HANetf Management Limited (the Manager)
HANetf ICAV (the ICAV)
Important Notice to Shareholders of
Alerian Midstream Energy Dividend UCITS ETF
(the Fund), a sub-fund of the ICAV
4 October 2024
ISIN: IE00BKPTXQ89
Dear Shareholder
This notice is to inform you, on behalf of the board of directors of the Manager (the Board), of the changes proposed to the Fund and the related proposed amendments to the supplement of the Fund dated 13 May 2024 (the Supplement).
Changes to the Investment Policy
The investment objective of the Fund is to replicate the price and yield performance, before fees and expenses, of the Alerian Midstream Energy Dividend Index™ (the Current Index) which provides exposure to the performance of the liquid, dividend-paying portion of the North American energy infrastructure market (the Investment Objective). In order to seek to achieve the Investment Objective, the Fund employs a "passive management" strategy to gain indirect exposure to the individual constituents in the same weighting as the Current Index through the use of swaps.
The Current Index measures the performance of companies domiciled in the US or Canada, including US MLPs, US C Corporations and Canadia C Corporations. The Fund is no longer in a position to secure consistent swap counterparty support for the Current Index and so it is proposed that the Fund will seek to achieve the Investment Objective by replicating the price and yield performance, before fees and expenses, of the Alerian Midstream Energy Corporation Dividend Index™ (the Proposed New Index).
The investment policy as disclosed in the Supplement will be amended to permit the Fund to gain exposure to the individual constituents of the Proposed New Index by employing a direct replication methodology, meaning as far as possible, that the Fund will invest directly in all of the securities in proportion to the weightings comprising the Proposed New Index. It is further proposed that in order to seek to achieve the Investment Objective, the Proposed New Index will only measure the performance of companies domiciled in the US or Canada, as well as listed transferable securities, which provide exposure to the dividend paying portion of the North American energy infrastructure market. The Fund will no longer provide exposure to US MLPs and so it is proposed that the Supplement is updated accordingly.
In order to replicate the Proposed New Index, it is proposed that the Sub-Fund may invest up to 20% of Net Asset Value in shares or units issued by the same body. It is further proposed that this limit may be raised to 35% for a single issuer when exceptional market conditions apply.
Changes to the Index Universe
Companies eligible for inclusion in the universe of the Current Index (the Current Index Universe) must satisfy the criteria set out in the below table under the heading "Current Index Universe". The differences between the Current Index Universe and the Index universe for the Proposed New Index (the Proposed Index Universe) are detailed in the below table.
| Current Index Universe | Proposed Index Universe |
| Companies eligible for inclusion in the Current Index Universe must belong to the Global Industry Classification Standard Oil & Gas Storage & Transportation Sector.
| Companies and transferable securities eligible for inclusion in the Proposed Index Universe must earn the majority of cashflows from the qualifying midstream activities involving energy commodities. The following activities as defined by the Energy MLP Classification Standards (EMCS) are considered qualifying: gathering & processing, liquefaction, pipeline transportation, rail terminaling and storage. Cashflow is calculated on a trailing four-quarter basis using a company's reported business segments.
|
| Companies eligible for inclusion in the Current Index Universe must be listed on NYSE, NASDAQ, NYSE American or TSX. | Companies and transferable securities eligible for inclusion must be listed on a regulated market as listed in Appendix 1 of the Prospectus of the ICAV. |
| Companies eligible for inclusion in the Current Index Universe must have a listing domiciled in the United States or Canada. | Companies eligible for inclusion in the Proposed Index Universe must be domiciled in the United States or Canada. |
| Companies eligible for inclusion in the Current Index Universe must have declared a cash dividend (excluding special dividends) or distribution for the trailing two quarters. | Companies and transferable securities eligible for inclusion in the Proposed Index Universe must have declared a cash dividend (excluding special dividends) or distribution for the trailing two quarters. |
| Companies eligible for inclusion in the Current Index Universe must have a median daily trading volume of at least $5 million for the six-month period preceding the last Business Day of September in each year (the Observation Date). | Companies and transferable securities eligible for inclusion in the Proposed Index Universe must have a median daily trading volume of at least $1 million for the six-month period preceding an index rebalance. |
Changes to Weighting and Rebalance
The Current Index is weighted based on each company's total quarterly issued distributions. It is proposed that the Proposed New Index will be dividend-weighted, with each company assigned a weighting in proportion to aggregate annualised dividends paid. It is further proposed that the previous capping rules will be disapplied and that if there are few than 10 constituents, the Proposed New Index will be equally weighted.
The Current Index applies a buffer rule in an effort to reduce turnover during the rebalancing process. Each current constituent is kept in the Current Index as long as its median daily trading volume is above US$4million for the six-month period preceding the Observation Date. It is proposed that the buffer rule will be amended so that constituents must have a median daily volume of above $0.5million for the six-month period preceding the Observation Date in order to remain as a constituent in the Proposed New Index.
Changes to the Anticipated Tracking Error
The current annualised tracking error as disclosed in the Supplement is currently not anticipated to exceed 1% under normal market circumstances.
It is proposed to update the Supplement to reflect that the annualised tracking error is not anticipated to exceed 2% under normal market circumstances.
Changes to the Settlement Date for Subscriptions
The settlement date for subscriptions is the first business day after the relevant dealing day, provided that if such day is not a day on which foreign exchange markets are open for settlement of payments in the relevant share class currency (a Currency Day), settlement will be postponed to the immediately following Currency Day.
It is proposed that the Supplement will be amended to also permit in-kind subscriptions which will settle on the third business day after the relevant dealing day or within such period as the Board may determine, not exceeding 10 business days following the relevant dealing deadline.
The proposed changes do not significantly alter the asset type, credit quality, borrowing or leverage limits or risk profile of the Fund.
It is proposed that these changes will be effective on or around 24 October 2024. The changes will be reflected in a revised supplement which will be noted by the Central Bank shortly thereafter.
If you have any questions or require any further information in relation to the above please contact the Manager at info@hanetf.com. This notice will also be available at www.hanetf.com.
Capitalised terms used in this notice shall have the same meaning ascribed to them in the latest version of the Prospectus unless the context otherwise requires.
We thank you for your continuing support of the ICAV.
END
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