Registered office: 49, avenue JF Kennedy, L-1855 Luxembourg,
RCS Luxembourg B-124.284
Important Notice to Xtrackers II Shareholders
Adoption of the International Central Securities Depository Settlement Model
September 2, 2022
The Board of Directors of the Company (the “board of directors“) informs the shareholders of the Company (the “Shareholders“) that it has decided to centralize the settlement of transactions in Shares of all Sub-Funds of the Company in an International Central Securities Depository (“ICSD”) structure, as detailed below (the “ICSD Settlement Model”) with effect from October 10, 2022 (the “Effective date”).
Capitalized terms used in this notice shall have the same meaning as given to them in the latest version of the Company’s prospectus (the “Prospectus”), unless the context requires otherwise.
Current Settlement Model
Currently, the existing settlement model (the “Current Settlement Model”) of the Sub-Funds involves settlement on several local central securities depositories (“CSD”) showing where the Sub-Funds are listed and traded. Each exchange typically operates its own CSD for settlement functions. Trading and settlement of Shares in Funds under this structure involves having to move Shares between different CSDs, which is complex, costly and inefficient. Examples of these local CSDs include (but are not limited to) the CREST system, Euroclear Netherlands, Clearstream Banking AG, Frankfurt/Main, SIS Sega Intersettle AG and Monte Titoli SPA. The Current Model Fund Rules will no longer be operational as of the close of business on 7 October 2022.
The ICSD Settlement Model
The main difference between the current settlement model and the ICSD settlement model is that the ICSD settlement model provides centralized settlement in Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking SA, Luxembourg (“Clearstreamand, with Euroclear, theInternational Central Securities Depositories”) for stocks traded on multiple exchanges.
Benefits of the ICSD Settlement Model
There are a number of anticipated benefits for the Company in transitioning to the ICSD settlement model, as follows:
increased liquidity for investors and less liquidity fragmentation;
improved settlement performance, thanks to the pooling of each Sub-Fund’s stocks in the ICSD structure, which provides a longer time window for the settlement of transactions and minimizes the need to manually move the relevant shares between several local CSDs ;
improving the efficiency of the settlement process through longer hours of operation of the ICSD, thereby increasing the time during which transactions can be matched and settled, and minimizing operational complexity in the current settlement model of having to organize the realignment of actions between the CSDs, which is complex, costly and time-consuming;
reduced inventory requirements and lower capital and overhead charges for market makers and brokers, which could ultimately help reduce trading costs for end investors;
improved currency functionality on dividend payments; and
contribute to the creation of a more efficient securities lending market for the Shares.
Accordingly, the Directors are of the view that the ICSD settlement model provides a more streamlined centralized settlement structure, which they believe will result in improved liquidity and spreads for investors and reduce risk in the process. of settlement relating to the Company and its Sub-Funds.
Impact on registered shareholders
For the Company, the main difference between the current Model Rules and the ICSD Model Rules relates to registered shareholders entered in the Company’s register of shareholders (the “Shareholder register”).
Under the current settlement model, only certain CSDs (eg Clearstream Banking AG, Frankfurt/Main) or their agents are registered as shareholders in the shareholder registers. Accordingly, the Company’s Register of Shareholders consists of a mix of proxies of Authorized Participants who hold accounts with CSDs, as well as the CSDs themselves or their proxies. Under the ICSD settlement model, all investors will be represented by a common depositary (the “Common Depositary”) and the sole registered holder of all Shares of each Sub-Fund will be the appointed depositary (the “Designated Common Depositary”). The Common Depositary has been appointed by the ICSD and its participation will represent all of the holdings of the investors through the ICSD.
Under the current settlement model, investors who do not have an account with, and who are not CSDs, hold their interests in the shares of the sub-funds through nominees and other intermediaries, meaning they are beneficial owners who do not hold legal title in the Shares. Investors who are not currently registered as Shareholders on the Register of Shareholders and who have a beneficial interest in Shares will continue to hold a beneficial interest in the same number of Shares in the same Sub-Fund(s). (s) than the one they currently hold under the Current Settlement. Model when adopting the ICSD Model Settlement.
Under the ICSD settlement model, authorized participants will continue to originate and instruct trades directly with the firm (as is the case under the current settlement model).
Impact on end investors
Under the ICSD settlement model, the appointed Common Depositary, together with the Common Depositary and the ICSDs, will be subject to contractual obligations to transfer the beneficial interest and all associated rights of the Registered Shareholder (i.e. i.e. the appointed Designated Custodian) on all Shares in each of the Sub-Funds to participants in the ICSD (who may themselves be underlying investors in the Sub-Fund(s) or CSDs, brokers or intermediaries holding directly or indirectly on behalf of underlying investors in the Sub-Fund(s).
The Nominee Common Depositary will be under a contractual obligation to forward all notices of the Company (or any of its Sub-Funds) (such as shareholder meetings) and related documentation issued by the Company to the Common Depositary, which shall further be required to forward such notices and documents to the ICSDs. The relevant ICSD will in turn transmit the notifications and associated documentation received from the Common Depositary to its participants in accordance with its rules and procedures. Similarly, each ICSD will be contractually bound to collect and transfer all votes received from its participants to the Common Depositary and the Common Depositary will in turn be contractually bound to collect and transfer all votes received from the relevant ICSDs to the appointed Common Depositary, who will be contractually bound to vote in accordance with these instructions.
The Common Depositary Nominee, the Common Depositary and the ICSDs will also be contractually bound to pass on any distributions received from the Downline Company to the relevant participants and/or their nominees. In particular, on the instruction of the Appointed Depositary, any redemption proceeds and declared dividends payable by the Company to the Appointed Depositary as Shareholder may be paid by the Company or its authorized agent directly to the relevant ICSD. If the Common Depositary Nominee receives redemption proceeds or dividends from the Company or its authorized agent, the Common Depositary Nominee will arrange for such payments to be forwarded to the relevant ICSD. The relevant ICSD will in turn pay the redemption proceeds and dividends received to the relevant participants of the ICSD.
Under the ICSD Settlement Model, investors who are not ICSD Participants will need to use a broker, agent, custodian bank or other intermediary who is, directly or indirectly, an ICSD Participant to trade and settle shares, similar to how investors under the current settlement model use a broker or other intermediary who is a CSD participant for the market in which the investor intends to trade and settle. Investors are invited to consult the entity which concerns them for further information in this respect.
The adoption of the ICSD model settlement will not change the way investments in the sub-funds are managed or the rights of investors other than those described herein.
Shareholders who subscribe for Shares in a Sub-Fund on the primary market and who do not agree to the Amendments have the right to redeem their Shares in the relevant Sub-Fund in accordance with the Prospectus. Such redemptions will be free of any Redemption Charge from the date of this notice until 5:00 p.m. (Luxembourg time) on 5 October 2022. Please note that the Company does not charge any redemption charge for the sale of Shares on the secondary market. Orders to sell Shares through a stock exchange may be placed through an authorized intermediary or stockbroker. Shareholders should note that secondary market orders may incur costs over which the Company has no control and to which the above waiver of redemption charges does not apply.
Copies of the revised Prospectus (including detailed information regarding settlement under the ICSD settlement model, as well as a summary of the interaction between the Common Depositary and the underlying investors) reflecting the Amendments will be made available on the Company’s website (www.Xtrackers.com) on or about the Effective Date, and copies may be obtained free of charge upon request at the registered office of the Company or from the offices of foreign representatives, upon that they will be available.
Shareholders who have questions or for whom any of the above is unclear should seek advice from their stockbroker, bank manager, legal adviser, accountant or other independent financial adviser.
In particular, Shareholders should consult their own professional advisers as to the specific tax implications under the laws of the countries of which they are nationals, resident, domiciled or incorporated and as to any costs or charges which may be applicable to them as a result of the company’s implementation of the ICSD settlement model.
Further information regarding the implementation of the ICSD settlement model can be obtained from the legal entities mentioned under Contact information below, Foreign Representative Offices or by emailing [email protected]
Neither the content of the Company’s website nor the content of any other website accessible from hyperlinks on the Company’s website is incorporated into or forms part of this announcement.
Board of directors
49, avenue JF Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg
DWS Investment SA
2, boulevard Konrad-Adenauer, L-1115 Luxembourg, Grand Duchy of Luxembourg
Category Code: MSCU
Sequence number: 980615
Received time (offset from UTC): 20220902T091455+0100