November 18, 2021

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

HORIZONS ETFS MANAGEMENT (CANADA) INC.

(the Filer)

and

HORIZONS MORNINGSTAR HEDGE FUND INDEX ETF

(the Terminating Fund)

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer on behalf of the Terminating Fund for a decision under the securities legislation of the Jurisdiction (the Legislation) approving the proposed merger (the Merger) of the Terminating Fund into Horizons ReSolve Adaptive Asset Allocation ETF (the Continuing Fund and, together with the Terminating Fund, the Funds) pursuant to paragraph 5.5(1)(b) of National Instrument 81-102 Investment Funds (NI 81-102) (the Merger Approval).

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

1. the Ontario Securities Commission is the principal regulator for this application; and

2. the Filer has provided notice that paragraph 4.7(1)(c) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in all of the provinces and territories of Canada other than the Jurisdiction (together with the Jurisdiction, the Jurisdictions).

Interpretation

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

Representations

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

The Filer and the Funds

3. The Filer is registered as (a) an investment fund manager in Newfoundland and Labrador, Ontario and Québec, (b) a portfolio manager in Alberta, British Columbia, Ontario and Québec (c) a dealer in the category of exempt market dealer in Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Québec and Saskatchewan, (d) a commodity trading adviser in Ontario and (e) a commodity trading manager in Ontario.

4. The Filer is the manager of each Fund.

5. Horizons ETF Corp. (Horizons MFC) is a mutual fund corporation established under the laws of Canada, with its head office located in Toronto, Ontario. The authorized capital of Horizons MFC includes an unlimited number of non-cumulative, redeemable, non-voting classes of shares (each, a Corporate Class) issuable in an unlimited number of series, and one class of voting shares.

6. Each Fund is represented by a separate Corporate Class of shares consisting of one series of shares. Each Fund is considered an alternative mutual fund under NI 81-102.

7. The Terminating Fund is an exchange-traded mutual fund (ETF) whose shares are listed on the Toronto Stock Exchange (the TSX).

8. The Continuing Fund is an ETF whose shares are listed on the TSX.

9. The Filer and each Fund is not in default of securities legislation in any Jurisdiction.

10. Each Fund is a reporting issuer (or the equivalent) under the securities legislation of each Jurisdiction and is subject to the requirements of NI 81-102.

11. Each of the Funds follows the standard investment restrictions and practices established under the Legislation, except to the extent that the Fund has received an exemption to deviate therefrom.

12. Securities of the Terminating Fund were previously offered and distributed in all of the Jurisdictions pursuant to a prospectus and ETF Facts dated June 22, 2020. Securities of the Terminating Fund are no longer in distribution (since August 31, 2021).

13. Securities of the Continuing Fund are currently qualified for sale in each of the Jurisdictions under a prospectus and ETF Facts dated August 26, 2021.

14. The net asset value (NAV) of each Fund is calculated on each day that the TSX is open for business in accordance with the Funds’ valuation policy and as described in each Fund’s prospectus.

Reason for Approval of the Merger

15. Regulatory approval of the Merger is required because the Merger does not satisfy all the criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102. In particular, a reasonable person may not consider (i) the Terminating Fund to have substantially similar fundamental investment objectives as the Continuing Fund and (ii) the Terminating Fund to have a substantially similar fee structure as the Continuing Fund. Additionally, the Merger will not be a “qualifying exchange” within the meaning of section 132.2 of the Income Tax Act (Canada) (the ITA) and is not expected to be a tax-deferred transaction under subsection 85(1), 85.1(1), 86(1) or 87(1) of the ITA.

16. The investment objectives of the Terminating Fund and the Continuing Fund are as follows:

Terminating Fund

Continuing Fund

To seek investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that replicate the performance of the Morningstar Broad Hedge Fund Index (the “Hedge Fund Index”), hedged to the Canadian dollar. The Terminating Fund uses an index replication strategy that provides exposure to futures contracts, exchange traded funds, money market instruments and cash. The Terminating Fund does not invest, directly or indirectly, in the constituent hedge funds comprising the Hedge Fund Index.

To seek long-term capital appreciation by investing, directly or indirectly, in major global asset classes including but not limited to equity indexes, fixed income indexes, interest rates, commodities and currencies.

17. The Terminating Fund currently pays a management fee to the Filer equal to 0.95% of the NAV of the Terminating Fund’s shares, while the Continuing Fund currently pays a management fee to the Filer equal to 0.85% of the NAV of the Continuing Fund’s shares. However, shares of the Continuing Fund are also subject to a performance fee (the Performance Fee) that may be payable to the Filer. The Performance Fee, if any, payable by the Continuing Fund is equal to 15% of the amount by which the performance of Continuing Fund, at any date on which the Performance Fee is payable, (i) exceeds the greater of: (a) the initial NAV per share of the Continuing Fund; and (b) the highest NAV per share previously utilized for the purposes of calculating a Performance Fee that was paid, and (ii) is greater than an annualized return of 3%. The detailed formula by which the Performance Fee is determined is outlined in the Continuing Fund’s prospectus and the Circular.

18. The Merger will be implemented on a taxable basis because a tax-deferred alternative is not available under the ITA. The assets and liabilities of the Terminating Fund will be reallocated to the Continuing Fund. The reallocation will not be a taxable transaction for the Terminating Fund.

19. Except as described above, the Merger will otherwise comply with all the other criteria for pre-approved reorganizations and transfers set out in section 5.6 of NI 81-102.

20. Although the investment objectives of the Terminating Fund may not be substantially similar to the Continuing Fund, each of the Terminating Fund and Continuing Fund is an alternative mutual fund for purposes of NI 81-102 and each is exposed to multiple and varied global asset classes.

The Proposed Merger

21. The Filer intends to merge the Terminating Fund into the Continuing Fund.

22. The proposed Merger was announced in a press release dated August 31, 2021. A material change report with respect to the Merger was also filed via SEDAR on September 2, 2021.

23. As required by National Instrument 81-107 Independent Review Committee for Investment Funds, the Filer presented the terms of the Merger to the independent review committee of the Funds (the IRC) for its review. The IRC determined that the Merger, if implemented, will achieve a fair and reasonable result for the Terminating Fund.

24. The Filer is convening a special meeting (the Meeting) of the shareholders of the Terminating Fund on or about November 30, 2021 in order to seek the approval of the shareholders to complete the Merger, as required by paragraph 5.1(1)(f) of NI 81-102.

25. The Filer has concluded that the Merger is not a material change to the Continuing Fund (a substantially larger fund), and, accordingly, there is no intention to convene a meeting of shareholders of the Continuing Fund to approve the Merger pursuant to paragraph 5.1(1)(g) of NI 81-102.

26. By way of order dated November 4, 2016, the Filer was granted relief (the Notice-and-Access Relief) from the requirement set out in paragraph 12.2(2)(a) of National Instrument 81-106 Investment Fund Continuous Disclosure (NI 81-106) to send a printed management information circular to shareholders while proxies are being solicited, and, subject to certain conditions, instead allows a notice-and-access document (as described in the Notice-and-Access Relief) to be sent to such shareholders. In accordance with the Filer’s standard of care owed to the Funds pursuant to securities legislation, the Filer will only use the notice-and-access procedure for a particular meeting where it has concluded it is appropriate and consistent with the purposes of notice-and-access (as described in Companion Policy 54-101CP Communication with Beneficial Owners of Securities of a Reporting Issuer) to do so, also taking into account the purpose of the meeting and whether the Funds would obtain a better participation rate by sending the management information circular with the other proxy-related materials.

27. Pursuant to requirements of the Notice-and-Access Relief, a notice-and-access document and applicable proxies in connection with the Meeting and any adjournment thereof, along with the ETF Facts of the Continuing Fund, was mailed to shareholders of the Terminating Fund on October 29, 2021, and filed via SEDAR immediately prior to such mailing. A management information circular in respect of the Meeting (the Circular), which the notice-and-access document provided a link to, was also filed via SEDAR at the same time.

28. If all required approvals for the Merger are obtained, it is intended that the Merger will occur on or about December 3, 2021 (the Effective Date). The Filer therefore anticipates that each shareholder of the Terminating Fund will become a shareholder of the Continuing Fund after the close of business on the Effective Date. The Terminating Fund will be wound-up as soon as reasonably practicable following the Merger.

29. The tax implications of the Merger as well as the differences between the investment objectives and other features of the Terminating Fund and the Continuing Fund will be described in the Circular, so that shareholders may make an informed decision before voting on whether to approve the Merger. The Circular will also describe the various ways in which shareholders can obtain a copy of the prospectus of the Continuing Fund and its most recent interim and annual financial statements and management reports of fund performance.

30. Shareholders of the Terminating Fund will continue to have the right to sell their shares of the Terminating Fund on the TSX at any time until the shares are delisted, which will occur shortly prior to the Merger being implemented. In addition, if shareholders of the Terminating Fund approve the Merger at the Meeting, shareholders of the Terminating Fund who do not wish to participate in the Merger will also have the opportunity to redeem their shares of the Terminating Fund in accordance with the articles of incorporation, as amended from time to time, of the Terminating Fund prior to the Effective Date.

31. The costs of preparing and sending the proxy materials and of the solicitation of proxies, as well as other costs and expenses associated with the Meeting and the Merger, will be borne by the Filer.

32. No sales charges will be payable by shareholders of the Funds in connection with the Merger.

33. The investment portfolio and other assets of the Terminating Fund to be acquired by the Continuing Fund in order to effect the Merger are currently, or will be on or prior to the Effective Date, acceptable to the portfolio manager of the Continuing Fund and are, or will be, consistent with the investment objectives of the Continuing Fund.

Steps of the Merger

34. The specific steps to implement the Merger are expected to be as follows:

(a) Shares of the Terminating Fund will be exchanged for shares of the Continuing Fund. The number of shares of the Continuing Fund received will be determined by multiplying the number of shares of the Terminating Fund outstanding at the close of trading on the business day immediately preceding the Merger by an exchange ratio (which will be equal to the NAV per share of the Terminating Fund as of the close of trading on the business day immediately preceding the Merger, divided by the NAV per share of the Continuing Fund as of the close of trading on such date).

(b) All the assets of the Terminating Fund notionally allocated to the Terminating Fund will become assets that are notionally allocated to the Continuing Fund.

(c) The Terminating Fund will cease to exist and a notice pursuant to 2.10 of NI 81-106 will be filed on the Terminating Fund’s SEDAR profile.

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 Merger Approval is granted, provided that the Filer obtains the prior approval of the shareholders of the Terminating Fund for the Merger at the Meeting, or any adjournment thereof.

“Darren McKall”

Darren McKall

Manager, Investment Funds and Structured Products Branch

Ontario Securities Commission

Application #: 2021/0610

SEDAR #: 3300256