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Ballot Voting Procedure iro the amendment of CoreShares Equal Weight Top 40 to CoreShares Scientific Beta Multi Fact
CoreShares Index Tracker Managers (RF) Proprietary Limited
CoreShares Equal Weight Top 40 ETF
Share code: CSEW40
ISIN: ZAE000217139
A portfolio in the CoreShares Index Tracker Collective Investment Scheme registered as such in terms
of the Collective Investment Schemes Control Act, 45 of 2002, managed by CoreShares Index Tracker
Managers (RF) Proprietary Limited (“CoreShares”)
BALLOT VOTING PROCEDURE IN RESPECT OF THE AMENDMENT OF THE CORESHARES
EQUAL WEIGHT TOP 40 ETF TO THE CORESHARES SCIENTIFIC BETA MULTI FACTOR ETF
1. Background
CoreShares has been managing the CSEW40 portfolio since 2016, following its amalgamation with the
BettaBeta Equally Weighted Top 40 Fund previously managed by Nedbank. The CSEW40 is a single
factor, or weighting methodology, index ETF which equally weights each of the underlying constituents
that make up the FTSE/JSE Equally Weighted Top 40 index.
In the time that has elapsed since taking it over, CoreShares has performed continuous research on
its South African equity offerings and, as a result, we assess our indices for robustness, scalability and
usability. The work we have carried out has led us to the following conclusions:
1. Multi-factor strategies demonstrate more consistency and less timing risk than single ‘factor’
or ‘style’ strategies. As such, investors are increasingly seeking to use a multi-factor framework
instead of allocating to single factors.
2. Multi-factor strategies provide investors with similar benefits to the Top40 Equal Weighted
Strategy whilst mitigating other risks.
3. CoreShares is refining and streamlining its product offering with reference to its South African
equity strategies whereby this offering will consist of a) beta products b) equity income products
and c) multi factor strategies.
A decision has been made, based on the above factors, to seek approval from the underlying investors
in the CSEW40 to amend the investment mandate from its current form of tracking the FTSE/JSE Equal
Weighted Top 40 Index to change to track the Scientific Beta CS South-Africa Multi-Beta Multi-Strategy
Six-Factor EW Index. In addition to this change in index, the name of the CoreShares Top 40 Equal
Weighted ETF (CSEW40) portfolio will also be amended to the CoreShares Scientific Beta Multi Factor
ETF (the “Amendments”).
The impact of the Amendments is that the portfolio will no longer buy and hold constituents of the
FTSE/JSE Equal Weighted Top 40 Index but will now buy and hold constituents of the Scientific Beta
CS South-Africa Multi-Beta Multi-Strategy Six-Factor EW Index. The management fee charged will
increase from 0.30% p.a. to 0.40% p.a. which will only become effective once the regulatory approval
of the Amendments has been obtained. The management of the portfolio, income distributions, risk
profile and ASISA classification will all remain as is and will not be changed.
2. Scientific Beta Background
In 2017, CoreShares partnered with EDHEC Risk Institute Scientific Beta (“ERI Scientific Beta”) to
develop a multi-factor index for the South African equity market. In October 2017, CoreShares
launched the CoreShares Scientific Beta Multi-Factor Index Fund – a traditional CIS unit trust fund
which currently tracks this index.
Taking into consideration the CSEW40 product, CoreShares does not believe the Equal Weighted Top
40 strategy to be as well balanced from a factor perspective as the Scientific Beta index.
ERI Scientific Beta has constructed its index around six main factors, namely, Size, Momentum,
Volatility, Value, Low Investment and High Profitability which are rewarded in the long term.
CoreShares believes this use of multiple factors will ultimately expose investors to greater
diversification benefits, reduction in the levels of risk and increased coverage to the number of
constituents held in a portfolio.
The changes to the Portfolio are summarised as follows:
EXISTING PROPOSED EFFECTIVE DATE
8 May 2019
CORESHARES TOP 40 EQUALLY WEIGHTED CORESHARES SCIENTIFIC BETA MULTI FACTOR
ETF INDEX ETF
INDEX DEFINITION: INDEX DEFINITION:
FTSE/JSE EQUALLY WEIGHTED TOP40 SCIENTIFIC BETA CS SOUTH-AFRICA MULTI-BETA
INDEX MULTI-STRATEGY SIX-FACTOR EW INDEX
The “Index” means the Equally Weighted Top40 The Index means Scientific Beta CS South-Africa Multi-
Index as calculated independently by the Beta Multi-Strategy Six-Factor EW Index, which is a
FTSE/JSE daily; and “constituent securities” price-only return index. The Index is calculated and
means listed shares on the Johannesburg Stock maintained in accordance with the ERI Scientific Beta
Exchange or such other listed instruments Equity Strategy Construction Rules.
which constitute the securities included from
time to time in the Index. The “Extended South Africa Regional Universe” are
those stocks from the ERI Scientific Beta Global,
Extended Developed Europe or Extended USA
Universes, that have a listing (primary or otherwise) in
Johannesburg. Only the most liquid and highest free-
float market capitalisation constituents are selected.
INVESTMENT POLICY: INVESTMENT POLICY:
a) The investment policy of the portfolio shall a) The investment objective of the portfolio is to provide
be to track the index as closely as investors with an efficient and easily accessible
reasonably as possible and means by which to achieve a return that tracks the
(i) buying only shares in constituent price and yield performance of the Scientific Beta
companies in the weightings in CS South-Africa Multi-Beta Multi-Strategy Six-
which they have been assigned; Factor EW Index. The portfolio will attempt to place
and an investor in substantially the same position, from
(ii) selling only shares in constituent capital and income perspective, as if they held the
companies which are excluded from underlying constituents of the Scientific Beta CS
the Index from time to time as a South-Africa Multi-Beta Multi-Strategy Six-
result of the quarterly Index reviews Factor EW Index in their correct weightings.
or corporate action, so as to ensure b) In order to achieve the abovementioned objective,
that at all times the portfolio holds the portfolio will generally be invested in all of the
shares in the Index in the component securities of the index in proportion to
weightings determined. their weighting in the Scientific Beta CS South-
Africa Multi-Beta Multi-Strategy Six-Factor EW
b) The portfolio shall only buy or sell securities Index and will under normal circumstances aim to
for the purpose of tracking the Index. be invested in at least 100% of the component
c) As a secondary objective, securities held by securities comprising the Scientific Beta CS South-
the fund may from time to time be scrip lent Africa Multi-Beta Multi-Strategy Six-Factor Price
to generate income for the sole benefit of Index.
investors in the fund, provided that such c) The objective of the index namely the Scientific
activities do not conflict with the provisions Beta CS South Africa Multi-Beta Multi-Strategy
of the Act. Six-Factor EW Index is to represent the
d) Investors can obtain participatory interests performance of Johannesburg-listed large and mid-
in the fund on the secondary market or by capitalisation companies from the underlying
buying and selling participatory interests in investment universe, the Extended South Africa
the fund directly from the manager. In order Regional Universe, while outperforming the
to achieve this object the manager may, capitalisation-weighted reference index for this
subject to the Act and the deed, create and universe. This outperformance relative to the cap-
issue, and redeem and cancel an unlimited weighted benchmark is sought by systematic index
number of participatory interests in the construction and management processes:
portfolio. d) Sub-indices correspond to investible and diversified
e) The portfolio will not be managed according (long-only) proxies for six risk factors that have been
to the traditional methods of active widely documented in the academic literature and
management, which involves the buying and recognized to be remunerated over the long run.
selling of securities based on economic, These indices are tilted towards companies with the
financial and market analysis and investing following market and fundamental characteristics:
judgment. Instead, the investment objective • Mid Capitalisations
and style will be full replication of the Index. • Value
As a result, the financial or other condition of • Low Volatility
any company or entity included from time to • High Momentum
time in the Index will not result in the • High Profitability
elimination of its securities from the portfolio • Low Investment
unless such company or entity is removed The weighting scheme used as diversification
from the Index itself. methodology within each sub-index is the Scientific
f) On receipt of ordinary cash dividends, these Beta diversified multi-strategy weighting scheme.
will be credited to the Income Account, and Designed to limit model risks in the diversification
held in liquid assets until the quarterly process, it is defined as the equally weighted
distribution has been declared, after which it combination of five popular diversification schemes:
will be treated according to the provisions of • Maximum Deconcentration
ETF Principal Deed.
• Maximum Decorrelation
g) The composition of the portfolio will be
• Efficient Minimum Volatility
adjusted periodically to conform to changes
• Efficient Maximum Sharpe Ratio
in the composition and weighting of the
• Diversified Risk Weighted
securities in the Index so as to ensure that
the composition and weighting of the
portfolio is representative of the composition These diversification techniques may be adjusted
and weighting of the securities contained in from time to time. New techniques may be
the Index. introduced or existing techniques taken out of the
h) The portfolio will hold securities purely for methodology.
the economic rights and benefits attaching e) The Scientific Beta CS South-Africa Multi-Beta
thereto, and accordingly if a takeover bid is Multi-Strategy Six-Factor EW Index may be
made for shares of a company included in adjusted from time to time according to the rules of
the Index, the portfolio will not tender shares the Scientific Beta CS South-Africa Multi-Beta
in respect thereof. Securities held by the Multi-Strategy Six-Factor EW Index. The
portfolio which are subject to a takeover bid adjustments may require the removal of a
will only be surrendered if such surrender is constituent security from the index and the
mandatory (and then only to the extent of replacement thereof with a new constituent security.
such mandatory surrender) in terms of Adjustments to the portfolio will at all times remain
applicable law or under the rules of a substantially aligned with the Scientific Beta CS
regulatory authority or body having South-Africa Multi-Beta Multi-Strategy Six-
jurisdiction. If a takeover bid results in a Factor EW Index.
company no longer qualifying for inclusion in The portfolio’s ability to replicate the performance of
the index, any shares of the company held the Scientific Beta CS South-Africa Multi-Beta
by the portfolio after the takeover bid will be Multi-Strategy Six-Factor EW Index will be
disposed of by the portfolio, and the affected by the costs and expenses incurred. Costs
proceeds will be applied in effecting the and expenses incurred may result in the Scientific
appropriate adjustments to the portfolio. Beta CS South-Africa Multi-Beta Multi-Strategy
i) To the extent necessary for the purposes of Six-Factor EW Index not being replicated perfectly
achieving its investment policies, the fund by the portfolio.
may hold liquid assets. f) Under normal market conditions the tracking error
j) The portfolio’s ability to replicate the should not exceed 1% (one percent) on an annual
performance of the Index will be dependent basis.
on the composition and weighting of the g) The Scientific Beta CS South-Africa Multi-Beta
portfolio and the net expenses incurred by Multi-Strategy Six-Factor EW Index is calculated
the portfolio. by ERI Scientific Beta in accordance with ERI
k) The Trustee shall ensure that the Scientific Beta Equity Strategy Construction Rules.
investment policy set out in this The index construction and calculation rules and the
supplemental deed is carried out. appointment of calculation agent are subject to
change from time to time.
h) The portfolio shall hold securities purely for the
economic rights and benefits attaching thereto and,
accordingly, if there is any take-over bid or other
corporate action occurs in relation to any entity or
company whose securities are included in the
portfolio, the Manager shall not surrender any
securities held by the portfolio which may be subject
to such take-over bid or other corporate action,
unless such surrender is mandatory (and then only
to the extent of such mandatory surrender) in terms
of any applicable law or under the rules of a
regulatory authority or body having jurisdiction over
the portfolio and/or the applicable securities.
However, if any such take-over bid or corporate
action results in an entity or company whose
securities were previously included in the Index no
longer qualifying for inclusion in the Index, any such
securities held by the portfolio, shall be disposed of
and the proceeds derived from such disposal shall
be applied in effecting the appropriate adjustments
to the portfolio so as to ensure same tracks the
Index.
i) The portfolio will be passively managed in that the
manager will not buy and sell securities based on
economic, financial and /or market analysis but
rather, will buy and sell securities solely for the
purpose of ensuring that the portfolio tracks the
Index. As such the investment objective and style of
the portfolio will be full replication of the Index.
Accordingly, the financial or other condition of any
company or entity included from time to time in the
Index will not result in the elimination of its securities
from the portfolio, unless the securities of such
company or entity are removed from the Index itself.
j) Assets in liquid form will form a minor part of the
portfolio’s assets.
k) The Trustee shall ensure that the investment policy
set out in this supplemental deed is carried out.
3. Ballot voting procedure and Implementation of the Amendments
CoreShares is regulated by the Financial Sector Conduct Authority (formerly the Financial Services
Board). In terms of Section 98(2) of Collective Investment Schemes Control Act of 2002 and clause 67
of the Main Deed of the Scheme, investor consent is required to effect the Amendments, which allow:
• Regulations state that investors holding no less than 25% in value of the total number of
participatory investors in the Portfolio, excluding CoreShares, must respond to the ballot request,
for it to be successful.
• If the majority of those who have responded to the ballot, have voted in favour, then the
amendment will be successful.
• Where less than 25% of investors respond, a second ballot will be conducted.
4. Action required by investors
4.1 Existing unit holders are requested to notify their JSE Brokers/ CSDPs by no later than
Monday, 1 April 2019, as to whether they approve the Amendments as set out in this
announcement or not;
4.2 The various Brokers/CSDPs will then submit the ballot responses via ballot form to
CoreShares’ registered Auditors, Deloitte and Touché, before close of business on
Tuesday, 2 April 2019;
4.3 If you have disposed of your participatory interests in the portfolio, no action is
required.
5. Approval and Commencements
Approval for the Amendments was granted by the JSE on Monday, 18 February 2019.
Subject to the ballot voting procedure being successful, the Amendments will be with effective from
commencement of business on Wednesday, 8 May 2019. Copies of the CoreShares Scientific Beta
Multi Factor Index ETF Pricing Supplement, in English, may be obtained during normal business hours
from the office of the local manager, CoreShares Index Tracker Managers (RF) Proprietary Limited,
located at Grindrod Tower, 4th Floor, 8a Protea Place, Sandton, 2096 and is available on the website:
www.coreshares.co.za.
Salient dates in respect of the Amendments are set out below:
Expected timeline for the implementation of the Amendments 2019
Declaration and Finalisation Data SENS announcement of approval of Monday, 18 February
the Amendments
Last day for investors to respond to their JSE brokers/ CSDPs on Monday, 1 April
whether they approve the Amendments as set out in this announcement
or not
Last Day to Trade in the CoreShares EWTop40 ETF Tuesday, 7 May
Suspension of trading of CoreShares EWTop40 ETF on the JSE Wednesday, 8 May
Commencement of trading in the CoreShares Scientific Beta Multi- Wednesday, 8 May
Factor Index ETF on the JSE
Record date Friday, 10 May
Accounts of dematerialised securities holders updated at their CSDPs Monday, 13 May
or brokers
Termination of trading of CoreShares EWTop40 ETF on the JSE Tuesday, 14 May
6. Notices
CoreShares Scientific Beta Multi Factor Index participatory interests are not in any way sponsored,
endorsed, sold or promoted by the JSE and it does not make any warranty or representation
whatsoever, expressly or implied, either as to the basis of calculation of, or as to the results to be
obtained from the use of the Scientific Beta CS South-Africa Multi-Beta Multi-Strategy Six-Factor EW
Index (“the Index”) and/or the value at which the said Index stands at any particular time on any
particular day or otherwise. The Index is compiled and calculated on behalf of and on the instructions
of CITM by EDHEC Risk Institute Asia Ltd (“ERIA”). The JSE shall not be liable (whether in negligence
or otherwise) to any person for any error in the Index and the JSE shall not be under any obligation to
advise any person of any error therein.
The securities being issued pursuant to this supplement are not eligible for sale in the United States or
in any other jurisdiction in which trading in the securities would be illegal. The securities have not been,
and will not be, registered under the U.S. Securities Act of 1933, as amended, and the U.S. Commodity
Futures Trading Commission under the U.S. Commodity Exchange Act has not approved trading in the
securities. The securities may not be offered, sold or delivered within the United States or to U.S.
persons, nor may any U.S. person at any time trade or maintain a position in the securities
18 February 2019
Corporate advisor and sponsor: Grindrod Bank Limited
Trustee: Société Générale
Date: 18/02/2019 03:58:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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