ETFS Commodity Securities Limited. ETFS Short Commodity Securities

Transcription

1 Baseprospectusdated 19 October 2015 Bringing Exchange Traded Commodities to the World s Stock Exchanges ETFS Commodity Securities Limited (Incorporated and registered in Jersey under the Companies (Jersey) Law 1991 (as amended) with registered number 90959) AVII.4.2 AVII.4.3 Prospectusfortheissueof ETFS Short Commodity Securities and ETFS Leveraged Commodity Securities What is this document? Thisdocument(the Prospectus )constitutesabaseprospectusincompliancewitharticle3ofdirective 2003/71/ECandtheprospectusrulesmadeundersections73Aand84oftheFinancialServicesand MarketsAct2000,asamendedasatthedatehereof,andisissuedinrespectoftheprogrammeforthe issueofetfsshortcommoditysecuritiesandetfsleveragedcommoditysecurities(the Short and Leveraged Commodity Securities )byetfscommoditysecuritieslimited(the Issuer ). AXX(XII) (ii)c Itisimportantthataninvestorcarefullyreads,considersandunderstandsthisProspectusbeforemaking anyinvestmentinshortandleveragedcommoditysecurities. ThisProspectusisvalidforoneyearandmaybesupplementedorreplacedfromtimetotimetoreflect anysignificantnewfactor,materialmistakeorinaccuracyrelatingtotheinformationincludedinit. TermsusedinthisProspectushavethemeaningsgiventothemundertheheading Definitionsand Interpretation. What securities are being issued pursuant to this Prospectus? ThisProspectusrelatestotheissueofShortandLeveragedCommoditySecuritieswhichareundated securedlimitedrecoursedebtsecuritiesoftheissuer.shortandleveragedcommoditysecuritiesare designedtoenableinvestorstogain ashortexposureofonetimesshort(-1x)orthreetimesshort(-3x) oraleveragedexposureoftwotimeslong(+2x)orthreetimeslong(+3x) tothedailychangesinindices whichtrackmovementsinthepriceofindividualcommodityfuturescontractsorbasketsofcommodity futurescontracts. An investment in Short and Leveraged Commodity Securities involves a significant degree of risk and investors may lose some or all of their investment. It should be remembered that the value of Short and Leveraged Commodity Securities can go down as well as up. Short and Leveraged Commodity Securities are complex, structured products involving a significant degree of risk and may not be suitable or appropriate for all types of investor. It is advisable that any person wishing to invest seeks appropriate financial, tax and other advice from an independent financial advisor with appropriate regulatory authorisation and qualifications and an investment in Short and Leveraged Commodity Securities is only suitable for persons who understand the economic risk of an investment in Short and Leveraged Commodity Securities and are able to bear the risk for an indefinite period of time. A prospective investor should be aware that the value of their entire investment or part of their investment in Short and Leveraged Commodity Securities may be lost.

2 What is in this Prospectus? ThisProspectusisintendedtoprovideaprospectiveinvestorwiththenecessaryinformationrelatingto theissuerandtheshortandleveragedcommoditysecuritiesrequiredtoenablethemtomakean informedassessmentof(i)theassetsandliabilities,financialposition,profitsandlossesandprospects oftheissuer;and(ii)therightsattachingtotheshortandleveragedcommoditysecurities. TherightsattachingtotheShortandLeveragedCommoditySecuritiesarecontainedintheConditions undertheheading TheConditions inpart7(trust Instrument and Short and Leveraged Commodity Securities)andarecompletedbytheFinalTermsspecifictoaparticularissueofShortorLeveraged CommoditySecuritieswhichwillbepublishedanddeliveredtotheUKListingAuthoritybeforesuchShort orleveragedcommoditysecuritiesareissued. WorkedexamplesofhowaninvestorcandeterminethevalueoftheirinvestmentaresetoutinPart2 (How does a Security Holder determine the value of their investment?). AlsosetoutinthisProspectusaredetailsofthestructureoftheProgramme,thekeypartiestothe Programme,thetermsofanymaterialcontractsoftheIssuer,detailsofthetaxtreatmentofaholdingof ShortorLeveragedCommoditySecuritiesincertainjurisdictionsanddetailsoftheriskfactorsrelating toaninvestmentinshortandleveragedcommoditysecurities. What information is included in the Final Terms? TheFinalTermssetoutinformationspecifictotheShortorLeveragedCommoditySecuritiestowhich theyrelate,includingtheclassandnumberofshortorleveragedcommoditysecuritiestobeissued andtheissuepriceapplicabletotheshortorleveragedcommoditysecuritiestobeissued. What other information should a prospective investor consider? CertainoftheinformationinthisProspectusisincorporatedbyreference.Thismeansthatitisnotset outinthedocumentbutinsteadhasbeenmadepubliclyavailableelsewhereforreferencebyinvestors andprospectiveinvestors. ProspectiveinvestorsshouldensurethattheyreviewtheProspectus(including anyinformationthathasbeenincorporatedbyreference)andthefinalterms. AcopyofthisProspectus(includinganydocumentsincorporatedbyreference)andanyFinalTerms issuedareavailableathttp:// 2

3 TABLE OF CONTENTS ThistablesetsoutthecontentsofthisProspectustogetherwithanoutlinedescriptionofthecontentsof eachsectionandisintendedasaguidetohelpaprospectiveinvestortonavigatetheirwayaroundthis Prospectus. Eachsectionshouldbecarefullyconsideredbyaprospectiveinvestorbeforedecidingwhethertoinvest inshortandleveragedcommoditysecurities. Section of Prospectus Page What is covered by this section ImportantInformation 7 This section sets out important legal notices relating to the Short and Leveraged Commodity Securities. Summary 10 This section sets out in a grid format standard information which is arranged under standard headings and is required to be included in a prospectus summary for this type of product. It also provides the form of the Issue Specific Summary which will be completed and attached to the form of Final Terms (either in the form contained within this Prospectus at Annex 3 to be issued each time the Issuer has issued securities to a securities house or other market professional approved by the Issuer and which has entered into an agreement with the Issuer in relation to Short and Leveraged Commodity Securities or Annex 4 to be issued each time the Issuer has issued securities to the public pursuant to a public offer). RiskFactors 30 This section sets out the material risks known to the Issuer associated with an investment in Short and Leveraged Commodity Securities and should be carefully considered by a prospective investor. FrequentlyAskedQuestions 46 This section addresses a list of frequently asked questions about the Short and Leveraged Commodity Securities. ClassesofShortand LeveragedCommodity Securities 52 This section sets out a list of classes of Short and Leveraged Commodity Securities that the Issuer is currently making available for issue. LicencesGrantedtotheIssuer 56 This section provides information on the licences granted to the Issuer by UBS Securities LLC and Bloomberg Finance L.P. DefinitionsandInterpretation 57 This section sets out the definitions that apply throughout this Prospectus. Directors,SecretaryandAdvisers 81 This section sets out the names and business addresses of directors of the Issuer and of the entities which provide services and legal advice to the Issuer. DocumentsIncorporatedbyReference 84 This section details the documents incorporated into this Prospectus by reference and details where copies of these documents can be found. These documents are part of this Prospectus and should be carefully considered by a potential investor. Part1 General 85 This section provides a description of the Short and Leveraged Commodity Securities and the role of the different parties in the structure of the offering. 3

4 Part 2 How does a Security Holder determine the value of their investment? 99 This section sets out how an investor can work out the value of their investment and provides the relevant formulae and worked examples. Part 3 The Bloomberg Commodity Index Family 110 This section provides an overview of the indices tracked by the Short and Leveraged Commodity Securities and information relating to the simulated historical returns of the Short and Leveraged Commodity Securities to help investors evaluate the past performance of the Short and Leveraged Commodity Securities. Part 4 Description of Short and Leveraged Commodity Securities 122 This section provides a description of the Short and Leveraged Commodity Securities as well as details of the rights attached to the Short and Leveraged Commodity Securities, how the price of each Short and Leveraged Commodity Security is calculated and details of how Short and Leveraged Commodity Securities can be redeemed. Part 5 Description of Facility Agreements and Commodity Contracts 135 This section provides a description of the Facility Agreements and the Commodity Contracts by which the Short and Leveraged Commodity Securities are backed. Part 6 The Programme 143 This section provides information on where this Prospectus has been passported to allow the public offer of the Short and Leveraged Commodity Securities to take place and provides information on the settlement and delivery process on each of the exchanges where Short and Leveraged Commodity Securities are admitted to trading. Part 7 Trust Instrument and Short and Leveraged Commodity Securities 150 This section gives details of the main constitutive document in respect of the Short and Leveraged Commodity Securities the Trust Instrument and sets out the details of the approval of the issue of the Short and Leveraged Commodity Securities. It includes an extract from the Trust Instrument under the heading The Conditions which sets out the terms and conditions which apply to the Short and Leveraged Commodity Securities. This extract is drafted in legal language as it is taken directly from the Trust Instrument but information on how the terms and conditions apply to Security Holders is contained throughout this Prospectus, including in Part 4. Part 8 Particulars of Security Deeds 205 The Security Deeds create security over, and give investors (through the Trustee) rights to, the underlying assets relating to each class of security. This section contains details of the terms of the rights granted by the Security Deeds and when these rights become enforceable. Part 9 Commodities, Commodity 207 This section provides an overview of the and Futures Markets, and Exchanges commodities, commodity and futures markets, and exchanges to help an investor decide whether an investment in a product which provides inverse or two times leveraged exposure to daily changes in commodity futures indices is appropriate for them. Part 10 Global Bearer Certificates 215 This section contains an English translation of the German text of the German Global Bearer 4

5 Certificates, which is set out in Annex 1 and which is only relevant to investors wishing to purchase Short and Leveraged Commodity Securities on the Frankfurt Stock Exchange. Part11 Particularsofthe CommodityContract Counterparties 220 This section contains details relating to UBS AG and Merrill Lynch Commodities, Inc. ( MLCI ), with whom the Issuer has entered into agreements to purchase Commodity Contracts, and Bank of America Corporation, which guarantees MLCI s payments under its Facility Agreement. Part12 Taxation 221 This section sets out the tax treatment of holding Short and Leveraged Commodity Securities in the UK and Jersey and in each of the European jurisdictions in which the Short and Leveraged Commodity Securities are available for public offer. Part13 AdditionalInformation 258 This section sets out further information on the Issuer which the Issuer believes a potential investor will want to be aware of or which the Issuer is required to include under applicable rules. This section also includes details of the material contracts relating to the Short and Leveraged Commodity Securities, other than the Trust Instrument, which is covered in Part 7, the Security Deeds, which are covered in Part 8, and the Facility Agreements and Commodity Contracts, which are covered in Part 5. Annex1 FormoftheGlobalBearer Certificates 276 This section sets out the form of the German Global Bearer Certificates, which is only relevant to investors wishing to purchase Short and Leveraged Commodity Securities on the Frankfurt Stock Exchange. The English translation of this text is included in Part 10 of this Prospectus. Annex2 TextoftheConditionsofthe GlobalBearerCertificates 277 This section sets out the German text of the conditions of the German Global Bearer Certificates, which is only relevant to investors wishing to purchase Short and Leveraged Commodity Securities on the Frankfurt Stock Exchange. The English translation of this text is contained in Part 10 of this Prospectus. Annex3 FormofFinalTerms 281 This section sets out the form of Final Terms which the Issuer will publish when it has issued Short or Leveraged Commodity Securities to a securities house or other market professional approved by the Issuer and which has entered into an agreement with the Issuer in relation to Short and Leveraged Commodity Securities. This details the class and number of Short or Leveraged Commodity Securities and other relevant information applicable to the issue and when completed will also include an issue specific summary which is taken from the summary included in this document and adjusted to be relevant only to the Short or Leveraged Commodity Securities issued under the Final Terms. Each time that Short or Leveraged Commodity Securities are issued by the Issuer, a Final Terms document is prepared by the Issuer and submitted to the FCA and notified to the competent authority in each 5

6 European jurisdiction into which the product is passported. Completed Final Terms documents are available on the website of the Issuer at Annex4 FormofFinalTerms PublicOffers 283 This section sets out the form of Final Terms which the Issuer will publish if it issues any Short or Leveraged Commodity Securities to the public pursuant to a public offer rather than to a securities house or other market professional (as set out at Annex 3). This details the class and number of Short or Leveraged Commodity Securities and other relevant information applicable to the issue and when completed will also include an issue specific summary which is taken from the summary included in this document and adjusted to be relevant only to the Short or Leveraged Commodity Securities issued under the Final Terms. Each time that Short or Leveraged Commodity Securities are issued by the Issuer, a Final Terms document is prepared by the Issuer and submitted to the FCA and notified to the competent authority in each European jurisdiction into which the product is passported. Completed Final Terms documents are available on the website of the Issuer at 6

7 Programme for the Issue of ETFS Short and Leveraged Commodity Securities Important Information A. Approvals A copy of this document, which comprises a base prospectus relating to the Short and Leveraged CommoditySecuritiesofeachclassincompliancewithArticle3ofDirective2003/71/EC,asinforceas atthedatehereof,andtheprospectusrules(the Prospectus Rules )madeundersections73aand84 ofthefinancialservicesandmarketsact2000,asamendedasatthedatehereof,hasbeenfiledwith thefcaandhasbeenmadeavailabletothepublicforthepurposesofsection85ofthatactandin accordancewitharticle14ofdirective2003/71/ecandrulepr3.2oftheprospectusrules.shortand LeveragedCommoditySecuritieswillbeavailabletobeissuedonacontinuousbasisduringtheperiod of12monthsfromthedateofthisdocument.aprospectiveinvestorshouldbeawarethatcompensation willnotbeavailableundertheukfinancialservicescompensationscheme. ThisProspectusisprepared,andacopyofithasbeensenttotheJerseyFinancialServicesCommission, inaccordancewiththecollectiveinvestmentfunds(certifiedfunds-prospectuses)(jersey)order TheIssuerhasobtainedacertificateundertheCollectiveInvestmentFunds(Jersey)Law1988,as amended(the CIF Law )toenableittoundertakeitsfunctionsinrelationtotheshortandleveraged CommoditySecurities.TheJerseyFinancialServicesCommissionisprotectedbytheCIFLawagainst liabilityarisingfromthedischargeofitsfunctionsthereunder. EachofManJer,R&HFundServices(Jersey)LimitedandtheRegistrarisregisteredundertheFinancial Services(Jersey)Law,1998,asamended(the Financial Services Law )toenableittoundertakeits functionsinrelationtotheshortandleveragedcommoditysecurities.thejerseyfinancialservices CommissionisprotectedbytheFinancialServicesLawagainstliabilityarisingfromthedischargeofits functionsthereunder. TheJerseyFinancialServicesCommissiondoesnottakeanyresponsibilityforthefinancialsoundness oftheissuerorforthecorrectnessofanystatementsmadeorexpressedinthisprospectus. ShortandLeveragedCommoditySecuritieshavenotbeenandwillnotberegisteredundertheUnited StatesSecuritiesActof1933asamended(the Securities Act ),orunderthesecuritieslawsofany statesoftheunitedstates.shortandleveragedcommoditysecuritiesmaynotbedirectlyorindirectly offered,sold,takenup,deliveredortransferredinorintotheunitedstatesortoanyusperson(as definedinregulationsunderthesecuritiesact)(a US Person ).TheIssuerhasnotregistered,and doesnotintendtoregister,asaninvestmentcompanyundertheunitedstatesinvestmentcompany Act of 1940, as amended (the Investment Company Act ). Accordingly, Short and Leveraged CommoditySecuritiesmaynotbeoffered,sold,pledgedorotherwisetransferredordeliveredwithinthe UnitedStatesorto,orfortheaccountorbenefitof,anyUSPerson.ShortandLeveragedCommodity SecuritiesofferedandsoldoutsidetheUnitedStatesmaybeofferedtopersonswhoarenotUSPersons inrelianceuponregulationsunderthesecuritiesact.eachoftheauthorisedparticipantshas,pursuant toitsauthorisedparticipantagreementwiththeissuer,undertakennottoofferorselltheshortand LeveragedCommoditySecuritieswithintheUnitedStatesortoanyUSPerson,norwillitengageinany directedsellingefforts (assuchtermisdefinedbyregulationsunderthesecuritiesact)withrespect totheshortandleveragedcommoditysecurities. ProhibitedUSPersonsandProhibitedBenefitPlanInvestorswhonotwithstandingtheforegoingacquire ShortandLeveragedCommoditySecuritiesshouldnotetheprovisionsintheConditionsunderthe heading CompulsoryRedemptionbytheIssuerorTrustee (Condition8)inPart7(Trust Instrument and Short and Leveraged Commodity Securities). B. Listing and Trading ApplicationhasbeenmadetotheUKListingAuthorityforallShortandLeveragedCommoditySecurities issuedwithin12monthsofthedateofthisdocumenttobeadmittedtotheofficiallist,andtothelondon StockExchangefor certainclassesof ShortandLeveragedCommoditySecuritiestobeadmittedto AXX(XII)6.1(i)B AXX(XII)6.1(ii)C 7

8 tradingonthemainmarketofthelondonstockexchange(beingpartofthelondonstockexchange s RegulatedMarketforthepurposesofEUDirective2004/39/EC(theMarketsinFinancialInstruments Directive)). CertainoftheShortandLeveragedCommoditySecuritiesarealsolistedortradedoncertainother markets see Passporting inpart6(the Programme). C. Responsibility and No Investment Advice TheIssueracceptsresponsibilityfortheinformationcontainedinthisdocument.Tothebestofthe knowledgeandbeliefoftheissuer,whichhastakenallreasonablecaretoensurethatsuchisthecase, theinformationcontainedinthisdocumentisinaccordancewiththefactsanddoesnotomitanything likelytoaffecttheimportofsuchinformation. AVII.1.1. AVII.1.2 AXX(XII).1.1A AXX(XII).1.2A Nothing in this document or anything communicated to holders or potential holders of the Short and Leveraged Commodity Securities or other obligations by the Issuer is intended to constitute or should be construed as advice on the merits of the purchase of or subscription for the Short and Leveraged Commodity Securities or the exercise of any rights attached thereto for the purposes of the Jersey Financial Services Law Noneof Bloomberg,UBSSecurities,UBS,MLCIorBAChasseparatelyverifiedthe informationcontained orincorporatedbyreferenceinthisprospectus.norepresentation,warrantyorundertaking,expressor implied,ismade,andnoresponsibilityorliabilityisacceptedby, Bloomberg,UBSSecurities,UBS,MLCI orbacastotheaccuracyorcompletenessofanyinformationcontainedinthisprospectusoranyother informationsuppliedinconnectionwithshortandleveragedcommoditysecuritiesortheirdistribution. EachpersonapplyingforShortandLeveragedCommoditySecuritiesinaccordancewiththisProspectus acknowledgesthat(i)suchpersonhasnotreliedon Bloomberg,UBSSecurities,UBS,MLCIorBAC, noronanypersonaffiliatedwithanyofthem,inconnectionwithitsinvestmentdecisionoritsinvestigation oftheaccuracyoftheinformationcontainedherein;(ii)shortandleveragedcommoditysecuritiesare direct,limitedrecourseobligationsofthe Issueraloneandnotobligationsof Bloomberg,UBSSecurities, UBSoranyothermemberoftheUBSGrouporMLCIoranyothermemberoftheBACGroup;and (iii) theobligationsoftheissuertosecurityholdersundertheshortandleveragedcommoditysecurities arenotguaranteedby Bloomberg,UBSSecurities,UBSoranyothermemberoftheUBSGrouporMLCI oranyothermemberofthebacgroup.noneoftheissuer,thetrustee,theauthorisedparticipantsand thesecurity Holdersare,byvirtueofanyoftheactivitiesof Bloomberg,anymemberoftheUBSGroup oranymemberofthebacgroupinconnectionwithcommoditycontracts,clientsorcustomersof Bloomberg,anymemberoftheUBSGrouporanymemberoftheBACGroupforthepurposeofthe FCAHandbook. TheAuthorisedParticipantshavenotseparatelyverifiedtheinformationcontainedorincorporatedby referenceinthisprospectus.noneoftheauthorisedparticipantsmakesanyrepresentation,expressor implied, or accepts any responsibility, with respect to the accuracy or completeness of any of the informationinthisprospectusorforthesuitabilityofshortandleveragedcommoditysecuritiesforany investor.noneoftheauthorisedparticipantsundertakestoreviewthefinancialconditionoraffairsofthe IssuerduringthelifeoftheProgrammenortoadviseanyinvestororpotentialinvestorintheShortand LeveragedCommoditySecuritiesofanyinformationcomingtotheattentionofanyoftheAuthorised Participants. NeitherthisProspectusnoranyFinalTermsconstitutesanofferoraninvitationtosubscribeforor purchaseshortandleveragedcommoditysecuritiesoranyothersecuritiesissuedbytheissuerand shouldnotbeconsideredasarecommendationbytheissuer,theauthorisedparticipants, Bloomberg, UBSSecurities,UBS,MLCI,BACoranyofthemthatanyrecipientofthisProspectusoranyFinalTerms should subscribe for or purchase Short and Leveraged Commodity Securities. Each person contemplatingmakinganinvestmentinshortandleveragedcommoditysecuritiesmustmakeitsown investigationandanalysisofthecreditworthinessoftheissueranditsowndeterminationofthesuitability ofanysuchinvestment,withparticularreferencetoitsowninvestmentobjectivesandexperienceand anyotherfactorswhichmayberelevanttoitinconnectionwithsuchinvestment,anditisadvisablethat suchpersonsobtaintheirownindependentaccounting,taxandlegaladviceandconsulttheirown professionalinvestmentadviserstoascertainthesuitabilityofshortandleveragedcommoditysecurities asaninvestment,andconductsuchindependentinvestigationandanalysisregardingtherisks,security arrangementsandcash-flowsassociatedwithshortandleveragedcommoditysecuritiesastheydeem 8

9 appropriate,inordertoevaluatethemeritsandrisksofaninvestmentinshortandleveragedcommodity Securities.Aprospectiveinvestorwhoisinanydoubtwhatsoeverastotherisksinvolvedininvestingin ShortandLeveragedCommoditySecuritiesshouldconsultitsindependentprofessionaladvisers. D. Investors to Make Their Own Assessment ProspectiveSecurityHoldersmaywishtoobtaintheirownindependentaccounting,taxandlegaladvice andmaywishtoconsulttheirownprofessionalinvestmentadviserstoascertainthesuitabilityofshort andleveragedcommoditysecuritiesasaninvestment.prospectivesecurityholdersmaywishto conductsuchindependentinvestigationandanalysisregardingtherisks,securityarrangements,delivery processesandcash-flowsassociatedwithshortandleveragedcommoditysecuritiesastheydeem appropriate,inordertoevaluatethemeritsandrisksofaninvestmentinshortandleveragedcommodity Securities. E. Supplementary Prospectus IfatanytimetheIssuershallberequiredtoprepareasupplementaryprospectuspursuantto section 87G ofthefinancialservicesandmarketsact2000,theissuerwilleitherprepareandmake availablean appropriate amendment or supplement to this document which shall constitute a supplementary prospectus as required by section 87G of that Act or prepare and make available a further base prospectusincompliancewitharticle3ofdirective2003/71/ecandtheprospectus Rules. 9

10 SUMMARY ETFS Commodity Securities Limited Prospectus Summary Base prospectus dated 19 October 2015 for the issue of ETFS Short Commodity Securities and ETFS Leveraged Commodity Securities Summariesaremadeupofdisclosurerequirementsknownas Elements.Theseelementsarenumbered insectionsa E(A.1 E.7). ThissummarycontainsalltheElementsrequiredtobeincludedinasummaryforthistypeofsecurities and Issuer. Because some Elements are not required to be addressed, there may be gaps in the numberingsequenceoftheelements. Even though an Element may be required to be inserted into the summary because of the type of securitiesandissuer,itispossiblethatnorelevantinformationcanbegivenregardingtheelement.in this case a short description of the Element is included in the summary with the mention of not applicable. SECTION A Introduction and Warnings A.1 Standardwarningdisclosure Thissummaryshouldbereadasanintroductiontothe baseprospectusofetfscommoditysecuritieslimited relating to the programme for the issue of Short and LeveragedCommoditySecuritiesdated 19October 2015 (the Prospectus ). Any decision to invest in the ETFS Short Commodity SecuritiesortheETFSLeveragedCommoditySecurities shouldbebasedonconsiderationoftheprospectusas awholebytheinvestor. Whereaclaimrelatingtotheinformationcontainedinthe Prospectusisbroughtbeforeacourt,theplaintiffinvestor might, under the national legislation of the member states, have to bear the costs of translating the Prospectusbeforethelegalproceedingsareinitiated. Civilliabilityattachesonlytothosepersonswhohave tabledthesummaryincludinganytranslationthereof,but only if the summary is misleading, inaccurate or inconsistentwhenreadtogetherwiththeotherpartsof theprospectusoritdoesnotprovide,whenreadtogether withtheotherpartsoftheprospectus,keyinformationin ordertoaidinvestorswhenconsideringwhethertoinvest intheetfsshortcommoditysecuritiesortheetfs LeveragedCommoditySecurities. A.2 Disclosureofconsentfor useoftheprospectusfor subsequentresaleorfinal placementofsecuritiesby financialintermediaries The Issuer has consented to the use of the Prospectus, and hasacceptedresponsibilityforthecontentoftheprospectus, withrespecttosubsequentresaleorfinalplacementbywayof public offer of the Short or Leveraged Commodity Securities (as described below) in any of Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Portugal, the Netherlands,Norway,Spain,SwedenandtheUnitedKingdom byanyfinancialintermediarywhichisaninvestmentfirmwithin themeaningofthemarketsinfinancialinstrumentsdirective, asamended( MiFID )andwhichisauthorisedinaccordance withmifidinanymemberstate.suchconsentappliestoany suchresaleorfinalplacementbywayofpublicofferduringthe AXXII(AVII).A.1 AXXII(AVIII).A.1 AXXII(AXII).A.1 AXXII(AVII).A.2 AXXII(AVIII).A.2 AXXII(AXII).A.2 10

11 periodof12monthsfromthedateoftheprospectus,unless suchconsentiswithdrawnpriortothatdatebynoticepublished on the Issuer s website. Other than the right of the Issuer to withdrawtheconsent,nootherconditionsareattachedtothe consentdescribedinthisparagraph. In the event of an offer being made by a financial intermediary, this financial intermediary will provide information to investors on the terms and conditions of the offer at the time the offer is made. Any financial intermediary using the Prospectus for the purpose of any offering must state on its website that it uses the Prospectus in accordance with the consent given and the conditions attached thereto. It is a condition of this consent that, where the financial intermediarywishestoresellormakeafinalplacementbyway ofpublicofferoftheshortandleveragedcommoditysecurities, suchfinancialintermediarymaynotreusethisprospectusfor suchpurposeunlessitisinspecificagreedjurisdictionsduring a specified offer period. The financial intermediary may not otherwise reuse this Prospectus to sell Short and Leveraged CommoditySecurities. In the event of a public offer in one or more Public Offer Jurisdictions, the Short or Leveraged Commodity Securities maybeofferedandsoldtopersonsintherelevantpublicoffer Jurisdiction who are legally eligible to participate in a public offeringofsuchsecuritiesinsuchjurisdictionunderapplicable lawsandregulations. TheIssuerhasnotauthorised,nordoesitauthorise,themaking ofanyofferofshortandleveragedcommoditysecuritiesin anyothercircumstances. Issue Specific Summary: PublicOfferJurisdiction(s): OfferPeriod: SECTION B Issuer N/A N/A B.1 Legalandcommercialname ETFSCommoditySecuritiesLimited(the Issuer ). B.2 Domicile/Legal TheIssuerisapubliccompanyincorporatedandregisteredin form/legislation/ JerseyundertheCompanies(Jersey)Law1991(asamended) Countryofincorporation withregisterednumber B.16 Direct/indirectcontrolofthe The shares in the Issuer are held entirely by ETFS Holdings Issuer (Jersey)Limited( HoldCo ),aholdingcompanyincorporated in Jersey. The shares in HoldCo are directly owned by ETF Securities Limited ( ETFSL ) which is also incorporated in Jersey. The Issuer is neither directly or indirectly owned or controlledbyanyotherpartytotheprogramme. B.20 Specialpurposevehicle TheIssuerhasbeenestablishedasaspecialpurposevehicle for the purpose of issuing exchange traded commodities ( ETCs )asasset-backedsecurities. AXXII(AVII).B.1 AXXII(AVII).B.2 AXXII(AVII).B.16 AXXII(AVII).B.20 11

12 B.21 Principalactivitiesand The principal activity of the Issuer is issuing several classes overviewoftheparties andtypesofdebtsecuritybackedbyderivativecontractslinked tocommodityindiceswhich(beforefeesandexpenses)provide exposure to the daily changes in such commodity indices. PursuanttothisProspectus,theIssuerisissuingdebtsecurities (the Short and Leveraged Commodity Securities ) which (beforefeesandexpenses)provide onetimesshort ( 1times),,threetimesshort( 3times),twotimeslong(+2times)orthree timeslong(+3times) exposuretothedailychangesinspecified commodityindicescalculatedandpublishedbybloombergl.p. and/orbloombergfinancel.p.and/ortheaffiliateofeitherof them (together Bloomberg ) (the Bloomberg Commodity Indices and each a Bloomberg Commodity Index ). The BloombergCommodityIndicestrackmovementsinthepriceof individualcommodityfuturescontractsorbasketsofcommodity futures contracts. Prior to and including 30 June 2014, the BloombergCommodityIndiceswerecalculatedandpublished by CME Group Index Services LLC in conjunction with UBS Securities LLC and were known as The Dow Jones UBS CommodityIndices SM. TheIssuerhasestablishedaprogramme under which different classes of Short and Leveraged CommoditySecuritiesmaybeissuedfromtimetotime. TheIssuergainsexposuretothedailypercentagechangesin thelevelofthebloombergcommodityindicesbyenteringinto fullyfunded collateralisedderivativecontracts(the Commodity Contracts )with UBSAG,LondonBranch( UBS )andmerrill LynchCommoditiesInc. ( MLCI ).TogetherMLCIandUBSare known as the Commodity Contract Counterparties. The terms of the Commodity Contracts purchased or to be purchased by the Issuer are governed by (i) an agreement entitled Facility Agreement between the Issuer and UBS dated5august2009;and(ii)anagreemententitled Facility Agreement between the Issuer and MLCI dated 14 March The payment obligations of MLCI under its Facility Agreement are supported by a guarantee (the BAC Guarantee )frombankofamerica Corporation( BAC ). TheobligationsoftheCommodityContractCounterpartiesto theissuer undercommoditycontractsaresecuredbycollateral provided by the Commodity Contract Counterparties (the Collateral ) and held in accounts in the names of the CommodityContractCounterpartiesat BankofNewYorkMellon ( BNYM ).Pursuantto(i)agreements entitled UBS Security Agreement betweenubsandtheissuerand UBS Control Agreement betweenbnym,ubsandtheissuereach dated 5August 2009; and (ii) agreements entitled MLCI Security Agreement between MLCIandtheIssuerand MLCI Control Agreement betweenbnym,mlciandtheissuereachdated 14 March 2011, UBS and MLCI are required to transfer to a collateralaccount, securitiesandobligationstothevalueofthe Issuer stotalexposure underthecommoditycontractstoubs ormlci(asapplicable).the collateralheldisadjusteddailyto reflectthevalueoftherelevant CommodityContracts. ShortandLeveragedCommoditySecuritiescanbeissuedto and required to be redeemed on a daily basis by financial institutions( Authorised Participants )who(i)haveentered into an agreement entitled Authorised Participant Agreement withtheissuer;(ii)havecertifiedtotheissueras AXXII(AVII).B.21 12

13 to their status under the Financial Services and MarketsAct 2000( FSMA ); and(iii)(except in the case of a Commodity Contract Counterparty which has entered into anauthorised Participant Agreement with the Issuer) has entered into a correspondingagreemententitled Direct Agreement withat leastonecommoditycontractcounterpartyandwhichhasnot beennotifiedbythatcommoditycontractcounterpartythatit isnotanunacceptableauthorisedparticipantinrespectofthat CommodityContractCounterparty.OtherholdersofShortand LeveragedCommoditySecuritiesmayalsoredeemShortand Leveraged Commodity Securities if there are no Authorised Participants or if the Issuer otherwise announces. All other parties may buy and sell Short and Leveraged Commodity Securitiesthroughtradingonanexchangeormarketonwhich theshortandleveragedcommoditysecuritiesareadmitted totrading. Short and Leveraged Commodity Securities are constituted underanagreemententitledthe Trust Instrument between theissuerandthelawdebenturetrustcorporationp.l.c.as trustee(the Trustee )ofallrightsandentitlementsunderthe TrustInstrumentforanypersonidentifiedontheregistersas holding the Short and Leveraged Commodity Securities (the Security Holders ). The Issuer and the Trustee have entered into separate documents each entitled Security Deed in respect of each poolofassetsattributabletoanyclassofshortorleveraged Commodity Securities (each a Pool ) and the rights and entitlementsheldbythetrusteeundereachsecuritydeedare held by the Trustee on trust for the Security Holders of the relevantclassofshortorleveragedcommoditysecurity. ETFS Management Company(Jersey) Limited( ManJer ), a company which is wholly-owned by ETFSL, supplies, or will arrange the supply of, all management and administration services to the Issuer and pays all the management and administrationcostsoftheissuerinreturnforafeepayableby theissuer. Issue Specific Summary: RelevantBloombergCommodityIndex: B.22 Nofinancialstatements Notapplicable;financialstatementshavebeenmadeupasat thedateofthisprospectus. B.23 Keyhistoricalfinancial As at 31 December information USD USD Current Assets TradeandOtherReceivables 2,300,571 2,241,550 CommodityContracts 3,244,864,050 3,389,700,130 AmountsReceivableonCommodity ContractsAwaitingSettlement 20,473,411 14,211,084 AmountsReceivableonCommodity SecuritiesAwaitingSettlement 4,159,320 35,616,361 Total Assets 3,271,797,352 3,441,769,125 AXXII(AVII).B.22 AXXII(AVII).B.23 13

14 As at 31 December USD USD Current Liabilities CommoditySecurities 3,277,478,201 3,413,854,578 AmountsPayableonCommodity SecuritiesAwaitingSettlement 20,473,411 14,211,084 AmountsPayableonCommodity ContractsAwaitingSettlement 4,159,320 35,616,361 TradeandOtherPayables 2,300,569 2,241,548 Total Liabilities 3,304,411,501 3,465,923,571 Equity StatedCapital 2 2 RevaluationReserve 32,614,151 (24,154,448) Total Equity 32,614,149 (24,154,446) Total Equity and Liabilities 3,271,797,352 3,441,769,125 B.24 Materialadversechange Notapplicable;therehasbeennomaterialadversechangein thefinancialortradingpositionorprospectsoftheissuersince the date of its last audited financial statements for the year ended31 December B.25 Underlyingassets TheunderlyingassetsfortheShortandLeveragedCommodity Securities of each class, by which they are backed and on whichtheyaresecured,are: therightsandinterestsunderthecommoditycontracts enteredintobytheissuerwiththecommoditycontract Counterparty; the rights and interests under the FacilityAgreements pursuanttowhichthecommoditycontractsareentered into(totheextentattributabletothatclass);and therightsandinterestsinthecollateralpursuanttothe UBS SecurityAgreement, the UBS ControlAgreement and/or the MLCI Security Agreement and the MLCI ControlAgreement. Thesecuritisedassetsbackingtheissuehavecharacteristics that demonstrate capacity to produce funds to service any paymentsdueandpayableonthesecurities. ThesecuritisedassetsaretheCommodityContracts,Facility Agreements,theBACGuarantee,theUBSSecurityAgreement, theubscontrolagreement,themlcisecurityagreementand themlcicontrolagreement.shortandleveragedcommodity SecuritiesofeachclassarebackedbyCommodityContracts withcorrespondingtermsandeachtimeashortorleveraged CommoditySecurityiscreatedorredeemedamatchingamount of Commodity Contracts are purchased or cancelled by the Issuer. Commodity Contracts will be purchased from one or morecommoditycontractcounterparties. The Issuer will decline applications for Short and Leveraged Commodity Securities if it cannot for any reason create correspondingcommoditycontractswithacommoditycontract Counterparty. At the date of this Prospectus, the Issuer has entered into arrangementswithtwocommoditycontractcounterparties UBSandMLCI. AXXII(AVII).B.24 AXXII(AVIII).B.25 14

15 UndertheFacilityAgreementstherearelimits,bothdailyand inaggregate,onthenumberofcommoditycontractsthatcan becreatedorcancelledatanytime.creationsandredemptions ofshortandleveragedcommoditysecuritiesaresubjectto bothdailylimitsandtotalaggregatelimits,tomatchthelimits oncommoditycontracts. UBSisacorporationdomiciledinBasel,Switzerland,operating in the United Kingdom under branch registration number BR004507, acting though its London branch at 1 Finsbury Avenue,London,EC2M2PP,England.UBSAG stworegistered offices and principal places of business are: Bahnhofstrasse 45,CH-8001Zurich,Switzerland,andAeschenvorstadt1,CH Basel, Switzerland.The principal activity of UBS is the provision of financial services to private, institutional and corporateclients. MLCI is a company incorporated in the State of Delaware, UnitedStateswhoseregisteredofficeiscareofTheCorporation TrustCompany,CorporationTrustCenter,1209,OrangeStreet, Wilmington,Delaware,19801.TheprincipalactivityofMLCIis conductingacommoditybusiness,includingover-the-counter commodityderivatives,withinstitutionalclientsinvariousu.s. domesticandinternationalmarkets. BAC is a bank holding company and a financial holding companyincorporatedinthestateofdelaware,unitedstates, in Through BAC s banking and various non-banking subsidiariesthroughouttheu.s.andininternationalmarkets, BACprovidesadiversifiedrangeofbanking,andnon-banking financialservicesandproducts.bac sprincipalexecutiveoffices arelocatedat100 NorthTryonStreet,Charlotte,NC282255, UnitedStates. Issue Specific Summary: ClassofShortorLeveragedCommoditySecurity: ClassofCommodityContract: Relevant BloombergCommodityIndex: B.26 Investmentmanagement Notapplicable;thereisnoactivemanagementoftheassetsof theissuer. B.27 Furthersecuritiesbackedby FurtherShortandLeveragedCommoditySecuritiesofanyclass thesameassets maybeissuedbuteachtimeashortorleveragedcommodity Security of any class is issued corresponding Commodity Contractsofthesameclasswillbecreatedandwillformpart of the corresponding Secured Assets. Such newly issued Short and Leveraged Commodity Securities will be fungible withallexistingshortandleveragedcommoditysecuritiesof thesameclassandwillbebackedbytheassetsofthesame SecuredAssets. B.28 Structureofthetransaction The Issuer has created a programme whereby Short and LeveragedCommoditySecuritiesmaybeissuedfromtimeto time.theshortandleveragedcommoditysecuritiescanbe issued or required to be redeemed on a daily basis by AuthorisedParticipantswhohaveenteredintoanAuthorised ParticipantAgreementwiththeIssuer. Authorised Participants may then sell and buy Short and LeveragedCommoditySecuritiestoandfromotherinvestors onexchangeorinprivatetransactions. AXXII(AVIII).B.26 AXXII(AVIII).B.27 AXXII(AVIII).B.28 15

16 ShortandLeveragedCommoditySecuritiesareconstitutedby thetrustinstrument.underthetermsofthetrustinstrument, the Trustee acts as trustee for the Security Holders of each classofshortandleveragedcommoditysecurityboth(a)to makedeterminationsandexerciserightsundertheshortand Leveraged Commodity Securities for the benefit of Security Holdersand(b)toholdontrustforSecurityHoldersthesecurity granted by the Issuer under the Security Deeds, to exercise anyrightstoenforcethesameandtodistributetheproceeds (after payment of all amounts owed to the Trustee) to the SecurityHolders(amongothers). TheobligationsoftheIssuerinrespectofeachclassofShort andleveragedcommoditysecurityaresecuredbyacharge over the equivalent class of Commodity Contracts under the FacilityAgreementsandrelatedcontracts. Adiagrammaticrepresentationoftheprincipalaspectsofthe structureascurrentlyinplaceappearsbelow: Agreements Fund Flows Collateral Flows ManJer Trustee Trust Instrument Security Deed Short and Leveraged Commodity Security Holders Issuer Securities Intermediary Securities Control Agreement Market-making Authorised Participant Agreements Facility Commodity Agreement Contracts and Security Agreement Collateral Account Collateral Authorised Participants Commodity Contract Counterparty Creation and Redemption payments B.29 Descriptionoftheflowof ShortandLeveragedCommoditySecuritiescanbeboughtor funds soldforcashonthelondonstockexchange,borsaitaliana, Euronext Amsterdam and/or the Frankfurt Stock Exchange (beingthestockexchangesonwhichthesecuritiesareadmitted to trading) or in private off-exchange transactions. Details of theexchanges on which a particularclassofsecuritycanbe traded are set out in a document entitled Final Terms, prepared by the Issuer each time that securities are issued. Market makers provide liquidity on those stock exchanges and for those transactions but only Authorised Participants can apply directly to the Issuer for the issue of Short and Leveraged Commodity Securities. The Issuer has entered into Authorised Participant Agreements and has agreed with Authorised Participants to issue Short and Leveraged Commodity Securities to those Authorised Participants on an on-going basis.anauthorised Participant mayselltheshortandleveragedcommoditysecuritiesonan exchange or in an off-exchange transaction or may hold the securitiesthemselves. UponissueofShortandLeveragedCommoditySecurities,an AuthorisedParticipantmustdeliveranamountofcashtothe Commodity Contract Counterparty equal to the price of the Short and Leveraged Commodity Securities to be issued in exchangeforwhichtheissuerissuestheshortandleveraged AXXII(AVIII).B.29 16

17 Commodity Securities and delivers them to the Authorised ParticipantviaCREST. UponredemptionofShortandLeveragedCommoditySecurities by an Authorised Participant (and in certain limited circumstances,othersecurityholders),thecommoditycontract Counterparty must deliver an amount of cash to the relevant Authorised Participant equal to the price of the Short and LeveragedCommoditySecuritiestoberedeemedinreturnfor delivery by the redeeming Security Holder of the Short and LeveragedCommoditySecurities. B.30 Originatorsofthesecuritised TheCommodityContractsareandwillbeenteredintowiththe assets CommodityContractCounterparties. At the date of the Prospectus, the Issuer has entered into agreementswithubsandmlcitoactascommoditycontract Counterparties. UBSisacorporationdomiciledinBasel,Switzerland,operating in the United Kingdom under branch registration number BR004507, acting though its London branch at 1 Finsbury Avenue,London,EC2M 2PP,England.UBSAG stworegistered offices and principal places of business are: Bahnhofstrasse 45,CH-8001Zurich,Switzerland,andAeschenvorstadt1,CH Basel, Switzerland.The principal activity of UBS is the provision of financial services to private, institutional and corporateclients. MLCI is a company incorporated in the State of Delaware, UnitedStateswhoseregisteredofficeiscareofTheCorporation TrustCompany,CorporationTrustCenter,1209,OrangeStreet, Wilmington,Delaware,19801.TheprincipalactivityofMLCIis conductingacommoditybusiness,includingover-the-counter commodityderivatives,withinstitutionalclientsinvariousu.s. domesticandinternationalmarkets. TheProspectuswillbeupdatedshouldanadditionalCommodity ContractCounterpartybeappointed. AXXII(AVIII).B.30 SECTION C Securities C.1 Typeandclassofsecurities beingoffered Short and Leveraged Commodity Securities are designed to give investors a total return similar to that which could be achieved from managing a long fully cash collateralised unleveragedpositioninfuturescontractsofspecificmaturities, lessapplicablefees.unlikemanagingfuturespositions,short andleveragedcommoditysecuritiesinvolvenorolling,margin calls,expiryorfuturesbrokerage. TheIssuerhascreatedandmadeavailableforissue 120 classes ofshortandleveragedcommoditysecuritieseachofwhich gives investors exposure to the daily percentage changes in movementsinoneofthe BloombergCommodityIndicesand whichcanbegroupedinto 6 differenttypes: OneTimesShortIndividualSecurities; OneTimesShortIndexSecurities; ThreeTimesShortIndividualSecurities; TwoTimesLong IndividualSecurities; TwoTimesLong IndexSecurities;and ThreeTimesLongIndividualSecurities. AXXII(AXII).C.1 17

18 Class and Index characteristics ThereturnontheShortandLeveragedCommoditySecurities is linked in each case to the daily percentage change in the valueoftherelated BloombergCommodityIndicesasfollows: One Times Short Individual Securities provide a short exposuretothedailypercentagechangein Bloomberg CommodityIndiceswhichtrackmovementsinthevalue offuturescontractsinonetypeofcommodity(suchthat ifthevalueoftherelevant BloombergCommodityIndex increasesonanyday,thevalueoftheonetimesshort IndividualSecuritywilldecreaseonthatdaybythesame percentageandviceversa); One Times Short Index Securities provide a short exposuretothedailypercentagechangein Bloomberg CommodityIndiceswhichtrackmovementsinthevalue of futures contracts in respect of a number of different commodities (such that if the value of the relevant BloombergCommodityIndexincreasesonanyday,the valueoftheonetimesshortindexsecuritywilldecrease onthatdaybythesamepercentageandviceversa); ThreeTimesShortIndividualSecuritiesprovideashort exposuretothreetimesthedailypercentagechangein BloombergCommodityIndiceswhichtrackmovements inthevalueoffuturescontractsinonetypeofcommodity (such that if the value of the relevant Bloomberg CommodityIndexincreasesonanyday,thevalueofthe ThreeTimesShortIndividualSecuritywilldecreaseon thatdaybythreetimesthepercentageincreaseinthe BloombergCommodityIndexandviceversa); Two Times Long Individual Securities provide an exposure to twice the daily percentage change in BloombergCommodityIndiceswhichtrackmovements inthevalueoffuturescontractsinonetypeofcommodity (such that if the value of the relevant Bloomberg CommodityIndexincreasesonanyday,thevalueofthe TwoTimesLong IndividualSecuritywillincreaseonthat daybytwicethepercentageincreaseinthe Bloomberg CommodityIndexandviceversa); TwoTimesLong IndexSecuritiesprovideanexposure to twice the daily percentage change in Bloomberg CommodityIndiceswhichtrackmovementsinthevalue of futures contracts in respect of a number of different commodities (such that if the value of the relevant BloombergCommodityIndexincreasesonanyday,the valueofthe TwoTimesLong IndexSecuritywillincrease on that day by twice the percentage change in the BloombergCommodityIndexandviceversa); Three Times Long Individual Securities provide an exposuretothreetimesthedailypercentagechangein BloombergCommodityIndiceswhichtrackmovements inthevalueoffuturescontractsinonetypeofcommodity (such that if the value of the relevant Bloomberg CommodityIndexincreasesonanyday,thevalueofthe Three Times Long Individual Security will increase on that day by three times the percentage change in the BloombergCommodityIndexandviceversa), 18

19 ineachcaseplusanadjustmentfortheriskfreeinterestrate whichaccruestoafullycollateralisedpositionintherelevant underlyingfuturescontracts. Issue specific summary: The following details apply to the Short or Leveraged CommoditySecuritiesbeingissuedpursuanttotheFinalTerms: Class LSECode ISIN AggregatenumberofShortorLeveraged CommoditySecuritiesofthatclass Nameofunderlying Bloomberg CommodityIndex Class and index characteristics [OneTimesShortIndividualSecuritiesprovideashortexposure to the daily percentage change in Bloomberg Commodity Indiceswhichtrackmovementsinthevalueoffuturescontracts inonetypeofcommodity(suchthatifthevalueoftherelevant BloombergCommodityIndexincreasesonanyday,thevalue of the One Times Short Individual Security will decrease on thatdaybythesamepercentageandviceversa)] [OneTimesShortIndexSecuritiesprovideashortexposureto thedailypercentagechangeinbloombergcommodityindices which track movements in the value of futures contracts in respectofanumberofdifferentcommodities(suchthatifthe value of the relevant Bloomberg Commodity Index increases onanyday,thevalueoftheonetimesshortindexsecurity will decrease on that day by the same percentage and vice versa)] [Three Times Short Individual Securities provide a short exposure to three times the daily percentage change in BloombergCommodityIndiceswhichtrackmovementsinthe valueoffuturescontractsinonetypeofcommodity(suchthat if the value of the relevant Bloomberg Commodity Index increases on any day, the value of the Three Times Short IndividualSecuritywilldecreaseonthatdaybythreetimesthe percentageincreaseinthebloombergcommodityindexand viceversa)] [TwoTimesLong IndividualSecuritiesprovideanexposureto twice the daily percentage change in Bloomberg Commodity Indiceswhichtrackmovementsinthevalueoffuturescontracts inonetypeofcommodity(suchthatifthevalueoftherelevant BloombergCommodityIndexincreasesonanyday,thevalue ofthe TwoTimesLong IndividualSecuritywillincreaseonthat day by twice the percentage increase in the Bloomberg CommodityIndexandviceversa)] [TwoTimesLong IndexSecuritiesprovideanexposuretotwice thedailypercentagechangeinbloombergcommodityindices which track movements in the value of futures contracts in respectofanumberofdifferentcommodities(suchthatifthe value of the relevant Bloomberg Commodity Index increases on any day, the value of the TwoTimes Long Index Security 19