NOTICE OF MERGER
 
pursuant to Section 404 of Act No. 240/2013 Coll.,

The investment company Erste Asset Management GmbH, Vienna, Republic of Austria,
acting through its branch office
Erste Asset Management GmbH, pobočka Česká republika,
(hereinafter referred to as the “Investment Company”)
hereby informs unitholders of the mutual fund
FOND ŘÍZENÝCH VÝNOSŮ – open-ended mutual fund (ISIN CZ0008472255)
of the decision to dissolve this mutual fund by its merger with the mutual fund
SPOROINVEST- open-ended mutual fund (ISIN CZ0008472271)

Pursuant to Section 401 of Act No. 240/2013 Coll., on Investment Companies and Investment Funds (hereinafter referred to as the “Investment Company and Investment Fund Act”), on 5 October 2023 the Czech National Bank issued decision ref. no. 2023/129197/CNB/650, in which it granted permission for this merger of the mutual funds.

Reasons for the merger

- The investment strategy of the merging fund FOND ŘÍZENÝCH VÝNOSŮ largely overlaps with our conservative mutual funds resulting in the unnecessary overlap of the offer, without the risk profile or yield potential being significantly different. As part of the offer clients can currently diversify their investments in various investment-oriented funds which in view of their greater volume of managed funds allow investments to be made at lower costs. As part of the group of investment solutions offered by our investment company, the merging fund is presently not considered an effective investment solution for out clients.

- The fund is not commercially successful and in recent years has been stagnating or its redemptions have exceeded gross sales. In the last 10 years the number of clients has gradually fallen by 38% and the fund’s assets have fallen by 46%. The size of the fund has gradually decreased to the limit of 250 mil. CZK, which is the volume in which transaction and planned fixed costs begin to be shown that also affect the fund’s management. These costs are gradually and continuously increasing due to the development of the regulatory environment.

- As a bond fund the Receiving Mutual Fund SPOROINVEST has very short-term investments, an investment strategy and risk profile best corresponding to the current investment strategy and risk profile of the merging fund FOND ŘÍZENÝCH VÝNOSŮ – open ended mutual fund, out of all the mutual funds managed by ERSTE AM CZ, which offer a retail class of investment securities.

- The proposed merger of the funds will make the offer more effective of the ERSTE-AM mutual funds to clients of Česká spořitelna in the retail segment and eliminate the management of the fund’s assets of an inadequate size therefore making savings in the financial and administrative complexity of the management of the merging fund.

- The Receiving Mutual Fund offers unitholders of the merging fund a very similar investment strategy with significantly lower costs made with regard to the greater volume of the managed assets. The management fee of the merging fund is 1.30% (total costs including transaction costs are then 1.58%), the management fee of the Receiving Mutual Fund is 0.55% (total costs including transaction costs are then 0.72%). The initial fee of the distributor is currently 1% for the merging fund and 0.5% for the Receiving Mutual Fund.

Impacts of the merger on the interests of the unitholders

The interests of the unitholders of the merging funds will not in any way be endangered. This basic requirement of the Act (Section 401 (2) c) of the ICIFA) was followed when determining the method of the merger of the mutual funds, informing the unitholders of the mutual fund FOND ŘÍZENÝCH VÝNOSŮ dissolved with the merger, as well as the merger of the assets and investment strategy of the merging and Receiving Mutual Fund.

Both mutual funds are managed and administered by the Austrian investment company Erste Asset Management GmbH, through its branch office Erste Asset Management GmbH, pobočka Česká republika (hereinafter referred to as “Erste AM”, “Investment Company”). The depositary and distributor of both mutual funds is Česká spořitelna, a.s.

The merger of the mutual fund FOND ŘÍZENÝCH VÝNOSŮ with the mutual fund SPOROINVEST is not a merger of mutual funds with a significantly different method of investment. The investment goal of both funds is to provide unitholders growth of the value of their investment securities based on a conservative investment strategy provided that the overall risk profile of the mutual fund minimises the possibility of loss in a short-term horizon of 6, 12 months respectively. The goal is achieved by investments made in a widely diversified portfolio of securities with a fixed or variable interest yield and active management of the interest risk. Although the merging fund can, in case of a favourable market environment, acquire up to 25% of the value of assets, stock and financial instruments bearing risk, this is only possible as part of a conservative investment strategy and both funds bear a low summary risk indicator (SRI) (2 in case of the merging fund and 1 in case of the Receiving Mutual Fund – the dissolving fund is classified in a higher risk category due to the stock component in the portfolio). The stock component in the merging fund will not be represented for the planned merger. Both mutual funds are managed actively and do not copy any index.

In terms of the interests of the unitholders of the mutual fund SPOROINVEST, the takeover of the assets of the mutual fund FOND ŘÍZENÝCH VÝNOSŮ will not in any way affect the quality of the portfolio of the Receiving Mutual Fund SPOROINVEST. In the portfolio of the merging fund no liabilities or financial instruments which could damage the interests of the unitholders of the Receiving Mutual Fund will be transferred. The sole restriction will be the suspension of the issue and redemption of the investment securities of the mutual fund SPOROINVEST at most on the day of the merger and one working day in advance. Fees for the transfer of the portfolio of securities from the asset accounts of FOND ŘÍZENÝCH VÝNOSŮ to the asset accounts of SPOROINVEST will be covered by the branch office Erste AM ČR from its own resources.

In both mutual funds the risk created without difference is fully retained in the fund as a source for further investment. If the management of the assets in the mutual fund ends in loss, this loss is covered from the resources of the mutual fund.

All costs associated with the merger will be borne by Erste AM ČR, as the branch office of the investment company managing and administering both mutual funds.

The investment securities will be exchanged automatically during the merger without the participation of the unitholders. The costs associated with the exchange of the investment securities will be covered by the branch office Erste AM ČR from its own resources. The exchange of investment securities will not be subject to initial fees otherwise deducted by the distributor with the issue of the investment securities of the fund SPOROINVEST (the exemption from the initial fee will only apply for the investment securities of the mutual fund SPOROINVEST issued in connection with the takeover of assets and liabilities of the mutual fund FOND ŘÍZENÝCH VÝNOSŮ).

In cases when the number of investment securities of the Receiving Mutual Fund SPOROINVEST will not result in entire units, the unitholders of the merging fund FOND ŘÍZENÝCH VÝNOSŮ will receive the nearest higher entire number of investment securities of the fund SPOROINVEST. The financial difference will be paid by Erste AM ČR in the mutual fund SPOROINVEST immediately after it is calculated.

In tax terms, there are favourable legislative preconditions for the merger of funds. This is a case of the dissolution of a mutual fund without liquidation when there is no tax liability in terms of a special tax rate pursuant to Section 36 of Act No. 586/1992 Coll., on Income Taxes. The dissolution of the mutual fund by merger and acquisition of the investment securities of the Receiving Mutual Fund also does not interrupt the time test for the exemption of income from the sale of investment securities from income tax which applies to natural persons that do not have investment securities included in their business assets (Section 4 (1) x) of Act No. 586/1992 Coll., on Income Taxes).

The Decisive Day of the Merger

The record date of the merger will be 23 November 2023. The merging fund FOND ŘÍZENÝCH VÝNOSŮ will be dissolved at the merger date and its unitholders will become the unitholders of the Receiving Mutual Fund SPOROINVEST, retail class of investment securities, ISIN CZ0008472271.

Information on the right of redemption and right of replacement

The unitholders of the open-ended mutual fund FOND ŘÍZENÝCH VÝNOSŮ may from the start of its existence claim the right of redemption of investment securities at any time against the investment company without any fee or deduction, and investment securities are redeemed without undue delay.
A request for redemption can be made until 14 November 2023. Subsequently the issue and redemption of investment securities will be suspended from 15 November 2023 up until the winding up of the mutual fund as at 23 November 2023. The merging investment fund will no longer be offered to our clients as of the suspension date and the instructions for the sale of investment securities submitted on the days of suspension will be processed only in the Receiving Mutual Fund SPOROINVEST for the first current value of the investment securities designated as at the date of the renewal of the issue and redemption of its investment securities, i.e. as of Friday, 24 November 2023 (settled on Monday, 27 November 2023).

In the event that all processes connected with the merger of the mutual funds are completed on the merger date of 23 November 2023, the issue and redemption of the investment securities will also be renewed on 23 November 2023 (with settlement on Friday, 24 November 2023.)

In addition, Erste AM will make it possible for the unitholders of the merging fund FOND ŘÍZENÝCH VÝNOSŮ to make an alternative free purchase of the investment securities of some other publicly offered domestic standard mutual fund with the same investment plan managed by Erste AM, if the unitholder so requests through the instruction given for the exchange/sale of the investment securities of the mutual fund FOND ŘÍZENÝCH VÝNOSŮ, prior to its merger with the merging fund SPOROINVEST. However, in the event of this choice, the tax test is interrupted just as in the event of the standard exchange of investment securities pursuant to Section 4 (1) x) of Act No. 586/1992 Coll., on Income Taxes.

In the event that the right to the redemption of investment securities or exchange for other than the Receiving Mutual Fund is not claimed, the unitholders will automatically become the legitimate unitholders of the investment fund SPOROINVEST as at 23 November 2023 (the tax test is not interrupted).

We recommend that unitholders follow the notices for more and specific information about the continuing merger process that will be published especially at the internet address https://www.erste-am.cz and at branches of Česká spořitelna, a.s. At the internet address https://www.erste-am.cz unitholders will also be able to become acquainted with the statute and especially with the Key Information Document (KID) of the Receiving Mutual Fund SPOROINVEST.

The course and result of the merger of the mutual funds will be by law checked by the depositary Česká spořitelna a.s., the report of the result of this check will be available free of charge on request at the address depozitar@csas.cz

The fund’s unitholders can request any additional information or the independent auditor’s report at the address compliance@erste-am.cz
 
 
 
Prague, 13 October 2023