On August 23, 2019, Horizons ETFs Management (Canada) Inc. issued a press release announcing a proposed corporate class reorganization of a number of its existing ETFs. The full press release is available by clicking here.

This web resource page can be used to learn about the conversion process as well as allow unit holders to access information to help them to make a specific tax election if they held the units of the ETFs during the conversion.

Some of the key resources available to unit holders on how the conversion process works include the following:

A press release discussing the proposed changes:
https://www.horizonsetfs.com/news/Press-Release/Horizons-ETFs-Proposes-Corporate-Class-Reorganizat

The Management Circular that provides a comprehensive overview of the unit holder vote and the conversion process:
https://www.horizonsetfs.com/horizons/media/pdfs/corporateclass/Circular.pdf
https://www.horizonsetfs.com/horizons/media/pdfs/corporateclass/Circular_FR.pdf (French)

The Notice and Access that was sent to all unitholders:
https://www.horizonsetfs.com/horizons/media/pdfs/corporateclass/NoticeAndAccess.pdf

An investor-friendly frequently asked questions (FAQ) document on the conversion as it was proposed:
https://www.horizonsetfs.com/horizons/media/pdfs/corporateclass/CorporateClass_FAQ.pdf

A summary of the ETFs that merged and their respective net asset value per unit / share on the date of the transaction:
https://www.horizonsetfs.com/horizons/media/pdfs/corporateclass/ConversionNAVs.pdf

Section 85 Election

The reorganization is not expected to be a taxable event for Canadian resident unitholders of the ETFs provided that such unitholders who hold units of the ETFs in taxable accounts make a joint election with the mutual fund corporation under Section 85 of the Income Tax Act as part of the exchange from their trust units into shares of a series of the new mutual fund corporation.

Between December 1st, 2019 and April 30, 2020, Horizons provided a portal that allowed investors to submit required information and then receive the completed documents necessary to make a Section 85 election. This portal is now closed. Investors who did not previously submit the required information must now complete the documentation on their own behalf and submit copies to the required parties.

The Canada Revenue Agency forms may be found through the following links:

T2057 – which is for individuals, trusts, and corporations: 
https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2057.html

T2058 – which is for use by Partnerships:
https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t2058.html

Publications relevant to the joint tax election may be found at:
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/ic76-19.html
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/it291r3.html

For Quebec residents/taxpayers, in addition to the above federal forms, please see the following:

The following are the links for the joint tax election forms on the Revenu Quebec website:

TP-518(-V) – Transfer of Property by a Taxpayer to a Taxable Canadian Corporation
EN: https://www.revenuquebec.ca/en/online-services/forms-and-publications/current-details/tp-518-v/
FR: https://www.revenuquebec.ca/fr/services-en-ligne/formulaires-et-publications/details-courant/tp-518/

TP-529(-V) – Transfer of Property by a Partnership to a Taxable Canadian Corporation
EN: https://www.revenuquebec.ca/en/online-services/forms-and-publications/current-details/tp-529-v/
FR: https://www.revenuquebec.ca/fr/services-en-ligne/formulaires-et-publications/details-courant/tp-529/

 

Tips For Completing the Required CRA Forms

 

The information contained in this section reflects general tax information only and does not constitute, and should not be construed as, tax advice. Investor’s situations may differ, and investors should consult with their tax advisors before making any decisions. The information provided herein is provided as is and Horizons makes no warranty as to the accuracy of the information, and may not update the information as updates become available. Any documents submitted to Horizons will be responded to on a best efforts basis only, and Horizons bears no responsibility for the accuracy of such documents or for the timeliness of such documents or for the timeliness of any response to any such documents submitted to Horizons.

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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 values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the Horizons Exchange Traded Products. Please read the relevant prospectus before investing.

The Horizons Exchange Traded Products include our BetaPro products (the “BetaPro Products”). The BetaPro Products are alternative mutual funds within the meaning of National Instrument 81-102 Investment Funds, and are permitted to use strategies generally prohibited by conventional mutual funds: the ability to invest more than 10% of their net asset value in securities of a single issuer, to employ leverage, and engage in short selling to a greater extent than is permitted in conventional mutual funds. While these strategies will only be used in accordance with the investment objectives and strategies of the BetaPro Products, during certain market conditions they may accelerate the risk that an investment in shares of a BetaPro Product decreases in value. The BetaPro Products consist of our 2x Daily Bull and 2x Daily Bear ETFs (“2x Daily ETFs”), Inverse ETFs (“Inverse ETFs”) and our BetaPro S&P 500 VIX Short-Term Futures™ ETF (the “VIX ETF”). Included in the 2x Daily ETFs and the Inverse ETFs are the BetaPro Marijuana Companies 2x Daily Bull ETF (“HMJU”) and BetaPro Marijuana Companies Inverse ETF (“HMJI”), which track the North American MOC Marijuana Index (NTR) and North American MOC Marijuana Index (TR), respectively. The 2x Daily ETFs and certain other BetaPro Products use leveraged investment techniques that can magnify gains and losses and may result in greater volatility of returns. These BetaPro Products are subject to leverage risk and may be subject to aggressive investment risk and price volatility risk, among other risks, which are described in their respective prospectuses. Each 2x Daily ETF seeks a return, before fees and expenses, that is either 200% or –200% of the performance of a specified underlying index, commodity futures index or benchmark (the “Target”) for a single day. Each Inverse ETF seeks a return that is –100% of the performance of its Target. Due to the compounding of daily returns a 2x Daily ETF’s or Inverse ETF’s returns over periods other than one day will likely differ in amount and, particularly in the case of the 2x Daily ETFs, possibly direction from the performance of their respective Target(s) for the same period. Hedging costs charged to BetaPro Products reduce the value of the forward price payable to that ETF. Due to the high cost of borrowing the securities of marijuana companies in particular, the hedging costs charged to HMJI are expected to be material and are expected to materially reduce the returns of HMJI to unitholders and materially impair the ability of HMJI to meet its investment objectives. Currently, the manager expects the hedging costs to be charged to HMJI and borne by unitholders will be between 10.00% and 45.00% per annum of the aggregate notional exposure of HMJI’s forward documents. The hedging costs may increase above this range. The manager will publish, on its website, the updated monthly fixed hedging cost for HMJI for the upcoming month as negotiated with the counterparty to the forward documents, based on the then current market conditions. The VIX ETF, which is a 1x ETF, as described in the prospectus, is a speculative investment tool that is not a conventional investment. The VIX ETF’s Target is highly volatile. As a result, the VIX ETF is not intended as a stand-alone long-term investment. Historically, the VIX ETF’s Target has tended to revert to a historical mean. As a result, the performance of the VIX ETF’s Target is expected to be negative over the longer term and neither the VIX ETF nor its target is expected to have positive long-term performance. Investors should monitor their holdings in BetaPro Products and their performance at least as frequently as daily to ensure such investment(s) remain consistent with their investment strategies.

*The indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The rates of return shown in the table are not intended to reflect future values of the ETF or returns on investment in the ETF. Only the returns for periods of one year or greater are annualized returns.