Risk Disclosure

General

This section contains a number of risk factors pertaining to the Issuer, the ETP Securities and the Issuer’s ability to fulfil its obligations under the ETP Securities issued under the Programme. All of these factors are contingencies that may or may not occur.

Factors which the Issuer believes may be material for the purpose of assessing the market risks associated with ETP Securities issued under the Programme are also described below.

The Issuer believes that the factors described below represent the principal risks inherent in investing in ETP Securities issued under the Programme, but the inability of the Issuer to pay any amounts on or in connection with any ETP Securities may occur for other reasons and the Issuer does not represent that the statements below regarding the risks of holding any ETP Securities are exhaustive. Before making an investment decision, prospective purchasers of ETP Securities should consider carefully, in the light of their own financial circumstances and investment objectives, all the detailed information set out elsewhere in this document and, in particular, the considerations set forth below in order to reach their own views prior to making any investment decision.

The assessment of materiality of each risk factor is based on the Issuer’s assessment (as of the date of this Base Prospectus) of the probability of its occurrence and the expectation of the magnitude of its adverse impact which are disclosed by rating the relevant risks as low, medium or high. Prospective investors should note that, in practice, any risk(s) may materialise and the magnitude of the associated impact may vary depending on the circumstances.

The risk factors are presented in categories where the most material risk factors in a category is/are presented first under such category. Subsequent risk factors in the same category are not ranked in order of materiality or probability of occurrence. Where a risk factor may be categorised in more than one category, such risk factor appears only once and in the most relevant category for such risk factor.

Words and expressions not defined in this Risk Factors section shall have the meanings given to them elsewhere in this Base Prospectus.

1. Risk factors relating to the ETP Securities

1.1 Market price of the ETP Securities

The ETP Securities may have a long term and the Final Redemption Date could be up to 50 years from the original Issue Date of the Series. Unless the Issuer permits redemption requests from ETP Securityholders which are not Authorised Participants. the only means through which an investor will be able to realise value from an ETP Security prior to its Final Redemption Settlement Date will be to sell it at its then market price in a secondary market transaction.

General movements in local and international markets and factors that affect the investment climate and investor sentiment could all affect the level of trading and, therefore, the market price of the ETP Securities. Investors should note that general movements in markets and factors that affect the investor climate and investor sentiment may have different effects on each Series of ETP Securities. The ETP Security Value and/or market price of the ETP Securities may be volatile and may fall rapidly and an investor may not be able to sell its ETP Securities quickly and/or at a price such that the investor is able to prevent or minimise any loss of its investment. This may result in the ETP Securities experiencing a significantly higher degree of volatility compared to financial instruments exposed to the price of traditional assets.

The market price of the ETP Securities of a Series will be affected by a number of factors, including, but not limited to:

1. the value of the Reference Assets (and the associated Underlying Assets) referenced by such Investment Strategy;
2. the degree of leverage applicable to such Series of ETP Securities;
3. market perception, interest rates, yields and foreign exchange rates;
4. whether or not any market disruption is subsisting;
5. the nature and value of any Collateral Assets relating to such Series of ETP Securities;
6. the creditworthiness of the FCMs and the Authorised Participants;
7. any fees or execution costs applicable to subscriptions for or redemptions of the ETP Securities; and
8. the liquidity in the ETP Securities.

Prospective investors should be aware that the ETP Security Value and the secondary market price of the ETP Securities can go down as well as up throughout the term of the ETP Securities. Prospective investors should be aware that the ETP Security Value and market price of any ETP Securities on any Valuation Date may not reflect their prior or future performance. There can be no assurance as to the future value and market price of any ETP Securities.

AN INVESTMENT IN ETP SECURITIES INVOLVES A SIGNIFICANT DEGREE OF RISK AND AN INVESTOR MAY LOSE THE VALUE OF ITS ENTIRE INVESTMENT OR PART OF IT.

Risk Rating: High

1.2 Market-making by Authorised Participants

The price (if any) provided by an Authorised Participant for the purchase or sale of ETP Securities in the secondary market (whether in an on-exchange or off-exchange transaction), and the number of ETP Securities subject to any such offer, will be determined at the absolute discretion of that Authorised Participant by reference to such factors as it sees fit.

An Authorised Participant may maintain such bid/offer spread as it determines in its absolute discretion. The bid/offer spread is the difference between the bid price (i.e. the price at which a holder can sell ETP Securities to the Authorised Participant) and the offer price (i.e. the price at which a holder can buy ETP Securities from the Authorised Participant). Any price provided by an Authorised Participant or other secondary market price may take into account fees (including any dealing order fees charged by the Issuer to such Authorised Participant), charges, duties, taxes, commissions, liquidity, market spreads and/or other factors.

Investors should be aware that no Authorised Participant is obliged to make a market for any Series of ETP Securities (including any Series in respect of which it is appointed as an Authorised Participant) and in circumstances where an Authorised Participant acts as market maker with respect to any Series of ETP Securities, such Authorised Participant may discontinue making a market at any time. Where an Authorised Participant discontinues making a market and there is no other liquidity in the secondary market, investors would be not be able to realise their investment in the ETP Securities and may be required to hold their ETP Securities until the Final Redemption Date. In addition, investors should be aware that in the event that there is no market maker with respect to a Series of ETP Securities and there is no other liquidity in the secondary market, the Issuer may, but is not obliged to, redeem all the ETP Securities of the relevant Series in accordance with the Issuer Call Redemption provisions set out at Condition 8.6.

Prospective investors should note that:

1. not all market participants and Authorised Participants will determine the price of the ETP Securities of a Series in the same manner, and the variation between such valuations and prices quoted may be substantial;
2. the number of ETP Securities of a Series subject to any offer made by an Authorised Participant or otherwise in the secondary market may be affected by market demand for the ETP Securities of that Series, the number of ETP Securities of that Series in issue, whether the relevant FCM has requisite capacity to increase the exposure under the LS FCM Agreement to the extent required for any new ETP Securities, whether subscriptions can be processed and prevailing market conditions;
3. they may not be able to sell their ETP Securities quickly, easily or at prices that will provide them with a yield comparable to other similar investments;
4. any price at which the ETP Securities of a Series may be sold prior to the Final Redemption Date may be at a discount, which could be substantial, to the price at which such ETP Securities were acquired by the relevant investor; and
5. illiquidity of the Reference Assets to which a Series of ETP Securities is exposed may have a severely adverse effect on the ETP Security Value. Furthermore, because a Series of ETP Securities may provide a leveraged or inversed leveraged exposure to a single digital currency the impact of illiquidity of any such digital currency – particularly during an environment with significant price fluctuations – is intensified due to the concentrated nature of the exposure of the ETP Securities.

Prospective investors should be aware that ETP Securities requested for issue and subscribed for by an Authorised Participant may be held on an inventory basis by such Authorised Participant and offered for sale and/or sold over a period of time. Investors should not assume that ETP Securities will automatically be placed with investors by the relevant Authorised Participant(s) immediately upon issue. To the extent that the Authorised Participants hold ETP Securities at any time, they may exercise their rights under them in such manner as they see fit in their own interests and need not have regard to the interests of other holders of ETP Securities or any other person. In particular, an Authorised Participant that is a holder of ETP Securities may vote at any meeting of holders of such ETP Securities or approve any resolution of such holders as it sees fit (including with respect to any changes to the terms of the ETP Securities proposed by the Issuer).

Risk Rating: High

1.3 Investment capacity risk

The Issuer’s ability to obtain exposure to the Underlying Assets consistent with its investment objective and the applicable Leverage Factor may be disrupted for a number of reasons, including but not limited to, limited liquidity in the futures market for the Underlying Assets, a disruption to the futures market for the Underlying Assets, or as a result of margin requirements or position limits imposed by the FCMs, the relevant exchange, or the U.S. Commodity Futures Trading Commission (the “CFTC”). If such a disruption occurs and the Issuer is not otherwise able to generate exposure to the Underlying Assets consistent with its investment objective and the applicable Leverage Factor, the Issuer would not be able to achieve its investment objective and the actual level of exposure to the Underlying Assets may be less than the applicable Leverage Factor. In those circumstances, the return on the ETP Securities may deviate significantly from investors expectations based on the stated investment objective of the Series.

Risk Rating: High

1.4 Foreign exchange risk

Prospective investors should be aware that if a Reference Asset of the Investment Strategy for a Series of ETP Securities is denominated in a currency other than the currency in which the ETP Securities are listed, they will be exposed to the risk that the exchange rate between those currencies moves against them. If the currency of denomination of the Reference Asset depreciates against the listing currency in which prospective investors buy the ETP Securities, such movement may impact negatively the return that they will derive from an investment in such Series of ETP Securities.

Risk Rating: High

1.5 Exchange rate risks and exchange controls

The Issuer will satisfy its payment obligations in respect of the ETP Securities in the currency of denomination of the ETP Securities. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the "Investor’s Currency") other than the specified currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the specified currency or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the specified currency would decrease (a) the Investor’s Currency equivalent value of the payment payable on the ETP Securities and (b) the Investor’s Currency equivalent market value of the ETP Securities.

Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less payment than expected and may receive no payment.

Risk Rating: High

1.6 Issuer’s right to vary fees

The fees that are taken into account in calculating the ETP Security Value in respect of a Series on any Valuation Date may be varied upon the Issuer giving notice to the ETP Securityholders. Potential investors should note that the Issuer is not required to consider the interests of the ETP Securityholders in making any such variation. Any increase in fees would negatively impact the return for ETP Securityholders.

Risk Rating: High

1.7 Optional redemption

Only Authorised Participants may deal with the Issuer in subscribing for or requiring the Issuer to redeem outstanding ETP Securities, save in relation to Optional Redemptions at any time following notification by the Issuer that redemption requests from ETP Securityholders which are not Authorised Participants will be permitted.

The amount of any Optional Redemption is subject to the Maximum Daily Redemption Limit, being a maximum limit (if applicable) on the redemption number of ETP Securities of a Series on any Optional Redemption Pricing Date, as may be amended from time to time.

Prospective investors should be aware that it is possible that the Maximum Daily Redemption Limit could cause the ETP Securities to trade at a higher premium or result in a discount to the ETP Security Value. An investor who buys ETP Securities in such circumstances may incur a significant loss should market demand change. Significant loss could occur even where the ETP Security Value has increased during the investor’s holding period. The Maximum Daily Redemption Limit could also lead to higher trading spreads for the ETP Securities in the secondary market, which could increase the execution costs for an investor purchasing the ETP Securities in the secondary market.

In the event that an investor is not able to immediately redeem their ETP Securities due to a breach of the Maximum Daily Redemption Limit, such investor will be subject to market risk (i.e. that the value of the ETP Securities will decline prior to redemption and therefore reduce the redemption amount). As a result, it is possible that the redemption amount could be reduced due to an adverse change in the price of the Underlying Assets (which would consequently impact the value of the ETP Securities).

In addition, prospective investors should be aware that if trading in the Reference Assets in respect of a Series of ETP Securities is suspended, any Optional Redemption would be delayed. As a result, any redemption request relating to the relevant ETP Securities placed on the day upon which the relevant Reference Assets are suspended from trading would be delayed and such suspension from trading of the relevant Reference Assets could ultimately lead to a Disruption Event Redemption. Investors would therefore be subject to market risk (i.e. that the value of the ETP Securities will decline prior to redemption and therefore reduce the redemption amount). As a result, it is possible that the redemption amount could be reduced due to an adverse change in the price of the Underlying Assets (which would consequently impact the value of the ETP Securities).

Risk Rating: Medium

1.8 Issuer call option

The Issuer may at any time, in its sole and absolute discretion, elect to redeem all or some only of the ETP Securities of a Series. In exercising such discretion, the Issuer will have no regard to the interests of the ETP Securityholders. In such circumstances it is possible that the ETP Securityholders may receive less, or substantially less, than their initial investment.

Risk Rating: Medium

1.9 Mandatory Redemption Events and Events of Default

The ETP Securities of a Series may become due and payable prior to their Final Redemption Date, as further described in Conditions 8.8 and 12, in connection with the occurrence of an Event of Default (including an event of default with respect to the Issuer or the FCM under the LS FCM Agreement) or a Mandatory Redemption Event. In such circumstances it is possible that the ETP Securityholders may receive less, or substantially less than their initial investment.

Risk Rating: Medium

1.10 Disruption events/adjustment events/change in law impacting the ETP Securities

Any Valuation Date of a Series of ETP Securities may become subject to disruption due to occurrence of certain events including, without limitation:

1. any applicable Exchange fails to open for its regular trading session, or suspends or limits trading of any Reference Assets of an Investment Strategy, as applicable, or an event occurs that impairs trading or valuation on the Exchange of any Reference Assets of an Investment Strategy;
2. the ETP Security Value falling by more than the applicable threshold;
3. the Portfolio Manager making operational adjustments to the Investment Strategy to ensure that, so far as possible, the basic principles and economic effect of the Investment Strategy are maintained; and
4. a change in any applicable law or regulation that causes it to become illegal for the Issuer to perform its duties under the LS FCM Agreement.

The consequences of such events may include disruptions or delays to pricing of ETP Securities, the postponement of subscriptions for, and redemptions of, ETP Securities and adjustments to the terms of the ETP Securities. Ultimately, the occurrence of any such event may trigger the mandatory redemption of the affected Series of ETP Securities. In this eventuality, the amount which an ETP Securityholder may receive in respect of each ETP Security subject to such redemption may be lower than the ETP Security Value.

Risk Rating: Medium

1.11 Suspension of Trading and Termination of Listing

Each exchange where the ETP Securities are listed, and/or their regulatory bodies may at any time, in their sole and absolute discretion, elect to temporarily suspend trading at the request of the Issuer or on their own initiative if this is deemed necessary in exceptional circumstances, in particular, in the event of suspected price manipulation, falsification of liquidity or criminal activity. Each exchange where the ETP Securities are listed may also order a suspension in trading if the ongoing listing requirements are no longer fulfilled.

If trading has been suspended for a continuous period of three months, the ETP Securities are likely to be delisted from the relevant exchange, unless the reasons for the suspension ceased to exist.

Neither the exchanges nor any of their regulatory bodies accept liability for damage or loss incurred in connection with the suspension of trading and delisting.

ETP Securityholders will not be able to buy or sell ETP Securities on exchanges where a suspension of termination of listing has occurred.

Risk Rating: Medium

1.12 Restricted Investors

The Issuer may redeem the ETP Securities if at any time the Issuer, in its sole discretion, considers that any ETP Securityholder, through its holding of the ETP Securities, is, in the opinion of the Issuer (acting reasonably), in breach of any law or regulation or would risk exposing any Programme Party to a breach of any law or regulation.

Risk Rating: Medium

1.13 The Conditions and the Master Trust Deed contain provisions which may permit modifications without the consent of ETP Securityholders

Prospective investors should be aware that the Conditions and the Master Trust Deed permit the Issuer to agree, without the consent of the Trustee or the ETP Securityholders, to any adjustments, variations or modifications of the Conditions, the Trust Deed or any Programme Document including but not limited to any adjustments, variations or modifications which are made:

1. in connection with the accession of a new Authorised Participant to the Programme or the termination of the appointment of an existing Authorised Participant (including the Initial Authorised Participant);
2. in connection with any variation of the terms of appointment of a Programme Party or Agent, the termination of the appointment of a Programme Party or Agent, the replacement of a Programme Party or Agent, the appointment of additional Programme Parties or Agents or any adjustment, variation or amendment to the terms of any Programme Document or the Conditions;
3. in connection with any variation of the terms of appointment of an FCM, the termination of the appointment of an FCM, the replacement of an FCM, the appointment of additional FCMs or any variation or amendment to the terms of any LS FCM Agreement;
4. in connection with an amendment to the terms of the Programme and/or the Conditions to extend the range of assets which may be included as Collateral Assets for any Series of ETP Securities;
5. in connection with an amendment to the terms of the Programme to facilitate the issue of Series of ETP Securities which pursue actively managed Investment Strategies;
6. in order to facilitate any application for the admission of the ETP Securities of any Series to listing or trading on any stock exchange or the de-listing of any ETP Securities from any stock exchange;
7. in order to effect the transfer of the LS FCM Agreement to a new FCM or to make amendments consequent upon such transfer;
8. to effect any adjustment to the Conditions of the ETP Securities and/or the terms of the LS FCM Agreement pursuant to the Conditions as a consequence of the occurrence of an Adjustment Event provided that the adjustments do not take effect until at least three calendar days have elapsed after they are announced to the ETP Securityholders in accordance with the Conditions; or
9. to effect any adjustment, including but not limited to: (i) any amendment(s), variation(s), or modification(s) to the Programme, a Programme Document, the Conditions of a Series of ETP Securities, the Supplemental Trust Deed, a Security Document, the Programme Parties or Agents; and (ii) any adjustment, variation or modification related to or concerning the matters contemplated by paragraphs (i) to (viii) above but not otherwise permitted by those paragraphs which the Issuer considers to be necessary or desirable for the Programme or any Series of ETP Securities.

Any adjustment, variation or modification within the scope of paragraphs (i) to (ix) above being “Relevant Adjustment(s).

Any Relevant Adjustment shall be subject to the following provisions:

1. such Relevant Adjustment(s) are notified to ETP Securityholders at least 5 Business Days in advance of becoming effective;
2. in the case of a Relevant Adjustment within the scope of paragraph (ix) above, the Issuer certifies in the notice to ETP Securityholders that, in the opinion of the Issuer, such Relevant Adjustment(s) are not materially prejudicial to the interests of the ETP Securityholders; and
3. following such Relevant Adjustment(s) becoming effective, the Issuer shall, as soon as practicable, notify such Relevant Adjustment(s): (i) to the ETP Securityholders of each of the relevant Series in accordance with the Conditions of the relevant Series; and (ii) where relevant, to any stock exchange on which the relevant ETP Securities are admitted to trading.

Furthermore, to the extent that the consent of the Trustee is required in order to give effect to any permitted adjustment, variation or modification to the Conditions, the Trust Deed, or any Programme Document to which the Trustee is a party which the Issuer certifies to the Trustee is necessary or desirable to be made for the purposes described above, the Trustee is required to agree, without the consent of the ETP Securityholders, to such adjustment, variation or modification provided however that the Trustee shall be entitled to refuse to agree to any adjustment, variation modification or any other matter which would, in the Trustee’s sole opinion, have the effect of (i) exposing the Trustee to any liability against which it has not been indemnified and/or secured and/or pre-funded to its satisfaction and/or (ii) adding to or increasing the obligations, liabilities or duties or decreasing the rights, powers, authorisation, indemnities, discretions or protections of the Trustee.

In addition, the Issuer shall not have any ability to unilaterally make any adjustment, variation, modification or any other matter which would, in the Trustee’s sole opinion, have the effect of (i) exposing the Trustee to any liability against which it has not been indemnified and/or secured and/or pre-funded to its satisfaction and/or (ii) adding to or increasing the obligations, liabilities or duties or decreasing the rights, powers, authorisation, indemnities, discretions or protections of the Trustee.

Accordingly, a situation could arise whereby the Issuer makes an adjustment, variation or modification to the Conditions, the Trust Deed, any Programme Document, any Programme Party or Agent which would not otherwise have been made if the consent of the Trustee or the ETP Securityholders was required (as the Trustee or ETP Securityholders would not have consented to such modification).

Risk Rating: Low

2. Risk factors relating to Reference Assets

2.1 Risks related to futures contracts

Series of ETP Securities may be issued where the Reference Assets are comprised of futures contracts. Futures contracts are derivative contracts whereby the parties agree to exchange payments on a future date based on changes to the value of an Underlying Asset. Accordingly, the value of the ETP Securities of such Series will be subject to the risks which apply to investing in futures contracts generally and also to the relevant Underlying Asset.

If the Issuer takes a long position in the relevant futures contract by acting as the buyer, the value of the Issuer’s position in the futures contract may increase if the price of the Underlying Asset increases. Conversely, the Issuer may be required to make payments to the seller of the futures contract to the extent that the price of the Underlying Asset decreases over the term of the futures contract. If the Issuer takes a short position in the relevant futures contract by acting as the seller, the value of the Issuer’s position in the futures contract may increase if the price of the Underlying Asset decreases. Conversely, the Issuer may be required to make payments to the buyer of the futures contract to the extent that the price of the Underlying Asset increases over the term of the futures contract.

As there is no limit to which the price of an Underlying Asset can potentially increase, short positions involve the potential of an unlimited loss. By contrast, the potential loss of the Issuer in respect of any long position is limited to amount of the contract settlement price. See “Leveraged or Inversed Leveraged Series” at Risk Factor 4.1 below for more details.

Futures contracts involve, to varying degrees, elements of market risk and exposure to loss in excess of the amounts of any margin which is required to be delivered. Additional risks associated with the use of futures contracts are imperfect correlation between movements in the price of the futures contracts and the level of the Underlying Asset and the possibility of an illiquid market for a futures contract. The futures markets are subject to temporary distortions and other disruptions due to various factors, including the lack of liquidity, congestion, disorderly markets, manipulation, limitations on deliverable supplies, the participation of speculators, government regulation and intervention, technical and operation or system failures, nuclear accidents, terrorism, riots and acts of God. In connection with such events, a futures exchange may determine to halt trading, to cancel trades executed during a specified period and to take any other actions it deems appropriate.

With exchange traded futures contracts, there is minimal but some counterparty risk to the Issuer since the exchange’s clearinghouse, as counterparty to all exchange-traded futures contracts, effectively guarantees futures contracts against default. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified times during the trading day. Futures contracts prices could move to the limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and potentially subjecting the holders of ETP Securities linked to such futures contracts to substantial losses. If trading is not possible or if the Issuer determines not to close a futures position in anticipation of adverse price movements, the Issuer may be required to make daily cash payments of additional margin.

Risk Rating: High

2.2 Risks related to digital currency futures contracts risk.

Digital currency futures contracts are subject to collateral requirements and daily limits which may impact the Issuer’s ability to achieve the target Leverage Factor for a Series of ETP Securities. If the Issuer is unable to meet the investment objective of a Series of ETP Securities, the returns for that Series of ETP Securities may fluctuate. Additionally, these collateral requirements may require the Issuer to liquidate its position when it otherwise would not do so.

The performance of digital currency futures contracts, in general, have historically been highly correlated with the performance of corresponding underlying digital currency. However, there can be no guarantee that this will continue. Transaction costs (including the costs associated with futures investing), position limits, the availability of counterparties and other factors may impact the cost of digital currency futures contracts and decrease the correlation between the performance of digital currency futures contracts and their corresponding underlying digital currency, over short or even long-term periods. The differences in the prices of digital currency futures contracts and their corresponding underlying digital currency will expose the Issuer to risks different from, and possibly greater than, the risks associated with investing directly in the relevant underlying digital currency, including larger losses or smaller gains.

Currently, the Issuer does not anticipate that the liquidity of digital contracts futures contracts will have any material negative impact on its ability to achieve the investment objective of each Series of ETP Securities or meet any redemptions. If the Issuer’s ability to obtain exposure to the relevant digital currency futures contracts were to be disrupted for any reason, including, for example, limited liquidity in the digital currency futures market, a disruption to the digital currency futures market, or as a result of margin requirements, position limits, accountability levels, or other limitations imposed by the FCMs, the listing exchanges, or the CFTC, the Portfolio Manager would take such action as it believes appropriate and in the best interest of the Issuer in consideration of the facts and circumstances at such time, including to underleverage the Series of ETP Securities, relative to its stated Leverage Factor by an amount reflecting prevailing position limits.

Additionally, when a futures contract is nearing expiration, the Portfolio Manager will, in the case of Leveraged Exposure Investment Strategies, generally sell it and use the proceeds to buy a futures contract with a later expiration date and, in the case of Short Exposure Investment Strategies, buy such futures contract and short another one with a later expiration. This is commonly referred to as “rolling”.

If the market for these contracts is in “contango,” meaning that the prices of futures contracts in the nearer months are lower than the price of contracts in the distant months, the sale of the near-term month contract would be at a lower price than the longer-term contract, resulting in a cost to “roll” a long position in the futures contract.

Conversely, futures contracts with a longer term to expiration may be priced lower than futures contracts with a shorter term to expiration, a relationship called “backwardation”. The presence of backwardation may positively affect the performance of Leveraged Exposure Investment Strategies and negatively the performance of Short Exposure Investment Strategies.

The actual realisation of a potential roll cost will be dependent upon the difference in price of the near and distant contract. The costs associated with rolling long positions in digital futures contracts typically are substantially higher than the costs associated with other futures contracts and may have a significant adverse impact on the performance of the ETP Securities which employ a Leveraged Exposure Investment Strategy. Contango in the digital futures market may cause digital currency futures contracts, and in turn, and the ETP Securities employing Leveraged Exposure Investment Strategies to underperform the relevant spot digital currency.

Both contango and backwardation would reduce the ETP Securities’ correlation to their Underlying Assets and may limit or prevent the ETP Securities from achieving their investment objective.

Risk Rating: High

2.3 Concentration risk

Where there is a single Reference Asset or a limited number of Reference Assets, prospective investors should be aware that there are risks deriving from such concentration, the most significant of which is the impact on the liquidity and the volatility of the ETP Securities. A similar concentration risk arises to the extent that the Reference Asset is a futures contract which is linked to a single Underlying Asset or a limited number of Underlying Assets.

In respect of liquidity, a concentrated leveraged and inversed leveraged exposure to a digital currency heightens the impact of the illiquidity of any such Underlying Asset or related Reference Asset on the ETP Securities, particularly during an environment with significant price declines and inclines. Furthermore, the volatility of the ETP Securities is also intensified due to their concentrated leveraged or inversed leveraged exposure, as there is no other Underlying Asset or Reference Asset to counterbalance potential volatile movements on the Underlying Asset or Reference Asset of the relevant Investment Strategy for a Series of ETP Securities.

Risk Rating: High

2.4 Risks related to digital currencies

1. Regulatory Risks

   The legal status of digital currencies varies widely from country to country. In many countries, the legal status is not yet defined or is changing. Some countries may have made the use of digital currencies illegal. Other countries have banned digital currencies or securities or derivatives relating to them, prohibited local banks from working on digital currencies or otherwise restricted digital currencies. In addition, the legal treatment of digital currencies is often unclear, and there is uncertainty as to whether the underlying digital currencies are securities, money, commodities or property. In some countries, such as the United States, different government agencies define digital currencies differently, leading to regulatory conflict and uncertainty. This uncertainty is exacerbated by the rapid evolution of regulations. Some countries may explicitly restrict, prohibit or limit the acquisition, use, trading or redemption of digital currencies in the future. In such a scenario, the ownership or trading of securities replicating or linked to digital currencies, such as the ETP Securities, could be deemed illegal or subject to sanctions.

   The tax treatment of digital currencies can vary significantly across jurisdictions and is subject to change. Investors holding and transacting in digital currencies may face unexpected tax liabilities, reporting requirements, or accounting hurdles.

   It is also difficult to predict how the regulatory outlook and policies regarding digital currencies could and will change. A shift to a generally more negative view could lead to risk for investors as tightening regulations may restrict access for investors.

   Risk rating: High

2. Digital currency market uncertainty

   The digital currency market operates with a high degree of uncertainty, influenced by factors including regulatory shifts, technological developments, security concerns, and market manipulation. Regulatory changes or government actions, including restrictions on digital currency trading or taxation policies, may significantly impact the value of any Series of ETP Securities invested in any underlying that itself its linked to digital currencies. Additionally, unforeseen events such as security breaches, network disruptions, or changes in market sentiment can further contribute to market uncertainty and affect returns.

   Risk Rating: High

3. The value of digital currencies can change quickly and could even drop to zero

   Digital currencies, including bitcoin, ethereum, solana, XRP and others, are known for their price volatility. The prices of digital currencies can fluctuate over short periods due to various factors such as market demand, regulatory developments, technological advancements, macroeconomic trends, and investor sentiment. Investors should be aware that the value of any Series of ETP Securities invested in any Reference Asset that itself is linked to digital currencies may experience rapid and substantial changes, leading to potential losses or the value of the ETP Securities dropping to zero.

   Risk rating: High

4. Valuation

   Digital currencies do not represent an underlying claim on income or profits, nor do they represent a liability that must be repaid. Their price reflects the assessment of value by market participants (or a particular marketplace) and supply and demand dynamics. As a result, the value of digital currencies may be more speculative and more volatile than the traditional assets which represent claims on income or profits or debts. Digital currencies are also unlike traditional commodities (such as oil) in that they are not raw materials and do not have a physical existence. Lastly, digital currencies are unlike traditional currencies (such as the Euro) in that digital currencies are not issued by a central bank and may not be broadly accepted for payments. As a consequence, fundamental valuations typically do not exist. In many cases, there may be limited use of the digital currencies and potential use cases are still being explored.

   The speculative nature of the underlying digital currencies can make it difficult to apply consistent valuation methods for the digital currencies. Furthermore, extreme volatility can impact the ability of market participants to provide reliable, consistent pricing, which, in turn, could adversely affect the price at which investors are able to trade the ETPs in the secondary markets.

   Risk Rating: High

5. Valuation

   Digital currencies do not represent an underlying claim on income or profits, nor do they represent a liability that must be repaid. Their price reflects the assessment of value by market participants (or a particular marketplace) and supply and demand dynamics. As a result, the value of digital currencies may be more speculative and more volatile than the traditional assets which represent claims on income or profits or debts. Digital currencies are also unlike traditional commodities (such as oil) in that they are not raw materials and do not have a physical existence. Lastly, digital currencies are unlike traditional currencies (such as the Euro) in that digital currencies are not issued by a central bank and may not be broadly accepted for payments. As a consequence, fundamental valuations typically do not exist. In many cases, there may be limited use of the digital currencies and potential use cases are still being explored.

   The speculative nature of the underlying digital currencies can make it difficult to apply consistent valuation methods for the digital currencies. Furthermore, extreme volatility can impact the ability of market participants to provide reliable, consistent pricing, which, in turn, could adversely affect the price at which investors are able to trade the ETPs in the secondary markets.

   Risk Rating: High

6. Risk associated with development protocols

   The protocols governing digital currencies are publicly available and in the process of development. However, the progress and acceptance of these protocols depend on various factors. Disagreements between participants, developers, and network members can impede or delay the development of these digital currencies. Upgrades to the source code may be implemented through majority voting by network members/miners, who update their nodes accordingly. If consensus cannot be reached on implementing a new protocol version, it may hinder scalability improvements and other enhancements. Such delays or prevention in protocol development can adversely impact the value of the digital currencies, which, in turn, affects the value of associated ETP Securities. Furthermore, the lack of direct compensation for protocol developers may reduce incentives for continuous protocol development. If the protocols do not progress further, it could lead to a decrease in the value of the associated digital currency, consequently affecting the value of the ETP Securities. Additionally, the risk rating is considered medium, but for digital currencies with larger market capitalization, the risk is assessed as low due to the involvement of a substantial number of developers. Conversely, digital currencies with fewer active developers, often associated with lower market capitalization compared to other digital currencies, carry a higher risk rating, assessed as medium. As protocols mature, gain adoption among developers, and the number of active developers increases, the likelihood and impact of this risk diminish.

   Risk Rating: Medium

7. Risk of errors / bugs in the underlying code behind most digital currencies

   The source code of digital currencies is accessible to the public, allowing anyone to download and examine it. However, despite this transparency, there is a possibility of undiscovered bugs or flaws in the code, which could pose a threat to the security and integrity of one or more digital currency networks. In the case of digital currencies with larger user bases, widespread adoption, and a larger number of developers, any errors or issues in their protocols are more likely to be detected and rectified promptly. On the other hand, digital currencies with new protocols, fewer developers, or limited adoption are at a higher risk of encountering such problems. If a significant error in the code arises and proves challenging to resolve or can be exploited maliciously, it can lead to a decline in the value of the associated digital currency. Consequently, the value of the related ETP Securities would be negatively affected.

   Risk Rating: Medium

8. Forking and Governance Risks

   Digital currencies reside on the public blockchain in a distributed ledger, which means it is not held by a central authority at a single location, but rather distributed among a network or community of users. Digital currencies can undergo "forks," where the blockchain splits into two or more separate chains due to disagreements within the community or technical upgrades. This can lead to confusion and volatility, potentially impacting the value of the ETP Securities. Additionally, the governance of many digital currencies is decentralized, meaning decisions are made through consensus among network participants. Disagreements or lack of consensus on future developments could hinder progress and affect the value of the underlying digital currencies.

   Risk Rating: Medium

As a consequence of the risk set out in this risk factor 2.3, the ETP Securityholders may lose some or all of their investment in the ETP Securities.

3. Risk factors relating to Investment Strategies

Investment Strategy-linked securities

Prospective investors should note that the amount payable on the redemption of the ETP Securities will be linked to the performance of the Investment Strategy referenced by that Series. Potential Investors should note that they will have no entitlement to the Reference Assets of such Investment Strategy and will be entitled solely to the Redemption Amount (as defined herein), which, depending on the performance of the Investment Strategy, may be less, than their initial investment.

Accordingly, before investing in any ETP Securities, prospective investors should carefully consider whether an investment based on the performance of the applicable Investment Strategy is suitable for them and in all cases an investor in ETP Securities should carry out its own detailed review of the applicable Investment Strategy.

The Portfolio Manager is responsible for the maintenance of the Investment Strategy. The Portfolio Manager may make certain operational adjustments to the Investment Strategy to ensure that, so far as possible, the basic principles and economic effect of the Investment Strategy are maintained. For example, if the futures contracts listed as Reference Assets in the relevant Investment Strategy are delisted and not available for investment, the Portfolio Manager may make adjustments to the Investment Strategy to replace such futures contracts with alternative Reference Assets to ensure the basic principles and economic effect of the Investment Strategy are maintained. The Portfolio Manager may take any actions in respect of such Investment Strategy without regard to the interests of the investor in the ETP Securities, and any of these actions could adversely affect the market value of the ETP Securities.

Risk rating: Medium

3.3 Investing in ETP Securities is not the same as an investment in the Reference Asset of the Investment Strategy

Investing in ETP Securities is not the same as making an investment in the Reference Assets of the relevant Investment Strategy. Accordingly, investors in ETP Securities may receive a lower payment upon settlement or redemption of such ETP Securities than such investor would have received if it had invested directly in the Reference Assets of the relevant Investment Strategy.

Risk Rating: Medium

4. Risk factors relating to ETP Securities offering Leveraged Exposures and Short Exposures

For an explanation of the risks covered here and some simulated numerical examples, see the Section of this Base Prospectus titled "Economic Overview of the ETP Securities".

4.1 Leveraged or Inverse Leveraged Series

Where a Series of ETP Securities employs leverage, the effect which any negative or positive changes in the price of the relevant Reference Asset will have on the ETP Security Value will be multiplied by the applicable Leverage Factor for the relevant Series of ETP Securities.

Series of ETP Securities which provide for a Leveraged Exposure seek to achieve a return which is a multiple of the Rebalance Period return of the relevant digital currency (excluding the effects of any applicable fees and adjustments). Conversely, Series of ETP Securities which provide for a Short Exposure seek to achieve a return which is a multiple of the Rebalance Period rate of decrease of the price of the Underlying Asset (excluding the effects of any applicable fees and adjustments). Thus the ETP Securities will magnify losses in market environments adverse to their objective compared to similar exchange traded products that are not leveraged. In addition, losses will be magnified as the amount of leverage increases.

For Series which pursue Leveraged Exposures, the Leverage Factor may be between 2x and 3x. For Series which pursue Short Exposures, the Leverage Factor may be between -1x and -3x. The Leverage Factor applicable to a Series of ETP Securities will be set out in either the Investment Strategy or the Final Terms for such Series.

Risk rating: High

4.2 Rebalancing Risk

If for any reason the Issuer is unable to fully or partially rebalance an ETP Security to its applicable Leverage Factor, or any ETP Security’s exposure to the Underlying Asset is rebalanced incorrectly, the Issuer’s exposure to the Underlying Asset may not be consistent with the Leverage Factor set out in the relevant Investment Strategy. In these instances, the Issuer may not successfully track the performance of the relevant Underlying Asset and may not achieve its investment objective. Additionally, the rebalancing of futures contracts may impact the trading in such futures contracts and may adversely affect the value of the ETP Security. For example, such trading may cause the FCM’s to adjust their hedges. The trading activity associated with such transactions will contribute to the existing trading volume on the underlying futures contracts and may adversely affect the market price of such underlying futures contracts.

Risk Rating: High

4.3 Risk of unscheduled rebalancing

As defined in the Investment Strategy in respect of a Series of ETP Securities, where relevant, there is a possibility of unscheduled rebalancing in the event of (i) a significant decline in the price of the Reference Asset if such Series provides a Leveraged Exposure; and (ii) a significant increase in the price of the Reference Asset if such Series provides a Short Exposure, in both cases before the beginning of the next rebalance period of the Series as set out in the Final Terms (the “Rebalance Period”). On a day in which an Unscheduled Rebalance is triggered, the Rebalance Period return of the relevant Series of ETP Securities will not be equal to the Leverage Factor of such Series multiplied by the Rebalance Period price change of the Reference Asset. Such unscheduled adjustment seeks to protect the holder of ETP Securities providing Leveraged Exposure or Short Exposure in the event of extreme market movements during Rebalance Periods by crystallising the losses incurred up to that point.

As a result of the unscheduled rebalancing, a Series of ETP Securities may not track what an investor might expect for such Rebalance Period. For example, in the case of a Series providing a Leveraged Exposure, if the price of the Reference Asset was to reverse its fall after the unscheduled rebalancing, then the holder of the relevant ETP Security will not benefit from the reversal of the price decline of the Reference Asset to the same extent that it might have if the unscheduled rebalancing had not occurred. However, if the price of the Reference Asset continues to fall, then the holder of such ETP Security will not suffer a loss to the same extent as if the unscheduled rebalancing had not occurred. Similarly, in the case of a Series providing for a Short Exposure, if the price of the Reference Asset was to fall after the unscheduled rebalancing, then the holder of the relevant ETP Security will not benefit from the reversal of the price of the Reference Asset to the same extent that it might have if the unscheduled rebalancing had not occurred. However, if the price of the Reference Asset continues to increase, then the holder of such ETP Security will not suffer a loss to the same extent as if the unscheduled rebalancing had not occurred.

Risk rating: High

4.4 Risks of Holding the ETP Securities for longer than their Rebalance Period

Where applicable, the Rebalance Period applicable to a Series of ETP Securities will be set out in the Investment Strategy or in the Final Terms. Due to the Rebalance Period investment goal of ETP Securities, an ETP Security’s return over holding periods longer than the Rebalance Period will likely differ from the return of the relevant Investment Strategy (as adjusted to take account of the Leverage Factor), and this difference will become more significant as the holding period increases in length.

The return on ETP Securities over a period longer than the Rebalance Period will reflect the return for each Rebalance Period compounded over all Rebalance Periods in that holding period and the effects of the Rebalance Period rebalancing. As a consequence of the Rebalance Period and the leveraged exposure of ETP Securities, over periods longer than the Rebalance Period, the redemption entitlement of an ETP Security will fall if the Investment Strategy’s performance is flat (i.e. has a zero or close to zero return). Similarly, if an investor holds ETP Securities offering Leveraged Exposure or Short Exposure for longer than their Rebalance Period, the return of such ETP Securities over that holding period will likely differ from the return of the Reference Assets over such holding period multiplied by the Leverage Factor of the ETP Securities. This means that where an investor holds an ETP Security over a period longer than the Rebalance Period, the value of the ETP Security on redemption will (i) fall where the Investment Strategy’s performance is zero or close to zero and (ii) may not reflect the performance of the Reference Assets over that holding period multiplied by their Leverage Factor, and may have a negative impact on the value of the ETP Security the longer the holding period, the higher the Leverage Factor and the greater the volatility of the Reference Assets over the holding period.

Risk rating: High

4.5 Effective daily Leverage Factor where Rebalance Periods are longer than a day

At the end of each Rebalance Period, where relevant, the Portfolio Manager will buy or sell the relevant Reference Assets so that, at the beginning of the immediately following Rebalancing Period, the ETP Securities offer their Leveraged Exposure or Short Exposure to the Underlying Asset determined by their stated Leverage Factor. If the Rebalance Period is longer than a day, the exposure of such ETP Securities to the Underlying Asset will not be rebalanced daily to maintain such exposure constant by reference to the Leverage Factor. As such, the effective level of Leveraged Exposure or Short Exposure offered by such ETP Securities, as the case may be, will vary on each day of the Rebalance Period as prices of the Underlying Asset fluctuate and subscriptions and redemptions are fulfilled by the Issuer on a daily basis. What this means is that, for example, in the case of a Leveraged Exposure, where the value of the Underlying Asset decreases during the Rebalance Period, the exposure of the ETP Securities of such Series to the Underlying Asset will increase (i.e., the effective leverage exposure to the Underlying Asset will be greater than the stated Leverage Factor of the ETP Securities), which may negatively impact the value of the ETP Securities.

Risk Rating: High

4.6 Factors affecting leverage risk

Higher leverage, higher volatility and longer holding periods will increase the risk from investing in ETP Securities and hence may adversely affect the value of the ETP Securities. For leveraged returns with holding periods longer than the Rebalance Period (excluding the effects of any applicable fees and adjustments):

1. the return of such ETP Securities will likely differ from the product of the Reference Asset return and the Leverage Factor; and
2. an ETP Security may lose value if the relevant Reference Asset’s performance is flat (i.e. has a zero or close to zero return); and
3. it is possible for an ETP Security with Leveraged Exposure to the price of Underlying Assets by investing in Reference Assets to lose value even if the relevant Reference Asset’s return is positive. Similarly it is possible for an ETP Security with a Short Exposure to the price of Underlying Assets by investing in Reference Assets to lose value even if the relevant Underlying Asset’s return is negative; and
4. the risks in (a) to (c) will be magnified for longer holding periods, higher Reference Asset volatility and higher leverage.

See section of the Base Prospectus entitled “Economic Overview of the ETP Securities” for simulated examples on how the above risks may occur.

Risk Rating: High

5. Risk factors relating to the Security

5.1 Limited recourse obligations, non-petition and related risks

In respect of the ETP Securities of any Series, the Secured Creditors (which includes the ETP Securityholders), with the exception of the FCM with respect to the LS FCM Agreement, will have recourse only to the Secured Property in respect of such ETP Securities, subject always to the Security, and not to any other assets of the Issuer. If, following realisation in full of the Secured Property (whether by way of liquidation or enforcement) and application of available cash in accordance with the applicable orders of priority and the Trust Deed, any outstanding claim against the Issuer in respect of the Secured Obligations remains unpaid, then such outstanding claim will be extinguished and no debt will be owed by the Issuer in respect thereof. Following such extinguishment, with the exception of the FCM with respect to the LS FCM Agreement, none of the Programme Parties, the ETP Securityholders of any relevant Series or any other person acting on behalf of any of them will be entitled to take any further steps against the Issuer or any of its officers, shareholders, corporate service providers or directors to recover any further sum in respect of the extinguished claim and no debt, liability or obligation will be owed to any such persons by the Issuer in respect of such further sum.

With the exception of the FCM with respect to the FCM Agreement, none of the Programme Parties, the ETP Securityholders or any person acting on behalf of any of them may, at any time, bring, institute or join with any other person in bringing, instituting or joining insolvency, administration, bankruptcy, winding-up, examinership or any other similar proceedings (whether court-based or otherwise) in relation to the Issuer or any of its assets (save that the Trustee may lodge a claim in the liquidation of the Issuer which is initiated by another non-affiliated party or take proceedings to obtain a declaration as to the obligations of the Issuer and without limitation to the Trustee's right to enforce or realise the relevant Security (including by appointing a receiver and/or Appointee)), and none of them will have any claim arising with respect to the sums, assets and/or property attributable to any other securities issued by the Issuer (save for any further securities which form a single Series with the ETP Securities).

There is also the risk that the Issuer may become subject to claims or other liabilities (whether or not in respect of the ETP Securities) which are not themselves subject to limited recourse or non-petition limitations. There is a risk that such claims or liabilities may negatively impact the value of the ETP Securities of a particular Series.

Investors should be aware that the LS FCM Agreement does not contain limited recourse provisions with respect to the obligations of the Issuer. There is a risk therefore that, in respect of a claim against the Issuer by the FCM in relation to the LS FCM Agreement, if following realisation in full of the Collateral Assets in respect of a Series of ETP Securities and application of the proceeds by the FCM, a claim which is attributable to such Series remains outstanding against the Issuer, such claim may be made by the FCM against assets attributable to all other outstanding Series of ETP Securities (the “FCM Claim”), which may, in certain circumstances, result in a Mandatory Redemption of all Series of ETP Securities at a Mandatory Redemption Amount of zero or close to zero. In other circumstances the Portfolio Manager will reconstitute the FCM Account with respect to each outstanding Series of ETP Securities to ensure that such FCM Claim is apportioned to all outstanding Series of ETP Securities on a pro rata basis. The Broker Dealer of Record, however, has agreed to indemnify the Issuer, against any loss, cost, claim, action, demand or expense which the Issuer may incur as a result of any such claims by the FCM. Such indemnity is limited to the lower of the value of 5% of the Collateral Assets of the Largest Series or $20 million. The Largest Series means any Series of ETP Securities, the Collateral Assets of which has the highest value of all Series of ETP Securities in issue at any time. If for any reason the Broker Dealer of Record cannot or does not honour such indemnity or the Broker Dealer of Record resigns its appointment under the Broker Dealer of Record Agreement, such claim would negatively impact the value of the ETP Securities of such outstanding Series of ETP Securities.

Risk Rating: Medium

5.2 The claims of ETP Securityholders are subordinated upon enforcement of the Security

The obligations of the Issuer in respect of a Series of ETP Securities are secured by the Security Documents in respect of such Series of ETP Securities. Pursuant to such Security Documents, the Issuer will create security in respect of that Series in favour of the Trustee (for its benefit and the benefit of the Secured Creditors) over (i) all of the Issuer’s rights, title, interest and benefit present and future in, to and under the Programme Documents to the extent that they relate to the ETP Securities; (ii) all sums held now or in the future by or on behalf of the Issuer (including, without limitation, by the Issuing and Paying Agent and/or the Registrar) to meet payments due in respect of the obligations and duties of the Issuer under the Security Documents and the ETP Securities, (iii) the Collateral Assets and any sums of money, securities, financial instruments or other property received or receivable now or in the future by or on behalf of the Issuer under the LS FCM Agreement, (iv) all of the Issuer’s rights as against the FCM in respect of any sum or property now or in the future standing to the credit of the FCM Account, the Cash Account and any other relevant accounts of the Issuer with the FCM, and (v) all of the Issuer’s rights in respect of any sum or property now or in the future standing to the credit of the FCM Account and the Cash Account, in each case, to the extent that they relate to the ETP Securities.

Following the enforcement of the security, the Trustee will apply the proceeds derived from the realisation of the assets that are the subject of the security constituted by the Security Documents in the applicable order of priority under which amounts due to the ETP Securityholders will be subordinated to all costs, fees, expenses and all other amounts including (without limitation) the costs of enforcing and/or realising any security due to the Trustee itself and any receiver(s) and/or Appointee(s), amounts owing to the FCM under the LS FCM Agreement, including margin interest, securities lending and brokerage fees (as applicable), and amounts due to the Arranger in respect of the Arranger Fee, in each case in relation to the ETP Securities. The impact of such subordination is that the ETP Securityholders may receive less, or substantially less than their initial investment.

Risk Rating: Medium

5.3 Recognition of Security in other jurisdictions

The laws of certain jurisdictions may affect some or all of the assets comprising the Collateral Assets. In the event that the laws of a jurisdiction do not recognise the security granted by the Security Documents, such security may not be effective in relation to assets deemed located in that jurisdiction and/or such assets may be subject to claims which would otherwise rank after claims secured by the Security Documents. In the event that it becomes necessary to enforce the security granted by the Security Documents in a jurisdiction that does not recognise such security (or in which it has not been perfected) there may be delays in enforcing the security or it may not be possible to enforce such security which could result in losses to the ETP Securityholders.

Risk Rating: Low

6. Risk factors relating to the Issuer and its legal structure

6.1 The Issuer is a special purpose vehicle

The Issuer is a special purpose vehicle with the sole business of issuing ETP Securities. The contracts which may be entered into by the Issuer (such as the LS FCM Agreement entered into by the Issuer in relation to one or more Series of ETP Securities) and the payments of the Issuer and the parties thereunder are structured to have the capacity to provide the Issuer with funds to service payments due and payable in respect of the ETP Securities and on any redemption by the Issuer of the ETP Securities.

The Issuer has, and will have, no assets other than (i) the small sums of money raised by issuing shares in relation to its incorporation, (ii) such fees (if any) as are payable to it in connection with the issue or redemption of any Series of ETP Securities from time to time and (iii) any rights, property, sums or other assets on which any Series of ETP Securities issued under the Programme are secured.

This means that if the assets on which a Series of ETP Securities are secured are not sufficient to meet sums payable by the Issuer in respect of that Series, there are no other assets that are available to the Issuer to make those payments. In such circumstances, the holders of the ETP Securities would not receive the amounts owing to them in full.

Risk Rating: Low

6.2 Regulation of the Issuer by any regulatory authority

The Issuer is not required to be licensed or authorised under any current securities, commodities or banking laws of its jurisdiction of incorporation and will operate without supervision by any authority in any jurisdiction. There is no assurance, however, that regulatory authorities in one or more jurisdictions would not take a contrary view regarding the applicability of any such laws to the Issuer. The taking of a contrary view by such regulatory authority could have an adverse impact on the Issuer or the holders of the ETP Securities. For instance, if it was determined by a regulatory authority that the Issuer was required to be authorised in a particular jurisdiction, it may not be possible for the Issuer as a special purpose vehicle to receive such authorisation. In such a scenario there is a risk that the Issuer could be required to effect a mandatory redemption of the ETP Securities which could result in a loss being incurred by holders of the ETP Securities.

Risk rating: Low

6.3 The Issuer is structured to be insolvency-remote, but not insolvency proof

The Issuer has agreed not to engage in activities other than the issue of ETP Securities and related and incidental matters. Any issue of ETP Securities must be on terms that provide for the claims of the ETP Securityholders and the Programme Parties (with the exception of the claims of the FCM with respect to the LS FCM Agreement) in respect of such ETP Securities to be limited to the proceeds of the assets on which such ETP Securities are secured (see “Risk factors relating to the Security – Limited recourse obligations, non-petition and related risks” above). In addition, with the exception of the FCM with respect to the LS FCM Agreement, there are restrictions on the ETP Securityholders and Programme Parties bringing insolvency proceedings against the Issuer. If such provisions are upheld, it would be unlikely that the Issuer could become insolvent.

However, notwithstanding the restrictions described in Condition 7 and the limited recourse and non-petition provisions, should the Issuer have outstanding liabilities to the FCM or third parties which it is unable to discharge or should the limited recourse or non-petition provisions be found to be non-enforceable in a particular jurisdiction and as a result the Issuer becomes or is declared insolvent according to the law of any country having jurisdiction over it or any of its assets, the insolvency laws of that country may determine the validity of the claims of ETP Securityholders and may prevent ETP Securityholders from enforcing their rights with respect to any ETP Securities held by it or delay such enforcement. If the ETP Securityholders are prevented from enforcing their rights with respect to the ETP Securities, this may result in the ETP Securityholders losing their investment in the ETP Securities. In particular, depending on the jurisdiction concerned and the nature of the assets and security, the Security created in favour of the Trustee in respect of such Series of ETP Securities may be set aside or ranked behind certain other creditors and the assets subject to such Security may be transferred to another person free of such Security. The impact of the occurrence of such scenarios is that the ETP Securityholders may either lose all their investment in the ETP Securities or receive less, or substantially less than their initial investment.

In addition, certain jurisdictions have procedures designed to facilitate the survival of companies in financial difficulties. In such jurisdictions, the rights of the Trustee or of the Issuer to enforce the Security created pursuant to any Security Document may be limited or delayed by such procedures. Such a situation may adversely impact the value of the ETP Securities.

Risk Rating: Low

6.4 Jersey insolvency

The Issuer is incorporated under the laws of Jersey. Consequently and, in the event of an insolvency of the Issuer, insolvency proceedings may be initiated in Jersey. There are two principal regimes for corporate insolvency in Jersey: a declaration of “en désastre” under the Bankruptcy (Désastre) (Jersey) Law 1990 (“Bankruptcy Law”) and a winding up under the Companies (Jersey) Law 1991 (“Companies Law”).

The primary insolvency procedure available to creditors under Jersey law is an application for an Act of the Royal Court of Jersey (“Royal Court ”) under the Bankruptcy Law declaring the property of a debtor to be “en désastre”. On a declaration of “en désastre,” title and possession of the property of the debtor vests automatically in the Viscount, an official of the Royal Court (“ Viscount”). With effect from the date of declaration, a creditor has no other remedy against the property of the debtor, and may not commence or, except with the consent of the Viscount or the Royal Court, continue any legal proceedings to recover the debt. However, a secured party with the benefit of a security interest pursuant to the Security Interests (Jersey) Law 2012 (the “ Security Interests Law”) may, without the consent of the Viscount or an order of the Royal Court, exercise any power of enforcement it may have under that law.

To the extent that the proceeds of such enforcement are insufficient to discharge liabilities owed, that secured party has no other remedy against the property or person of the debtor, and may not commence any legal proceedings or, except with the consent of the Viscount or the Royal Court, continue any legal proceedings to recover the balance of the debt.

Additionally, the creditors and shareholders of a Jersey company can instigate a winding up of an insolvent company pursuant to Part 21 of the Companies Law (a “creditors’ winding up”). On a creditors’ winding up commenced by a company’s shareholders, a liquidator is nominated by the shareholders and creditors may approve such a liquidator or apply to appoint a different liquidator. The shareholders must give creditors 14 days’ notice of the meeting to commence the creditors’ winding-up.

On a creditors’ winding up commenced by a company’s creditors, an application is made to the Royal Court to place the company in a creditors’ winding up. At any time after the application has been made to the Royal Court, the Royal Court may appoint a provisional liquidator with such powers as it sees fit. If the application is successful, the Royal Court will place the company in a creditors’ winding up and appoint a liquidator.

After the commencement of the winding up, or the appointment of a provisional liquidator, no action can be taken or continued against the company except with the permission of the Royal Court. The liquidator will stand in the shoes of the directors and administer the winding up, gather assets, make appropriate disposals of assets, settle claims and distribute assets as appropriate. However, a secured party (with the benefit of a security interest pursuant to the Security Interests Law) may, without the permission of the Royal Court, exercise any power of enforcement it may have under that law. To the extent that the proceeds of such enforcement are insufficient to discharge liabilities owed, the secured party has no other remedy against the company without the permission of the Royal Court in the same manner as unsecured creditors.

The Jersey Companies Law requires a creditor of a company (subject to appeal) to be bound by an arrangement entered into by the company and its creditors immediately before or in the course of its winding up if (among others) three quarters in number and value of the creditors acceded to the arrangement.

Compromises and arrangements with creditors

The Companies Law also grants the Royal Court the power to sanction a compromise or arrangement (“Scheme”) between a Jersey company and its creditors or shareholders (or a class of either of them) if approved by the relevant majorities of its creditors or shareholders (or a class of either of them). Once sanctioned, the Scheme is binding on all creditors or shareholders (or a class of either of them).

Reviewable transactions

Under the Bankruptcy Law and the Companies Law the Royal Court or a liquidator (as applicable) may set aside a transaction entered into by a company with any person at an undervalue. There is a five-year look-back period from the date of commencement of the winding up or declaration of “en désastre” during which transactions are susceptible to being set aside as a transaction at an undervalue.

Under the Bankruptcy Law and the Companies Law the Royal Court or a liquidator (as applicable) may set aside a preference given by the company to any person. There is a 12-month look-back period from the date of commencement of the winding up or declaration of “en désastre” during which transactions are susceptible to being set aside as a preference.

Under the Bankruptcy Law and the Companies Law the Royal Court or a liquidator (as applicable) may set aside a transaction providing credit to the debtor company which is or was extortionate. There is a three-year look-back period from the date of commencement of the winding up or declaration of “désastre” during which transactions are susceptible to being set aside as an extortionate credit transaction. Under the Bankruptcy Law and the Companies Law the Royal Court or a liquidator (as applicable) may within six months following the commencement of a creditors’ winding up, disclaim any onerous property of the company. For this purpose “onerous property” includes any moveable property, a contract lease or other immoveable property if it is situated outside of Jersey that is unsaleable or not readily saleable or is such that it might give rise to a liability to pay money or perform any other onerous act, and includes an unprofitable contract.

A disclaimer operates to determine the rights, interests and liabilities of the company/debtor in the property disclaimed and discharges the company/Viscount from all liability in respect of the property but does not, except so far as is necessary for the purpose of releasing the company/debtor from liability, affect the rights or liabilities of any other person.

A person sustaining loss or damage as a result of a disclaimer is deemed to be a creditor of the company to the extent of the loss or damage and has standing as an unsecured creditor in the “en désastre” or creditors’ winding up.

In addition to the Jersey statutory provisions referred to above, there are certain principles of Jersey customary law under which dispositions of assets with the intention of defeating creditors’ claims may be set aside.

Preferred creditors

If the Issuer becomes subject to an insolvency proceeding and the Issuer has obligations to creditors that are treated under Jersey law as creditors that are senior relative to the Secured Creditors, including the ETP Securityholders, the ETP Securityholders (and other Secured Creditors) may suffer losses as a result of their subordinated status during such insolvency proceedings. In particular, under Jersey law, upon an insolvency of a Jersey company, such as the Issuer, when applying the proceeds of assets subject to security not created under Jersey law which may have been realised in the course of a liquidation or other bankruptcy proceedings, the claims of a limited category of preferential creditors will take priority over the claims of creditors holding the relevant security. These preferred claims include the remuneration, costs and expenses properly incurred by a liquidator, the Viscount or other insolvency practitioner. Such preferred claims may negatively impact on the value of the ETP Securities.

Foreign law governed security

Under the laws of Jersey, a person incorporated or established in Jersey is deemed to have capacity to grant security governed under foreign law over property situated outside Jersey. However, to the extent that any security interest governed by a foreign law (including a floating charge) is expressed to apply to any assets situated in Jersey such floating charge or other security interest is not likely to be held valid and enforceable by the Jersey courts in respect of such assets.

Further, Irish insolvency laws do not apply in Jersey and receivers, administrators and other similar officials are not part of the laws of Jersey. Accordingly, the Jersey courts may not recognize the powers of an administrator, receiver or other similar official appointed in respect of Jersey situs assets.

The Royal Court may, however, assist the courts of prescribed countries and territories and, applying general principles of comity, assist the courts in other jurisdictions, in all matters relating to the insolvency of any person to the extent that the Royal Court think fit.

If insolvency proceedings have been commenced in relation to the company outside of Jersey, the nature and extent of the cooperation from Jersey is likely to depend on the nature of the requesting country’s insolvency regime.

When considering how to proceed, the Royal Court may have regard to the UNCITRAL model law, even though the model law has not been implemented as a separate law in Jersey, but this is matter for the Court’s discretion and they may choose not to follow the provisions of the UNCITRAL model law.

Further, as Jersey is not part of the European Union Regulation (EU) 2015/848, as amended by Regulation (EU) 2021/2260 (“Recast Insolvency Regulation”) does not have direct effect in Jersey and has not been implemented in Jersey as a separate law. Accordingly, the automatic test of centre of main interests does not apply and the approach adopted by the Royal Court may not be consistent with the Recast Insolvency Regulation.

If insolvency proceedings have been commenced in another jurisdiction in relation to the company, the nature and extent of the cooperation from Jersey is likely to depend on the nature of the requesting country’s insolvency regime and any reciprocity between the jurisdictions.

Enforcement of a security interest against a Jersey company may be further limited by fraud, bankruptcy, insolvency, liquidation, dissolution, re-organization or other laws of general application relating to or affecting the rights of creditors.

Risk Rating: Low

6.5 The Issuer is operated by an administrator

The Issuer has appointed and is operated by the Administrator in accordance with the Administration Agreement. The Administrator is an independent, third party entity which has agreed to provide certain administrative, corporate governance and director services to the Issuer.

The operations of the Issuer may be adversely affected by the termination of the appointment of the Administrator, the insolvency or bankruptcy of the Administrator or any default, negligence or fraud on the part of the Administrator or any or its employees.

Risk Rating: Low

6.6 The Issuer is subject to anti-money laundering legislation which, if violated, could materially and adversely affect the timing and amount of payments made by the Issuer

The Issuer and the Administrator are subject to certain anti-money laundering legislation and regulations in Jersey (“Jersey AML Regulations”).

In order to comply with legislation or regulations aimed at the prevention of money laundering the Administrator is required to adopt and maintain anti-money laundering procedures, and may require prospective investors who subscribe directly from the Issuer (i.e. Authorised Participants) to provide evidence to verify their identity, the identity of their beneficial owners/controllers (where applicable), source of funds and wealth. Any failure by the Administrator to comply with its obligations under the relevant legislation or regulations may have an adverse impact on the Issuer, its on-going administration and its ability to comply with its own obligations under the Jersey AML Regulations to which it is subject.

The Issuer and the Administrator reserve the right to request such information as is necessary to verify the identity of Authorised Participants and the identity of their beneficial owners/controllers (where applicable). Where the circumstances permit, the Issuer, in consultation with the Administrator, may be satisfied that full due diligence may not be required at subscription where a relevant exemption applies under applicable law. However, detailed verification information may be required prior to the payment of any proceeds in respect of, or any transfer of, an interest in the ETP Securities.

In the event of delay or failure on the part of an Authorised Participant in producing any information required for verification purposes, the Issuer may refuse to accept the application, or if the application has already occurred, may suspend or withdraw the interest, in which case any funds received will, to the fullest extent permitted by applicable law, be returned without interest to the account from which they were originally debited. Such a delay, failure or violation could materially adversely affect the timing and amount of payments by the Issuer to the holders of the ETP Securities.

The Issuer also reserves the right to refuse to make any redemption (or prepayment) or distribution payment to a holder of any ETP Securities if the Issuer suspects or is advised that the payment of redemption or distribution proceeds to such interest holder may be non-compliant with applicable laws or regulations, or if such refusal is considered necessary or appropriate to ensure the compliance by the Issuer and the Administrator with any applicable laws or regulations.

The Jersey Financial Services Commission has a discretionary power to impose substantial administrative fines upon the Issuer and/or the Administrator in connection with any breaches by them of prescribed provisions of the Proceeds of Crime (Jersey) Law 1999 and Money Laundering (Jersey) Order 2008 (as applicable), as amended and revised from time to time, and upon the Issuer and/or any director or officer of the Issuer who either consented to or connived in the breach, or to whose neglect the breach is proved to be attributable. To the extent any such administrative fine is payable by the Issuer, the Issuer will bear the costs of such fine and any associated proceedings.

If any person in Jersey knows or suspects or has reasonable grounds for knowing or suspecting that another person is engaged in criminal conduct or money laundering or is involved with terrorism or terrorist financing and property and the information for that knowledge or suspicion came to their attention in the course of business in the regulated sector, or other trade, profession, business or employment, the person will be required to report such knowledge or suspicion to their Money Laundering Reporting Officer (if they are required by relevant legislation to appoint one) or in their absence direct to the Jersey Financial Crime Unit of the States of Jersey Police as required in section 34A of the Proceeds of Crime (Jersey) Law 1999. Such a report shall not be treated as a breach of confidence or of any restriction upon the disclosure of information imposed by any enactment or otherwise.

The Issuer is not required by the Jersey AML Regulations to appoint a Money Laundering Reporting Officer, Deputy Money Laundering Reporting Officer, to adopt and maintain anti-money laundering procedures nor to register with the Jersey Financial Services Commission pursuant to Proceeds of Crime (Supervisory Bodies) (Jersey) Law 2008.

Investors may obtain details (including contact details) of any current Money Laundering Reporting Officer and Deputy Money Laundering Reporting Officer of the Administrator, by contacting the Issuer.

Risk Rating: Low

7 Legal, Regulatory and Taxation matters impacting the Issuer

7.1 Taxation and no gross-up

Each ETP Securityholder will assume and be solely responsible for any and all taxes of any jurisdiction or governmental or regulatory authority, including, without limitation, any state or local taxes or other like assessment or charges that may be applicable to any payment to it in respect of the ETP Securities. In the event that any withholding or deduction for or on account of tax is imposed on payments on the ETP Securities, the ETP Securityholders will be subject to such tax or deduction and will not be entitled to receive amounts to compensate for such withholding or deduction. No Event of Default will occur as a result of any such withholding or deduction.

The Issuer may become liable for tax charges whether by direct assessment or withholding. If any such event occurs as a result of a change in law or regulation that materially increases the cost to the Issuer of performing its obligations under the ETP Securities or the LS FCM Agreement or makes it illegal for the Issuer to do the same or to hold, acquire or dispose of the Collateral Assets, the ETP Securities may become subject to early redemption or a shortfall could arise in the amount available to meet the obligations of the Issuer under the ETP Securities, which in turn could negatively impact the value of the ETP Securities.

Risk Rating: Medium

7.2 Markets in Crypto-Assets Regulation (MiCAR)

The Markets in Crypto-Assets Regulation (“MiCAR”) introduces a new regulatory framework for European crypto-assets. MiCAR aims to protect consumers and investors and mitigate risks to financial stability. MiCAR will become applicable for issuers of utility tokens and Crypto-Asset Service Providers (“CASPs”) on 30 December 2024.

The impending implementation of MiCAR introduces uncertainty regarding its potential impact on the Programme. As MiCAR comes into force, it remains unclear how precisely it will affect the operational and legal landscape of the Programme. Given the evolving nature of crypto regulations, potential changes or adjustments may be required to ensure continued compliance with MiCAR requirements. As such, investors should be aware that the introduction of MiCAR may lead to modifications in the Programme’s structure, governance, and operational procedures to align with the regulatory framework.

Risk Rating: Medium

7.3 Change of law

The Conditions of the ETP Securities are governed by Irish law in effect as at the date of issue of the relevant ETP Securities. No assurance can be given as to the impact of any possible judicial decision or change to Irish law or administrative practice after the date of issue of the relevant ETP Securities. Any such change could have a significant adverse effect on the value and liquidity of the ETP Securities. For example, such changes in law may include changes in statutory, tax and regulatory regimes during the life of the ETP Securities, which could materially adversely impact the value of any ETP Securities affected.

In addition, if any change in law or regulation materially increases the cost to the Issuer of performing its obligations under the ETP Securities and/or the Programme Documents or makes it illegal for the Issuer to do the same or to hold, acquire or dispose of the Reference Assets, or otherwise materially adversely impacts the Issuer, the Issuer may determine to exercise its right to redeem the ETP Securities. As a result of any such Mandatory Redemption Event, ETP Securityholders may receive less, or substantially less, than their initial investment.

Risk Rating: Low

7.4 Legality of purchase

The purchase of the ETP Securities by any prospective investor may be subject to investment laws, regulations and/or restrictions or review by certain authorities. None of the Issuer, the Arranger, the Trustee, the FCMs, the Broker Dealer of Record, the Authorised Participants and any Affiliates of such persons are responsible for compliance by a prospective investor of such ETP Securities (whether for its own account or for the account of any third party) with such investment laws, regulations and/or restrictions. There may be risks to such investors which acquire or hold ETP Securities in contravention of such laws, regulations and/or restrictions and breach of such laws, regulations and/or restrictions may have adverse consequences including, without limitation, adverse tax consequences for any investor, which ultimately may impact on the return an investor receives on the ETP Securities.

Risk Rating: Low

7.5 Recharacterisation risk

The ETP Securities are issued in the form of debt securities and are listed as non-equity securities on each Relevant Stock Exchange. The ETP Securities are not units in a collective investment scheme for the purposes of the Directive of 13 July 2009 of the European Parliament and of the Council on the coordination of laws, regulations and administrative provisions relating to Undertakings for Collective Investment in Transferable Securities (No 2009/65/CE), as amended.

There can be no assurance that the courts or regulatory authorities in any jurisdiction would not apply a different interpretation, including recharacterising the ETP Securities as units in a collective investment schedule or a fund. Any such difference in interpretation may have adverse consequences (including, without limitation, adverse tax consequences) for an investor, which ultimately may impact the return an investor receives on the ETP Securities.

Prospective investors should consult their professional advisers on the implications, and in particular the tax and accounting implications, of investment in the ETP Securities and any risk of recharacterisation of the ETP Securities.

Risk rating: Low

7.6 Alternative Investment Fund Managers Directive

EU Directive 2011/61/EU on Alternative Investment Fund Managers ("AIFMD") provides, among other things, that all alternative investment funds ("AIFs") must have a designated alternative investment fund manager ("AIFM") with responsibility for portfolio and risk management.

The requirements of AIFMD have, in general, taken effect from 22 July 2013. If, AIFMD were to apply to the Issuer, the Issuer would need to be appropriately regulated. AIFMD and any other changes to the regulation or regulatory treatment of the ETP Securities for some or all investors may negatively impact the regulatory position of individual investors and, in addition, have a negative impact on the price and liquidity of the ETP Securities affected by such rules in the secondary market.

Risk Rating: Low

7.7 Risk of Data Security Breach

There is a risk that a security breach impacting a Programme Party could lead to a loss or theft of the Issuer’s or Programme Parties’ confidential data. A major data security breach could lead to significant reputational damage for the Issuer and/or the relevant Programme Party and result in regulatory intervention and/or fines, which may, in turn, negatively impact the price of the ETP Securities.

Risk Rating: Low

7.8 Disruptions and volatility in the global financial markets may adversely impact the Issuer

The value of the Reference Assets may be impacted by numerous factors beyond the Issuer’s control, including global, regional, political, economic or financial events and situations (including the Covid 19 pandemic and Russia’s invasion of the Ukraine). These effects include spikes in volatility, lower or negative interest rates, widening of credit spreads and credit deterioration.

Disruptions and volatility in global financial markets may affect the value of the Reference Assets and/or the Portfolio Manager’s ability to pursue an Investment Policy, which may ultimately impact the value of the ETP Securities.

Risk Rating: Low

7.9 Adjourned Meetings of ETP Securityholders

Any adjourned meeting for passing an Extraordinary Resolution requires a low quorum threshold. In the event of an adjourned meeting, the quorum requirement remains at one or more ETP Securityholders or agents present in person, regardless of the number of ETP Securities represented. ETP Securityholders should understand that any Extraordinary Resolution passed at such an adjourned meeting will be binding on all ETP Securityholders, irrespective of their presence at the meeting.

Risk Rating: Low

8. Risk factors relating to the Programme Parties

8.1 Risks relating to the Futures Clearing Merchant

As a consequence of the risks set out in this risk factor 8.1, the ETP Securityholders may lose some or all of their investment in the ETP Securities.

1. Operational Adjustments to the FCM Account

   It is possible that the FCM may make adjustments to the operation of the FCM Account, including amending margin call requirements, which could adversely impact the ability of the Portfolio Manager to maintain the positions in the Reference Assets in order to pursue the Investment Strategy of the ETP Securities.

   Risk Rating: Medium

2. Creditworthiness of the Futures Clearing Merchant

   Any funds that the Issuer deposits with an FCM, in its capacity as an FCM, are subject to risk of loss, including in the event of the insolvency or bankruptcy of the FCM.

   Collateral Assets in the form of cash will be held in the FCM Account or in a customer segregated account maintained by the FCM in accordance with section 4(d)(a)(2) of the Commodity Exchange Act and CFTC rule 1.20 (the “Cash Account”).

   The ability of the Issuer to meet its obligations with respect to the ETP Securities may be dependent upon receipt by the Issuer of payments from the FCM or the relevant institution where the Cash Account is held (the “Cash Account Institution”) (if the Collateral Assets are so held). Consequently, the ETP Securityholders are relying not only on the creditworthiness of the Collateral Assets, but also on the creditworthiness of the FCM and the Cash Account Institution in respect of the performance of its obligations for such Series of ETP Securities.

   Risk Rating: Low

3. An FCM or an Exchange’s clearing house could fail

   In the event of the bankruptcy of an FCM or an Exchange’s clearing house, the Issuer could be exposed to a risk of loss with respect to its assets that are posted as margin. If such a bankruptcy were to occur, the Issuer would be afforded the protections granted to customers of a futures commission merchant and participants to transactions cleared through a clearing house, under the United States Bankruptcy Code and applicable CFTC regulations. Such provisions generally provide for a pro rata distribution to customers of customer property held by the bankrupt futures commission merchant or an Exchange’s clearing house if the customer property held by the futures commissions merchant or the Exchange’s clearing house is insufficient to satisfy all customer claims. In any case, there can be no assurance that these protections will be effective in allowing the Issuer to recover all, or even any, of the amounts it has deposited as margin.

   Bankruptcy of an FCM can be caused by, among other things, the default of one of an FCM’s customers. In this event, the Exchange’s clearing house is permitted to use the entire amount of margin posted by the Issuer (as well as margin posted by other customers of an FCM) to cover the amounts owed by the bankrupt FCM. Consequently, the Issuer could be unable to recover amounts due to it on its futures positions, including assets posted as margin, and could sustain substantial losses.

   The FCM is subject to regulations relating to enhanced customer protections, risk management programs, internal monitoring and controls, capital and liquidity standards, customer disclosures and auditing and examination programs for futures clearing merchants. There can be no assurance that the implementation of these regulations will prevent losses to, or not materially adversely affect, the Issuer or ultimately the ETP Securityholders.

   Risk Rating: Low

4. Risks Related to Affiliates

   As an FCM may be dependent on group companies affiliated with the FCM ("the FCM Affiliates”) to a significant extent, including for access to capital and funding and for risk management, risks that could affect FCM Affiliates could also have a significant impact on an FCM. FCM Affiliates may face a variety of risks that are substantial and inherent in its businesses, including market, liquidity, credit, operational, legal, regulatory and reputational risks. Further, certain FCM Affiliates may have exposure to virtual currencies and other digital currencies. In the event that one or more FCM Affiliates experience materially adverse effects on their businesses or profitability, the FCM’s businesses, reputation or financial condition may also be adversely affected. Financial losses or changes in regulations could affect the ability of FCM Affiliates to contribute capital to an FCM, their ability to extend loans to an FCM, or their ability to continue business, investment or credit arrangements that the FCM currently has in place with the FCM Affiliates.

   Risk Rating: Low

5. Risks Related to the Economic Environment

   An FCM may be adversely affected by U.S. and global market and economic conditions that may cause fluctuations in interest rates, exchange rates, equity and commodity prices and credit spreads. The financial services industry and the U.S. and global financial markets are influenced by numerous unpredictable factors including economic conditions, monetary and fiscal policies of various governments, the liquidity of global markets, availability and cost of capital, international and regional political events, acts of war or terrorism and investor sentiment.

6. Customer or Counterparty Credit Risk

   An FCM may incur losses from its credit exposure related to clearing business activities. An FCM may be exposed to the potential for credit-related losses that can occur because of a customer or counterparty being unable or unwilling to honour its contractual obligations. These exposures may arise, for example, from a decline in the financial condition or insolvency of a customer or counterparty, from a decrease in the value of securities of third parties held by an FCM as collateral and from extending credit or margin to customers or counterparties through various arrangements. An FCM’s credit exposures could have an adverse effect on its business and profitability if credit losses exceed any credit provisions.

   Risk Rating: Low

7. Operational Risk

   An FCM may incur losses arising from its exposure to operational risk. Financial services firms, including the FCMs, are exposed to the risk of loss resulting from inadequate or failed internal processes and systems, the actions of employees, customers, counterparties or third-party vendors and from external events. Such operational risks may include, for example, exposure to natural or man-made disasters, mistakes made in the confirmation or settlement of transactions or from the improper recording, evaluating, or accounting for transactions. In such instances, an FCM could suffer financial loss, disruption of its business, liability to customers, regulatory intervention, or reputational damage, which would affect its business and financial condition.

   Risk Rating: Low

8. Reputational Risk

   Maintaining an FCM’s reputation among customers, investors and regulators is an important aspect of its business, and depends on many factors, including the selection of customers, the conduct of business activities and regulatory actions. In the event one of these factors or other risks set forth herein materialize, an FCM could experience market losses, loss of access to credit, or an inability to do business because of the adverse impact these risks may have on its reputation.

   Risk Rating: Low

9. Liquidity Risk

   An FCM’s business and financial condition could be adversely affected by an inability to borrow funds or sell assets to meet obligations. Financial services firms, including an FCM, are exposed to funding liquidity risk, which is the potential inability to repay financial obligations (both contractual as well as behavioural) when due. This could be most pronounced in times of stress when tenor mismatches between funding sources and uses or incremental requirements put a strain on available sources of liquidity. An FCM’s liquidity could be impaired due to circumstances that it may be unable to control, such as general market disruptions or an operational problem that affects its customers, third parties or itself. An FCM’s ability to sell assets also could be impaired if other market participants are seeking to sell similar assets at the same time in significant volumes or in a thinly traded market environment.

   Risk Rating: Low

10. Litigation Risk

    Legal proceedings could adversely affect an FCM’s operating results and financial condition for a particular period and have a negative impact. The FCM could be named as a defendant in legal actions, including arbitrations, class actions, and other litigation arising in connection with its activities as a financial services institution.

    Risk Rating: Low

11. Regulatory and Legislative Risks

    An FCM’s business is highly regulated and could be adversely affected by regulatory and legislative initiatives. An FCM could be subject to investigations and/or proceedings by governmental, regulatory, and self-regulatory authorities including federal and state securities regulators such as the U.S. Securities and Exchange Commission, the CFTC, self regulatory organizations including the National Futures Association, the CME, and FINRA. Such investigations and proceedings could result in fines, penalties, and sanctions, including a loss of the necessary licenses to conduct business, as well as increased governmental and self-regulatory scrutiny following an investigation.

    If, due to a change of applicable law or regulation, it becomes illegal for an FCM to perform its obligations under the LS FCM Agreement, the LS FCM Agreement will terminate. There is therefore a risk that if the Issuer is unable to find a replacement FCM the ETP Securities of the relevant Series will fall for mandatory early redemption. In such a situation the relevant ETP Securities will be redeemed at the Mandatory Redemption Amount. It is possible that such amount may be less than an investor’s initial investment

    Risk Rating: Low

12. Tax Risk

    An FCM is subject to the tax laws in all jurisdictions in which it operates. Tax risk is the risk associated with changes in tax law or in the interpretation or application of tax law. It also includes the risk of changes in tax rates and the risk of failure to comply with procedures required by tax authorities. Failure to manage tax risks could lead to additional tax charges or a financial penalty for failure to comply with required tax procedures or other aspects of tax law.

    Risk Rating: Low

13. Competitive Environment

    Competitive pressures in the financial services industry in which an FCM operates could adversely affect its business and results of operations. The futures and prime brokerage business in the United States is highly competitive. An FCM competes with numerous U.S. and international competitors for customers based on price, the range of products that it offers, the quality of its services, its financial resources, and product and service innovation. The financial services industry continues to be affected by an intensifying competitive environment, as demonstrated by the introduction of new technology platforms, consolidation through mergers, increased competition from new and established industry participants and diminishing margins in many mature products and services. Plans to enter new businesses could be unsuccessful or could expose the FCM to new or increased risks which, if materialised in a manner or to a degree outside of the FCM’s expectations, its business, financial condition, and results of operations could be materially and adversely affected.

    Risk Rating: Low

14. Provision of information

    None of the Issuer, any Programme Party or any Affiliate of any such persons makes any representation as to the credit quality of an FCM or any Collateral Assets. Any of such persons may have acquired, or during the term of the ETP Securities may acquire, non-public information in relation to the FCM and/or the Collateral Assets which could have an adverse effect on the value of the ETP Securities. None of such persons are under any obligation to make such information directly available to ETP Securityholders. None of the Issuer, any Programme Party or any Affiliate of any such persons are under any obligation to make available any information relating to, or keep under review on the ETP Securityholders’ behalf, the business, financial conditions, prospects, creditworthiness or state of affairs of the FCM or any issuer/obligor in relation to any Collateral Assets or conduct any investigation or due diligence thereon or to monitor such FCM.

    Risk Rating: Low

15. Business relationships and capacity of the FCM

    An FCM or any FCM Affiliate may have existing or future business relationships with any Authorised Participant and will pursue actions and take steps that they deem or it deems necessary or appropriate to protect their or its interests arising therefrom without regard to the consequences for an ETP Securityholder. In addition, an FCM or any FCM Affiliate may make a market or hold positions in respect of any of the ETP Securities. From time to time, an FCM and its Affiliates may own significant amounts of ETP Securities issued under the Programme.

    There are no restrictions on the future business operations or activities of an FCM, and, accordingly, the ability of an FCM to meet its obligations under the LS FCM Agreement may be adversely affected depending on such future business operations or activities (the “Business Changes”). The Arranger will not be responsible for updating any Programme Party, including the Portfolio Manager, of any Business Changes and shall not be responsible for any adverse effects of such Business Changes on the ETP Securities.

    The FCM and any FCM Affiliate may actively trade futures contracts and options on assets that underlie the Investment Strategy linked to Series of ETP Securities, over-the-counter contracts on those assets and other instruments and derivative products based on such assets. Any such trading by an FCM and any FCM Affiliate and unaffiliated third parties could adversely affect the value of the Reference Assets to which certain Series of ETP Securities are linked, which could in turn affect the return on, and the value of, such Series of ETP Securities.

    Any FCM and/or any FCM Affiliate may also issue or underwrite other securities or financial or derivative instruments which compete with a Series of ETP Securities. By introducing competing products into the marketplace in this manner, the FCM and/or any FCM Affiliate could adversely affect the market value of certain ETP Securities, and therefore the amount payable on such ETP Securities on the stated maturity date or any early redemption date, as applicable, and the value of such ETP Securities before that date. To the extent that an FCM and/or any FCM Affiliate serves as issuer, agent or underwriter of, or as futures clearing merchant in relation to, those securities or other similar instruments, their interests with respect to those products may be adverse to the interests of an ETP Securityholder.

    Risk Rating: Low

16. Lack of third party execution agents

    An FCM may rely on the services of third party entities to provide technology solutions for the execution of futures contracts. There is a risk that if no third party is able to provide such services then the FCM may be unable to trade the futures contracts which may result in adverse consequences for the ETP Securityholders.

    Risk Rating: Low

8.2 Other business activities of Authorised Participants

The Authorised Participants and/or their respective Affiliates may be active traders, in the futures markets and the over-the-counter markets. These trading activities may present a conflict between the interests of holders of the ETP Securities and the interests the Authorised Participants and their respective Affiliates may have in their proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for their customers and in accounts under their management. These trading activities, if they influence the value of an Investment Strategy which a Series of ETP Securities pursues could be adverse to the interests of the ETP Securityholders.

Such activities could give rise to conflicts of interest which are adverse to the interests of the ETP Securityholders and could adversely affect the market value of such ETP Securities. With respect to any of the activities described above, none of the Authorised Participants or any of their respective Affiliates has any obligation to the Issuer to take the needs of any buyers, sellers or holders of the ETP Securities into consideration at any time.

Risk Rating: Low

8.3 Determination Agent

Calculation Agent Services LLC will act as Determination Agent. The Determination Agent will, pursuant to the provisions of the Determination Agency Agreement and the Conditions, make various non-discretionary calculations, that affect the ETP Securities, including calculating, among other things, the ETP Security Value and the Final Redemption Amount, the Optional Redemption Amount or the Mandatory Redemption Amount. The value of the ETP Securities could be adversely affected by such calculations. In making such calculations the Determination Agent will depend upon timely and accurate provision of information and certain constituent values of the relevant formulae which are provided to the Determination Agent by various parties, including, but not limited to, the FCM and the Issuer. Any consequent variation in the value of the amounts required to be calculated by the Determination Agent could result in a change to value of the ETP Securities.

Risk Rating: Low

8.4 Trustee

In connection with the exercise of its functions, the Trustee will have regard to the interests of the ETP Securityholders as a class and will not have regard to the consequences of such exercise for individual ETP Securityholders and the Trustee will not be entitled to require, nor will any ETP Securityholder be entitled to claim, from the Issuer any indemnification or payment in respect of any tax consequence of any such exercise upon individual ETP Securityholders.

Accordingly, a situation would potentially arise whereby the Trustee takes a certain action and in doing so will have regard to the interests of the ETP Securityholders as a class, however such action may not be in the best interests of a particular individual ETP Securityholder, for example such action may have an adverse tax consequence for such individual ETP Securityholder.

Risk Rating: Low

8.5 Common Ownership of Arranger, Portfolio Manager, Determination Agent and Broker Dealer of Record

Prospective investors should be aware that the Broker Dealer of Record, the Portfolio Manager and the Determination Agent are under the common ownership of Jose Gonzalez who is also a director and ultimate majority shareholder of the Arranger.

Where such entities are acting, they will have only the duties and responsibilities expressly agreed to by them in the relevant capacity and will not, by virtue of being related to an entity acting in any other capacity, be deemed to have other duties or responsibilities or be deemed to hold a standard of care other than as expressly provided with respect to each such capacity.

For example, GWM Limited will not be responsible for the liabilities of Calculation Agent Services LLC, despite the fact that both entities are under common ownership. Therefore if the Issuer has a claim against the Determination Agent and the Determination Agent cannot satisfy such claim in full, the Issuer shall have no recourse against GWM Limited in its capacity as Broker Dealer of Record in respect of such claim. The value of the ETP Securities may be negatively impacted in such circumstances.

Risk Rating: Low

8.6 Issuer’s right to replace agents and providers

The Issuer reserves the right to replace the FCM, the Portfolio Manager, the Issuing and Paying Agent, the Registrar, the Broker Dealer of Record, the Determination Agent, and any other agents or providers herein at its sole discretion, without the consent of the Trustee or the ETP Securityholders, in order to ensure the efficient operation of the Programme. In addition, prior to the enforcement of the Security for the Secured Obligations, the Issuer has the right to replace the Trustee without the consent of the Trustee or the ETP Securityholders. Accordingly, a situation could arise whereby an agent or service provider is appointed by the Issuer, however such appointment would not otherwise have taken place if the consent of the Trustee or the ETP Securityholders was required (as the Trustee or ETP Securityholders would not have consented to such appointment).

Risk rating: Low