Tax Information

Hamilton ETFs pay distributions on either a monthly or quarterly basis (see fund details table of the respective ETF for more info). Each month, we announce the upcoming distribution amounts, current yields, and anticipated ex-dividend and pay dates in our Press Releases. In general, for our ETFs, the ex-dividend date is the last business day of the month, and the payment date for cash distributions is 5 business days after the ex-date.

Yes, all Hamilton ETFs are eligible for DRIP. If you own a Hamilton ETF, you may enroll in the DRIP program by contacting your investment brokerage. Hamilton ETFs administers a Treasury DRIP; whereby enrolled investors automatically have their distributions reinvested in additional shares of the ETF. DRIP shares are issued at a share price equal to the average closing price of the ETF on the Toronto Stock Exchange (TSX) for the five consecutive trading days immediately prior to the applicable payment date. In the event that there were no prices, NAVs are used. Any remaining fractional values are distributed in cash to unitholders instead of fractional shares.

Note, each brokerage has their own criteria for whether they allow DRIP for certain funds. If DRIP isn’t currently available at your brokerage, we recommend you contact them to inquire and request that they make it available. Please note, with certain brokers, there may be a slight delay for DRIP shares to be reflected in your account. We recommend you contact your broker to inquire about any delays.

The characterization of distributions for tax purposes will not be known until after the ETF’s tax year end. Investors will be informed of the characterization of the amounts distributed for tax purposes only for the entire year and not with each distribution. These amounts will be reported to brokers and relayed to you on official tax statements from your broker. These amounts and proportions may vary from year to year.

For our ETFs that hold Canadian dividend-paying companies, there may be a portion of the total distribution that could be eligible for the Canadian Dividend Tax Credit.

It is important to differentiate the source of the income being generated from the tax characterization of that income. While individual circumstances may vary, below is a general example.

Covered call option premium, from a tax perspective, is initially considered a capital gain.

• Scenario 1: An ETF with a starting NAV of $10 generates and pays out $1 of option premium in the form of distributions. All else equal, the investor would receive a tax slip with $1 of capital gain, the NAV would remain at $10, and your adjusted cost base (ACB) would be unchanged.
• Scenario 2: An ETF with a starting NAV of $10 generates $0 of option premium and still pays out $1 in distributions. All else equal, the investor would receive a tax slip with $1 in return of capital, the NAV would drop to $9, and your ACB would be reduced by $1.
• Scenario 3: An ETF with a starting NAV of $10 generates and pays out $1 of option premium in the form of distributions. If the ETF had any realized capital or carry forward losses of $1, those could be applied to the option premium capital gain. All else equal, the investor would receive a tax slip with $1 in return of capital, the NAV would remain $10, and their ACB would be reduced by $1.

The above is a simplified example meant to illustrate why investors may see a higher proportion of ROC in covered call ETF tax reporting and help explain the different sources of income. In practice, there are many other factors that can influence the NAV of the fund.