Bateleur Flexible Prescient Fund · 2016-06-20 · miners (BHP Billiton, Anglos, Vale and Rio...
Transcript of Bateleur Flexible Prescient Fund · 2016-06-20 · miners (BHP Billiton, Anglos, Vale and Rio...
Bateleur Flexible Prescient Fund—2016 first quarter report back
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Bateleur Flexible Prescient Fund - 2016 first quarter report back
This quarterly review covers one of the more challenging quarters in the fund’s history. The review
period was considered tough, not primarily due to absolute performance – the fund’s unit price declined
0.9% over the quarter – but rather as it coincided with a sharp reversal of certain capital market trends
that had been taking place over the prior three years. These included:
Commodity prices and resource shares rebounding from oversold levels.
Growth shares selling off in favour of value shares.
The Rand strengthening from oversold levels.
These trend reversals all encapsulate some form of “reversion to the mean” and it is not surprising that
investment styles following this type of strategy, outperformed in the first quarter of 2016, after several
disappointing years.
We were acutely aware of the possibility of a reversal of all three trends – and these were discussed at
length in our prior report back. Our conclusion at the time was that none were sufficient to cause
wholesale changes to the fund’s portfolio, largely due to our overriding concerns on global and SA
economic growth rates – and our long standing preference to invest in companies that can deliver
sustainable organic revenue and earnings growth irrespective of economic conditions.
Nevertheless, given the level of extremes, the fund took deliberate action in January 2016 to increase
the cash levels and reduce equity exposure to more conservative levels; and in so doing minimise the
fund’s downside risk to acceptable levels.
However, we cannot pretend that the fund was well positioned for what transpired, or else performance
would have been better than it was. What caught us off guard was the swiftness and severity of the
reversal – none more evident than the resource sector.
Commodity prices and resource shares rebounding from oversold levels:
At the time of writing, three major resource shares have appreciated more than 200% YTD – iron ore
producers Assore and Kumba; and gold producer Harmony. There are additionally a multitude of
resource shares that have more than doubled YTD including Anglos, Anglogold, Angloplats and Implats.
The fund had no exposure to any of these shares over the period. Performance therefore suffered on a
relative basis. Importantly, the fund did not suffer on an absolute basis by not owning resource shares.
Managing an absolute return fund unfortunately does not imply that we can ignore resource companies
just because they are cyclical, capital intensive and notoriously difficult to forecast.
Having risen sharply from their lows, most resource companies are still a long way from their highs. For
example, even after its recent rally, Anglos is still 85% below its 2008 high in US$. To reach its 2008 high
02 it needs to appreciate 565% (charts 1 and 2). This explains why the resource sector cannot be ignored –
shares are still trading at very depressed levels.
Chart 1: Anglo American share price in US$ Chart 2: Anglo American peak to trough in US$
Source: Bloomberg, Bateleur Capital
A case for investing into resource companies must be built around the outlook for the underlying
commodity prices. This in turn is based on individual commodity supply and demand dynamics and
additionally requires a firm understanding of the cost of production of each commodity.
Once a view on commodity prices is formulated (which in itself is no small feat), this needs to be
incorporated into valuing the resource company. Sometimes an investment view on the commodity may
differ from the investment view on the commodity company.
For example we have a constructive view on platinum as a commodity based on the metal being in
deficit and the current price trading only marginally above the marginal cost of production (the fund
holds a long position in physical platinum via ETF’s); but are less positive on platinum shares, as they
already appear to be discounting a higher platinum price (refer chart 6).
Commodity prices are also extremely volatile and may trade at levels for an extended period of time
that bear little resemblance to underlying fundamentals. This makes investing in resources companies
especially tricky.
Iron ore (the main input into making steel) has been a key earnings contributor to the global diversified
miners (BHP Billiton, Anglos, Vale and Rio Tinto) for several years, and has also been the top performing
major commodity YTD – gaining in excess of 50%.
It is also a commodity that is in substantial oversupply – with more low cost supply coming on stream via
major new developments. Mining executives are in agreement that the pricing outlook for iron ore is
challenging with BHP Billiton making the following comments at their recent results presentation.
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High to low -94% 565% back to peak
03 “iron ore prices are likely to remain low on weak demand from China and rising Seaborne supply…….the
marginal cost of supply continues to decline………..the cost curve will continue to flatten in the medium
term as low-cost supply exceeds demand growth.”
The marginal cost of production (cash cost) of the iron ore majors (BHP, Vale, Rio and Fortescue) who
jointly control 65% of the global seaborne market, is $18 a tonne excluding transportation and $31
including transportation, maintenance capex and royalties.
The current spot price of $66 is more than double the all in price and not reflective of current supply and
demand dynamics. In the current weak demand environment, we would expect the price of iron ore to
trend lower toward the marginal all in cost of production – and therefore have a negative view on the
commodity and associated resource companies (chart 3).
Speculative activity can also play a role in commodity price movements. Recent Chinese stimulus
measures combined with commodity restocking have led to a dramatic increase in commodity futures
trading in China. The increase in activity (chart 4) bears similar traits to the Chinese equity market rally
that took place in 2015, that quickly burst causing reverberations throughout global capital markets.
Chart 3: Iron ore production cost vs. spot price Chart 4: Chinese commodity trading activity
Source: Bateleur Capital, Company Annual Reports, BofAML
The one major commodity we view as undervalued is oil. At the current price of $45 per barrel of Brent
crude, 60% of global producers are not achieving cash breakeven (average cost $54). Only onshore
Middle East (mainly Saudi Arabia) and offshore shelf are making money (chart 5). At current prices there
will be limited investment in new supply which should ultimately drive up the price of oil. For this
reason, the fund recently increased its weight in Sasol. Sasol is attractively priced on a 10.5 P/E multiple,
at the current price of oil, with significant earnings upside potential if the oil price trends towards the
average cost of production, and the R/$ exchange rate stays constant.
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*Average cash cost incl. freight = US$31 per tonne
Note the sharp increase in commodity futures trading on the three Chinese commodity exchanges in April 2016, displaying similar traits to the speculative rally in the Chinese equity markets in 2015
04 Chart 5: Oil cost of production vs spot Brent US$ Chart 6: Platinum cost of production vs spot US$
Source: Bateleur Capital, Company Annual Reports
Growth shares selling off in favour of value shares:
The recent rebound in SA value shares (low price to book multiples) has for the most part not been
accompanied by an improvement in the earnings outlook for these companies. There has also been no
noticeable increase in M&A or delisting activity in the value space (as acquirers and management take
advantage of low prices) – which would lend credibility that the shares are offering value or business
prospects are improving.
We have no interest in owning shares just because they have sold off, appear cheap and have the
potential to mean revert. From both a top down (indicating a slowing SA economy) and bottom up
analysis (where corporate earnings forecasts are being revised lower) the outlook for value stocks has
generally not improved, based on our analysis.
We would far rather pay a fair price to hold shares in a company with strong organic revenue and
earnings growth prospects than pay a bargain price to own shares in a company with poor
fundamentals.
Take Tencent (held via Naspers and directly) as a case in point. In 2010 Tencent generated HK$ 11bn in
operating profit and EPS of HK$ 1 and traded on a 34 P/E multiple. At the time, many analysts and
investors viewed the stock as expensive and vulnerable to a correction.
Fast forward to 2016, where Tencent is forecast to generate HK$ 58bn in operating profit and EPS of
HK$ 5, a fivefold increase in earnings in a six year period. Unsurprisingly, the share price has tracked the
EPS growth increasing from HK$ 34 in December 2010 to current levels of HK$ 157.
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Top 5 platinum majors produce 70% of global platinum60% of global production not profitable at current spot
05 Chart 7: Tencent revenue 2003 - 2015 Chart 8: Tencent operating profit 2003 - 2015
Source: Factset, Bateleur Capital
Using the closing price of Tencent in December 2010 (when it was viewed by many as expensive) and
current EPS forecasts for 2016 of HK$ 5, would imply a P/E multiple for Tencent of 6.4 times. This merely
illustrates how quickly a high P/E can unwind if it is accompanied by high earnings growth (chart 9).
Tencent trades on a December 2016 estimated P/E multiple of 29.7. Excluding associates and net cash,
this forward multiple declines to 26.4. We expect the company to grow organic revenue and earnings by
28% p.a. over the next two years as it increasingly monetises off its powerful platform position in China
leading to a noticeable unwind in the P/E multiple. While aware that the earnings base is now
significant, we are comfortable to continue owning Tencent (via Naspers) at current ratings.
Chart 9: Tencent PE unwind 2010 to 2016 Chart 10: Tencent forward PE unwind 2016 – 19e
Source: Factset, RMB Morgan Stanley, Bateleur Capital
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Tencent operating profit has grown by 51% compound since 2003
Tencent revenue has grown by 54.5% compound since 2003
06 The Rand strengthening from oversold levels:
The fund owns foreign listed equities primarily through the Ranmore Global Equity Fund and indirect
holdings via dual listed SA equities. Currently the fund’s holdings of foreign listed equities comprise
20.6% of fund NAV, while dual listed equities comprise 21.9%.
Over the review period the Rand strengthened 4.5% against the US dollar and 7.1% against the Pound
Sterling; it was largely flat against the Euro. The strengthening Rand was the main driver behind the
funds negative return in the first quarter – detracting a cumulative 1.1% (table 1).
Table 1: Summary of fund returns
Recent Rand strength can be attributed to both external and internal factors. Externally, the weak US
dollar and recovery in commodity prices led to a rebound in most major emerging market currencies –
the Rand merely followed suite (chart 11).
Internally, recent political developments have (for the time being) reinforced the independence of the
Judiciary and Treasury and could be viewed as Rand positive. Other Rand positives include improving
trade balance numbers, higher interest rates and better than expected inflation numbers.
Chart 11: EM currencies vs. US$ indexed Chart 12: SA GDP per capita since 1999 (%)
Source: Bloomberg, RMB Morgan Stanley, Bateleur Capital
Rand negatives include the structurally weak SA economy where GDP per capita growth has turned
negative (chart 12). The ratings agencies, in particular S&P, place a large emphasis on GDP per capita –
and in this regard, the expectation of a downgrade of SA sovereign debt to sub investment grade in June
2016 remains a distinct likelihood.
Performance by strategy Top fund enhancers Top fund detractors
JSE listed equities 0.2% Steinhoff 0.9% Capita l & Counties -0.7%
Foreign l i s ted equities -1.1% Standard Bank 0.5% Sirius -0.3%
Interest net of costs 0.0% Spire Healthcare 0.4% Russel l 2000 -0.3%
-0.9% Mpact 0.3% Discovery -0.3%
Hudaco 0.2% MAS Real Estate -0.3%
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GDP per capita growth rate has turned negative – a key metric watched by S&P
07 Clearly, the trend of a weakening Rand was broken in the first quarter and its directional call is no longer
obvious (technically it is still oversold although significant tail risks remain).
Table 2: Current fund positioning at 31 March 2016
Source: Bateleur Capital
The fund added to cash over the quarter and selectively trimmed direct and indirect offshore equities
that had served the fund well in 2015 but whose valuations were no longer obviously compelling. These
included select European Property shares (Capital & Counties, MAS Real Estate and Stenprop), S&P 500
and Russell 2000 index positions. The fund increased its weighting in the Ranmore Global Equity Fund to
18.5%. The fund has a healthy cash position of 24%, providing a buffer to volatility while being in a
position to act if and when attractively valued opportunities present themselves.
The fund selectively added to SA banks (Barclays Group Africa and Standard Bank) during the quarter. SA
bank valuations are attractive in absolute terms, relative to history and relative to the market. They are
also well capitalised, adequately provisioned and have diversified income sources.
Although impairments and credit loss ratios are expected to increase (in the current rising interest rate
environment), we do not expect these to become too elevated as the banks were conservative in
extending credit when interest rates were low. We expect the major banks to deliver earnings and
dividends growth at least in line with inflation over the next two years, despite the challenging macro-
economic backdrop. Charts 13 and 14 display the historic P/E multiple and dividend yield of the banks
and indicate that the last time the banks appeared this cheap was in the financial crisis period of 2008/9.
Fund positioning (31 March 2016) Current top 5 holdings
JSE listed equities 55% Ranmore Global Equity Fund
Non- mining Rand hedge shares 22% Naspers
SA stock specific opportunities 33% BTI/ Reinet
Foreign listed equities 21% Steinhoff
Equities 76% Old Mutual
Cash 24%
08 Chart 13: SA Banks DY over time (%) Chart 14: SA Banks PE multiple over time
Source: Bloomberg, Bateleur Capital
Conclusion
As these trend reversals continue to play out, capital markets will remain volatile and challenging. Nevertheless, we remain confident in our ability to deliver on the fund’s investment objectives.
Kevin Williams James Easterbrook
Fund Manager: Head: Distribution
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Bateleur Flexible Prescient FundMinimum Disclosure Document
About the Fund Fund Manager: Kevin Williams Launch Date: July 2010 Sector: South African Multi Asset Flexible Benchmark: CPI Inflation +4% Minimum Investment: R20,000 Administrator: Prescient Management Company (RF) (Pty) Limited Custodian: Nedbank Investor Services Unit Price (Class A1): R273.40 Fund Size: R936m
Risk Profile:Moderate:
Fees Initial Fund Fee: nil Initial Adviser Fee: nil Annual Management Fee: Class A1: 1.25% p.a excl. VAT Performance Fee: 10% on outperformance of the benchmark calculated over a roll-ing 1 year period. The combined Management Fee and Perfor-mance Fee is capped at 3% excl. VAT Total Expense Ratio TER incl. VAT: 2.82% TIC incl VAT: 3.30% Income Distribution Distribution: Annually at the beginning of April. Recent Distributions: April 2012 2.47c per unit April 2013 1.42c per unit April 2014 3.49c per unit April 2015 0.00c per unit Contact Bateleur Capital (Pty) LtdAuthorised Financial Services ProviderFSP No. 18123 SG 109 Great Westerford Building240 Main Road , Rondebosch South Africa7700 T +27 (0)21 681 5060F +27 (0)21 681 5066 E [email protected] W bateleurcapital.com
Domestic Equities 54%Foreign Holdings 21% Domestic Cash 25%
Source: Bloomberg, performance as calculated by Bateleur Capital.
Bateleur FlexiblePrescient Fund
20.4%
9.7%
CAGR Since Inception
CPI +4%Benchmark
31 March 2016
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD
2016 -3.2% -1.2% 3.6% -0.9%
2015 3.2% 3.7% 2.1% 1.6% 0.2% 0.5% 1.1% -0.7% 1.0% 5.2% -0.5% 1.8% 20.9%
2014 -1.3% 3.1% 2.3% 2.1% 1.9% 1.4% 1.5% -0.1% -0.1% -0.4% 3.2% 1.9% 16.6%
2013 2.9% -0.6% 2.0% -0.4% 6.0% -1.5% 2.7% 1.2% 4.5% 2.9% -0.3% 2.7% 24.1%
2012 -0.2% 2.0% 1.7% 3.2% -1.3% 0.7% 3.7% 4.0% 0.8% 2.6% 2.9% 2.1% 24.4%
2011 -0.1% 2.1% 1.2% 2.5% 0.2% -0.4% 0.0% 0.0% 1.3% 4.0% 0.7% 2.9% 15.2%
2010 3.2% 0.4% 4.8% 3.7% 1.6% 2.4% 17.1%
Investment objective The Bateleur Flexible Prescient Fund aims to generate returns in excess of inflation over the medium to longer term, whilst placing a high premium on protecting investor capital. Strategy The fund may invest in a mix of assets such as equities, bonds, property stocks and cash. Asset allocation will vary depending on the fund manager’s view on capital markets. Investments are biased towards JSE listed equities as this is Bateleur‘s core area of expertise. Foreign exposure is limited to 25% of the fund’s value.
Cumulative returns since inception (Indexed to 100 from 1 July 2010)
Monthly performance, class A1 net of fees
Fund exposure
Bateleur Global Feeder Fund* Naspers British American Tobacco Steinhoff Old Mutual
*Registered name is Bateleur Global Equity Prescient Feeder Fund
Bateleur Flexible Prescient Fund vs. Hurdle (CPI +4%) from inception 1 July 2010 to 31 March 2016
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Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15
Annualised returns
Return period Fund Benchmark
Since Inception 20.4% 9.7%
5 Year 19.2% 10.0%
3 Year 18.4% 9.8%
1 Year 9.6% 11.3%
Highest rolling 1 year return (since inception)
29.8% 11.3%
Lowest rolling 1 year return (since inception)
8.1% 8.1%
Top equity holdings
Issue Date: 8 April 2016
The investment performance is for illustrative purposes only, and is calculated by taking the actual initial fees and all ongoing fees into account for the amount shown. This takes into account reinvesting the distribution.
Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CIS’s are traded at the ruling price and can engage in scrip lending and borrowing. The collective investment scheme may borrow up to 10% of the market value of the portfolio to bridge insufficient liquidity. A schedule of fees, charges and maximum commissions is available on request from the Manager. There is no guarantee in respect of capital or returns in a portfolio. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. CIS prices are calculated on a net asset basis, which is the total value of all the assets in the portfolio including any income accruals and less any permissible deductions (brokerage, STT, VAT, auditor’s fees, bank charges, trustee and custodian fees and the annual management fee) from the portfolio divided by the number of participatory interests (units) in issue. Forward pricing is used. The Fund’s Total Expense Ratio (TER) reflects the percentage of the average Net Asset Value (NAV) of the portfolio that was incurred as charges, levies and fees related to the management of the portfolio. A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The current TER cannot be regarded as an indication of future TER’s. During the phase in period TER’s do not include information gathered over a full year. Transaction Costs(TC) is the percentage of the value of the Fund incurred as costs relating to the buying and selling of the Fund’s underlying assets. Transaction costs are a necessary cost in administering the Fund and impacts Fund returns. It should not be considered in isolation as returns may be impacted by many other factors over time including market returns, the type of Fund, investment decisions of the investment manager and the TER
Management Fee 1.43%Performance Fee 1.35%Other Fees 0.04%Total Expense Ratio (TER) 2.82%Transactions Costs (TC) 0.48%Total Investment Charge (TIC) 3.3%
Where a current yield has been included for Funds that derive its income primarily from interest bearing income, the yield is a weighted average yield of all underlying interest bearing instruments as at the last day of the month. This yield is subject to change as market rates and underlying investments change.
The Manager retains full legal responsibility for any third-party-named portfolio. Where foreign securities are included in a portfolio there may be potential constraints on liquidity and the repatriation of funds, macroeconomic risks, political risks, foreign exchange risks, tax risks, settlement risks; and potential limitations on the availability of market information. The investor acknowledges the inherent risk associated with the selected investments and that there are no guarantees. Please note that all documents, notifications of deposit, investment, redemption and switch applications must be received by the Manager by or before 13:00 (SA), to be transacted at the net asset value price for that day. Where all required documentation is not received before the stated cut off time Prescient shall not be obliged to transact at the net asset value price as agreed to. Money market Funds are priced at 1pm all other Funds are priced at either 3pm or 5pm depending on the nature of the Fund. Prices are published daily and are available on the Prescient website.
Performance has been calculated using net NAV to NAV numbers with income reinvested. The performance for each period shown reflects the return for investors who have been fully invested for that period. Individual investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestments and dividend withholding tax. Full performance calculations are available from the manager on request.
For any additional information such as fund prices, brochures and application forms please go to www.bateleurcapital.com
Risk Guidance:
Low:Generally low risk portfolios have minimal equity exposure or equity exposure, resulting in far less volatility than more aggressive mandated portfolio and in turn the probability of capital loss (permanent/temporary) is less likelyHowever, expected potential long term investment returns could be lower over the medium to long term
Moderate:These portfolios generally hold more equity exposure than low risk portfolios but less that high risk portfolios.In turn the expected volatility is higher than low risk portfolios but less that high risk portfoliosThe probability of losses are higher than low risk portfolios, but less the high risk portfoliosExpected potential long term investment returns could therefore be lower than high risk portfolios due to lower equity exposure, but higher than low risk portfolios.
High:Generally these portfolios hold more equity exposure than any other risk profiled portfolios, therefore tend to carry more volatility.Expected potential long term returns could be higher than other risk profiles, in turn potential losses of capital could be higher.
Glossary Summary
Annualised performance: Annualised performance show longer term performance rescaled to a 1 year period. Annualised performance is the average return per year over the period. Actual annual figures are available to the investor on request.Highest & Lowest return: The highest and lowest returns for any 1 year over the period since inception have been shown.NAV: The net asset value represents the assets of a Fund less its liabilities.High Water Mark: The highest level of performance achieved over a specified period.
Contact DetailsManagement Company:Prescient Management Company (RF) (Pty) Ltd, Registration number: 2002/022560/07 Physical address: Prescient House, Westlake Business Park, Otto Close, Westlake, 7945 Postal address: PO Box 31142, Tokai, 7966. Telephone number: 0800 111 899. E-mail address: [email protected] Website: www.prescient.co.za
Trustee:Nedbank Investor Services Physical address: 2nd Floor, 16 Constantia Boulevard, Constantia Kloof, Roodepoort, 1709 Telephone number: +27 11 534 6557 Website: www.nedbank.co.za
The Management Company and Trustee are registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002). Prescient is a member of the Association for Savings and Investments SA.
Investment Manager:Bateleur Capital (Pty) Ltd, Registration number: 2003/029676/07 is an authorised Financial Services Provider (FSP 18123) under the Financial Advisory and Intermediary Services Act (No.37 of 2002), to act in the capacity as investment manager. This information is not advice, as defined in the Financial Advisory and Intermediary Services Act (N0.37 of 2002). Please be advised that there may be representatives acting under supervision.Physical address: SG109 Great Westerford Building, 240 Main Road, Rondebosch, 7700 Postal address: Postnet Suite 130, Private Bag X1005, Claremont, 7735. Telephone number: 021 681 5060 Website: www.bateleurcapital.com
This document is for information purposes only and does not constitute or form part of any offer to issue or sell or any solicitation of any offer to subscribe for or purchase any particular investments. Opinions expressed in this document may be changed without notice at any time after publication. We therefore disclaim any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable directly or indirectly to the use of or reliance upon the information.
Performance Fee: The Fund charges a base and performance fee. Performance fees are payable on outperformance of the benchmark.
Management and administration:Prescient Management Company (RF) (Pty) Ltd. This portfolio operates as a white label fund under the Prescient Unit Trust Scheme, which is governed by the Collective Investment Schemes Control Act.
Issue Date: 8 April 2016
Bateleur Capital (Pty) Ltd Authorised financial services provider FSP no 18123 — SG109 Ground Floor, South Wing Great Westerford Building 240 Main Road, Rondebosch 7735 — T +27 (0)21 681 5060 F +27 (0)21 681 5066 —
bateleur capital 2015
Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CIS’s are traded at the ruling price and can engage in scrip lending and borrowing. A schedule of fees, charges and maximum commissions is available on request from the Manager. There is no guarantee in respect of capital or returns in a portfolio. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. CIS prices are calculated on a net asset basis, which is the total value of all the assets in the portfolio including any income accruals and less any permissible deductions (brokerage, STT, VAT, auditor’s fees, bank charges, trustee and custodian fees and the annual management fee) from the portfolio divided by the number of participatory interests (units) in issue. All documents, notifications of deposit, investment, redemption and switch applica-tions must be received by the Manager by or before 13:00 (SA), to be transacted at the net asset value price for that day. Where all required documentation is not received before the stated cut off time the Manager shall not be obliged to transact at the net asset value price as agreed to. Fluctuations and movements in exchange rates may also cause the value of underlying international investments to go up or down. Forward pricing is used. The Fund’s Total Expense Ratio (TER) reflects the percentage of the average Net Asset Value (NAV) of the portfolio that was incurred as charges, levies and fees related to the management of the portfolio. A higher TER does not necessarily imply a poor return, nor does a low TER imply a good return. The current TER cannot be regarded as an indication of future TER’s. During the phase in period TER’s do not include information gathered over a full year. A Money Market portfolio is not a bank deposit account and the price is targeted at a constant value. The total return is made up of interest received and any gain or loss made on any particular instrument; and in most cases the return will have the effect of increasing or decreasing the daily yield, but in the case of abnormal losses it can have the effect of reducing the capital value of the portfolio. The yield is calculated as a weighted average yield of each underlying instrument in the portfolio. Excessive withdrawals from the portfolio may place the portfolio under liquidity pressures and a process of ring-fencing of withdrawal instructions and managed pay-outs over time may be followed A Fund of Funds is a portfolio that invests in portfolios of collective investment schemes, which levy their own charges, which could result in a higher fee structure for these portfolios. A Feeder Fund is a portfolio that invests in a single portfolio of a collective investment scheme which levies its own charges and which could result in a higher fee structure for the feeder fund. The Manager retains full legal responsibility for any third-party-named portfolio. Where for-eign securities are included in a portfolio there may be potential constraints on liquidity and the repatriation of funds, macroeconomic risks, political risks, foreign exchange risks, tax risks, settlement risks; and potential limitations on the availability of market information. The investor acknowledges the inherent risk associated with the selected investments and that there are no guarantees. Prescient is a member of the Association for Savings and Investments SA. Bateleur Capital Pty Ltd, an AFSP; is the investment manager of the Funds.Prescient Management Company (RF) Limited, Prescient House, Westlake Business Park, Otto Close, Westlake, Cape Town, 7966
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