Last checked at 27 Feb 2020 09:00
Xtrackers II
Investment Company with Variable Capital
Registered office: 49, avenue J.F. Kennedy, L-1855 Luxembourg
R.C.S. Luxembourg B-124.284
(the “Company”)
IMPORTANT NOTICE TO THE SHAREHOLDERS OF:
Xtrackers II USD Emerging Markets Bond UCITS ETF
(LU0677077884)
(the “Sub-Fund”)
27 February 2020
The board of directors of the Company (the “Board of Directors”) hereby informs the shareholders of the Sub-Fund (the “Shareholders”) about material changes to the methodology of its Reference Index.
The Reference Index of the Sub-Fund is the FTSE Emerging Markets USD Government and Government-Related Bond Select Index. The Reference Index is based on the FTSE Emerging Markets Broad Bond Index (the “Parent Index”) and aims to reflect the performance of both investment-grade and high-yield USD-denominated debt issued by governments, regional governments and government related entities, domiciled in emerging market countries. The Reference Index is administered and published by FTSE Fixed Income LLC (the “Index Administrator”).
Current Reference Index methodology
Emerging Market country selection: According to the Reference Index methodology, a country must be classified as “emerging” in order to be eligible for inclusion in the Reference Index. Furthermore, as part of the country selection, the two criteria below need to be met:
1) The country is defined as:
"emerging and developing economy" by the IMF World Economic Outlook, or"low-income economy" or "lower-middle-income economy" or "upper-middle- income economy” by the World Bank.2) Only countries classified as emerging markets with a per capita income below 2x the World Bank definition of "High Income" for 3 consecutive years are eligible for inclusion in the Reference Index.
Exposure limits: The cap on the outstanding par amount for each country is at USD 25 billion.
New Reference Index methodology
As of 31 January 2020, the Index Administrator announced certain changes to the methodology of the Reference Index (the “Index Changes”) which will affect the Reference Index in two ways:
1) Emerging Market country selection: the Reference Index will be diversified to include all countries within the Parent Index.
2) Exposure limits: the cap on the outstanding par amount for each country will be lowered to USD 20 billion.
The full announcement from FTSE is available on: https://www.yieldbook.com/f/m/pdf/ftse_indexes/announcements/EMUSDGovGovRelated.Select.idxchg.20200131.pdf
Implementation of changes
To facilitate the Index Changes, the Index Administrator will stagger the change in exposure, as described in the paragraph above, over three month end rebalances from March 2020 to May 2020.
As a consequence of the Index Changes, the Product Annex of the Sub-Fund will be amended so as the following sentence under the Reference Index methodology paragraph is deleted: “Only issuers from countries classified as emerging markets with a per capita income below 2x the World Bank definition of “High Income” for 3 consecutive years are eligible for the Reference Index”.
Transaction costs
Shareholders should be aware that certain transaction costs will arise as a result of the Index Changes which will be borne by the Sub-Fund. Under normal market circumstances the transaction costs are expected to be immaterial.
Shareholders can apply for redemption in accordance with the Prospectus, free of any charge, during a one-month period starting from the date of this publication and ending on 30 March 2020. Please note that the Company does not charge any fee for the sale of shares in the secondary market. Orders to sell shares through a stock exchange can be placed via an authorised intermediary or stockbroker. However, Shareholders should note that orders in the secondary market may incur costs over which the Company has no control and to which the abovementioned disapplication of the redemption fee does not apply. Shareholders should consult with their authorised intermediary or stockbroker in relation to these costs.
Further information in relation to the Index Changes may be obtained from the legal entities mentioned under Contact information below, the offices of foreign representatives or by sending an email to Xtrackers@dws.com
Shareholders who have any queries or to whom any of the above is not clear should seek advice from their stockbroker, bank manager, legal advisor, accountant or other independent financial advisor. Shareholders should also consult their own professional advisors as to the specific tax implications under the laws of the countries of their nationality, residence, domicile or incorporation.
Capitalised terms used in this notice shall have the same meaning ascribed to them in the latest version of the prospectus of the Company (the “Prospectus”), unless the context otherwise requires.
Neither the contents of the Company's website nor the contents of any other website accessible from hyperlinks on the Company's website is incorporated into, or forms part of, this announcement.
Xtrackers IIThe Board of Directors
Contact information
Xtrackers II49, avenue J.F. Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg
DWS Investment S.A.2, boulevard Konrad Adenauer, L-1115 Luxembourg, Grand Duchy of Luxembourg
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