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CORESHARES INDEX TRACKER MANAGERS (RF) PROPRIETARY LIMITED - Ballot Voting Procedure iro the amendment of CoreShares Equal Weight Top 40 to CoreShares Scientific Beta Multi Fact

Release Date: 18/02/2019 15:58
Code(s): CSEW40     PDF:  
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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'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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