September 2, 2014

In the Matter of the Securities Legislation of Ontario (the Jurisdiction)

and

In the Matter of the Process for Exemptive Relief Applications in Multiple Jurisdictions

and

IN THE MATTER OF

AlphaPro Management Inc. (the Filer) and Horizons Active Yield Matched Duration ETF (the ETF)

Decision

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the ETF:

(a) pursuant to section 19.1 of National Instrument 81-102 Mutual Funds (NI 81-102) from the requirement in section 5.1(c) of NI 81-102 to obtain the approval of securityholders before changing the fundamental investment objective of the ETF (the Investment Objective Relief); and

(b) pursuant to section 17.2(7) of National Instrument 41-101 General Prospectus Requirements (NI 41-101) and section 62(5) of the of the Securities Act (Ontario) (the Act) from the requirement in the Legislation in section 62(2) of the Act and section 17.2(4) of NI 41-101 that the time limits pertaining to filing the renewal long form prospectus of the ETF be extended as if the lapse date of the current long form prospectus of the ETF dated August 23, 2013 is October 2, 2014 (the Lapse Date Relief);

(together, the Requested Relief).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission (the OSC) is the principal regulator for this application, and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in each of the other provinces and territories of Canada (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in the Legislation, MI 11-102, National Instrument 14-101 – Definitions, and NI 81-102 have the same meanings if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

The Filer

1. The Filer is a corporation incorporated under the federal laws of Canada with its head office located in Toronto, Ontario. The Filer is registered under the securities legislation of Ontario as an investment fund manager in Ontario.

2. The Filer is not in default of the securities legislation in any Jurisdiction.

3. The Filer is the manager of the ETF.

The ETF

4. The ETF is a “mutual fund”, as such term is defined under the Securities Act (Ontario), and to which NI 81-102 applies. The ETF is also an exchange-traded fund whose securities are primarily traded on the Toronto Stock Exchange and a reporting issuer under the Legislation.

5. Horizons ETFs Management (Canada) Inc. (the Portfolio Manager) is the portfolio manager of the ETF.

6. Fiera Capital Corporation (the Sub-Advisor) is the sub-advisor of the ETF.

7. The ETF is not in default of the securities legislation in any Jurisdiction.

8. Securities of the ETF are qualified for distribution in each Jurisdiction pursuant to a long form prospectus of the ETF dated August 23, 2013 (the Current Prospectus).

9. In accordance with applicable securities legislation, and in order to continue the distribution of securities of the ETF following the lapse date of the Current Prospectus, a pro forma renewal prospectus for the ETF, which also serves as a preliminary prospectus for Horizons Active Floating Rate Senior Loan ETF (Horizons HSL), was filed on behalf of the ETF on July 23, 2014 (the Preliminary and Pro Forma Prospectus).

Investment Objective Change

10. The current fundamental investment objective (the Current Objective) of the ETF is as follows:

“to seek to provide the holders of Units with: (i) a stable stream of tax-efficient monthly distributions; and (ii) the opportunity for capital appreciation through a tactical asset allocation strategy that includes managing the duration and yield of its exposure to fixed income and fixed income-like securities according to the prevailing interest rate environment.”

11. In order to seek to achieve the Current Objective, the ETF was a party to a forward purchase and sale agreement (the Forward Agreement) with a Canadian chartered bank. The Forward Agreement provided the ETF with exposure to the returns of the securities of another investment fund, the Tactical Global Bond ETF Fund (the Reference Fund). The fundamental investment objective of the Reference Fund was as follows:

“to maximize total returns for its unitholders, consisting of both distributions and capital appreciation, while reducing risk.”

12. As a result of the Forward Rules (as defined below), it was anticipated that the Forward Agreement would no longer be able to, over the long term, provide material tax efficiency to unitholders of the ETF. As a result, the Filer determined that, prior to the expiry of the Forward Agreement on July 21, 2014 (the Termination Date), the Forward Agreement would not be extended and the ETF would acquire in the market the same, or substantially the same, assets as those held by the Reference Fund. Such proposed course of action is disclosed in the Current Prospectus of the ETF.

13. The Forward Agreement was terminated on June 27, 2014.

14. The Income Tax Act (Canada) was amended in December 2013 to implement proposals that were first announced in the March 21, 2013 federal budget regarding the income tax treatment of certain types of forward transactions (the Forward Rules). Under the Forward Rules, after a prescribed date (the Changeover Date), gains (and losses) realized by a fund under certain forward purchase and sale agreement will be treated as ordinary income (or loss) rather than a capital gain (or capital loss). The Changeover Date for the ETF was the Termination Date (being the date on which the Forward Agreement was terminated in accordance with its terms).

15. A press release and material change report were issued and filed in respect of the impact of the Forward Rules on the ETF on April 4, 2013 and April 9, 2013, respectively. Such press release and material change report: (i) specified the Termination Date of the Forward Agreement; and (ii) disclosed that, following the Termination Date, the ETF would no longer be able to deliver, in its entirety, tax-efficient distributions to unitholders.

16. As noted above, the Filer determined that, as a result of the Forward Rules, it would be more efficient and less costly for the ETF to seek to achieve its fundamental investment objective after the Changeover Date by investing its assets in the same, or substantially the same, assets as those held by the Reference Fund. The Filer, the Portfolio Manager and the Sub-Advisor also continued to manage the portfolio of the ETF in as tax-efficient a manner as possible.

17. To clarify the foregoing approach, the Filer proposes to change the fundamental investment objective of the ETF to the following:

“to seek to provide Unitholders with: (i) a stable stream of monthly distributions; and (ii) the opportunity for capital appreciation through a tactical asset allocation strategy that includes managing the duration and yield of its exposure to fixed income and fixed income-like securities according to the prevailing interest rate environment.”

18. The proposed change of investment objective will be disclosed in the new, final, prospectus of the ETF under which securities of the ETF will be qualified for distribution (the Final Prospectus) following the Current Lapse Date (as defined below), as the Current Lapse Date may be extended by way of the Lapse Date Relief.

19. Direct investment by the ETF in securities previously held by the Reference Fund following the Termination Date represents the business judgment of responsible persons uninfluenced by considerations other than the best interests of the ETF.

20. The Filer has determined that it would be in the best interests of the ETF and not prejudicial to the public interest to receive the Investment Objective Relief.

The Lapse Date

21. Pursuant to the Legislation, the lapse date for the Current Prospectus is August 23, 2014 (the Current Lapse Date). Accordingly, pursuant to the Legislation, the distribution of units of the ETF would have to cease on the Current Lapse Date unless (i) a final prospectus is filed no later than 10 days after the Current Lapse Date (i.e. by September 2, 2014); and (ii) a receipt for such final prospectus is obtained within 20 days of the Current Lapse Date.

22. It would be unduly costly for the Filer to separate the Final Prospectus, such that Horizons HSL and the ETF would be offered pursuant to separate final long form prospectuses, in order to ensure that the Final Prospectus of the ETF is filed in accordance with the requirements of the Current Lapse Date. Given the ongoing review of the Preliminary and Pro Forma Prospectus and ongoing comments from, and discussions with, the OSC, the Filer is therefore requesting additional time by means of an extension of the Current Lapse Date to October 2, 2014 to permit the Filer to respond to anticipated further comment letters and to file the Final Prospectus which satisfactorily addresses all of the comments without resulting in the ETF being forced to cease distribution of units because the Current Prospectus has lapsed and which would allow Horizons HSL and the ETF to be offered pursuant to the same final long form prospectus.

23. Since the date of the Current Prospectus, there has been no undisclosed material changes to the ETF. Accordingly, the Current Prospectus continues to provide accurate information regarding the ETF.

24. Given the disclosure obligations of the Filer and the ETF, should any material changes be proposed to the ETF, the Current Prospectus will be amended accordingly. Therefore, the extension requested will not affect the currency or accuracy of the information contained in the Current Prospectus and accordingly, will not be prejudicial to the public interest.

25. The Filer has determined that it would be in the best interests of the ETF and not prejudicial to the public interest to receive the Lapse Date Relief.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Requested Relief is granted provided that, with respect to the Investment Objective Relief, securityholders of the ETF will be sent a written notice (the “Notice”) that sets out the change to the investment objective, the reasons for such change and a statement that the ETF will no longer distribute gains under forward contracts that are treated as capital gains for tax purposes and the Notice will be sent to securityholders of the ETF within 10 days of the date of this decision document.

“Vera Nunes”

Vera Nunes, Manager Investment Funds and Structured Products ONTARIO SECURITIES COMMISSION