AUSPICE Crude/Gas

Overview

Each (listed) ETF will track its designated (Canadian crude or Canadian natural gas) "Underlying Index" by entering into forward agreements with the Counterparty (expected to be NBC), and pledge T-Bills or other cash raised from its Unit offerings to secure its obligations thereunder. The forward agreements will be for a term of five years, but will be extended annually with the consent of the parties. The Underlying Indexes track the performance of a strategy of continually rolling over near month futures contracts for intermediate-term futures contracts. Income account gains under the forwards will only be realized as they are partially (or fully) settled. Accordingly, Unitholders who sell their units on the TSX generally will not have significant income allocated to them (whereas those who redeem units may have income allocated to them).

CCX

CCX seeks to replicate, to the extent possible, the performance of the Canadian Crude Excess Return Index, net of expenses. The Canadian Crude Excess Return Index is designed to measure the performance of the Canadian crude oil market. The Canadian Crude Excess Return Index targets an exposure that represents an approximately 3 month rolling position in the nearby Referenced Futures Contracts.

GAS

GAS seeks to replicate, to the extent possible, the performance of the NGX Canadian Natural Gas Index, net of expenses. The NGX Canadian Natural Gas Index is designed to measure the performance of the Canadian natural gas market. The NGX Canadian Natural Gas Index tracks the forward purchase value of its Referenced Futures Contract, the AECO physical one month forward price of natural gas, in Canadian dollars. In order to track the Underlying Index while maintaining an orderly transition from the prompt contract to the deferred contract, these contracts are "rolled" during an eight day period known as the "roll period" that begins on the thirteenth business day prior to the start of the delivery month.

Forward sales

Each Forward Document will require the ETF to pay the Counterparty an agreed notional amount. In return, the Counterparty will pay the applicable ETF the value of the notional investment, plus an amount based upon any increase in its Underlying Index. Each ETF will also invest the net proceeds of Unit subscriptions in interest bearing accounts and T-Bills to earn short-term money-market interest rates. The terms of the Forward Documents will require each ETF to pledge its respective interest bearing account and T-Bills to the applicable Counterparty to secure the payment of that ETF's payment obligations under the Forward Documents. Each Forward Document will have a remaining term to maturity at any point in time of less than five years which, with the consent of the applicable ETF and the applicable Counterparty, will be extended annually for a fixed number of years.

Counterparty

Expected to be National Bank of Canada.

Manager/trustee

The manager and trustee of the ETFs is Auspice Capital Advisors Ltd. ("Auspice", the "Manager" or the "Trustee"). The Manager has retained Horizons ETFs Management (Canada) Inc. (the "Portfolio Adviser") to act as the portfolio adviser and to make and execute investment decisions on behalf of the ETFs.

Distributions

The ETFs will distribute sufficient net income (including net capital gains) so that no ETF will be liable for income tax in any given year. Distributions on Units of an ETF, if any, are expected to be made annually at the end of each year where necessary and will automatically be reinvested on behalf of each Unitholder in additional Units of the applicable ETF and then consolidated.

Redemptions

In addition to the ability to sell Units of an ETF on the TSX, Unitholders of an ETF may redeem Units of that ETF in any number for cash, subject to a 5% redemption discount, or may redeem a PNU (the prescribed number of Units of that ETF determined by the Manager from time to time) or a multiple PNU of an ETF for cash equal to the net asset value of that number of Units, subject to any redemption charge.

Allocations on redemptions

Pursuant to the Trust Declaration, an ETF may allocate and designate any income or capital gains realized by the ETF as a result of any disposition of property of the ETF undertaken to permit or facilitate the redemption of Units to a Unitholder whose Units are being redeemed. In addition, each ETF has the authority to distribute, allocate and designate any income or capital gains of the ETF to a Unitholder who has redeemed Units of the ETF during a year in an amount equal to the Unitholder's share, at the time of redemption, of the ETF's income and capital gains for the year or such other amount that is determined by the ETF to be reasonable. Any such allocations will reduce the redeeming Unitholder's proceeds of disposition.

Canadian tax consequences

Ordinary income under forwards. The ETFs will each recognize income under a Forward Document when it is realized by such ETF upon partial settlements or upon maturity of the Forward Document. An ETF will partially settle the Forward Documents in each taxation year in order to fund operating expenses and other liabilities of the ETF. To the extent such income is not offset by any available deductions, it would be distributed to the Unitholders of the applicable ETF in the taxation year in which it is realized and included in such Unitholder's income for the year.

S. 39(4) election

Assuming that the ETF is a "mutual fund trust,", certain Holders may be entitled to have their Units and all other "Canadian securities" treated as capital property by making the irrevocable election under s. 39(4).

SIFT rules

The ETFs are not expected to have any income from "non-portfolio property."

FATCA

Information provided to the CRA regarding U.S. Reportable Accounts will be exchanged by the CRA with the U.S. Internal Revenue Service in accordance with the provisions of the Canada-U.S. IGA….