Horizons US 7-10 Year Treasury Bond CAD

Horizons US 7-10 Year Treasury Bond CAD Hedged ETF (HTH:TSX)
ETF Snapshot
Name:
Horizons US 7-10 Year Treasury
Bond CAD Hedged ETF
Launch Date:
September 20, 2016
CUSIP:
44053M105
Ticker:
HTH
Management Fee:1
0.15% (does not include a swap
fee of approximately 5 bps)
Underlying Index:
Solactive US 7-10 Year Treasury
Bond CAD Hedged Index (Total
Return)
Bloomberg Index Ticker:
SOLUTB Investment
Manager:
Horizons ETFs Management
(Canada) Inc.
Distribution Frequency:
HTH is not expected to make
distributions
Eligibility:
All registered and non-registered
investment accounts
Currency Hedge:
Yes
Low-cost, Tax-Efficient Exposure to U.S. Treasuries
Horizons US 7-10 Year Treasury Bond CAD Hedged ETF (HTH) seeks to replicate, to the extent
possible, the performance of the Solactive US 7-10 Year Treasury Bond CAD Hedged Index
(Total Return), net of expenses. The Solactive US 7-10 Year Treasury Bond CAD Hedged Index
(Total Return) is designed to measure the performance of the US 7-10 Year Treasury Bond
market, hedged to the Canadian dollar.
Reduce Taxes, Increase Returns
Taxes charged on interest income from U.S. bond exposure can often erode returns,
especially when interest rates are low. However, by investing in mid-term U.S. treasuries
using HTH, investors can ensure they are receiving the total compounded return of the
index, without the usual tax consequences that can occur from investing in the asset
class directly.
Key Features of HTH:
• Low cost: HTH has a low management fee of only 0.15%
• The TRI advantage: HTH is part of Horizons’ Total Return Index (“TRI”) Family of ETFs.
HTH uses a total return swap contract to replicate the performance of the Solactive US
7-10 Year Treasury Bond CAD Hedged Index (Total Return). This structure typically
reduces the cost and tracking error* associated with replicating an index and
increases tax efficiency
• Tax efficient: HTH is not expected to make taxable distributions
• Hedged exposure: Get Canadian currency-hedged** exposure to the US 7-10
year treasury market
• Higher compound growth: The reinvestment of index distributions are reflected
in HTH’s Net Asset Value (“NAV”)
*HTH would be expected to have some additional tracking error associated with the currency hedging mechanics of the ETF.
**Horizons ETFs also offers a non-hedged version of this fund, available under the ticker symbol HTB.
Tax Advantages
HTH does not directly receive any distributions from the index constituents and is therefore
not expected to make any distributions. Investors who hold HTH still get full exposure to the
total return of the Index through its TRI structure, but the value of any distributed income is
reflected in the ETF’s net asset value (NAV) rather than being received into the ETF as cash
and then paid out as taxable distributions.
For instance, an Ontario-based investor in the fourth highest marginal tax bracket for the
2016 tax year would generally be required to pay 46.41% tax on each distribution received
from U.S. treasuries. Typically, HTH unitholders would not be subject to this taxation.
Plus sales taxes.
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Horizons US 7-10 Year Treasury Bond CAD Hedged ETF (HTH:TSX)
Taxation on U.S. Bond ETFs
The after-tax yield of a bond portfolio is a crucial component of total return, particularly in an environment of low interest rates and tight
spreads between government and corporate debt. The following hypothetical example highlights the after-tax performance of holding HTH
versus a physically replicated bond ETF in a non-registered account. The example assumes both ETFs reflect a net yield of 2%.
It is important to note that neither HTH, nor any of the other TRI ETFs offered by Horizons ETFs, re-characterize the investment income
earned from their swap agreements as capital gains.
Tax Implications for Holding a TRI Bond ETF in Non-Registered Accounts
Physically Replicated Bond ETF
HTH Using a Total Return Swap
Principal Investment
$100,000
$100,000
Market Return (0%)
$0
$0
Constituent Distributions (2.0%)
$2,000
$2,000
Pre-Tax Total Portfolio Value
$102,000
$102,000
Taxes on Distributions (46.41%)
$928.20
$0
Total Taxes Payable
$928.20
$0
Total After-Tax Portfolio Return
$101,071.80
$102,000
Difference in Return
-$928.20
Return Loss due to Tax on Distributions
-0.93%
0%
For Illustrative Purposes Only. The above illustrative example highlights the expected after-tax performance benefits of holding a TRI Bond ETF versus another Canadian
domiciled physically replicated Bond ETF in a non-registered account, assuming both ETFs earned/reflected a net 2% interest income and track the exact same universe of
bonds. This example does not take into account any fees or expenses of the ETFs, or any commissions, fees, or expenses that would be associated with the purchase or sale
of units of the ETFs or any hedging expenses. Both ETFs are held by an Ontario resident investor in the fourth highest tax bracket, who would have a marginal tax rate of 46.41%
in 2016. The example does not contemplate the sale of the ETF units or any tax liability that would result. It also assumes no change in the market value of the index constituents.
To learn more, please visit www.HorizonsETFs.com/HTH
Horizons ETFs is a member of Mirae Asset Global Investments. Commissions, management fees and applicable sales taxes all may be associated with an investment in the Horizons Global Currency
Opportunities ETF listed herein and managed by Horizons ETFs Management (Canada) Inc. (the “ETF”). The ETF is not guaranteed, its value change frequently and past performance may not be
repeated. The prospectus contains important detailed information about the ETFs. Please read the prospectus before investing.
“Standard & Poor’s®” and “S&P®” are registered trademarks of Standard and Poor’s® Financial Services LLC (“S&P”), “Bloomberg®” is a trademark of Bloomberg Finance L.P.(Bloomberg). These marks
have been licensed for use by AlphaPro Management Inc. and Horizons ETFs Management (Canada) Inc. where applicable. The Horizons Exchange Traded Products are not sponsored, endorsed, sold,
or promoted by S&P or Bloomberg and their affiliated companies and none of these parties make any representation, warranty or condition regarding the advisability of buying, selling or holding
units/shares in the Horizons Exchange Traded Products. All trademarks/service marks are registered by their respective owners. None of the owners thereof or any of their affiliates sponsor, endorse,
sell, promote or make any representation regarding the advisability of investing in the Horizons Exchange Traded Products. Complete trademark and service-mark information is available at http://
www.horizonsetfs.com/legal/trademarks.
B00352 0916 PS