HXS: A Tax Efficient Way to Hold U.S. Stocks

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1 HXS: A Tax Efficient Way to Hold U.S. Stocks Name: Horizons S&P 500 Index ETF (HXS) Index: S&P 500 Index (Total Return) Management Fee: 0.15% ETF Investment Structure: Total Return Swap Swap Fee: Yes (approximately 0.30%) Available in U.S. Dollars: Yes, ticker symbol HXS.U Tax Efficient: Not subject to: Dividend Taxes U.S. Foreign Withholding Tax U.S. Estate Tax Eligibility: All registered and non-registered investment accounts 1

2 Benefits of Non-Hedged Exposure Investors in a non-hedged U.S. stock index ETF should receive performance that corresponds well to the performance of the underlying index There is a cost to implement a currency hedge, which usually results in tracking error versus the benchmark index A currency hedge delivers a diminishing value the more the U.S. dollar increases versus the value of the Canadian dollar and/or if the relationship between the two currencies remains stable 2

3 Tax Advantages HXS does not receive any taxable distributions and is therefore not expected to make any taxable distributions HXS tracks the total return version of the S&P 500 Index. This means that 100% of the value of any dividend distributions by the index s constituent stocks is immediately reinvested in the total return index and, for HXS, gets reflected in the mark-to-market value of its TRS, and therefore its net asset value Additionally, any distributions made by U.S. securities, such as U.S.-listed stocks are typically subject the to U.S. withholding tax of 15%. In a nonregistered account, Canadian investors may be able to apply for a Foreign tax credit. This credit would not apply for registered accounts Non-Canadian HXS unit holders would not be subject to any withholding tax 3

4 Avoiding U.S. Estate Tax High net worth Canadian investors that allocate to the United States run the risk of being subject to the U.S. Estate Tax on their U.S. holdings Estate tax applies to investors who have a global net worth in excess $5.25 million, which may seem high but includes life insurance proceeds, real estates and even pension proceeds U.S. stocks are subject to the U.S. estate tax, which could be as high as 40% of the value of the holdings depending on the net worth of the individual This means a $100,000 U.S. Stock portfolio left to heir could be reduced to $60,000 after the U.S. government applies the estate tax There are tax planning strategies that can reduce the amount of U.S. estate tax paid, but investors can avoid the U.S. estate tax process altogether by investing HXS 4

5 Disclaimer Commissions, management fees and applicable sales taxes all may be associated with an investment in the Horizons exchange traded products listed herein and managed by Horizons ETFs Management (Canada) Inc. (the ETFs ). The ETFs are not guaranteed, their values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the ETFs. Please read the prospectus before investing. The indicated rates of returns in the tables are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends and distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Standard & Poor s and S&P are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ) and TSX is a registered trademark of the TSX Inc. ( TSX ). These marks have been licensed for use by Horizons ETFs Management (Canada) Inc. The ETFs are not sponsored, endorsed, sold, or promoted by the S&P, TSX or their affiliated companies and none of these parties make any representation, warranty or condition regarding the advisability of buying, selling or holding units/shares of the ETFs. Complete trademark and service-mark information is available at 5