Source - RNS
RNS Number : 3537K
ETFS Hedged Commodity Secs Limited
20 September 2016
 

ETFS Hedged Commodity Securities

20 September 2016

 

ETFS Hedged Commodity Securities

Capital Adjustment and EU Bank Recovery and Resolution Directive

ETFS Hedged Commodity Securities (the "Issuer") gives notice of the following:

Capital Adjustment

With effect from 20 October 2016 the basis of calculation of the rate of the Capital Adjustment will change. The rate of the Capital Adjustment for each class of Currency-Hedged Commodity Security is currently the three month U.S. Treasury Bill rate plus an implied foreign exchange hedging cost which is expected to reflect an interest rate differential between the US Doller interbank interest rate and the interbank benchmark interest rate for the Relevant Currency less the Management Fee of 0.49 per cent. per annum in respect of the Euro Commodity Securities and the Sterling Commodity Securities and 0.69 per cent. per annum in respect of the Australian Dollar Commodity Securities, the Licence Allowance of 0.05 per cent. per annum and a Spread relating to the relevant class of Commodity Security as specified in the Prospectus.

As at 19 September 2016, the rate of the Capital Adjustment and the Collateral Yield was as follows:

 

Daily

Annual*

Australian Dollar Classic Securities

-0.0000011%

-0.04%

Euro Class Securities

-0.0000569%

-2.03%

Sterling Classic Securities

-0.0000317%

-1.13%

Australian Dollar Longer Dated Securities

-0.0000052%

-0.19%

Euro Longer Dated Securities

-0.0000610%

-2.17%

Sterling Longer Dated Securities

-0.0000358%

-1.28%

 

*  is the Capital Adjustment plus the daily Management Fee and Licence Allowance expressed as a percentage rate per       annum over 365 days

 

With effect from 20 October 2016 the rate will be based on the four week U.S. Treasury Bill rate rather than the three month U.S. Treasury Bill rate. Had the change become effective on 19 September 2016, the rate of the Capital Adjustment would have been as follows:

 

Daily

Annual*

Australian Dollar Classic Securities

-0.0000046%

-0.17%

Euro Class Securities

-0.0000604%

-2.15%

Sterling Classic Securities

-0.0000353%

-1.26%

Australian Dollar Longer Dated Securities

-0.0000087%

-0.31%

Euro Longer Dated Securities

-0.0000645%

-2.30%

Sterling Longer Dated Securities

-0.0000394%

-1.41%

 

*  is the Capital Adjustment plus the daily Management Fee and Licence Allowance expressed as a percentage rate per       annum over 365 days

 

 

EU Bank Recovery and Resolution Directive

Pursuant to the EU Bank Recovery and Resolution Directive (2014/59/EU) ("BRRD") EU member states were required to introduce a recovery and resolution framework for banks and significant investment firms ("institutions") giving national competent and resolution authorities powers of intervention where such an institution is deemed to be failing or likely to fail.

Among other things the BRRD provides for the introduction of a "bail-in tool" under which resolution authorities may write down claims of the institution's shareholders and creditors and/or convert such claims into equity.  Exceptions to this include secured labilities, client assets and client money.  If following a bail-in it is determined, based on a post-resolution valuation, that shareholders or creditors whose claims have been written down or converted into equity have incurred greater losses than they would have done had the institution had been wound up under normal insolvency proceedings, the BRRD provides that they are entitled to payment of the difference.

Other powers of intervention include the power to close out open derivatives positions, temporarily to suspend payment or delivery obligations, restrict or stay the enforcement of security interests and suspend termination rights.

As Merrill Lynch International, one of the Counterparties, is a UK institution, it is covered by BRRD. BRRD applies automatically in the case of agreements governed by any EEA law (such as the Facility Agreements and the Commodity Contracts) and institutions are required by BRRD to obtain specific acknowledgements relating to BRRD in respect of agreements governed by other laws. As the MLI Security Agreement and the MLI Control Agreement are governed by New York law, MLI requested that the Issuer provide such acknowledgments to MLI and the Issuer, with the consent of the Trustee (the Issuer having provided to the Trustee a certificate that in its opinion the amendments are necessary or desirable to comply with a statutory or other requirement of law and not materially prejudicial to Security Holders), has given such acknowledgements to MLI. 

The implementation of a resolution process in relation to an institution which is a counterparty to or obligor of the Issuer could result in a bail-in being exercised in respect of any unsecured claims of the Issuer, derivatives positions (including Commodity Contracts) being closed out or terminated, and delays in the ability of the Issuer to enforce its rights in respect of collateral or otherwise against the institution concerned.  Any payment of compensation due to the Issuer as a result of the Issuer being worse off as a result of a bail-in is likely to be delayed until after the completion of the resolution process and may prove to be less than anticipated or expected or may be the subject of dispute.

Terms used in this announcement and not otherwise defined bear the same meanings as where used in the prospectus of the Issuer dated 17 June 2016.

For further information, please contact

Richard Parker,

R&H Fund Services (Jersey) Limited

Tel: +44 (0) 1534 825200

Fax: +44 (0) 1534 825335

E-mail address: [email protected]

 


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