’s advisor class units (“Ad-visor Class units”) into the ETF’s common class units (“Class E units”) at the close of business on April 28, 2017 (the “Conversion Date”).

The remaining unitholders of record of the Advisor Class units as at the Conversion Date received a number of whole Class E units of the ETF with an aggregate net asset value (“NAV”) equal to the aggregate NAV of the Advisor Class units converted, based on the respective NAVs of the two classes as at the Conversion Date (the “Conversion Ratio”). The ETF’s Conversion Ratio was 0.997091, meaning, that for each Advisor Class unit of the ETF subject to the Conversion, the unit-holder received 0.997091 Class E units of the ETF.

The conversion of Advisor Class units into whole Class E units of the ETF did not give rise to a disposition by unitholders of converting Advisor Class units for tax purposes on any whole units converted. Any remaining fractional Advisor Class units were redeemed for cash and such redemption is considered a disposition for tax purposes.

Immediately following the completion of the Conversion, the Advisor Class units were terminated.

Related Party Transactions

Certain services have been provided to the ETF by related parties and those relationships are described below.

Manager, Trustee and Investment Manager

The manager and trustee of the ETF is AlphaPro Management Inc., 26 Wellington Street East, Suite 700, Toronto, Ontario, M5E 1S2, a corporation incorporated under the laws of Ontario specializing in actively managed ETFs. AlphaPro is a wholly-owned subsidiary of Horizons ETFs Management (Canada) Inc., which also serves as the ETF’s investment man-ager (“Horizons Management” or the “Investment Manager”), and both entities are members of the Mirae Asset Financial Group. If the ETF invests in the Horizons Management ETFs, Horizons Management may receive management fees in respect of the ETF’s assets invested in such Horizons Management ETFs. The offices of the Manager and Investment Man-ager are the same.

Other Related Parties

During the period, an affiliate of National Bank of Canada (“NBC”) and National Bank Financial Inc. (“NBF”) held an indirect minority interest in the Manager. NBF acted as a designated broker, an underwriter and/or a registered trader (market maker). These relationships may have created an actual or perceived conflict of interest which investors may have con-


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sidered in relation to an investment in the ETF. In particular, by virtue of these relationships, NBF may have profited from the sale and trading of the ETF’s units. NBF, as market maker of the ETF in the secondary market, may therefore have had economic interests which may have differed from and were adverse to those of unitholders.

NBF’s potential roles as a designated broker and a dealer of the ETF was not as an underwriter of the ETF in connection with the primary distribution of units under the ETF’s prospectus. NBF was not involved in the preparation of, nor did it perform any review of, the contents of the ETF’s prospectus. NBF and its affiliates may, at present or in the future, engage in business with the ETF, the issuers of securities making up the investment portfolio of the ETF, or with the Manager or any funds sponsored by the Manager or its affiliates, including by making loans, executing brokerage transactions, enter-ing into derivative transactions or providing advisory or agency services. In addition, the relationship between NBF and its affiliates, and the Manager and its affiliates may have extended to other activities, such as being part of a distribution syndicate for other funds sponsored by the Manager or its affiliates.

The ETF, in its course of normal business in seeking to achieve its investment objective, may enter into portfolio transac-tions that involve an investment in securities of an issuer that was a related party to the Manager during the period. The Manager was permitted to execute these transactions without seeking advance approval from the ETF’s Independent Review Committee (“IRC”), provided the Manager complied with the predetermined list of requirements agreed upon with the IRC.

For the periods ended June 30, 2017 and 2016, the ETF paid $22,485 (2016 - $33,043) to NBF, and/or its affiliates in broker commissions on portfolio transactions.

Effective June 30, 2017, Horizons Management acquired the minority interest of AlphaPro owned by an affiliate of NBC and as a result, is the sole shareholder of AlphaPro. Accordingly, NBC and NBF are no longer considered affiliates or re-lated parties of AlphaPro or the Investment Manager.

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The following tables show selected key financial information about the ETF and are intended to help you understand the ETF’s financial performance since it effectively began operations on August 25, 2015. This information is derived from the ETF’s audited annual financial statements and the current unaudited interim financial statements. Please see the front page for information on how you may obtain the ETF’s annual or interim financial statements.

The ETF’s Net Assets per Unit

Class EPeriod (1) 2017 2016 2015

Net assets, beginning of period $ 9.94 10.49 10.00

Increase (decrease) from operations: Total revenue 0.11 0.42 0.35 Total expenses (0.06) (0.17) (0.06) Realized gains (losses) for the period 0.11 (0.23) 0.26 Unrealized gains (losses) for the period 0.49 (0.23) 0.05

Total increase (decrease) from operations (2) 0.65 (0.21) 0.60

Distributions: From net investment income (excluding dividends) (0.19) (0.35) (0.10) From net realized capital gains – – (0.10)

Total distributions (3) (0.19) (0.35) (0.20)

Net assets, end of period (4) $ 10.45 9.94 10.49

Advisor ClassPeriod (1) 2017 2016 2015


Increase (decrease) from operations: Total revenue 0.03 0.42 0.35 Total expenses (0.06) (0.25) (0.09) Realized gains (losses) for the period (0.10) (0.23) 0.26 Unrealized gains (losses) for the period 1.02 (0.33) (0.10)


Distributions: From net investment income (excluding dividends) – (0.26) (0.07) From net realized capital gains – – (0.08)

Total distributions (3) – (0.26) (0.15)


Financial Highlights


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Class FPeriod (1) 2017 2016 2015


Increase (decrease) from operations: Total revenue 0.11 0.42 0.27 Total expenses (0.04) (0.12) (0.03) Realized gains (losses) for the period 0.09 (0.23) 0.20 Unrealized gains (losses) for the period 0.56 (0.16) 0.12


Distributions: From net investment income (excluding dividends) (0.21) (0.38) (0.08) From net realized capital gains – – (0.08)

Total annual distributions (3) (0.21) (0.38) (0.16)


1. This information is derived from the ETF’s unaudited interim financial statements as at June 30, 2017, for Class E units, and the audited annual financial statements as at December 31 of the other years shown for both Class E and Advisor Class units. Unaudited Advisor Class information for 2017 is presented as at the termination date of those units on April 28, 2017. Class E units and Advisor Class units of the ETF have an initial net asset value of $10.00 as at August 25, 2015. Information is presented in accordance with IFRS.

2. Net assets per unit and distributions are based on the actual number of units outstanding at the relevant time. The increase (decrease) from operations is based on the weighted average number of units outstanding over the financial period.

3. Income, dividend and/or return of capital distributions, if any, are paid in cash, reinvested in additional units of the ETF, or both. Capital gains distributions, if any, may or may not be paid in cash. Non-cash capital gains distributions are reinvested in additional units of the ETF and subsequently consolidated. They are reported as taxable distributions and increase each unitholder’s adjusted cost base for their units. Neither the number of units held by the unitholder, nor the net asset per unit of the ETF change as a result of any non-cash capital gains distributions. Distributions classified as return of capital, if any, decrease each unitholder’s adjusted cost base for their units. The characteristics of distributions, if any, are determined subsequent to the end of the ETF’s tax year. Until such time, distribu-tions are classified as from net investment income (excluding dividends) for reporting purposes.

4. The Financial Highlights are not intended to act as a continuity of the opening and closing net assets per unit.

Financial Highlights (continued)


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Ratios and Supplemental Data

Class EPeriod (1) 2017 2016 2015

Total net asset value (000’s) $ 14,632 11,926 10,126Number of units outstanding (000’s) 1,400 1,200 965Management expense ratio (2)(5) 1.47% 1.52% 1.38%Management expense ratio excluding proportion of expenses from underlying investment funds 0.99% 0.99% 0.99%Management expense ratio before waivers and absorptions (3) 1.61% 1.72% 3.14%Trading expense ratio (4)(5) 0.06% 0.07% 0.18%Trading expense ratio excluding proportion of costs from underlying investment funds 0.06% 0.07% 0.18%Portfolio turnover rate (6) 47.18% 79.84% 116.21%Net asset value per unit, end of period $ 10.45 9.94 10.49 Closing market price $ 10.46 9.94 10.52

Advisor ClassPeriod (1) 2017 2016 2015

Total net asset value (000’s) $ 1,348 745 524Number of units outstanding (000’s) 125 75 50Management expense ratio (2)(5) 2.31% 2.37% 2.22%Management expense ratio excluding proportion of expenses from underlying investment funds 1.83% 1.84% 1.83%Management expense ratio before waivers and absorptions (3) 2.35% 2.57% 3.99%Trading expense ratio (4)(5) 0.06% 0.07% 0.18%Trading expense ratio excluding proportion of costs from underlying investment funds 0.06% 0.07% 0.18%Portfolio turnover rate (6) 47.18% 79.84% 116.21%Net asset value per unit, end of period $ 10.79 9.94 10.49 Closing market price $ 10.79 9.95 10.61

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Class FPeriod (1) 2017 2016 2015

Total net asset value (000’s) $ 71,221 68,386 95,952Number of units outstanding (000’s) 6,826 6,898 9,174Management expense ratio (2)(5) 1.04% 1.08% 1.03%Management expense ratio excluding proportion of expenses from underlying investment funds 0.56% 0.56% 0.52%Management expense ratio before waivers and absorptions (3) 1.29% 1.24% 1.16%Trading expense ratio (4)(5) 0.06% 0.07% 0.18%Trading expense ratio excluding proportion of costs from underlying investment funds 0.06% 0.07% 0.18%Portfolio turnover rate (6) 47.18% 79.84% 116.21%Net asset value per unit, end of period $ 10.43 9.91 10.46

1. This information is provided as at June 30, 2017, for Class E units, April 28, 2017, for Advisor Class units (the termination date of those units) and December 31 of the other years shown. Information is presented in accordance with IFRS.

2. Management expense ratio is based on total expenses, including sales tax, (excluding commissions and other portfolio transaction costs) for the stated period and is expressed as an annualized per-centage of daily average net asset value during the period. Out of its management fees, the Manager pays for such services to the ETF as investment manager compensation, service fees and marketing.

3. The Manager, at its discretion, may waive and/or absorb a portion of the fees and/or expenses otherwise payable by the ETF. The waiving and/or absorption of such fees and/or expenses by the Manager may be terminated at any time, or continued indefinitely, at the discretion of the Manager.

4. The trading expense ratio represents total commissions and other portfolio transaction costs expressed as an annualized percentage of daily average net asset value during the period. Transaction costs related to the purchase and/or sale of fixed income securities are typically imbedded in the price of those transactions and are therefore not included in the trading expense ratio.

5. The ETF’s management expense ratio (MER) and trading expense ratio (TER) include an estimated proportion of the MER and TER for any underlying investment funds held in the ETF’s portfolio during the period.

6. The ETF’s portfolio turnover rate indicates how actively its portfolio investments are traded. A portfolio turnover rate of 100% is equivalent to the ETF buying and selling all of the securities in its port-folio once in the course of the year. Generally, the higher the ETF’s portfolio turnover rate in a year, the greater the trading costs payable by the ETF in the year, and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the ETF.



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Management Fees

The Manager appoints the Investment Manager and provides, or oversees the provision of, administrative services re-quired by the ETF including, but not limited to: negotiating contracts with certain third-party service providers, such as portfolio managers, custodians, registrars, transfer agents, auditors and printers; authorizing the payment of operating expenses incurred on behalf of the ETF; arranging for the maintenance of accounting records for the ETF; preparing re-ports to unitholders and to the applicable securities regulatory authorities; calculating the amount and determining the frequency of distributions by the ETF; preparing financial statements, income tax returns and financial and accounting information as required by the ETF; ensuring that unitholders are provided with financial statements and other reports as are required from time to time by applicable law; ensuring that the ETF complies with all other regulatory requirements, including the continuous disclosure obligations of the ETF under applicable securities laws; administering purchases, redemptions and other transactions in units of the ETF; and dealing and communicating with unitholders of the ETF. The Manager provides office facilities and personnel to carry out these services, if not otherwise furnished by any other ser-vice provider to the ETF. The Manager also monitors the investment strategies of the ETF to ensure that the ETF complies with its investment objectives, investment strategies and investment restrictions and practices.

In consideration for the provision of these services, the Manager receives a monthly management fee at the annual rate of 0.85%, plus applicable sales taxes, of the net asset value of the ETF’s Class E units and 0.425%, plus applicable sales taxes, of the net asset value of the Class F units, calculated and accrued daily and payable monthly in arrears.

Up until the termination of the ETF’s Advisor Class units on April 28, 2017, as described in the section on Recent Develop-ments, the ETF also received a monthly management fee at the annual rate of 1.60%, plus applicable sales taxes, of the net asset value of the ETF’s Advisor Class units, calculated and accrued daily and payable monthly in arrears. In addition, up until the termination of the Advisor Class units, the Manager, and not the ETF, paid to registered dealers a service fee equal to 0.75% per year of the net asset value of Advisor Class units held by clients of the registered dealer. No service fees are paid to registered dealers in respect of Class E units.

The Investment Manager and Sub-Advisor are compensated for their services out of the management fees without any further cost to the ETF. Any expenses of the ETF which are waived or absorbed by the Manager are paid out of the man-agement fees received by the Manager.

The table below details, in percentage terms, the services received by the ETF from the Manager in consideration of the management fees paid during the period.

Marketing

Portfolio management fees, general administrative costs

and profit

Waived/absorbed expenses of the ETF

6% 52% 42%



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Commissions, trailing commissions, management fees and expenses all may be associated with an investment in the ETF. Please read the prospectus before investing. The indicated rates of return are the historical total returns including changes in unit value and reinvestment of all distributions, and do not take into account sales, redemptions, distributions or optional charges or income taxes payable by any investor that would have reduced returns. An investment in the ETF is not guaranteed. Its value changes frequently and past performance may not be repeated. The ETF’s performance num-bers assume that all distributions are reinvested in additional units of the ETF. If you hold this ETF outside of a registered plan, income and capital gains distributions that are paid to you increase your income for tax purposes whether paid to you in cash or reinvested in additional units. The amount of the reinvested taxable distributions is added to the adjusted cost base of the units that you own. This would decrease your capital gain or increase your capital loss when you later redeem from the ETF, thereby ensuring that you are not taxed on this amount again. Please consult your tax advisor regarding your personal tax situation.

Year-by-Year Returns

The following chart presents the ETF’s performance for its Class E and Advisor Class units for the periods shown. In per-centage terms, the chart shows how much an investment made on the first day of the financial period would have grown or decreased by the last day of the financial period.

2015 2016 2017Class E 5.84% -1.89% 7.08%

Advisor Class 5.53% -2.71% 8.56%

Class F 4.51% -1.49% 7.27%

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

Rate

of R

etur

n

Class E units and Advisor Class units of the ETF have an initial net asset value of $10.00 as at August 25, 2015. The Advisor Class returns for 2017 are up to the termination date of that class of units on April 28, 2017.

Past Performance


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% of ETF’sAsset Mix Net Asset Value Net Asset Value

Global Equities $ 60,329,847 70.27%Global Fixed Income Securities 12,919,011 15.05%U.S. Fixed Income Securities 4,286,553 4.99%Cash and Cash Equivalents 8,636,311 10.06%Other Assets less Liabilities (318,222) -0.37% $ 85,853,500 100.00% % of ETF’sSector Mix Net Asset Value Net Asset Value

Global Broad Equity $ 55,938,918 65.16%Global Broad Fixed Income 12,919,011 15.05%Financials 4,390,929 5.11%U.S. Broad Fixed Income 4,286,553 4.99%Cash and Cash Equivalents 8,636,311 10.06%Other Assets less Liabilities (318,222) -0.37% $ 85,853,500 100.00%

Summary of Investment PortfolioAs at June 30, 2017


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% of ETF’sTop Holdings Net Asset Value

iShares MSCI Japan ETF 9.89%VanEck Vectors® ChinaAMC CSI 300 ETF 7.86%iShares China Large-Cap ETF 7.50%iShares MSCI EAFE Small-Cap ETF 7.48%iShares MSCI Europe Financials ETF 5.11%iShares MSCI Brazil Capped ETF 5.07%BMO Emerging Markets Bond Hedged to CAD Index ETF 5.05%VanEck Vectors® Gold Miners ETF 5.04%iShares MSCI United Kingdom ETF 5.03%PowerShares Chinese Yuan Dim Sum Bond Portfolio 5.01%PowerShares Senior Loan Portfolio 4.99%iShares J.P. Morgan EM Local Currency Bond ETF 4.99%iShares MSCI France ETF 4.96%iShares MSCI Frontier 100 ETF 4.93%Vanguard Global ex-U.S. Real Estate ETF 4.92%iShares Global 100 ETF 2.48%

The summary of investment portfolio may change due to the ongoing portfolio transactions of the ETF. The most recent financial statements are available at no cost by calling 1-866-641-5739, by writing to us at 26 Wellington Street East, Suite 700, Toronto, Ontario, M5E 1S2, by visiting our website at www.horizonsetfs.com or through SEDAR at www.sedar.com.

Summary of Investment Portfolio (continued)As at June 30, 2017


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MANAGER’S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying unaudited interim financial statements of Horizons Managed Global Opportunities ETF (the “ETF”) are the responsibility of the manager and trustee to the ETF, AlphaPro Management Inc. (the “Manager”). They have been prepared in accordance with International Financial Reporting Standards using information available and include certain amounts that are based on the Manager’s best estimates and judgments.

The Manager has developed and maintains a system of internal controls to provide reasonable assurance that all assets are safeguarded and to produce relevant, reliable and timely financial information, including the accompanying financial statements.

These financial statements have been approved by the Board of Directors of the Manager.

________________________ ________________________Steven J. Hawkins Taeyong LeeDirector DirectorAlphaPro Management Inc. AlphaPro Management Inc.

NOTICE TO UNITHOLDERS

The Auditors of the ETF have not reviewed these Financial Statements.

AlphaPro Management Inc., the Manager of the ETF, appoints an independent auditor to audit the ETF’s annual financial statements.

The ETF’s independent auditors have not performed a review of these interim financial statements in accordance with Canadian generally accepted auditing standards.


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2017 2016

Assets Cash and cash equivalents $ 8,636,311 $ 10,235,300 Investments 77,535,411 67,969,999 Amounts receivable relating to accrued income 45,534 1,654,758 Amounts receivable relating to portfolio assets sold – 1,714,960 Accounts receivable relating to securities issued – 759

Total assets 86,217,256 81,575,776

Liabilities Accrued management fees 32,851 32,210 Accrued operating expenses 13,872 14,371 Amounts payable relating to securities redeemed 51,592 137,105 Distribution payable 265,441 335,373

Total liabilities 363,756 519,059

Total net assets (note 2) $ 85,853,500 $ 81,056,717

Total net assets, Class E $ 14,632,038 $ 11,925,871 Number of redeemable units outstanding, Class E (note 9) 1,399,636 1,200,000 Total net assets per unit, Class E $ 10.45 $ 9.94

Total net assets, Advisor Class $ – $ 745,216 Number of redeemable units outstanding, Advisor Class (note 9) – 75,000 Total net assets per unit, Advisor Class $ – $ 9.94

Total net assets, Class F $ 71,221,462 $ 68,385,630 Number of redeemable units outstanding, Class F (note 9) 6,825,711 6,898,055 Total net assets per unit, Class F $ 10.43 $ 9.91

(See accompanying notes to financial statements)

Approved on behalf of the Board of Directors of the Manager:

______________________ _______________________Steven J. Hawkins Taeyong Lee

Statements of Financial Position (unaudited)As at June 30, 2017 and December 31, 2016


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2017 2016

Income Dividend income $ 856,818 $ 1,274,132 Securities lending income (note 8) 19,676 41,825 Net realized gain on sale of investments and derivatives 1,066,643 1,380,479 Net realized loss on foreign exchange (352,015) (180,809) Net change in unrealized appreciation (depreciation) of investments and derivatives 4,438,607 (7,780,759) Net change in unrealized appreciation of foreign exchange 103,910 5,991

6,133,639 (5,259,141)

Expenses Management fees (note 10) 233,454 274,021 Audit fees 7,051 7,666 Independent Review Committee fees 348 601 Custodial fees 3,567 5,298 Legal fees – 3,229 Securityholder reporting costs 17,193 17,378 Administration fees 104,011 93,181 Transaction costs 24,909 35,462 Withholding taxes 48,442 154,541

438,975 591,377

Amounts that were payable by the investment fund that were paid or absorbed by the Manager (98,559) (90,025)

340,416 501,352

Increase (decrease) in net assets for the period $ 5,793,223 $ (5,760,493)

Increase (decrease) in net assets, Class E $ 814,734 $ (567,505)Increase (decrease) in net assets per unit, Class E 0.65 (0.57)

Increase (decrease) in net assets, Advisor Class $ 78,710 $ (31,482)Increase (decrease) in net assets per unit, Advisor Class 0.89 (0.63)

Increase (decrease) in net assets, Class F $ 4,899,779 $ (5,161,506)Increase (decrease) in net assets per unit, Class F 0.72 (0.54)


Statements of Comprehensive Income (unaudited)For the Periods Ended June 30,


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Statements of Changes in Financial Position (unaudited)For the Periods Ended June 30,

2017 2016

Total net assets at the beginning of the period $ 81,056,717 $ 106,602,871

Increase (decrease) in net assets 5,793,223 (5,760,493) Redeemable unit transactions Proceeds from the issuance of securities of the investment fund 11,673,483 15,190,514 Aggregate amounts paid on redemption of securities of the investment fund (12,403,963) (6,678,694) Securities issued on reinvestment of distributions 1,380,170 (169) Distributions: From net investment income (1,646,130) (1,044,036)

Total net assets at the end of the period $ 85,853,500 $ 108,309,993

Total net assets at the beginning of the period, Class E $ 11,925,871 $ 10,125,952

Increase (decrease) in net assets, Class E 814,734 (567,505) Redeemable unit transactions Proceeds from the issuance of securities of the investment fund 2,682,429 740,963 Aggregate amounts paid on redemption of securities of the investment fund (525,555) (394,720) Distributions: From net investment income (265,441) (80,810)

Total net assets at the end of the period, Class E $ 14,632,038 $ 9,823,880

Total net assets at the beginning of the period, Advisor Class $ 745,216 $ 524,497

Increase (decrease) in net assets, Advisor Class 78,710 (31,482) Redeemable unit transactions Proceeds from the issuance of securities of the investment fund 524,396 – Aggregate amounts paid on redemption of securities of the investment fund (1,348,322) – Distributions: From net investment income – (1,943)

Total net assets at the end of the period, Advisor Class $ – $ 491,072

Total net assets at the beginning of the period, Class F $ 68,385,630 $ 95,952,422

Increase (decrease) in net assets, Class F 4,899,779 (5,161,506) Redeemable unit transactions Proceeds from the issuance of securities of the investment fund 8,466,658 14,449,551 Aggregate amounts paid on redemption of securities of the investment fund (10,530,086) (6,283,974) Securities issued on reinvestment of distributions 1,380,170 (169) Distributions: From net investment income (1,380,689) (961,283)

Total net assets at the end of the period, Class F $ 71,221,462 $ 97,995,041



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Statements of Cash Flows (unaudited)For the Periods Ended June 30,

2017 2016

Cash flows from operating activities:Increase (decrease) in net assets for the period $ 5,793,223 $ (5,760,493)Adjustments for: Net realized gain on sale of investments and derivatives (1,066,643) (1,380,479) Net change in unrealized depreciation (appreciation) of investments and derivatives (4,438,607) 7,780,759 Net change in unrealized appreciation of foreign exchange (72,002) (4,274) Purchase of investments (40,146,405) (51,529,202) Proceeds from the sale of investments 37,801,203 39,140,565 Amounts receivable relating to accrued income 1,609,224 190,538 Accrued expenses 142 9,789

Net cash used in operating activities (519,865) (11,552,797)

Cash flows from financing activities: Amount received from the issuance of units 10,325,920 15,621,726 Amount paid on redemptions of units (11,141,154) (6,771,526) Distributions paid to unitholders (335,892) (100,275)

Net cash from (used in) financing activities (1,151,126) 8,749,925

Net decrease in cash and cash equivalents during the period (1,670,991) (2,802,872) Effect of exchange rate fluctuations on cash and cash equivalents 72,002 4,274 Cash and cash equivalents at beginning of period 10,235,300 5,454,508

Cash and cash equivalents at end of period $ 8,636,311 $ 2,655,910

Dividends received, net of withholding taxes $ 2,417,600 $ 1,310,129



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Average FairSecurity Shares Cost Value

GLOBAL EQUITIES (70.27%)Global Broad Equity (65.16%) iShares China Large-Cap ETF 125,045 $ 6,066,426 $ 6,440,930 iShares Global 100 ETF 19,464 1,806,578 2,126,042 iShares MSCI Brazil Capped ETF 98,280 4,279,696 4,348,577 iShares MSCI EAFE Small-Cap ETF 85,635 5,732,994 6,422,107 iShares MSCI France ETF 114,208 3,985,828 4,259,498 iShares MSCI Frontier 100 ETF 114,111 3,822,119 4,236,643 iShares MSCI Japan ETF 122,019 7,856,148 8,489,267 iShares MSCI United Kingdom ETF 99,855 3,902,422 4,315,967 VanEck Vectors® ChinaAMC CSI 300 ETF 122,459 6,226,010 6,744,441 VanEck Vectors® Gold Miners ETF 151,292 4,377,090 4,330,034 Vanguard Global ex-U.S. Real Estate ETF 57,926 4,131,012 4,225,412

52,186,323 55,938,918

Financials (5.11%) iShares MSCI Europe Financials ETF 154,118 4,359,364 4,390,929

TOTAL GLOBAL EQUITIES 56,545,687 60,329,847

GLOBAL FIXED INCOME SECURITIES(15.05%)Global Broad Fixed Income (15.05%) BMO Emerging Markets Bond Hedged to CAD Index ETF 257,544 4,385,747 4,337,041 iShares J.P. Morgan EM Local Currency Bond ETF 70,917 3,905,867 4,285,577 PowerShares Chinese Yuan Dim Sum Bond Portfolio 146,726 4,543,906 4,296,393

12,835,520 12,919,011

TOTAL GLOBAL FIXED INCOME SECURITIES 12,835,520 12,919,011

U.S. FIXED INCOME SECURITIES (4.99%)U.S. Broad Fixed Income (4.99%) PowerShares Senior Loan Portfolio 142,909 4,249,768 4,286,553

TOTAL U.S. FIXED INCOME SECURITIES 4,249,768 4,286,553

Transaction Costs (24,225)

TOTAL INVESTMENT PORTFOLIO (90.31%) 73,606,750 77,535,411

Cash and cash equivalents (10.06%) 8,636,311 Other assets less liabilities (-0.37%) (318,222)

TOTAL NET ASSETS (100.00%) 85,853,500


Schedule of Investments (unaudited)As at June 30, 2017


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Notes to Financial Statements (unaudited)June 30, 2017

1. REPORTING ENTITY

Horizons Managed Global Opportunities ETF (“HGM” or the “ETF”) is an investment trust established under the laws of the Province of Ontario by Declaration of Trust and effectively began operations on August 25, 2015. The address of the ETF’s registered office is: c/o AlphaPro Management Inc., 26 Wellington Street East, Suite 700, Toronto, Ontario, M5E 1S2.

The ETF is offered for sale on a continuous basis by its prospectus in class E units (“Class E”) which trade on the Toronto Stock Exchange (“TSX”) under the symbol HGM. An investor may buy or sell units of the ETF on the TSX only through a registered broker or dealer in the province or territory where the investor resides. Investors are able to trade units of the ETF in the same way as other securities traded on the TSX, including by using market orders and limit orders and may incur customary brokerage commissions when buying or selling units.

Prior to their termination on April 28, 2017 (see below), the ETF also offered for sale on a continuous basis, by its prospec-tus, advisor class units (“Advisor Class”) which traded on the TSX under the symbol HGM.A. Advisors were directly com-pensated with a service fee on a trailing quarterly basis (the “Service Fee”). The only difference between the Advisor Class and Class E units of the ETF was that the Advisor Class charged higher management fees that included the Service Fees paid to the advisor (see note 10).

Class F units of Horizons HGM are only available for purchase to certain investors who qualify as “accredited investors”. The Class F units are subject to the terms and conditions of a Confidential Offering Memorandum. These units are not traded publicly on a stock exchange.

The investment objectives of HGM are to use flexible tactical asset allocation among multiple global asset classes to seek long term growth, while also seeking to protect against downside risk. HGM invests primarily in exchange traded prod-ucts that are listed on North American stock exchanges and may be exposed to equity securities, fixed-income securities or currencies around the world, or to gold.

AlphaPro Management Inc. (“AlphaPro” or the “Manager”) is the manager and trustee of the ETF. The Manager has ap-pointed Horizons ETFs Management (Canada) Inc. (“Horizons Management” or the “Investment Manager”), an affiliate of the Manager, to act as the investment manager to the ETF.

The Investment Manager is responsible for implementing the ETF’s investment strategies and for engaging the services of Forstrong Global Asset Management Inc. (“Forstrong” or the “Sub-Advisor”), to act as the sub-advisor to the ETF. The Manager and Investment Manager are both members of the Mirae Asset Financial Group (“Mirae Asset”).

Conversion and Termination of Advisor Class units

The Manager completed the previously announced conversion (the “Conversion”) of the ETF’s advisor class units (“Ad-visor Class units”) into the ETF’s common class units (“Class E units”) at the close of business on April 28, 2017 (the “Conversion Date”).

The remaining unitholders of record of the Advisor Class units as at the Conversion Date received a number of whole Class E units of the ETF with an aggregate net asset value (“NAV”) equal to the aggregate NAV of the Advisor Class units converted, based on the respective NAVs of the two classes as at the Conversion Date (the “Conversion Ratio”). The ETF’s Conversion Ratio was 0.997091, meaning, that for each Advisor Class unit of the ETF subject to the Conversion, the unit-holder received 0.997091 Class E units of the ETF.

The conversion of Advisor Class units into whole Class E units of the ETF did not give rise to a disposition by unitholders of converting Advisor Class units for tax purposes on any whole units converted. Any remaining fractional Advisor Class units were redeemed for cash and such redemption is considered a disposition for tax purposes.


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Notes to Financial Statements (unaudited) (continued)June 30, 2017

Immediately following the completion of the Conversion, the Advisor Class units were terminated.

2. BASIS OF PREPARATION

(i) Statement of compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”). Any mention of total net assets, net assets, net asset value or increase (decrease) in net assets is referring to net assets or increase (decrease) in net assets attributable to holders of redeemable units as reported under IFRS.

These financial statements were authorized for issue on August 15, 2017, by the Board of Directors of the Manager.

(ii) Basis of measurement

The financial statements have been prepared on the historical cost basis except for financial instruments at fair value though profit or loss, which are measured at fair value.

(iii) Functional and presentation currency

These financial statements are presented in Canadian dollars, which is the ETF’s functional currency.

3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

(a) Financial instruments

(i) Recognition, initial measurement and classification

Financial assets and financial liabilities at fair value through profit or loss (“FVTPL”) are initially recognized on the trade date, at fair value (see below), with transaction costs recognized in the statements of comprehensive income. Other finan-cial assets and financial liabilities are recognized on the date on which they are originated at fair value.

The ETF classifies financial assets and financial liabilities into the following categories:

• Financial assets at fair value through profit or loss:

- Held for trading: derivative financial instruments

- Designated as at fair value through profit or loss: debt securities and equity investments

• Financial assets at amortized cost: All other financial assets are classified as loans and receivables

• Financial liabilities at fair value through profit or loss:

- Held for trading: derivative financial instruments

• Financial liabilities at amortized cost: all other financial liabilities are classified as other financial liabilities


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(ii) Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction be-tween market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the ETF has access at that date. The fair value of a liability reflects its non-performance risk.

Investments are valued at fair value as of the close of business on each day upon which a session of the TSX is held (“Valu-ation Date”) and based on external pricing sources to the extent possible. Investments held that are traded in an active market through recognized public stock exchanges, over-the-counter markets, or through recognized investment deal-ers, are valued at their closing sale price. However, such prices may be adjusted if a more accurate value can be obtained from recent trading activity or by incorporating other relevant information that may not have been reflected in pricing obtained from external sources. Short-term investments, including notes and money market instruments, are valued at amortized cost which approximates fair value.

Investments held that are not traded in an active market, including some derivative financial instruments, are valued us-ing observable market inputs where possible, on such basis and in such manner as established by the Manager. Deriva-tive financial instruments are recorded in the statements of financial position according to the gain or loss that would be realized if the contracts were closed out on the Valuation Date. Margin deposits, if any, are included in the schedule of investments as margin deposits. See also the summary of fair value measurements in note 7.

Fair value policies used for financial reporting purposes are the same as those used to measure the net asset value (“NAV”) for transactions with unitholders.

The fair value of other financial assets and liabilities approximates their carrying values due to the short-term nature of these instruments.

(iii) Offsetting

Financial assets and liabilities are offset and the net amount presented in the statements of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or to real-ize the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis for gains and losses from financial instruments at fair value through profit or loss and foreign exchange gains and losses.

(iv) Specific instruments

Cash and cash equivalents

Cash and cash equivalents consist of cash on deposit and short-term, interest bearing notes with a term to maturity of less than three months from the date of purchase.

Forward foreign exchange contracts

Forward foreign exchange contracts, if any, are valued at the current market value thereof on the Valuation Date. The val-ue of these forward contracts is the gain or loss that would be realized if, on the Valuation Date, the positions were to be closed out and recorded as derivative assets and/or liabilities in the statements of financial position and as a net change


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in unrealized appreciation (depreciation) of investments and derivatives in the statements of comprehensive income. When the forward contracts are closed out or mature, realized gains or losses on forward contracts are recognized and are included in the statements of comprehensive income in net realized gain (loss) on sale of investments and derivatives. The Canadian dollar value of forward foreign exchange contracts is determined using forward currency exchange rates supplied by an independent service provider.

Redeemable units

The redeemable units are measured at the present value of the redemption amounts and are considered a residual amount of the net assets attributable to holders of redeemable units. They are classified as financial liabilities as a result of the ETF’s requirement to distribute net income and capital gains to unitholders and because the ETF has multiple classes of units with different features, as described in note 10.

(b) Investment income

Investment transactions are accounted for as of the trade date. Realized gains and losses from investment transactions are calculated on a weighted average cost basis. The difference between fair value and average cost, as recorded in the financial statements, is included in the statements of comprehensive income as part of the net change in unrealized ap-preciation (depreciation) of investments and derivatives. Interest income for distribution purposes from investments in bonds and short-term investments represents the coupon interest received by the ETF accounted for on an accrual basis. The ETF does not amortize premiums paid or discounts received on the purchase of fixed income securities. The ETF does not use the effective interest method. Dividend income is recognized on the ex-dividend date. Distribution income from investments in other funds or ETFs is recognized when earned.

Income from derivatives is shown in the statements of comprehensive income as net realized gain (loss) on sale of invest-ments and derivatives; net change in unrealized appreciation (depreciation) of investments and derivatives; and, interest income for distribution purposes, in accordance with its nature.

Income from securities lending, if any, is included in “Securities lending income” on the statements of comprehensive income and is recognized when earned. Any securities on loan continue to be displayed in the schedule of investments and the market value of the securities loaned and collateral held is determined daily (see note 8).

If the ETF incurs withholding taxes imposed by certain countries on investment income and capital gains, such income and gains are recorded on a gross basis and the related withholding taxes are shown as a separate expense in the state-ments of comprehensive income.

(c) Foreign currency

Transactions in foreign currencies are translated into the ETF’s reporting currency using the exchange rate prevailing on the trade date. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated at the period-end exchange rate. Foreign exchange gains and losses are presented as “Net realized gain (loss) on foreign exchange”, except for those arising from financial instruments at fair value through profit or loss, which are recognized as a component within “Net realized gain (loss) on sale of investments and derivatives” and “Net change in unrealized appre-ciation (depreciation) of investments and derivatives” in the statements of comprehensive income.



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(d) Cost basis

The cost of portfolio investments is determined on an average cost basis.

(e) Increase (decrease) in net assets attributable to holders of redeemable units per unit

The increase (decrease) in net assets per unit by class in the statements of comprehensive income represents the change in net assets attributable to holders of redeemable units from operations attributable to each class divided by the weighted average number of units of that class outstanding during the reporting period. Income, expenses other than management fees, and realized and unrealized capital gains (losses) are distributed amongst the different classes of units in proportion to the amount invested in them. For management fees please refer to note 10.

(f) Unitholder transactions

The value at which units are issued or redeemed is determined by dividing the net asset value of the class by the total number of units outstanding of that class on the Valuation Date. Amounts received on the issuance of units and amounts paid on the redemption of units are included in the statements of changes in financial position.

(g) Amounts receivable (payable) relating to portfolio assets sold (purchased)

In accordance with the ETF’s policy of trade date accounting for sale and purchase transactions, sales/purchase transac-tions awaiting settlement represent amounts receivable/payable for securities sold/purchased, but not yet settled as at the reporting date.

(h) Net assets attributable to holders of redeemable units per unit

Net assets attributable to holders of redeemable units per unit is calculated for each class of units of the ETF by taking the respective class’ proportionate share of the ETF’s net assets attributable to holders of redeemable units and dividing by the number of units of that class outstanding on the Valuation Date.

(i) Transaction costs

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of an investment, which include fees and commissions paid to agents, advisors, brokers and dealers, levies by regulatory agencies and secu-rities exchanges, and transfer taxes and duties. Transaction costs are expensed and are included in “Transaction costs” in the statements of comprehensive income.

(j) Future accounting changes

The International Accounting Standards Board (“IASB”) has issued the following new standards and amendments to exist-ing standards that are not yet effective.

IFRS 9, Financial Instruments (“IFRS 9”):

In July 2014, the IASB issued IFRS 9, Financial Instruments, to replace International Accounting Standard 39, Financial In-struments – Recognition and Measurement (“IAS 39”). IFRS 9 addresses classification and measurement, impairment and



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hedge accounting.

The new standard requires assets to be classified based on the ETF’s business model for managing the financial assets and contractual cash flow characteristics of the financial assets. Financial assets will be measured at fair value through profit and loss unless certain conditions are met which permit measurement at amortized cost or value through other compre-hensive income.

The classification and measurement of liabilities remain generally unchanged, with the exception of liabilities recorded at fair value through profit and loss. For financial liabilities designated at fair value through profit and loss, IFRS 9 requires the presentation of the effects of changes in the ETF’s own credit risk in other comprehensive income instead of net income.

IFRS 9 is effective for fiscal years beginning on January 1, 2018, though early adoption is permitted. The Manager is cur-rently assessing the impact of this new standard on the ETF’s financial statements.

4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

In preparing these financial statements, the Manager has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively.

The ETF may hold financial instruments that are not quoted in active markets, including derivatives. The determination of the fair value of these instruments is the area with the most significant accounting judgements and estimates that the ETF has made in preparing the financial statements. See note 7 for more information on the fair value measurement of the ETF’s financial instruments.

5. FINANCIAL INSTRUMENTS RISK

In the normal course of business, the ETF’s investment activities expose it to a variety of financial risks. The Manager seeks to minimize potential adverse effects of these risks for the ETF’s performance by employing professional, experienced portfolio advisors, by daily monitoring of the ETF’s positions and market events, and periodically may use derivatives to hedge certain risk exposures. To assist in managing risks, the Manager maintains a governance structure that oversees the ETF’s investment activities and monitors compliance with the ETF’s stated investment strategies, internal guidelines and securities regulations.

Please refer to the most recent prospectus for a complete discussion of the risks attributed to an investment in the units of the ETF. Significant financial instrument risks that are relevant to the ETF and an analysis of how they are managed are presented below.

(a) Market risk

Market risk is the risk that changes in market prices, such as interest rates, equity prices, foreign exchange rates and credit spreads (not relating to changes in the obligor’s/issuer’s credit standing) will affect the ETF’s income or the fair value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk expo-sures within acceptable parameters, while optimizing the return.



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(i) Currency risk

Currency risk is the risk that financial instruments which are denominated in currencies other than the ETF’s reporting currency, the Canadian dollar, will fluctuate due to changes in exchange rates and adversely impact the ETF’s income, cash flows or fair values of its investment holdings. The ETF may reduce its foreign currency exposure through the use of derivative arrangements such as foreign exchange forward contracts or futures contracts. The following tables indicate the foreign currencies to which the ETF had significant exposure as at June 30, 2017, and December 31, 2016, in Canadian dollar terms and the potential impact on the ETF’s net assets (including the underlying principal amount of future or for-ward currency contracts, if any), as a result of a 1% change in these currencies relative to the Canadian dollar:

June 30, 2017 Financial Instruments Currency Forward and/

or Futures Contracts TotalImpact on Net

Asset Value

Currency ($000's) ($000's) ($000's) ($000's)

Brazilian Real 5,013 – 5,013 50

Chinese Yuan 11,052 – 11,052 111

Euro Currency 8,953 – 8,953 90

British Pound 7,364 – 7,364 74

Hong Kong Dollar 7,506 – 7,506 75

Japanese Yen 11,376 – 11,376 114

U.S. Dollar 13,208 – 13,208 132

Other Currencies* 11,115 – 11,115 111

Total 75,587 – 75,587 757

As % of Net Asset Value 88.0% – 88.0% 0.9%

December 31, 2016 Financial Instruments Currency Forward and/

or Futures Contracts TotalImpact on Net

Asset Value

Currency ($000's) ($000's) ($000's) ($000's)

Chinese Yuan 9,991 – 9,991 100

Hong Kong Dollar 4,137 – 4,137 41

Indian Rupee 6,047 – 6,047 60

Japanese Yen 10,471 – 10,471 105

U.S. Dollar 29,294 – 29,294 293

Other Currencies* 18,314 – 18,314 183

Total 78,254 – 78,254 782

As % of Net Asset Value 96.5% – 96.5% 1.0%

* The ETF has exposure to several other foreign currencies through its portfolio holdings, none of which represent more than 5% of the ETF’s net assets. A 1% increase or decrease in any one those currencies relative to the Canadian dollar



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would have an immaterial impact on the ETF.

(ii) Interest rate risk

The ETF may be exposed to the risk that the fair value of future cash flows of its financial instruments will fluctuate as a result of changes in market interest rates. In general, the value of interest-bearing financial instruments will rise if interest rates fall, and conversely, will generally fall if interest rates rise. There is minimal sensitivity to interest rate fluctuation on cash and cash equivalents invested at short-term market rates since those securities are usually held to maturity and are short term in nature.

The following table summarizes the ETF’s exposure to interest rate risk, including the ETF’s assets categorized by the remaining term to maturity:

InvestmentsLess than

1 year 1 - 3 years 3 - 5 years > 5 yearsNon-interest

bearing Total

As at ($000's) ($000's) ($000's) ($000's) ($000's) ($000's)

June 30, 2017 1,814 3,132 3,063 8,495 – 16,504

December 31, 2016 3,381 4,717 7,477 9,325 – 24,900

The percentage of the ETF’s net assets exposed to interest rate risk as at June 30, 2017, was 19.2% (December 31, 2016 – 30.7%). The amount by which the net assets of the ETF would have increased or decreased, as at June 30, 2017, had the prevailing interest rates been lowered or raised by 1%, assuming a parallel shift in the yield curve, with all other variables remaining constant, was $529,763 (December 31, 2016 – $869,034). The ETF’s interest rate sensitivity was determined based on portfolio weighted duration. In practice, actual results may differ from this sensitivity analysis.

(iii) Other market risk

Other market risk is the risk that the value of financial instruments will fluctuate as a result of changes in market prices (other than those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment, its issuer, or all factors affecting all instruments traded in a market or market segment. The Manager has im-posed internal risk management controls on the ETF which are intended to limit the loss on its trading activities.

The table below shows the estimated impact on the ETF of a 1% increase or decrease in a broad-based market index, based on historical correlation, with all other factors remaining constant, as at the dates shown. In practice, actual results may differ from this sensitivity analysis and the difference could be material. The historical correlation may not be repre-sentative of future correlation.

Comparative Index June 30, 2017 December 31, 2016

S&P Global 1200 $528,959 $537,841

(b) Credit risk

Credit risk on financial instruments is the risk of a financial loss occurring as a result of the default of a counterparty on its obligation to the ETF. It arises principally from debt securities held, and also from derivative financial assets, cash and cash equivalents, and other receivables. The ETF’s maximum credit risk exposure as at the reporting date is represented by the



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respective carrying amounts of the financial assets in the statements of financial position. The ETF’s credit risk policy is to minimise its exposure to counterparties with perceived higher risk of default by dealing only with counterparties that meet the credit standards set out in the ETF’s prospectus and by taking collateral.

Analysis of credit quality

The ETF’s credit risk exposure by designated rating of the invested portfolio as at June 30, 2017, and December 31, 2016, is listed as follows:

Debt, Preferred or Derivative Securities by Credit Rating Percentage of Net Asset Value (%)

June 30, 2017 December 31, 2016

AAA 0.2% 0.2%

AA 0.6% 3.2%

A 3.8% 3.2%

BBB 5.8% 7.3%

BB 4.5% 8.2%

B 2.8% 5.1%

CCC 0.2% 1.3%

CC 0.1% 0.1%

D – 0.1%

Unrated 1.2% 2.0%

Total 19.2% 30.7%

Designated ratings are obtained by Standard & Poor’s, Moody’s and/or Dominion Bond Rating Services. Where more than one rating is obtained for a security, the lowest rating has been used. Credit risk is managed by dealing with counterpar-ties the ETF believes to be creditworthy and by regular monitoring of credit exposures. The maximum exposure to any one debt issuer as of June 30, 2017, was 0.7% (December 31, 2016 – 1.4%) of the net assets of the ETF.

(c) Liquidity risk

Liquidity risk is the risk that the ETF will encounter difficulty in meeting the obligations associated with its financial liabili-ties that are settled by delivering cash or another financial asset. The ETF’s policy and the investment manager’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stress conditions, including estimated redemptions of shares, without incurring unaccept-able losses or risking damage to the ETF’s reputation. All financial liabilities are generally due within 90 days. Liquidity risk is managed by investing the majority of the ETF’s assets in investments that are traded in an active market and can be readily disposed. The ETF aims to retain sufficient cash and cash equivalent positions to maintain liquidity; therefore, the liquidity risk for the ETF is considered minimal.



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6. NET CHANGES FROM FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Net changes in fair value on financial assets and financial liabilities at fair value through profit or loss presented in the table below are comprised of the following: net realized gain (loss) on sale of investments and derivatives, net change in unrealized appreciation (depreciation) of investments and derivatives, dividend income and interest income for distribution purposes. Their classifications between held for trading and designated at fair value are presented in the following table:

Net Changes at FVTPL ($)

Category June 30, 2017 June 30, 2016

Financial assets (liabilities) at FVTPL:

Held for trading – –

Designated at fair value 6,113,963 (5,300,966)

Total financial assets (liabilities) at FVTPL 6,113,963 (5,300,966)

7. FAIR VALUE MEASUREMENT

Below is a classification of fair value measurements of the ETF’s investments based on a three level fair value hierarchy and a reconciliation of transactions and transfers within that hierarchy. The hierarchy of fair valuation inputs is summa-rized as follows:

• Level 1: securities that are valued based on quoted prices in active markets.

• Level 2: securities that are valued based on inputs other than quoted prices that are observable, either directly as prices, or indirectly as derived from prices.

• Level 3: securities that are valued with significant unobservable market data.

Changes in valuation methods may result in transfers into or out of an investment’s assigned level. The following is a summary of the inputs used as at June 30, 2017, and December 31, 2016, in valuing the ETF’s investments and derivatives carried at fair values:

June 30, 2017 December 31, 2016

Level 1 ($) Level 2 ($) Level 3 ($) Level 1 ($) Level 2 ($) Level 3 ($)

Financial Assets

Exchange Traded Funds 77,535,411 – – 67,969,999 – –

Total Financial Assets 77,535,411 – – 67,969,999 – –

Total Financial Liabilities – – – – – –

Net Financial Assets and Liabilities 77,535,411 – – 67,969,999 – –

There were no significant transfers made between Levels 1 and 2 as a result of changes in the availability of quoted market prices or observable market inputs during the period or year shown. In addition, there were no investments or transactions classified in Level 3 for the period ended June 30, 2017, and for the year ended December 31, 2016.



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8. SECURITIES LENDING

In order to generate additional returns, the ETF is authorized to enter into securities lending agreements with borrowers deemed acceptable in accordance with National Instrument 81-102 – Investment Funds (“NI 81-102”). Under a securities lending agreement, the borrower must pay the ETF a negotiated securities lending fee, provide compensation to the ETF equal to any distributions received by the borrower on the securities borrowed, and the ETF must receive an acceptable form of collateral in excess of the value of the securities loaned. Although such collateral is marked to market, the ETF may be exposed to the risk of loss should a borrower default on its obligations to return the borrowed securities and the collat-eral is insufficient to reconstitute the portfolio of loaned securities. Revenue, if any, earned on securities lending transac-tions during the period is disclosed in the ETF’s statements of comprehensive income.

The aggregate closing market value of securities loaned and collateral received as at June 30, 2017, and December 31, 2016, was as follows:

As at Securities Loaned Collateral Received

June 30, 2017 $4,086,947 $4,325,165

December 31, 2016 $5,307,041 $5,653,684

Collateral may comprise, but is not limited to, cash and obligations of or guaranteed by the Government of Canada or a province thereof; by the United States government or its agencies; by some sovereign states; by permitted supranational agencies; and short-term debt of Canadian financial institutions, if, in each case, the evidence of indebtedness has a des-ignated rating as defined by NI 81-102.

The table below presents a reconciliation of the securities lending income as presented in the statements of comprehen-sive income for the periods ended June 30, 2017 and 2016. It shows the gross amount of securities lending revenues gen-erated from the securities lending transactions of the ETF, less any taxes withheld and amounts earned by parties entitled to receive payments out of the gross amount as part of any securities lending agreements.

For the periods ended June 30, 2017% of Gross

Income June 30, 2016% of Gross

Income

Gross securities lending income $39,037 $85,339

Withholding taxes (10,929) 28.00% (25,589) 29.99%

Lending Agents’ fees:

Canadian Imperial Bank of Commerce (8,432) 21.60% (17,925) 21.00%

Net securities lending income paid to the ETF $19,676 50.40% $41,825 49.01%

9. REDEEMABLE UNITS

The ETF is authorized to issue an unlimited number of redeemable, transferable Class E units each of which represents an equal, undivided interest in the net assets of the ETF. Each unit entitles the owner to one vote at meetings of unitholders. Each unit is entitled to participate equally with all other units with respect to all payments made to unitholders, other than management fee distributions, whether by way of income or capital distributions and, on liquidation, to participate equally in the net assets of the ETF remaining after satisfaction of any outstanding liabilities that are attributable to units of that class of the ETF. All units will be fully paid and non-assessable, with no liability for future assessments, when issued and will not be transferable except by operation of law.



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Prior to the Conversion transaction and subsequent termination of the Advisor Class units described in note 1, the ETF was authorized to issue an unlimited number of redeemable, transferable Advisor Class units each of which had the same rights and privileges as the Class E units.

The redeemable units issued by the ETF provide an investor with the right to require redemption for cash at a value proportionate to the investor’s share in the ETF’s net assets at each redemption date. They are classified as liabilities as a result of the ETF’s requirement to distribute net income and capital gains to unitholders and because the ETF has multiple classes of units with different features, as described in note 10. The ETF’s objectives in managing the redeemable units are to meet the ETF’s investment objective, and to manage liquidity risk arising from redemptions. The ETF’s management of liquidity risk arising from redeemable units is discussed in note 5.

On any trading day, which is defined as the day that a net asset value of the ETF is being struck, unitholders of the ETF may (i) redeem units of the ETF for cash at a redemption price per unit equal to 95% of the closing price for units of the ETF on the TSX on the effective day of the redemption, where the units being redeemed are not equal to a prescribed number of units (“PNU”) or a multiple PNU; or (ii) redeem, less any applicable redemption charge as determined by the Manager in its sole discretion from time to time, a PNU or a multiple PNU of the ETF for cash equal to the net asset value of that number of units.

Subject to regulatory and other necessary third party approvals, a stock exchange sponsored execution program may become available which would allow investors to purchase and sell Class E units of the ETF based on transaction prices calculated as at the end-of-day net asset value, plus any fee payable to the investor’s dealer for the dealer’s facilitation of the purchase or sale. The Manager will issue a news release announcing the details of any such stock exchange sponsored execution program.

Units of the ETF are issued or redeemed on a daily basis at the net asset value per security that is determined as at 4:00 p.m. (Eastern Time) each business day. Purchase and redemption orders are subject to a 9:30 a.m. (Eastern Time) cut-off time.

Class F Units

The ETF is authorized to issue an unlimited number of redeemable Class F units, each of which represents an equal, undivided interest in the net assets of the ETF attributable to that class. The ETF currently offers Class F units to investors who qualify as “accredited investors”. The Class F units are subject to the terms and conditions of a Confidential Offering Memorandum. These units are not traded publicly on a stock exchange.

Each Class F unit of the ETF entitles the owner to one vote at meetings of unitholders of the ETF or of the Class F units. Each unit is entitled to participate equally with all other units of the ETF of the same class with respect to all payments made to unitholders of the ETF, other than management fee distributions and income or capital gains allocated and des-ignated as payable to a redeeming unitholder, whether by way of income or capital gains distributions and, on liquida-tion, to participate equally in the net assets of the ETF remaining after satisfaction of any outstanding liabilities that are attributable to the Class F units of the ETF. All units will be fully paid, when issued, in accordance with the terms of the ETF’s amended and restated declaration of trust.

Class F Units of the ETF are designed for investors participating in programs that already charge a fee for the advice they are receiving, such as a dealer-sponsored “fee-for-service” or wrap program and who periodically pay their dealer an asset-based fee rather than commissions on each transaction, and do not require the Manager to incur distribution costs by paying them a trailer commission.



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Class F unitholders of the ETF may purchase or redeem their Class F units at the NAV per Class F unit on any trading day if their subscription or redemption request is received before 12:00 p.m. in respect of such trading day, except in extraordi-nary circumstances.

Distributions

The ETF is required to distribute any net income and capital gains that it has earned in the year. Income earned by the ETF is distributed to unitholders at least once per year, if necessary, and these distributions are either paid in cash or rein-vested by unitholders into additional units of the ETF. Net realized capital gains, if any, are typically distributed in Decem-ber of each year to unitholders. The annual capital gains distributions are not paid in cash but rather, are reinvested and reported as taxable distributions and used to increase each unitholder’s adjusted cost base for the ETF. Distributions paid to holders of redeemable units are recognized in the statement of changes in financial position.

Please consult the ETF’s most recent prospectus for a full description of the subscription, exchange and redemption fea-tures of the ETF’s units.

For the periods ended June 30, 2017 and 2016, the number of units issued by subscription and/or distribution reinvest-ment, the number of units redeemed, the total and average number of units outstanding was as follows:

Class of Units Period

Beginning Units

Outstanding Units

Issued Units

Redeemed

Ending Units

Outstanding

Average Units

Outstanding

Class E2017 1,200,000 249,636 (50,000) 1,399,636 1,247,663

2016 965,000 75,000 (40,000) 1,000,000 989,011

Class F2017 6,898,055 940,024 (1,012,368) 6,825,711 6,759,633

2016 9,174,250 1,463,816 (636,232) 10,001,834 9,560,639

Advisor Class2017 75,000 50,000 (125,000) – 88,136

2016 50,000 – – 50,000 50,000

The Class E units issued and Advisor Class units redeemed for the period ended June 30, 2017, include the units convert-ed as part of the Conversion transaction described in note 1.

10. EXPENSES

Management fees

The Manager appoints the Investment Manager and provides, or oversees the provision of, administrative services re-quired by the ETF including, but not limited to: negotiating contracts with certain third-party service providers, such as portfolio managers, custodians, registrars, transfer agents, auditors and printers; authorizing the payment of operating expenses incurred on behalf of the ETF; arranging for the maintenance of accounting records for the ETF; preparing re-ports to unitholders and to the applicable securities regulatory authorities; calculating the amount and determining the frequency of distributions by the ETF; preparing financial statements, income tax returns and financial and accounting information as required by the ETF; ensuring that unitholders are provided with financial statements and other reports as are required from time to time by applicable law; ensuring that the ETF complies with all other regulatory requirements,



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including the continuous disclosure obligations of the ETF under applicable securities laws; administering purchases, redemptions and other transactions in units of the ETF; and dealing and communicating with unitholders of the ETF. The Manager provides office facilities and personnel to carry out these services, if not otherwise furnished by any other ser-vice provider to the ETF. The Manager also monitors the investment strategies of the ETF to ensure that the ETF complies with its investment objectives, investment strategies and investment restrictions and practices.

In consideration for the provision of these services, the Manager receives a monthly management fee at the annual rate of 0.85%, plus applicable sales taxes, of the net asset value of the ETF’s Class E units and 0.425%, plus applicable sales taxes, of the net asset value of the Class F units, calculated and accrued daily and payable monthly in arrears.

Up until the termination of the ETF’s Advisor Class units on April 28, 2017, as described in note 1, the ETF also received a monthly management fee at the annual rate of 1.60%, plus applicable sales taxes, of the net asset value of the ETF’s Advi-sor Class units, calculated and accrued daily and payable monthly in arrears. In addition, up until the termination of the Advisor Class units, the Manager, and not the ETF, paid to registered dealers a service fee equal to 0.75% per year of the net asset value of Advisor Class units held by clients of the registered dealer. No service fees are paid to registered dealers in respect of Class E units.

The Investment Manager and Sub-Advisor are compensated for their services out of the management fees without any further cost to the ETF. Any expenses of the ETF which are waived or absorbed by the Manager are paid out of the man-agement fees received by the Manager.

Other expenses

Unless otherwise waived or absorbed by the Manager, the ETF pays all of its operating expenses, including but not limited to: audit fees; trustee and custodial expenses; valuation, accounting and record keeping costs; legal expenses; permitted prospectus preparation and filing expenses; costs associated with delivering documents to unitholders; listing and annual stock exchange fees; index licensing fees, if applicable; CDS Clearing and Depository Services Inc. fees; bank related fees and interest charges; extraordinary expenses; unitholder reports and servicing costs; registrar and transfer agent fees; costs of the Independent Review Committee; income taxes; sales taxes; brokerage expenses and commissions; and withholding taxes.

The Manager, at its discretion, may waive and/or absorb a portion of the fees and/or expenses otherwise payable by the ETF. The waiving and/or absorption of such fees and/or expenses by the Manager may be terminated at any time, or con-tinued indefinitely, at the discretion of the Manager.

11. BROKER COMMISSIONS, SOFT DOLLARS AND RELATED PARTY TRANSACTIONS

During the period, an affiliate of National Bank of Canada (“NBC”) and National Bank Financial Inc. (“NBF”) held an indirect minority interest in the Manager. NBF acted as a designated broker, an underwriter and/or a registered trader (market maker). NBC, NBF and its affiliates may, at present or in the future, engage in business with the ETF, the issuers of securi-ties making up the investment portfolio of the ETF, or with the Manager or any funds sponsored by the Manager or its affiliates, including by making loans, executing brokerage transactions, entering into derivative transactions or providing advisory or agency services.

Effective June 30, 2017, Horizons Management acquired the minority interest of AlphaPro owned by an affiliate of NBC and as a result, is the sole shareholder of AlphaPro. Accordingly, NBC and NBF are no longer considered affiliates or re-lated parties of AlphaPro or the Investment Manager.



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Brokerage commissions paid on securities transactions may include amounts paid to related parties of the Manager for brokerage services provided to the ETF.

Research and system usage related services received in return for commissions generated with specific dealers are gener-ally referred to as soft dollars.

Total brokerage commissions paid to dealers in connection with investment portfolio transactions, soft dollar transac-tions incurred and amounts paid to related parties of the Manager for the periods ended June 30, 2017 and 2016, were as follows:

Period Ended Brokerage Commissions Paid

Soft Dollar Transactions

Amount Paid to Related Parties

June 30, 2017 $22,485 $nil $22,485

June 30, 2016 $33,043 $nil $33,043

In addition to the information contained in the table above, the management fees paid to the Manager described in note 10 are related party transactions, as the Manager is considered to be a related party to the ETF. Fees paid to the Indepen-dent Review Committee are also considered to be related party transactions. Both the management fees and fees paid to the Independent Review Committee are disclosed in the statements of comprehensive income. The management fees payable by the ETF as at June 30, 2017, and December 31, 2016, are disclosed in the statements of financial position.

The ETF may invest in other ETFs managed by the Manager or its affiliates, in accordance with the ETF’s investment objec-tives and strategies. Such investments, if any, are disclosed in the schedule of investments.

12. INCOME TAX

The ETF has qualified as a mutual fund trust under the Income Tax Act (Canada) (the “Tax Act”) and accordingly, is not taxed on the portion of taxable income that is paid or allocated to unitholders. As well, tax refunds (based on redemp-tions and realized and unrealized gains during the year) may be available that would make it possible to retain some net capital gains in the ETF without incurring any income taxes.

13. TAX LOSSES CARRIED FORWARD

Capital losses for income tax purposes may be carried forward indefinitely and applied against capital gains realized in future years. Non-capital losses carried forwards may be applied against future years’ taxable income. Non-capital losses that are realized in the current taxation year may be carried forward for 20 years. As at December 31, 2016, the ETF had net capital losses and/or non-capital losses, with the year of expiry of the non-capital losses as follows:

Net Capital Losses Non-Capital Losses Year of Expiry

$82,617 – –

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14. OFFSETTING OF FINANCIAL INSTRUMENTS

In the normal course of business, the ETF may enter into various master netting arrangements or other similar agree-ments that do not meet the criteria for offsetting in the statements of financial position but still allow for the related amounts to be set off in certain circumstances, such as bankruptcy or termination of the contracts. As at June 30, 2017, and December 31, 2016, the ETF did not have any financial instruments eligible for offsetting.

15. INTERESTS IN SUBSIDIARIES, ASSOCIATES AND UNCONSOLIDATED STRUCTURED ENTITIES

The ETF may invest in units of other ETFs as part of its investment strategies (“Investee ETF(s)”). The nature and purpose of these Investee ETFs generally, is to manage assets on behalf of third party investors in accordance with their investment objectives, and are financed through the issue of units to investors.

In determining whether the ETF has control or significant influence over an Investee ETF, the ETF assesses voting rights, the exposure to variable returns, and its ability to use the voting rights to affect the amount of the returns. In instances where the ETF has control over an Investee ETF, the ETF qualifies as an investment entity under IFRS 10 - Consolidated Financial Statements, and therefore accounts for investments it controls at fair value through profit and loss. The ETF’s pri-mary purpose is defined by its investment objectives and uses the investment strategies available to it as defined in the ETF’s prospectus to meet those objectives. The ETF also measures and evaluates the performance of any Investee ETFs on a fair value basis.

Investee ETFs over which the ETF has control or significant influence are categorized as subsidiaries and associates, re-spectively. All other Investee ETFs are categorized as unconsolidated structured entities. Investee ETFs may be managed by the Manager, its affiliates, or by third-party managers.

Investments in Investee ETFs are susceptible to market price risk arising from uncertainty about future values of those Investee ETFs. The maximum exposure to loss from interests in Investee ETFs is equal to the total fair value of the invest-ment in those respective Investee ETFs at any given point in time. The fair value of Investee ETFs, if any, are disclosed in investments in the statements of financial position and listed in the schedule of investments. As at June 30, 2017, and December 31, 2016, the ETF had material investments in the subsidiaries (Sub), associates (Assc) and unconsolidated structured entities (SE) listed below:

Investee ETF as atJune 30, 2017

Place ofBusiness Type Ownership % Carrying

Amount

iShares MSCI Japan ETF U.S. SE 0.04% $8,489,267

VanEck Vectors® ChinaAMC CSI 300 ETF U.S. SE 5.97% $6,744,441

iShares China Large-Cap ETF U.S. SE 0.16% $6,440,930

iShares MSCI EAFE Small-Cap ETF U.S. SE 0.06% $6,422,107

iShares MSCI Europe Financials ETF U.S. SE 0.29% $4,390,929

iShares MSCI Brazil Capped ETF U.S. SE 0.06% $4,348,577

BMO Emerging Markets Bond Hedged to CAD Index ETF Canada SE 1.87% $4,337,041

VanEck Vectors® Gold Miners ETF U.S. SE 0.04% $4,330,034

iShares MSCI United Kingdom ETF U.S. SE 0.13% $4,315,967

PowerShares Chinese Yuan Dim Sum Bond Portfolio U.S. SE 5.24% $4,296,393



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Investee ETF as atDecember 31, 2016

Place ofBusiness Type Ownership % Carrying

Amount

iShares MSCI EAFE Small-Cap ETF U.S. SE 0.10% $8,011,250

iShares Emerging Markets Local Currency Bond ETF U.S. SE 1.56% $6,084,010

iShares MSCI India ETF U.S. SE 0.12% $6,043,814

iShares J.P. Morgan USD Emerging Markets Bond ETF U.S. SE 0.06% $6,041,269

iShares 0-5 Year High Yield Corporate Bond ETF U.S. SE 0.27% $6,030,990

iShares MSCI Frontier 100 ETF U.S. SE 0.91% $6,028,996

VanEck Vectors® ChinaAMC CSI 300 ETF U.S. SE 5.23% $5,965,975

iShares MSCI Japan ETF U.S. SE 0.03% $5,807,603

16. SUBSEQUENT EVENT

Subsequent to the end of the reporting period, the Manager announced that it is eliminating pre-authorized cash con-tribution plans (“PACCs”) and the systematic withdrawal plans (“SWPs”) for all of the ETFs it manages effective August 1, 2017. These changes will not impact the ETF’s distribution reinvestment plan (“DRIP”).

17. COMPARATIVE FINANCIAL STATEMENTS

Certain information in the comparative financial statements and/or notes to the financial statements for 2016 has been reclassified to conform to the financial statement presentation adopted for 2017.



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Horizons Exchange Traded Funds | 26 Wellington Street East, Suite 700 | Toronto, Ontario, M5E 1S2

T 416 933 5745 | TF 1 866 641 5739 | w horizonsetfs.com

ManagerAlphaPro Management Inc.26 Wellington Street East, Suite 700Toronto, OntarioM5E 1S2Tel: 416-933-5745Fax: 416-777-5181Toll Free: [email protected]

CustodianCIBC Mellon Trust Company1 York Street, Suite 900Toronto, OntarioM5J 0B6

AuditorsKPMG LLPBay Adelaide Centre333 Bay Street, Suite 4600Toronto, OntarioM5H 2S5

Registrar and Transfer AgentAST Trust Company (Canada)1 Toronto Street, Suite 1200Toronto, OntarioM5C 2V6

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