TORONTO – July 18, 2023 – Horizons ETFs Management (Canada) Inc. (“Horizons ETFs” or the “Manager”) is announcing special meetings of unitholders of Horizons Conservative TRI ETF Portfolio (“HCON”), Horizons Balanced TRI ETF Portfolio (“HBAL”) and Horizons Growth TRI ETF Portfolio (“HGRO”, and together with HCON and HBAL, the “ETFs”), at which unitholders of each ETF will be asked to consider and vote upon a proposal to approve changes to the investment objective of each ETF (including changes to the currency hedging strategy of each ETF) and, in connection therewith, changes to the fee structure of each ETF (the “Proposed Changes”).
Special meetings of unitholders (each, a “Meeting” and collectively, the “Meetings”) of the ETFs will be held concurrently, in-person, at the offices of Blake, Cassels & Graydon LLP, Commerce Court West, 199 Bay Street, Suite 4000, Toronto, Ontario M5L 1A9 on Wednesday, August 23, 2023, at 10:00 a.m. (Toronto time). Unitholders of an ETF of record at the close of business on July 12, 2023 will be entitled to receive notice of the applicable Meeting and to vote in respect of the matters to be voted on at the applicable Meeting.
The decision to propose the changes to the investment objectives of the ETFs and the fee structure of the ETFs follows an extensive review by the Manager of the activities of each ETF. The Manager has determined that it would be in the best interests of the unitholders of each ETF to adopt the Proposed Changes.
Additionally, the Independent Review Committee of each ETF has reviewed the Proposed Changes, and has determined, after reasonable inquiry, that the Proposed Changes would achieve a fair and reasonable result for each ETF, if implemented, and has provided to the Manager a positive recommendation in respect of the Proposed Changes.
The proposed changes to each ETF’s investment objective are substantially as follows:
|ETF||Current Investment Objective||Proposed Investment Objective|
|HCON||The investment objective of the ETF is to seek moderate long-term capital growth using a conservative portfolio of exchange traded funds.||The ETF seeks to provide a combination of income and moderate long-term capital growth, primarily by investing in exchange traded funds that provide exposure to a globally diversified portfolio of fixed income and equity securities.|
|HBAL||The investment objective of the ETF is to seek long-term capital growth using a balanced portfolio of exchange traded funds.||The ETF seeks to provide a combination of long-term capital growth and a moderate level of income, primarily by investing in exchange traded funds that provide exposure to a globally diversified portfolio of equity and fixed income securities.|
|HGRO||The investment objective of the ETF is to seek long-term capital growth using a portfolio of primarily equity-focussed exchange traded funds.||The ETF seeks to provide long-term capital growth, primarily by investing in exchange traded funds that provide exposure to a globally diversified portfolio of equity securities.|
The proposed changes to each ETF’s currency hedging strategy are substantially as follows:
|ETF||Current Currency Hedging Disclosure||Proposed Currency Hedging Disclosure|
|HCON||HCON will use currency forwards to hedge its non-Canadian dollar currency exposure to the Canadian dollar at all times.||The ETF, at its sole discretion, may elect to hedge the foreign currency exposure of its fixed income investments back to the Canadian dollar through the use of currency forwards or investments in hedged fixed income exchange traded funds. The ETF will not hedge the foreign currency exposure of any asset class other than fixed income.|
|HBAL||HBAL will use currency forwards to hedge its non-Canadian dollar currency exposure to the Canadian dollar at all times.||The ETF, at its sole discretion, may elect to hedge the foreign currency exposure of its fixed income investments back to the Canadian dollar through the use of currency forwards or investments in hedged fixed income exchange traded funds. The ETF will not hedge the foreign currency exposure of any asset class other than fixed income.|
|HGRO||HGRO will use currency forwards to hedge its non-Canadian dollar currency exposure to the Canadian dollar at all times.||The ETF will not hedge its exposure to foreign currencies back to the Canadian dollar.|
The proposed changes to each ETF’s fee structure are substantially as follows:
|ETF||Current Management Fee Disclosure||Proposed Management Fee Disclosure|
|HCON||The management fees directly payable to the Manager by each ETF are nil.
However, the total return index exchange traded funds managed by the Manager (“TRI ETFs”) and held by the ETFs will pay management fees and will incur trading expenses.
The Manager pays all of the operating and administrative expenses incurred by the ETFs. Based on the historical management expense ratios of the portfolios of TRI ETFs held by the ETFs, the total management expense ratios of HCON, HBAL and HGRO, for the 2022 calendar year, are expected to be approximately 0.14%, 0.15% and 0.16%, respectively, and will not exceed 0.15%, 0.16% and 0.17%, respectively, as at any rebalance.
Based on historical trading expense ratios of the TRI ETFs held by the ETFs, the aggregate underlying trading expense ratios of the portfolios of TRI ETFs held by HCON, HBAL and HGRO, for the 2022 calendar year, are expected to be approximately 0.10%, 0.09% and 0.08%, respectively, and are not expected to exceed 0.11%, 0.10% and 0.10%, respectively. As trading expense ratios include expenses outside of the control of the Manager, the trading expense ratios of the portfolios of TRI ETFs held by HCON, HBAL and HGRO are subject to change.
|Each ETF pays annual management fees (the “Management Fees”) to the Manager equal to 0.18% of the net asset value of the Units of that ETF, plus applicable Sales Tax. The Management Fees are calculated and accrued daily and payable monthly in arrears.
The Manager pays all of the operating and administrative expenses incurred by the ETFs. The total management expense ratios of HCON, HBAL, and HGRO are expected to be approximately 0.20%.
The trading expense ratio of each ETF is expected to be 0.02%. As trading expense ratios include expenses outside of the control of the Manager, the trading expense ratios of the portfolios held by an ETF are subject to change.
|HBAL||Same as above||Same as above|
|HGRO||Same as above||Same as above|
If the Proposed Changes are approved and implemented, the Manager intends to change the names of each ETF to the names set forth in the following table, or to such other names as the Manager deems appropriate at the time the Proposed Changes are implemented.
|ETF||Current ETF Name||Proposed New ETF Name|
|HCON||Horizons Conservative TRI ETF Portfolio||Horizons Conservative Asset Allocation ETF|
|HBAL||Horizons Balanced TRI ETF Portfolio||Horizons Balanced Asset Allocation ETF|
|HGRO||Horizons Growth TRI ETF Portfolio||Horizons All-Equity Asset Allocation ETF|
Additionally, if the Proposed Changes are approved and implemented in respect of each ETF, the Manager intends to change the ticker symbol of HGRO as follows:
|ETF||Current Ticker Symbol||Proposed New Ticker Symbol|
|Horizons Growth TRI ETF Portfolio||HGRO||HEQT|
The ticker symbols for each of HCON and HBAL will remain the same.
As permitted under Canadian securities legislation, the Manager has opted to use a notice-and-access procedure (the “Notice-and-Access Procedure”) to reduce the volume of paper in the materials distributed for the Meetings and to potentially encourage a higher voting participation rate among unitholders of the ETFs. The Manager is sending proxy-related materials using the Notice-and-Access Procedure directly to unitholders, which includes registered unitholders and beneficial unitholders whose securities are held by an intermediary.
Further details regarding the Meetings, the Proposed Changes, and other changes related to the Proposed Changes are described in the management information circular dated July 14, 2023, which will be available to unitholders of the ETFs at www.sedar.com and www.HorizonsETFs.com. If all required approvals are obtained, the Proposed Changes will be implemented as soon as practicable after the Meetings.
About Horizons ETFs Management (Canada) Inc. (www.HorizonsETFs.com)
Horizons ETFs Management (Canada) Inc. is an innovative financial services company with 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 currently has more than $26 billion of assets under management and 113 ETFs listed on major Canadian stock exchanges. Horizons ETFs is a wholly owned subsidiary of the Mirae Asset Financial Group, which manages approximately $710 billion of assets across 13 countries around the world.
Contact Horizons ETFs at 1-866-641-5739 (toll-free) or (416) 933-5745
Contact Jonathan McGuire
Assistant Vice President, ETF Strategy
Horizons ETFs Management (Canada) Inc.
Commissions, management fees and expenses all may be associated with an investment in exchange traded products managed by Horizons ETFs Management (Canada) Inc. (the “Horizons Exchange Traded Products”). The Horizons Exchange Traded Products are not guaranteed, their value changes frequently and past performance may not be repeated. Certain Horizons Exchange Traded Products may have exposure to leveraged investment techniques that magnify gains and losses and which may result in greater volatility in value and could be subject to aggressive investment risk and price volatility risk. Such risks are described in the prospectus. The prospectus contains important detailed information about the Horizons Exchange Traded Products. Please read the relevant prospectus before investing.
Horizons Total Return Index ETFs (“Horizons TRI ETFs”) are generally index-tracking ETFs that use an innovative investment structure known as a Total Return Swap to deliver index returns in a low-cost and tax-efficient manner. Unlike a physical replication ETF that typically purchases the securities found in the relevant index in the same proportions as the index, most Horizons TRI ETFs use a synthetic structure that never buys the securities of an index directly. Instead, the ETF receives the total return of the index through entering into a Total Return Swap agreement with one or more counterparties, typically large financial institutions, which will provide the ETF with the total return of the index in exchange for the interest earned on the cash held by the ETF. Any distributions which are paid by the index constituents are reflected automatically in the net asset value (NAV) of the ETF. As a result, the Horizons TRI ETF receives the total return of the index (before fees), which is reflected in the ETF’s share price, and investors are not expected to receive any taxable distributions. Certain Horizons TRI ETFs (Horizons Nasdaq-100 ® Index ETF and Horizons US Large Cap Index ETF) use physical replication instead of a total return swap. The Horizons Cash Maximizer ETF and Horizons USD Cash Maximizer ETF use cash accounts and do not track an index but rather receive interest paid on cash deposits that can change over time.
Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forward-looking 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.
This communication is intended for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to purchase exchange traded products (the “Horizons Exchange Traded Products”) managed by Horizons ETFs Management (Canada) Inc. and is not, and should not be construed as, investment, tax, legal or accounting advice, and should not be relied upon in that regard. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. These investments may not be suitable to the circumstances of an investor.