| Fri 10 Nov 2023, 17:31 | | Ballot Voting Procedure - Proposed Amalgamation of the Satrix Equity Momentum ETF with the Satrix Momentum Portfolio |
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Ballot Voting Procedure - Proposed Amalgamation of the Satrix Equity Momentum ETF with the Satrix Momentum Portfolio
Satrix Managers (RF) Pty Ltd
Satrix Equity Momentum ETF
Share code: STXEQM
ISIN: ZAE000318911
A portfolio in the Satrix Collective Investment Scheme in Securities
2, registered as such in terms of the Collective Investment Schemes
Control Act, 45 of 2002
Ballot Voting Procedure - Proposed Amalgamation of the Satrix Equity
Momentum ETF with the Satrix Momentum Portfolio
This letter is important and requires your immediate attention.
The purpose of this letter is to inform you of the proposed
amalgamation of the Satrix Equity Momentum ETF (source fund) with the
Satrix Momentum Portfolio (target fund), and to provide you with
sufficient information to vote on this proposal – including your
rights as an investor and the impact this will have on your investment.
In terms of Section 99 of the Collective Investment Schemes Control
Act, 45 of 2002 ("the Act"), the proposed amalgamation will proceed
if the majority of investors vote in favour of the amalgamation by
way of the enclosed ballot. The absence of a response will be regarded
as a vote in favour of the amalgamation.
The amalgamation ballot is conducted at the request of Satrix Managers
(RF) (Pty) Ltd ("Satrix"), FSP 15658, the investment manager of the
Satrix Collective Investment Scheme in Securities and the Satrix
Collective Investment Scheme in Securities 2.
Reason for the proposed amalgamation
The Satrix Equity Momentum ETF tracks the Newfunds Risk-Controlled
Wits SA-Momentum Index (NFEMOM). The "NFEMOM" inception date is
January 2012 and aims to provide investors with exposure to securities
that exhibit the greatest price momentum over the past 12 months. The
Satrix Equity Momentum ETF holds 20 constituents, rebalances quarterly
in March, June, September and December, and uses an equal risk
contribution (ERC) optimiser to balance risk. The strategy, though,
has been plagued with very high turnover (with turnover costs at times
exceeding 1% per annum) and high-risk concentration by design. It has
also experienced high levels of volatility – particularly experiencing
periods of deep drawdowns.
The Satrix Momentum Portfolio tracks the Satrix Momentum Index. We
argue that the Satrix Momentum Index offers an improved means of
capturing momentum in a risk-controlled manner, with active risk and
turnover controlled in the fund to both mitigate costs and better
manage drawdowns. The Satrix Momentum Index also has a more sensible
definition of momentum, considering a composite of price- (6- and 12-
month) and fundamental momentum (as determined by changes in analyst
earnings recommendations and earnings surprizes) in the signal. Our
research suggests that this definition of momentum is less procyclical
and less susceptible to deep drawdowns than considering prices alone.
The composite momentum information persistence is also higher, meaning
the need to refresh information by trading more is reduced. The Satrix
Momentum Index also directly controls for absolute and relative risk
(through the optimization process and risk control to the benchmark
index), which leads to reduced trading and less pronounced drawdowns.
Details of the similarities, differences, and the impact on you as an
investor are detailed in the table below:
Satrix Equity Momentum ETF Satrix Momentum Portfolio Changes and impact
Investment Objective Investment Objective
No change to investment
4.1. The investment policy of the Portfolio shall be 3.1 The investment policy of the Portfolio shall be
objective
to: to track the proprietary Satrix Momentum Index
4.1.1. track the Index as closely as possible by, to (hereinafter referred to as "the Index") as closely
the fullest extent possible: as possible, by:
4.1.1.1. buying only securities in the Index in the Buying only constituent securities in the same
weightings in which they are included in the Index; weightings in which they are included in the Index
and and selling only securities which are excluded from
4.1.1.2. selling only securities which are excluded the Index from time to time as a result of periodic
from the Index from time to time as a result of the Index reviews or corporate actions or which are
quarterly Index reviews or corporate actions, so as
required to be sold to ensure that the Portfolio
to ensure that at all times the Portfolio holds
holds securities in the same weighting as they are
securities in the Index in the same weightings in
which they are included in the Index; and included in the Index.
3.2 The Portfolio shall not buy or sell securities for
4.1.2. as a further objective, to manage the
the purpose of making a profit nor for any purpose
securities held by the Portfolio to generate income
other than tracking the Index.
for the benefit of investors.
3.3 It is anticipated that assets in liquid form will
4.2. The Portfolio shall not buy or sell securities
not form a substantial part of the Portfolio's assets.
for the purpose of making a profit nor for any
However, any liquid assets that the Portfolio holds
purpose other than tracking the Index.
may be invested in short term investments such as
4.3. The Portfolio will be passively managed in banker's acceptances and certificates of deposit.
that the manager will not buy and sell securities
3.4 As a further objective, the securities held by
based on economic, financial and/or market
the portfolio shall be managed to generate income
analysis but rather, will buy and sell securities
solely for the purpose of ensuring that the for the benefit of investors.
Portfolio tracks the Index. As such the
3.5 Investors can obtain participatory interests in
investment objective and style of the Portfolio
the Portfolio on the secondary market or by
will be full replication of the Index. Accordingly,
the financial or other condition of any company or subscribing for new participatory interest in the
entity included from time to time in the Index will Portfolio on the primary market. In order to
not result in the elimination of its securities from achieve this objective the Manager may, subject to
the Portfolio, unless the securities of such the Act and the Deed, create and issue an
company or entity are removed from the Index unlimited number of participatory interests in the
itself. Portfolio.
Satrix Equity Momentum ETF Satrix Momentum Portfolio Changes and impact
4.4. Investors may obtain participatory interests 3.6 The Portfolio will not be managed according to
in the Portfolio on the secondary market or by traditional methods of active management, which
subscribing for new participatory interests in the involve the buying and selling of securities based
Portfolio on the primary market. In order to on the economic, financial and market analysis and
achieve this objective the manager may, subject to investing judgement. Instead, the investment
the Act and the Deed, create and issue an objective and style will be full replication of the
unlimited number of participatory interests in the Index. As a result the financial or other condition
Portfolio. of any company or entity included from time to
4.5. The manager shall further be entitled, in its time in the Index will not result in the elimination
discretion and only on a temporary basis, to of its securities from the Portfolio unless the
employ such other investment techniques and securities of such company or entity are removed
instruments as will most effectively give effect to from the Index itself.
the object or the investment policies of the 3.7 The Portfolio will acquire and hold a portfolio
Portfolio, subject to the provisions of the Deed and of securities that substantially represents all of the
the Act from time to time. component securities of the Index in substantially
4.6. The composition of the Portfolio will be the same weighting as in the Index. However, the
adjusted periodically to conform to changes in the Portfolio shall also be entitled, in its discretion and
composition and weightings of the securities in the only on a temporary basis, to employ such other
Index so as to ensure that the composition and investment techniques and instruments as will
weighting of the Portfolio are a reflection of the most effectively give effect to the object or the
composition and weighting of the securities investment policies of the Portfolio.
contained in the Index.
3.8 The composition of the Portfolio will be
4.7. The Portfolio shall hold securities purely for adjusted periodically to confirm to changes in the
the economic rights and benefits attaching thereto composition and weighting of the securities in the
and, accordingly, if there is any takeover bid or Index so as to ensure that the composition and
other corporate action that occurs in relation to weighting of the Portfolio are a reflection of the
any constituent company, the Portfolio shall not composition and weighting of the securities
surrender any securities held by the Portfolio contained in the Index.
which may be subject to such takeover bid or other 3.9 The Portfolio will hold securities purely for the
corporate action, unless such surrender is economic rights and benefits attaching thereto,
mandatory (and then only to the extent of such and accordingly if a takeover bid is made for shares
mandatory surrender) in terms of any applicable of a company included in the Index, the Portfolio
law or under the rules of a regulatory authority or will not tender shares in respect thereof.
body having jurisdiction over the Portfolio and/or Securities held by the Portfolio which are subject
the applicable securities. However, if any such to a takeover bid will only be surrendered if such
takeover bid or corporate action results in a surrender is mandatory (and then only to the
previously constituent company no longer extent of such mandatory surrender) in terms of
qualifying for inclusion in the Index, any shares in applicable law or under the rules of a regulatory
such constituent company held by the Portfolio, authority or body having jurisdiction. If a takeover
shall be disposed of by the Portfolio and the bid results in a company no longer qualifying for
proceeds derived from such disposal shall be the inclusion in the Index, any shares of the
applied in effecting the appropriate adjustments company held by the Portfolio after the takeover
to the Portfolio so as to ensure same tracks the bid will be disposed of by the Portfolio, and the
Index. proceeds will be applied in effecting the
4.8. Assets in liquid form will form a minor part of appropriate adjustments to the Portfolio.
the Portfolio's assets.
4.9. The Portfolio's ability to replicate the price 3.10 The Portfolio's ability to replicate the price
and yield performance of the Index will be affected and yield performance of the Index will be affected
by the costs and expenses incurred by the by the costs and expenses incurred by the
Portfolio. Portfolio.
4.10. Since the manager will not be distributing to
investors any income (including dividends) in the
Portfolio, the manager will disclose in the Portfolio
Satrix Equity Momentum ETF Satrix Momentum Portfolio Changes and impact
Supplements that such income will be reinvested
in the Portfolio.
4.11 Any material change in the investment policy
of the Portfolio shall constitute an amendment of
the Deed, and shall be subject to the provisions of
clause 59 of the Deed, in which event investors
shall be given reasonable notice to enable them to
redeem their participatory interest prior to
implementation of the change.
Portfolio Benchmark Portfolio Benchmark
Newfunds Risk-Controlled WITS SA-Momentum Satrix Momentum Index Change due to amalgamation
Index (NFEMOM)
Distribution methodology Distribution methodology
Reinvesting quarterly Distributing Quarterly Change due to amalgamation
Total Expense Ratio Total Expense Ratio
52 bps 40 bps Change due to amalgamation
Charges, performance, and pricing
• Investors will not be liable for the payment of any additional
fees, charges, taxes, or brokerage as a result of the
amalgamation.
• Future performance and share pricing will be determined by the
new amalgamated fund, i.e., the Satrix Momentum Portfolio.
How the amalgamation impacts your investment
Replacement participatory interests
When the source fund, Satrix Equity Momentum ETF is absorbed into and
amalgamated with the target fund, the Satrix Momentum Portfolio,
investors will be issued with replacement participatory interests
(shares) in the new amalgamated fund. The replacement shares will be
equal in market/monetary value to the shares held prior to the
amalgamation, although the number of shares held may change. The
Satrix Equity Momentum ETF (source fund) will cease to exist.
This is in accordance with Section 99 (3) (a) of the Act, which
stipulates that on the effective date, every investor:
"shall… hold in the new scheme or portfolio, such participatory
interests with an aggregate money value that is not less than the
lower of the net asset value or market value, as may be fair and
reasonable in the circumstances of the participatory interests which
such investor, immediately before the date on which the proposed
transaction becomes effective, held in an original scheme or
portfolio."
BALLOT TIMELINE
Weekday Date Action
Friday 10 November 2023 Receive investor holdings per STRATE
Register (as of 10 Nov)
Friday 10 November 2023 Release of announcement on JSE SENS
Friday 22 December 2023 Final date of response to ballot letter
(30 business days after distribution)
Friday 26 January 2024 Effective date of amalgamation of
portfolios
Details of the special distribution and amalgamation salient dates
will be announced after FSCA approval.
Special distribution
The Financial Sector Conduct Authority ("FSCA") requires that all
accrued income in funds to be transferred be distributed prior to the
transfer taking place. In line with this requirement, both the source
and target funds will distribute a special income declaration.
Action required
1. Please read this circular on the proposed change to the fund, your
rights as an investor and the impact this will have on your
investment.
2. Please complete the enclosed ballot form and email it directly to
our external auditors, KPMG, at satrixballotSTXEQM@kpmg.co.za on
or before 22 December 2023. If you do not participate in the ballot
in time, you will be deemed to have voted in favour of the change.
3. Please do not include any other instructions regarding your
holdings with your ballot form, e.g., requests for purchases,
switching instructions, etc. Your ballot form will go directly to
our auditors and, should such instructions be sent to the auditors,
we cannot guarantee that any instruction after the commencement of
the ballot process will be effected.
4. If you are no longer invested in this fund, no action is required.
Effective date of change
The effective date of the proposed amalgamation of the funds will be
26 January 2024, provided that the necessary consent is obtained from
investors and the Financial Sector Conduct Authority ("FSCA").
Your rights as an investor
The rights of investors are firmly entrenched in the Act. In terms
of Section 99 of CISCA, as read with Clause 59 of the Deed of the
Satrix Collective Investment Scheme in Securities 2, the Registrar of
Collective Investment Schemes requires that:
• All investors in the affected portfolios will be informed in
writing on the details of the proposed amalgamations of the
portfolios.
• All investors are given an opportunity to vote in favour of, or
against, the proposed amalgamations.
• An independent auditor will verify the outcome of the ballot.
• All investors will be notified in writing of any proposed
material changes to the collective investment schemes and
portfolios in which they hold units, and
• All investors will be given the opportunity to vote on the
proposed changes.
Please note that, in terms of the Act, the Registrar will not consent
to the changes to the fund unless satisfied that the changes will not
be detrimental to the interests of any investor.
If investors do not respond before the cut-off date, they will be
deemed to have voted in favour of the change.
If the ballot is successful and you do not want your investment to be
included in the amalgamation, you may elect to sell your securities
at any time before the amalgamation effective date and withdraw your
funds at the prevailing market price of the ETF. Please note that this
this transaction may trigger a CGT event and that you may be liable
for CGT at your next income tax assessment as well as brokerage cost.
If you choose not to sell your funds prior to the effective date of
the amalgamation, the amalgamation proposals, as set out in this
letter (if approved by investors), will automatically apply to your
investment.
Should you require further information on the proposed change you can
also email us on info@satrix.co.za.
10 November 2023
JSE Sponsor
Vunani Sponsors
Date: 10-11-2023 05:31:00
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