Nasdaq Canadian Preservation Index

Nasdaq Canadian Preservation Index Overview

• The Nasdaq Canadian Preservation Index is designed as a tactical vehicle within fixed income targeted at Canadian investors via TSX-listed ETFs.

• The Index is made up of five ETFs selected each quarter and equally weighted. At each calendar quarter the quantitative model is run to update the holdings and weights.

• The Index will tactically rotate between segments of the fixed income market to take advantage of changing dynamics with duration, credit quality and geography.

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Nasdaq Canadian Preservation Index Overview

• In order to navigate long-term trends in fixed income, the Index deploys a strategy that has the flexibility to decrease or increase duration and credit risk via a momentum-driven tactical overlay.

• In order to provide steady income streams and return, the Index’s fixed income portfolios have the ability to adjust quickly to different market conditions due to its quarterly rebalance feature.

• The Nasdaq Canadian Preservation Index is designed to provide income while protecting capital. The Index selects from a basket of TSX-listed fixed income ETFs using a proprietary technology for relative strength. Canadian Preservation attempts to mitigate some of the inherent risks associated with fixed income (i.e. interest rate, credit and currency).

• The Index can track fixed income assets that are credit sensitive and those, which historically, are not. The tactical momentum calculation allows for adept movement between the fixed income assets to take advantage of rising and falling rates and changes in credit conditions.

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Nasdaq Canadian Preservation Index Creation Process

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Higher Credit Risk

Medium Credit Risk

Lower Credit Risk

Shorter Duration Medium Duration Longer Duration

Short-Term High Yield

Debt

Senior Floating Loans

Short-Term Corporate Debt

Short-Term Gov

Cash

Step 1) Define the Investment Universe

Medium-Term Gov

Mortgage Backed Bonds

Emerging Market Debt

Corporate Debt

High Yield Debt

Convertible Bonds

Long-Term Gov

Inflation Linked Gov

International Bonds

Preferred

Nasdaq Canadian Preservation Index Creation ProcessHow are ETFs selected for the investment universe?

• For inclusion in the Index, ETFs are screened using several criteria:

1. Exposure

o The ETF must provide exposure to a desirable sector of the fixed income market

2. Liquidity

o ETFs are screened based on size (AUM) and daily trading volume

3. Expense Ratio

o All else equal, ETFs with lower expense ratios are selected for the universe

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Nasdaq Canadian Preservation Index Creation ProcessStep 2) Analyze Macro Trends

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Credit TrendInflation Trend Dollar Trend

Longer Duration Higher Quality

Shorter Duration Lower Quality Canada

International

Nasdaq Canadian Preservation Index Creation ProcessStep 3) Select the Components and Allocate Weight

7As of open on 04/03/2020

Symbol Company Name Closing Price Market Value Index Weight (%) Exposure Duration Rating

ZAG BMO Aggregate Bond Index 15.89 100,000,005.53 20.00 Canada Medium Investment Grade A or higher

ZFL BMO Long Federal Bond Index 20.08 100,000,007.04 20.00 Canada Long Investment Grade A or higher

XBB iShares Canadian Universe Bond 31.65 99,999,992.90 20.00 Canada Medium Investment Grade BBB or higher

CLF iShares 1-5 Year Laddered Government 18.23 100,000,005.65 20.00 Canada Short Investment Grade A or higher

XGB iShares Canadian Government Bond 22.69 99,999,997.49 20.00 Canada Medium Investment Grade A or higher

BMO Aggregate Bond Index

BMO Long Federal Bond Index

iShares Canadian Universe Bond

iShares 1-5 Year Laddered Government

iShares Canadian Government Bond

Investment Universe

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CPD and FSL were added to the investment universe prior to the March 2015 rebalance. Previously the Index referenced XFR for floating rate exposure and had no preferred exposures

Ticker Mod. Duration Rating Focus Geo Focus Duration

ZHY 4.13 High Yield U.S. Medium

ZEF 4.80 High Yield International Medium

ZFL 16.36 Investment Grade A or higher Canada Long

XBB 8.01 Investment Grade BBB or higher Canada Medium

XFR 2.50 Investment Grade A or higher Canada Short

CVD 2.66 High Yield Canada Short

PGL 16.13 Investment Grade BBB or higher Canada Long

XHY 3.99 High Yield U.S. Medium

XGB 8.09 Investment Grade A or higher Canada Medium

ZAG 7.95 Investment Grade A or higher Canada Medium

CLF 2.67 Investment Grade A or higher Canada Short

XCB 6.36 Investment Grade BBB or higher Canada Medium

XRB 14.26 Investment Grade A or higher Canada Long

CPD 35.00 Investment Grade B or higher Canada Long

XFR 2.50 Investment Grade A or higher Canada Short

Distribution of Holdings - Type

9As of 3/31/2020

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

High yield Investment Grade B or higher Sovereign

Distribution of Holdings - Geography

10As of 3/31/2020

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

U.S. Canada International

Distribution of Holdings - Duration

11As of 3/31/2020

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Short Medium Long

Canadian Preservation Performance

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0%

5%

10%

15%

20%

25%

30%

80

85

90

95

100

105

110

115

120

125

130

135

140

145

150

155

160

12/2010 06/2011 12/2011 06/2012 12/2012 06/2013 12/2013 06/2014 12/2014 06/2015 12/2015 06/2016 12/2016 06/2017 12/2017 06/2018 12/2018 06/2019 12/2019

Nasdaq Canadian Preservation - Return vs. Volatility (as of 3/31/2020)

Performance - NQICPCADT Performance - XBB TR Vol - NQICPCADT Vol - XBB TR

Canadian Preservation - Key Metrics

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*2020 data as of 3/31/2020. Unless most recent calendar year data is as of end of December, yields are annualized.Source: Nasdaq Global Indexes Research, FactSet, Bloomberg

Return NQICPCAD NQICPCADT iShares Canadian Bond PR iShares Canadian Bond TR

2011 8.16% 13.17% 5.39% 9.37%

2012 2.21% 6.90% -0.35% 2.98%

2013 -2.15% 2.42% -4.46% -1.31%

2014 5.72% 9.82% 4.97% 8.28%

2015 -2.36% 1.06% 0.38% 3.27%

2016 -0.02% 4.09% -1.46% 1.29%

2017 0.06% 4.66% -0.42% 2.42%

2018 -7.31% -3.93% -1.90% 1.00%

2019 1.96% 5.70% 4.31% 7.27%

2020 -14.58% -13.49% -0.91% -0.25%

Yield NQICPCAD iShares Canadian Bond

2011 5.01% 3.98%

2012 4.69% 3.33%

2013 4.57% 3.16%

2014 4.10% 3.31%

2015 3.42% 2.89%

2016 4.11% 2.74%

2017 4.60% 2.84%

2018 3.38% 2.90%

2019 3.74% 2.97%

2020 4.45% 2.71%

Volatility NQICPCAD iShares Canadian Bond

2011 5.07% 4.75%

2012 3.19% 3.58%

2013 3.49% 3.68%

2014 3.23% 3.14%

2015 4.19% 4.99%

2016 4.54% 3.99%

2017 2.64% 3.51%

2018 3.17% 3.64%

2019 3.03% 4.48%

2020 25.67% 20.53%

Index Turnover

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Start Date End Date Portfolio 1 Portfolio 2 Portfolio 3 Portfolio 4 Portfolio 5 Turnover Annualized

9/30/2010 12/31/2010 ZHY XHY CLF XRB

12/31/2010 3/31/2011 ZEF ZHY XHY XRB 20% 20%

3/31/2011 6/30/2011 ZEF XGB XCB XRB PGL 60% 40%

6/30/2011 9/30/2011 XBB ZAG XGB XRB PGL 40% 40%

9/30/2011 12/30/2011 XFR CVD ZEF ZHY XHY 100% 55%

12/30/2011 3/30/2012 XFR CVD ZEF XHY XCB 20% 55%

3/30/2012 6/29/2012 ZEF XGB XCB XRB PGL 60% 55%

6/29/2012 9/28/2012 XFR CVD ZEF XHY XCB 60% 60%

9/28/2012 12/31/2012 XFR CVD ZEF ZHY XHY 20% 40%

12/31/2012 3/28/2013 XFR CVD ZHY XHY CLF 20% 40%

3/28/2013 6/28/2013 XFR CVD ZHY XHY CLF 0% 25%

6/28/2013 9/30/2013 XFR CVD ZHY XHY XRB 20% 15%

9/30/2013 12/31/2013 XFR CVD ZHY XHY XCB 20% 15%

12/31/2013 3/31/2014 CVD ZEF XHY XCB PGL 40% 20%

3/31/2014 6/30/2014 CVD ZEF XCB XRB PGL 20% 25%

6/30/2014 9/30/2014 XBB ZAG XGB XCB PGL 60% 35%

9/30/2014 12/31/2014 PGL XGB XCB XBB CLF 20% 35%

12/31/2014 3/31/2015 ZEF XCB XGB CPD PGL 40% 35%

3/31/2015 6/30/2015 ZEF ZHY CLF CVD XFR 80% 50%

6/30/2015 9/30/2015 ZEF ZHY CLF CVD XFR 0% 35%

9/30/2015 12/31/2015 ZEF CLF XGB XBB PGL 60% 45%

12/31/2015 3/31/2016 ZEF CPD CLF XBB PGL 20% 40%

3/31/2016 6/30/2016 ZEF ZHY CLF XBB PGL 20% 25%

6/30/2016 9/30/2016 ZEF ZHY CLF XBB PGL 0% 25%

9/30/2016 12/30/2016 ZEF ZHY XBB XHY PGL 20% 15%

12/30/2016 3/31/2017 ZEF ZHY XCB XBB XHY 20% 15%

3/31/2017 6/30/2017 ZEF ZHY XCB CPD XHY 20% 15%

6/30/2017 9/29/2017 ZEF ZHY XCB CPD XHY 0% 15%

9/29/2017 12/29/2017 ZEF ZHY XFR CPD XHY 20% 15%

12/29/2017 3/29/3018 XBB XGB XFR CPD CVD 60% 25%

3/29/3018 6/29/2018 XRB CLF XFR CPD CVD 40% 30%

6/29/2018 9/28/2018 XRB ZHY XCB XBB CVD 60% 45%

9/28/2018 12/31/2018 ZEF ZHY XFR CPD CVD 60% 55%

12/31/2018 3/29/2019 ZEF XBB XFR XGB CVD 40% 50%

3/28/2019 6/28/2019 ZEF XBB XHY XGB CVD 20% 45%

6/28/2019 9/30/2019 ZEF XBB XRB CVD XHY 20% 35%

9/30/2019 12/31/2019 ZAG XBB XGB CVD XHY 40% 30%

12/31/2019 3/31/2020 ZEF ZHY CPD XFR XHY 80% 40%

3/31/2020 6/30/2020 ZAG ZFL XBB CLF XGB 100% 60%

Tactical MethodologyFAQ

Canadian Preservation Index FAQs

Why invest in fixed income?

• The goal of a fixed income portfolio is to generate consistent income, while simultaneously preserving capital. This is fundamentally different from many other asset classes, such as equities, where capital appreciation is the primary source of profit. This makes fixed income an ideal asset class for those in or on the verge of retirement, who need to maximize the income generated from their nest eggs, and are unable to endure equity-like volatility.

What are the dangers of investing in fixed income?

• Although fixed income assets are generally known for their low volatility, the fixed income investment universe is large and diverse, and various vehicles can be particularly sensitive to changes in interest rate, credit, and inflation trends. For example, long-term secular trends in interest rates typically result in secular bull and bear markets in traditionally “safe” bonds, which can either reward these assets with large capital gains, or leave them with terrible losses.

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Canadian Preservation Index FAQs

How does the Canadian Preservation strategy address these dangers?

• Traditionally “safe” fixed income assets, such as Canadian government bonds, can be as sensitive to movements in interest rates as “riskier” assets, such as corporate and high yield bonds, are to changes in credit conditions. Simply diversifying across fixed income assets with different performance characteristics does not eliminate these capital risks from a fixed income portfolio, and it typically results in lower income streams.

• The Canadian Preservation strategy is a tactical, rules-based fixed income strategy, which uses proprietary relative strength signals to construct a dynamic fixed income portfolio. The flexibility of this strategy enables it navigate fixed income trends, overweighting assets that benefit from current macroeconomic trends, and avoiding those that do not.

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Canadian Preservation Index FAQs

What is the investment universe for the Canadian Preservation Index?

• The Canadian Preservation strategy has the capacity to invest in a variety of fixed income vehicles, such as short-term and long-term Canadian government bonds, preferred shares, convertible, corporate, high yield, floating-rate, and developed and emerging market bonds. The assets in this investment universe possess a highly diverse set of performance characteristics, and were carefully selected to withstand many different types of credit and interest rate conditions.

How does the strategy manage credit and interest rate risk?

• The Canadian Preservation methodology is a dynamic strategy, capable of dramatically reshaping its fixed income portfolio relatively quickly. The strategy's proprietary relative strength signals are designed to recognize significant shifts in prevailing credit, interest rate, and FX trends. Canadian Preservation will then adjust risk exposure accordingly, while simultaneously positioning the portfolio to take advantage of new opportunities in these trends.

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Canadian Preservation Index FAQs

What is the algorithm behind this rules-based strategy?• The Canadian Preservation methodology first examines the various fixed

income asset classes in its investment universe, using our proprietary relative strength signals to quantitatively rank the performance of these asset classes relative to each other. Clear trends often emerge from these rankings, and the Canadian Preservation strategy will construct a portfolio consisting of the highest rated assets.

• For example, if particularly interest rate sensitive bonds (such as long-term Canadian government bonds) are strongly outperforming credit sensitive assets (such as high yield bonds), Canadian Preservation will construct a portfolio that is biased towards long-term fixed income assets with low credit risk.

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Canadian Preservation Index FAQs

How might the strategy adjust to a rising interest rate environment?

• The Canadian Preservation process is not biased towards either rising or falling fixed income environments, and will construct a portfolio that is designed to do well in either environment. Throughout the recent falling interest rate environment, Canadian Preservation tended to overweight duration sensitive fixed income assets, such as long-term Canadian treasuries. Likewise, during rising interest rate environments, the strategy will invest in fixed income assets that have had a positive historical correlation to rising interest rates.

When will the strategy do well?

• The Canadian Preservation’s ability to recognize and adjust quickly to market trends has typically enabled it to do well across most environments. However, the strategy does best during trending environments, when interest rate or credit trends are rising or falling for a period of time.

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Canadian Preservation Index FAQs

What is the physical construction and asset turnover of the Canadian Preservation strategy?

• The Canadian Preservation Index typically holds roughly five equally weighted ETFs, and the portfolio is rebalanced quarterly. There is often little overlap in these ETFs, so the portfolio consists of roughly five different fixed income asset classes, each of which has independently ranked highly in Canadian Preservation’s relative strength signals. The quarterly rebalance is a time parameter that has been optimized to allow trends a sufficient amount of time to develop, and to minimize portfolio turnover. Over its lifetime, Canadian Preservation has typically had eight to twelve swaps a year.

What are the benefits to a rules-based process over an actively managed portfolio?

• Active managers without rules-based strategies often become enamored with their convictions, and hold winning or losing positions much longer than they should. Having a set, rules-based system often allows managers to act more quickly and decisively than their peers, as market trends will tend to shift faster than many fund managers’ prejudices.

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Canadian Preservation Index FAQs

What are the benefits of ETFs over individually selected fixed income assets?

• Although the bond market has grown significantly since 2008, the average daily trading volume of individual bonds has shrunk, and bid-ask spreads have risen. This has made it more difficult for bond managers who maintain portfolios of individual bonds to rotate quickly out of fixed income asset classes, and many have seen their operational costs rise. By contrast, the ETF fixed income market has seen tremendous growth in trading volume, and spreads on these ETFs have reached record lows. Bond managers who maintain portfolios of fixed income ETFs are thus able to quickly and cost effectively adjust their positions for various market conditions.

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Canadian Preservation Index Info

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Index Ticker Instrument Name Currency

NQICP NASDAQ Canadian Preservation Index USD

NQICPT NASDAQ Canadian Preservation Total Return Index USD

NQICPCAD NASDAQ Canadian Preservation CAD Index CAD

NQICPCADT NASDAQ Canadian Preservation CAD Total Return Index CAD

Disclaimer

Nasdaq® is a registered trademark of Nasdaq, Inc. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither Nasdaq, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding Nasdaq-listed companies or Nasdaq proprietary indexes are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED

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Disclaimer

Ibis Capital, LLC (DBA) of Stratos Wealth Partners, Ltd. A registered investment advisor.

Nothing contained herein should be construed as investment advice from Ibis Capital, Stratos Wealth Partners, either on behalf of a particular financial product or an overall investment strategy. Investors should undertake their own due diligence and carefully evaluate financial products before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

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