ETFS FTSE® MIB Super Short Strategy (Daily 2x)
GO UCITS ETF
FUND SUPPLEMENT
No.9
A sub-fund of GO UCITS ETF Solutions Plc, an umbrella investment company with variable
capital and segregated liability between its Funds incorporated with limited liability in Ireland under
registration number 459936.
The Company and the Directors, whose names appear on page 11 of the Prospectus, are the persons
responsible for the information contained in this Fund Supplement and accept responsibility accordingly.
To the best of the knowledge and belief of the Company and the Directors (who have taken all reasonable
care to ensure that such is the case), the information contained in this document is in accordance with the
facts and does not omit anything likely to affect the import of the information.
This Fund Supplement contains information relating to the ETFS FTSE® MIB Super Short Strategy (Daily
2x) GO UCITS ETF(the “Fund”) which is a separate Fund of GO UCITS ETF Solutions Plc (the “Company”),
an umbrella fund with segregated liability between its Funds. This Fund Supplement forms part of and
should be read in the context of, and together with, the Company’s Prospectus dated 25 March 2015 and
any other applicable addenda. Investors should also refer to the Company’s latest published annual
report and audited financial statements (if any) and, if published after such report, a copy of the latest
semi-annual report and unaudited financial statements. Capitalised expressions used and not defined in
this Fund Supplement shall bear the meanings as set out in the Prospectus. If you are in any doubt about
the action to be taken or the contents of this Fund Supplement, please consult your stockbroker, bank
manager, lawyer, accountant or other independent professional adviser who, if such advice is taken in the
United Kingdom, is an organisation or firm authorised or exempted pursuant to the FSMA. Investors
should note that this Fund will pursue its investment policy principally through investment in FDIs.
Potential investors should consider the risk factors set out in the Prospectus and in this Fund Supplement
before investing in this Fund. An investment in the Fund involves certain risks and may only be suitable
for persons who are able to assume the risk of losing their entire investment.
The Prospectus sets forth information on investment risk, management and administration of the Fund,
valuation, subscription, redemption and transfer procedures and details of fees and expenses payable by
the Fund and should be read subject to the information herein.
The date of this Fund Supplement is 25 March 2015.
INVESTMENT OBJECTIVE
The investment objective of the ETFS FTSE® MIB Super Short Strategy (Daily 2x) GO UCITS ETF (the
“Fund”) is to provide an inverse and leveraged exposure to the equity markets in Italy.
INVESTMENT POLICY
In order to achieve this investment objective, the Fund will seek to gain exposure to all of the component
securities of the FTSE® MIB Daily Super Short Strategy Index (the “Index”) in substantially the same
weighting as the Index and consequently the Fund may have exposure of up to 20% of its Net Asset
Value in shares issued by the same body, which limit may be raised to 35% for a single issuer in
exceptional market conditions, including (but not limited to) circumstances in which such issuer
occupies a dominant market position. This will be done primarily through the use of OTC Swaps using
the following model:
“Unfunded” swaps: The Investment Manager enters into an OTC Swap with a counterparty which will
provide exposure to the performance of the Index. Under the terms of the unfunded OTC Swap, cash
received from the subscription of Shares is retained by the Fund. As a result, the Fund holds substantially all
of its Net Asset Value in cash. For the purposes of efficient portfolio management, the Investment Manager
shall seek to employ an effective cash management policy by managing such cash (and any cash collateral
received from the counterparty) through investments in money market funds and/or entering into reverse
repurchase agreements.
The Index is a leveraged index with a short exposure which aims to provide twice the daily percentage
change in the level of the FTSE® MIB Total Return Index (the “Underlying Index”) on an inverse basis plus
an implied amount reflecting the interest accruing on the cash proceeds earned from the sale of the index
portfolio (Euro OverNight Index Average (“EONIA”)) (the “Overnight Interest Rate”) less an implied amount
reflecting the cost of borrowing the index portfolio to maintain the short exposure (the “Borrowing Cost”).
This means that the Fund will seek to deliver an Inverse Return to Shareholders which corresponds to twice
the daily percentage change in the level of the Underlying Index on an inverse basis on that day plus the
Overnight Interest Rate and less the Borrowing Cost (both of which are built into the leveraged methodology)
and fees and expenses levied at Fund-level. Therefore, in the event the Index produces a positive return on
a particular day, the Fund should record a positive return equivalent to twice that day’s percentage change in
the level of the Underlying Index on an inverse basis (before adjustment reflecting the Overnight Interest
Rate and Borrowing Cost built into the leveraged methodology and fees and expenses applied at Fundlevel). Conversely, in the event the Index produces a negative return on a particular day, the Fund should
record a negative return equivalent to twice that day’s percentage change in the level of the Underlying Index
on an inverse basis (before adjustment reflecting the Overnight Interest Rate and Borrowing Cost built into
the leveraged methodology and fees and expenses applied at Fund-level).
The OTC Swaps shall aim to provide an Inverse Return of the Underlying Index which corresponds, on an
inverse basis, to twice the daily percentage change in the level of the Underlying Index plus the Overnight
Interest Rate and less the Borrowing Cost and the fees charged by the OTC Swap counterparty. This
means that the Net Asset Value of the Fund should, on an inverse basis (before adjustment reflecting the
Overnight Interest Rate and Borrowing Cost and fees and expenses applied at Fund-level), increase or
decrease by twice the daily percentage change in the level of the Underlying Index. The OTC Swaps will be
structured in a way that will generally result in an amount being payable by the OTC Swap counterparties to
the Fund which is equivalent to twice the percentage change in the level of the Underlying Index (plus the
Overnight Interest Rate and less the Borrowing Cost and the fees charged by the OTC Swap counterparties)
in the event of a decrease in the level of the Underlying Index on a particular day. It will also generally result
in an amount being payable by the Fund to the OTC Swap counterparties equivalent to twice the percentage
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change in the level of the Underlying Index (less the Overnight Interest Rate and plus the Borrowing Cost
and the fees charged by the OTC Swap counterparties) in the event of an increase in the level of the
Underlying Index on a particular day. This means that, in the event the Underlying Index performs negatively
on a particular day, the Fund should record a positive return of twice the same percentage level (before
adjustment reflecting the Overnight Interest Rate and Borrowing Cost built into the leveraged methodology
and fees and expenses applied at Fund-level) on that day. Conversely, where the Underlying Index
produces a positive return on a particular day, the Fund should record a negative return of twice the same
percentage level (before adjustment reflecting the Overnight Interest Rate and Borrowing Cost built into the
leveraged methodology and fees and expenses applied at Fund-level) on that day. The terms of the OTC
Swaps will seek to limit the extent of payments for which the Fund will be liable and will provide that the
amount payable by the Fund to the OTC Swap counterparty will not exceed the then current Net Asset Value
of the Fund.
TRACKING ERROR
The estimated anticipated tracking error for the Fund in normal market conditions is 0.0971% (annualised).
INDEX DESCRIPTION
The Index is a leveraged index with a short exposure which aims to provide twice the daily percentage
change in the level of the FTSE® MIB Total Return Index (the “Underlying Index”) on an inverse basis plus
an implied amount reflecting the interest accruing on the cash proceeds earned from the sale of the index
portfolio (Euro OverNight Index Average (“EONIA”)) less an implied amount reflecting the cost of borrowing
the index portfolio to maintain the short exposure.The Index is calculated in real time every 15 seconds
between 9.01 a.m. and 5.30 p.m. (Central European Time) based on the Underlying Index. The rebalancing
of the Index takes place daily.
Corporate actions and constituent changes are reflected in the Index as they occur. The interest income
from selling the initial portfolio and the short sale as well as the stock borrowing costs associated with
running short positions are also taken into account in the Index. Dividends used in the Index total return
calculations are those declared by the company and applied on the ex-dividend date
The Underlying Index is the primary benchmark index for the Italian equity markets. The Underlying Index is
comprised of highly liquid, leading companies across Industry Classification Benchmark sectors in Italy. The
Underlying Index measures the performance of 40 Italian equities and seeks to replicate the broad sector
weights of the Italian stock market. The Underlying Index is derived from the universe of stocks trading on
the Borsa Italiana (BIt) main equity market. The Underlying Index has been created to be suitable for futures
and options trading, replacing the S&P/MIB Index as a benchmark Index for exchange-traded funds, and for
tracking large capitalization stocks in the Italian market. Each stock is analysed for size and liquidity, and the
overall Underlying Index has appropriate sector representation. The Underlying Index is market capweighted after adjusting constituents for float.
Rebalancing frequency of the Index
The Index rebalances daily (i.e. the x2 inverse leverage factor is reset against the Underlying Index on a
daily basis). Additionally, the methodology of the Index incorporates an intraday adjustment mechanism
whereby if the value of the Underlying Index falls by more than 25% on a single day, the Index is
automatically rebalanced during the same day giving an intraday reset price (“Intraday Reset Price”). Such
intraday adjustment seeks to protect the Index in the event of extreme market movements on a single day by
crystallising the losses incurred up to that point. This results in (i) the Index being able to reset its leverage
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against the Underlying Index based on the Intraday Reset Price of the Index and (ii) the Index being able to
chart the movements of the Underlying Index against such Intraday Reset Price for the remainder of the day.
Rebalancing frequency of the Underlying Index
Quarterly review: The quarterly review of constituents takes place in March, June, September and
December of each year and changes will be applied after close of business on the third Friday in March,
June, September and December. If any third Friday of these months is a holiday, the preceeding closing day
prices will be used. FTSE is responsible for publishing the outcome of the periodic review.
The underlying universe for the Underlying Index is all stocks trading on the Borsa Italiana MTA and MIV
markets (except for preferred and saving shares). The Underlying Index will consist of the 40 most liquid and
capitalised stocks listed on the Borsa Italiana (BIt) selected according to the index rules. The selection
procedure is based on size (free float adjusted market capitalisation) and liquidity (six months turnover),
according to the procedure detailed in the index rules. The FTSE Italia Index Policy Committee is
responsible for the implementation of the algorithm and will decide whether special circumstances would
warrant making an exceptional change to the index constituents.
Re-weightings: The constituents of the Underlying Index are capped at 15% at the time of the quarterly
reviews. Capping procedures are run on the Monday following the second Friday of March, June, September
and December, they are based on Friday closing prices and they are implemented after the closing of trading
of the third Friday of March, June, September and December. Any constituents whose weights are greater
than 15% are capped at 15%. The weights of all lower ranking constituents are increased correspondingly.
The weights of lower ranking constituents are then checked and if they exceed 15% they are also capped at
15%. This process is repeated until no constituent weight exceeds 15%. The weight of each stock in the
Underlying Index is evaluated in terms of its adjusted market capitalisation versus the Index, and will be reevaluated at each quarterly review.
Further Information
The index rules contain further details relating to the index rebalancing and reweighting including the
circumstances under which extraordinary adjustments may be made.
This is a summary of the principal features of the Index and the Underlying Index and does not purport to be
an exhaustive description. Further information on the composition of the Index, including the rules and
calculation methodology governing the Index, can be found in the “Ground Rules for the FTSE Daily Short
Indices”, the “Methodology for the Management of the FTSE MIB Index”and other informational materials
which are available at http://www.ftse.com/Indices/(as of the date of this Prospectus).
Index
FTSE® MIB Daily Super Short Strategy Index
Underlying Index
FTSE® MIB Total Return Index
ISIN
Bloomberg
Reuters
N/A
TFMIBI2E
.FTFMIBI2
N/A
TFTSEMIB
.TRIFTSEMIB
PROFILE OF A TYPICAL INVESTOR
Only Authorised Participants may invest for ETF Shares in the Fund directly with the Company. All other
investors may acquire or purchase ETF Shares only through the secondary market.
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It is expected that investors in the Fund will be sophisticated investors (and/or informed investors who have
taken professional advice) who (i) understand leverage and the risks associated with an investment in a
Leveraged Inverse Fund, including the impact on returns of the daily rebalancing of each Leveraged Index
and increased susceptibility to market movements , (ii) are able to bear the risk of losing their entire
investment, (iii) view the investment as short term (i.e. day-to-day, in respect of each daily rebalancing
period) and (iv) who can accept the levels of volatility associated with the relevant equity markets (or sectors
thereof) to which the Fund has exposure in addition to the double volatility imposed by the compounded daily
return.
RISK MANAGEMENT
Use of Relative value-at-risk (“VaR”)
The Investment Manager uses a risk management technique known as relative value-at-risk (“VaR”) to
assess the market risk of the Fund. Relative VaR is the VaR of a Fund divided by the VaR of the index
tracked or replicated by it where this index has no embedded leverage, allowing the global exposure of a
Fund to be compared, and limited by reference to, the global exposure of the relevant index. As the Index
being tracked by the Fund is a Leveraged Index (i.e. leverage is embedded in the Index return), the relative
VaR is the VaR of the Fund divided by the VaR of the Underlying Index (see the table in the section entitled
“Index Description” above) which has no embedded leverage. The Central Bank requires that relative VaR
must not exceed twice the reference portfolio (i.e. the Underlying Index in this case). It is not expected that
the relative VaR of the portfolio of the Fund shall exceed twice the VaR of the Underlying Index. The onetailed confidence level of the Fund shall be 99% and the holding period shall be one day. The historical
observation period will not be less than one year, however, a shorter observation period may be used when
appropriate, (e.g. as a result of significant recent changes in price volatility).
The Central Bank requires that UCITS using VaR approaches to risk management disclose the expected
level to which the Fund will be leveraged and, where relevant, the possibility that higher leverage levels may
apply. For the purpose of this disclosure, it is important to note that the Central Bank requires that leverage
be calculated as the full sum of the notionals of all derivatives held by the Fund. Leverage calculated in this
manner is therefore a reflection of the sum of all notional market exposures achieved through the use of
derivative instruments (primarily OTC Swaps) held by the Fund as a percentage of the Fund’s Net Asset
Value. For the Fund, the notional market exposure takes into account not only the notional value of the
relevant derivative instrument, but also the current mark-to-market value of the derivative instrument which
reflects the current mark-to-market value of the underlying reference asset (i.e. the index). On an intramonth basis, the TER and other expenses paid out of the assets of the Fund will steadily reduce the Net
Asset Value of the Fund versus the value of the derivative instrument until the derivative instrument is next
reset against the Net Asset Value of the Fund (this is done monthly). Nonetheless, and on the basis that the
expected level of leverage is calculated to the nearest percentile, it is not expected that the levels of leverage
for the Fund (calculated based upon the full sum of notionals as described above) will exceed 100% of the
Fund’s Net Asset Value or that higher levels of leverage will apply.
RISK FACTORS
Investors are specifically referred both to the section headed “Risk Factors” and to Schedule II in the
Prospectus and should consider the following risk factors prior to investing in the Fund.
1.
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The Fund is only suitable for sophisticated investors who understand leverage, double
volatility and compounded daily returns and can accept the potential of a magnified loss
arising within products incorporating these features by comparison to funds which do not
incorporate these features.
2.
The methodology of the Index incorporates an intraday adjustment mechanism whereby if the
value of the underlying FTSE® MIB Total Return Index (the “Underlying Index”) falls by more
than 25% on a single day, the Index is automatically rebalanced during the same day giving
an intraday reset price (“Intraday Reset Price”). Such intraday adjustment seeks to protect
the Index in the event of extreme market movements on a single day by crystallising the
losses incurred up to that point. This results in (i) the Index being able to reset its leverage
against the Underlying Index based on the Intraday Reset Price of the Index and (ii) the Index
being able to chart the movements of the Underlying Index against such Intraday Reset Price
for the remainder of the day. However, over time an investor can still lose the value of all of
its investment in the Fund but such loss is limited to the value of the investor’s holding of
Shares of the Fund.
3.
The performance of the Index is inversely related to the Underlying Index such that an increase in
value of the Underlying Index will generally result in a decrease in value of the Index equivalent to
twice the percentage change in the Underlying Index (and vice versa) before addition of the implied
interest income and deduction of the implied stock borrowing costs which are applied in the
leveraged inverse methodology. Accordingly, investing in the Fund is substantially more risky than
investing in a fund which tracks the Underlying Index and is suitable only for investors who
understand the risks and inherent costs associated with an investment in a short and leveraged
strategy.
4.
The Fund may not be suitable for investment over extended periods of time. Due to the daily
rebalancing of the Index, the actual change in the value of the Fund may differ significantly from the
change in the inverse return of the Underlying Index multiplied by a leverage factor of two (the
“Unbalanced Leveraged Return”). Price volatility may also result in long-term returns of the Fund
being significantly different from the Unbalanced Leveraged Return. The daily rebalancing of the
Index may result in the Index being under-leveraged or over-leveraged relative to the Unbalanced
Leveraged Return on the day following such rebalancing. Accordingly, this may result in the
underperformance of the Fund compared to the performance arising from the Unbalanced
Leveraged Return. Even after taking into account (i) the addition of the implied interest income and
deduction of the implied stock borrowing costs (which are applied in the leveraged inverse
methodology of the Index); and (ii) fees and expenses applied at Fund-level, investors should not
expect the actual percentage return for Shares in the Fund to be equal to the percentage change in
the Unbalanced Leveraged Return for periods of longer than one day.
5.
An investment in the Fund exposes an investor to the market risks associated with fluctuations in the
Index and the value of securities comprised in the Underlying Index. Due to the leverage inherent in
the Index, this effect will be greater than that for the Underlying Index. The value of the Index can
increase as well as decrease and the value of an investment will fluctuate accordingly.
6.
There is no guarantee that the Fund’s investment objective will be achieved. No asset or financial
instrument will allow automatic and continuous tracking of the performance of the Index. In addition,
any re-weighting of the Index may result in transaction and/or other costs being incurred at Fundlevel. Likewise, the Fund may not be able to track perfectly the performance of the Index, because
of the temporary unavailability of certain securities comprised in the Underlying Index or because of
exceptional circumstances triggering distortions in the weightings of the Underlying Index, especially
if trading in securities comprised in the Underlying Index is suspended or interrupted temporarily.
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THE SHARES
As at the date of this Fund Supplement, the Fund only has a single class of Shares which are ETF Shares as
detailed in the table below. Additional classes of Shares may be added in the future in accordance with the
requirements of the Central Bank.
Shares are freely transferable subject to and in accordance with the provisions of the Articles and as set out
in the Prospectus.
The Directors have resolved that Shares in the Fund will be issued in uncertificated form. Shares will be in
registered form and no temporary documents of title will be issued. Shares in the Fund will be issued in
Dematerialised Form in one or more Recognised Clearing and Settlement Systems subject to the issue of a
global certificate where required by a clearing system in which Shares are held. The Company will not issue
Share certificates and the Company will not issue fractions of Shares. In order for an investor to be a
Shareholder in the Fund, it must be registered in the Company’s register of Shareholders. All subscriptions
are dealt on a forward pricing basis (i.e. by reference to the subscription price for Shares calculated as at the
Valuation Point for the relevant Dealing Day).
Share Class
Share Class
Type
ETF Shares
EUR Accumulating ETF
Minimum Subscription /
Redemption Amount
EUR 1,000,000
TER*
0.60%
Dividend
policy
N/A
*Expressed as a % per annum of the Net Asset Value of the Share class.
STOCK EXCHANGE LISTINGS
As at the date of this Fund Supplement, the following classes of ETF Shares have been admitted to trading
on the stock exchanges listed below. Applications for the admission to additional stock exchanges of existing
and new classes of ETF Shares may be made from time to time.
Share Class
EUR Accumulating ETF
Share
Class
Type
ETF
Shares
Listing Exchange
Listing
Currency
Borsa Italiana
EUR
ISIN
IE00B4TG8N52
Bloomberg
code
ITS2 IM
Reuters code
ITS2.MI
DEALING PROCEDURES
The procedures for subscribing for and redeeming of Shares are outlined in the Prospectus. Subscriptions
and redemptions in the Fund may be in cash or, where agreed with the Manager or its delegate, on an in
specie basis.
Shares may be subscribed for in the manner set out in the Prospectus under the heading “Subscriptions”,
beginning on page 53.
Shares in the Fund may be redeemed as described in the Prospectus under the heading “Redemptions”
beginning on page 60.
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DEALING INFORMATION
Base Currency
EUR
Dealing Currency
The dealing currency for each class of Shares is the currency of
denomination of the relevant class of Shares.
Business Day
A day on which banks and markets and exchanges are open for business in
the United Kingdom.
Dealing Day
An Index Publication Day and a day on which no Significant Markets are
closed for business or such Business Day(s) as the Directors may from time
to time determine (and notify in advance to Shareholders) for dealings in
the Fund provided always that there shall be at least one Dealing Day each
fortnight. The Promoter maintains an online “Dealing Day Calendar” at:
http://www.etfsecurities.com, where advance notice of all expected Dealing
Days for the Fund is published on an ongoing basis. The Dealing Day
Calendar is also available on request from the Manager and from the
Promoter.
Dealing Deadline
The cut-off time in respect of any Dealing Day for receipt of applications for
subscriptions and redemptions in the Fund as shall be set out on
http://www.etfsecurities.com, which information shall be kept up to date.
Minimum
Amount
Subscription
Please refer to the table contained in the section above entitled “The
Shares”.
Minimum
Amount
Redemption
Please refer to the table contained in the section above entitled “The
Shares”.
Settlement Time
Settlement of subscriptions and redemptions must generally occur within
two Business Days after the relevant Dealing Day (unless otherwise agreed
with the Manager or its delegate).
Valuation
The Valuation Point is the time at which the value of the Index is
determined.
TER
The Fund gains exposure to the Index through the use of OTC Swaps
which are valued in accordance with the relevant provisions of the
Prospectus.
Please refer to the table contained in the section above entitled “The
Shares” for the TER applicable to each Share class.
Brokerage and extraordinary expenses are excluded from the TER – see
section entitled “Fees and Expenses” on page 70 of the Prospectus.
Fees and expenses relating to establishment of the Fund are borne by the
Manager.
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TAXATION
A description of the taxation applicable to the Company and its Shareholders is outlined under the heading
“Taxation” in the Prospectus.
INDEX DISCLAIMER
The Fund is not in any way sponsored, endorsed, sold or promoted by FTSE International Limited (“FTSE”),
the London Stock Exchange Plc (the “Exchange”), The Financial Times Limited (“FT”) or Borsa Italiana SpA
(“Borsa Italiana”) (collectively the “Licensor Parties”) and none of the Licensor Parties make any warranty or
representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the
Index (the “Index") and/or the figure at which the said Index stands at any particular time on any particular
day or otherwise. The Index is calculated by FTSE with the assistance of Borsa Italiana. None of the
Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index
and none of the Licensor Parties shall be under any obligation to advise any person of any error therein.
“FTSE®” is a trade mark of the Exchange and the FT, “MIB®” is a trade mark of Borsa Italiana and both are
used by FTSE under licence.
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