New structure allows the ETFs to maintain all of their existing key benefits
Toronto, August 23, 2019 – Horizons ETFs Management (Canada) Inc. (“Horizons ETFs”) is proposing a corporate class reorganization of a number of its existing ETFs, listed below, that primarily use derivative arrangements in order to achieve their investment objectives. The corporate class structure is expected to preserve all of the benefits offered by these ETFs under their synthetic investment strategies.
The decision to propose a corporate class structure follows an extensive review by Horizons ETFs of the activities and current tax positions of the relevant ETFs along with the proposed changes to the Income Tax Act. Following its assessment, Horizons ETFs has determined that it would be in the best interests of the unitholders of the relevant ETFs, currently structured as mutual fund trusts, to merge into a single multi-class mutual fund corporation, which would permit the ETFs to improve operational efficiency, aggregate all future gains and losses on both the income and capital accounts, and substantially reduce the likelihood of distributions.
Under the proposed reorganization, units of each of these ETFs would be exchanged for a corresponding class of shares of a new mutual fund corporation. It is currently expected that the investment objectives, investment strategies and fee structure of the ETFs will not change. Once the ETFs are merged into the new mutual fund corporation, the corporate class ETFs would, in Horizons ETFs’ view, be on a level playing field with other currently existing corporate class mutual funds and corporate class exchange-traded funds.
Corporate class mutual funds are very well-established in Canada and continue to be used widely by Canadian investors. According to Strategic Insight, there is currently more than CAN$155 billion of assets invested in corporate class mutual funds and ETFs.
“Even before the recent proposed changes to the taxation of mutual funds were announced, Horizons ETFs had been exploring the potential of a structural change for the majority of our synthetically-replicated index ETFs, from a mutual fund trust to a mutual fund corporate class,” said Steve Hawkins, President and CEO of Horizons ETFs. “Based on our review of the existing regulatory environment, including the tax changes proposed in the recent Federal Budget, we feel confident that the proposed corporate class structure will allow us to continue to offer our synthetic ETFs to investors in a manner that provides unitholders with all of the same benefits that they have enjoyed for the past ten plus years, including minimal tracking error, tax efficiency and competitive fees.”
It is also important to know these ETFs are not expected to carry forward any tax liability into the proposed mutual fund corporation, and there are not expected to be any historical or retroactive taxable implications to unitholders of these ETFs. The proposed reorganization is not expected to be a taxable event for unitholders of the ETFs provided that, in the case of Canadian resident unitholders who hold units of the ETFs in taxable accounts, such unitholders make a joint election with the proposed mutual fund corporation under Section 85 of the Income Tax Act as part of the exchange from their existing trust units into shares of a series of the new mutual fund corporation. Horizons ETFs is establishing a process to provide assistance to unitholders in taking the necessary steps to file the joint election, which will be free of charge.
Listed below are the ETFs that Horizons ETFs is proposing to merge into the new mutual fund corporation:
|ETF Name||Ticker||ETF Name||Ticker|
|Horizons S&P/TSX 60™ Index ETF||HXT||BetaPro Gold Bullion 2x Daily Bull ETF||HBU|
|Horizons S&P 500® Index ETF||HXS||BetaPro Gold Bullion -2x Daily Bear ETF||HBD|
|Horizons S&P 500 CAD Hedged Index ETF||HSH||BetaPro Crude Oil 2x Daily Bull ETF||HOU|
|Horizons S&P/TSX Capped Energy Index ETF||HXE||BetaPro Crude Oil -2x Daily Bear ETF||HOD|
|Horizons S&P/TSX Capped Financials Index ETF||HXF||BetaPro Natural Gas 2x Daily Bull ETF||HNU|
|Horizons Cdn Select Universe Bond ETF||HBB||BetaPro Natural Gas -2x Daily Bear ETF||HND|
|Horizons NASDAQ-100® Index ETF||HXQ||BetaPro Silver 2x Daily Bull ETF||HZU|
|Horizons EURO STOXX 50® Index ETF||HXX||BetaPro Silver -2x Daily Bear ETF||HZD|
|Horizons Cdn High Dividend Index ETF||HXH||BetaPro S&P/TSX 60™ 2x Daily Bull ETF||HXU|
|Horizons US 7-10 Year Treasury Bond ETF||HTB||BetaPro S&P/TSX 60™ -2x Daily Bear ETF||HXD|
|Horizons US 7-10 Year Treasury Bond CAD Hedged ETF||HTH||BetaPro S&P/TSX Capped Financials™ 2x Daily Bull ETF||HFU|
|Horizons Laddered Canadian Preferred Share Index ETF||HLPR||BetaPro S&P/TSX Capped Financials™ -2x Daily Bear ETF||HFD|
|Horizons Intl Developed Markets Equity Index ETF||HXDM||BetaPro S&P/TSX Capped Energy™ 2x Daily Bull ETF||HEU|
|Horizons Equal Weight Canada REIT Index ETF||HCRE||BetaPro S&P/TSX Capped Energy™ -2x Daily Bear ETF||HED|
|Horizons Equal Weight Canada Banks Index ETF||HEWB||BetaPro NASDAQ-100® 2x Daily Bull ETF||HQU|
|Horizons Gold ETF||HUG||BetaPro NASDAQ-100® -2x Daily Bear ETF||HQD|
|Horizons Silver ETF||HUZ||BetaPro S&P 500® 2x Daily Bull ETF||HSU|
|Horizons Crude Oil ETF||HUC||BetaPro S&P 500® -2x Daily Bear ETF||HSD|
|Horizons Natural Gas ETF||HUN||BetaPro Canadian Gold Miners 2x Daily Bull ETF||HGU|
|BetaPro Canadian Gold Miners -2x Daily Bear ETF||HGD|
|BetaPro Marijuana Companies 2x Daily Bull ETF||HMJU|
|BetaPro Marijuana Companies Inverse ETF||HMJI|
|BetaPro S&P/TSX 60™ Daily Inverse ETF||HIX|
|BetaPro S&P 500® Daily Inverse ETF||HIU|
|BetaPro S&P 500 VIX Short-Term Futures™ ETF||HUV|
Additional details regarding the merger of the ETFs into a single multi-class mutual fund corporation will be announced in the following weeks, and further details will also be provided in an information circular that will be made available for unitholders to vote on the proposed changes. Subject to the receipt of all necessary regulatory, unitholder and other third party approvals, as well as obtaining any necessary exemptive relief under applicable securities laws in order to effect the corporate class reorganization, and the receipt of a final prospectus for the corporate class ETFs, it is expected that the corporate class reorganization would take effect prior to end of the 2019 calendar year.
About Horizons ETFs Management (Canada) Inc. (www.HorizonsETFs.com)
Horizons ETFs Management (Canada) Inc. is an innovative financial services company and offers one of the largest suites of exchange traded funds in Canada. The Horizons ETFs product family includes a broadly diversified range of solutions for investors of all experience levels to meet their investment objectives in a variety of market conditions. Horizons ETFs has more than $10 billion of assets under management and 90 ETFs listed on major Canadian stock exchanges. Horizons ETFs Management (Canada) Inc. is a member of the Mirae Asset Global Investments Group.
For investor inquiries:
Contact Horizons ETFs at 1-866-641-5739 (toll-free) or (416) 933-5745
For media inquiries:
Contact Mark Noble
Senior Vice President, ETF Strategy
Horizons ETFs Management (Canada) Inc.
Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forwardlooking statements are not historical facts but reflect the author’s current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other factors should be considered carefully and readers should not place undue reliance on such forward looking statements. These forward-looking statements are made as of the date hereof and the authors do not undertake to update any forward-looking statement that is contained herein, whether as a result of new information, future events or otherwise, unless required by applicable law.