Xtrackers (Jersey) ETC PLC
Directors' report and audited financial statements
For the period from the date of incorporation
18 October 2022 to 31 December 2023
Registered number : 145739
Xtrackers (Jersey) ETC PLC
Contents Page
Directors and other information ................................................................................................................................................................................... 1
Directors' report .......................................................................................................................................................................................................... 2
Statement of Directors' responsibilities ........................................................................................................................................................................ 5
Independent auditor's report........................................................................................................................................................................................ 6
Statement of comprehensive income ........................................................................................................................................................................ 12
Statement of financial position ................................................................................................................................................................................. 13
Statement of changes in equity ................................................................................................................................................................................. 14
Statement of cash flows ............................................................................................................................................................................................ 15
Notes to the financial statements .............................................................................................................................................................................. 16
Xtrackers (Jersey) ETC PLC
1
Directors and other information
Directors
Paul Michael Monahan
Vinod Kumar Rajput
Registered Office
IFC 5
St Helier
Jersey
JE1 1ST
Channel Islands
Corporate Services Provider and
Carbon Accounts Administrator
Apex Financial Services (Corporate) Limited
IFC 5, St Helier
Jersey
JE1 1ST
Channel Islands
Company Secretary
Apex Financial Services (Secretaries) Limited
IFC 5, St Helier
Jersey
JE1 1ST
Channel Islands
Determination Agent and Issuing Agent
Apex Fund Services (Ireland) Limited
2
nd
Floor, Block 5
Irish Life Centre
Abbey Street Lower
Dublin
D01 P767
Ireland
Programme Administrator
DWS Investments UK Limited
21 Moorfields
London
EC2Y 9DB
United Kingdom
Listing Agent
Arthur Cox Listing Services Limited
Ten Earlsfort Terrace
Dublin
D02 T380
Ireland
Trustee
Apex Corporate Trustees (UK) Limited
6th Floor, 125 London Wall
London
EC2Y 5AS
United Kingdom
Paying Agent
Citibank, N.A., London Branch
Citigroup Centre
Canada Square
London
E14 5LB
United Kingdom
Custodian
European Depositary Bank S.A.
3, Rue Gabriel Lippmann
L-5365 Munsbach
R.C.S. Luxembourg B 10700
Carbon Counterparty
Standard Chartered Bank
1 Basinghall Avenue
London
EC2V 5DD
United Kingdom
Authorised Participants
Jane Street Financial Limited
30th Floor, 20 Fenchurch Street
London EC3M 3BY
United Kingdom
Flow Traders B.V.
Jacob Bontiusplaats 9
1018 LL Amsterdam
Netherlands
Independent Auditors
KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
37 Esplanade
St Helier
Jersey JE4 8QW
Channel Islands
Xtrackers (Jersey) ETC PLC
2
Directors' report
The Board of Directors (the "Directors" or the Board”)) present the Directors' report and audited financial statements of Xtrackers (Jersey) ETC
PLC (the “Company”) for the period from the date of incorporation 18 October 2022 to 31 December 2023.
Principal activities and business review
The Company was incorporated on 18 October 2022 as a public limited liability company in Jersey under the Companies (Jersey) Law 1991 with
registration number 145739. It has been established as a special purpose vehicle for the purpose of issuing asset backed securities. The Company was
dormant until the launch of the programme in quarter four of 2023 described below.
The principal activity of the Company, under the Secured Xtrackers (Jersey) ETC PLC Carbon Linked Securities Programme (the Programme”),
is to issue from time to time series (each a "Series") of carbon ETC securities (the Carbon ETC Securities”), where recourse in respect of each
Series is limited to the proceeds of enforcement of the security over each respective Series' assets.
The Company has established this Programme for the issue of Carbon ETC Securities whose return is linked to the price of specified allowances,
credits, permits, rights or similar assets which represent a volume of carbon dioxide equivalent or other greenhouse gas, which is issued, allocated,
created or recognised in accordance with the rules and regulations governing participation in a trading scheme for the transferring of such allowances,
credits, permits, rights, or similar assets (the Allowance(s)”). As at the date of this approval, the only type of Allowance(s) that Carbon ETC
Securities issued under this Programme may be linked to is EU allowances (the EUA(s)”). The Company may hold either (or a combination of)
EUAs allocated in Phase III (1 January 2013 to 31 December 2020) of the EU ETS or EUAs allocated in Phase IV (1 January 2021 to 31 December
2030) of the EU ETS.
The main assets of the Company in respect of a Series of Carbon ETC Securities are the EUAs held by the Company via the Custodian, and cash
held by the Company. The EUAs backing each Series of Carbon ETC Securities may be sold by the Company to service any payment due and payable
on the Carbon ETC Securities and to fund the payment of product fee to the Programme Administrator, which in turn shall be used by the Programme
Administrator to pay certain costs of the Programme and the Company more generally.
The Carbon ETC Securities are designed to provide purchasers with exposure to Allowance(s) of a specified type, without having to take delivery of
them. Each Series of Carbon ETC Securities relates to a number of Allowance(s) and each tranche of Carbon ETC Securities (the Tranche”) has
an Allowance(s) entitlement per Carbon ETC Security specified in the relevant final terms (the Final Terms”). On any particular day, the Carbon
ETC Security can be viewed as giving an exposure to a number of Allowance(s) – the amount payable to securityholders on final redemption or early
redemption of the relevant Carbon ETC Securities is linked to the value of the Allowance(s). In addition, the value per Carbon ETC Security is
similarly linked to the value of such Allowance(s). In order to back its obligations under the Carbon ETC Securities, the Company will seek to hold
enough Allowance(s) to meet its obligations under the Carbon ETC Securities. The precise number it holds at any time may be more or less than the
aggregate number of the Allowance(s) entitlement per Carbon ETC Security, reflecting the periodic payment of Product Fees.
Because the Company obtains its exposure to the Allowance(s) by investing directly in the relevant Allowance(s), these types of Carbon ETC
Securities are known as a replication exchange traded commodities. Upon maturity, the Carbon ETC Securities will pay an amount linked to the
performance of such Allowance(s) (being proceeds from the disposal of the relevant Underlying Allowance(s), subject to deduction of Product Fees).
In connection with a subscription of Carbon ETC Securities, the relevant number of Allowance(s) shall be delivered by the seed authorised participant
or an authorised participant (as applicable) to the secured series carbon account (the “Series Carbon Account”), on the original series issue date (in
respect of an initial issuance of a Series of Carbon ETC Securities). The obligations of the Company under the Carbon ETC Securities of a Series
will be secured in favour of the Trustee by an assignment by way of security of all the Company’s rights, title, interest and benefit present and future
against the Custodian. Subscription and redemption terms of the Carbon ETC Securities are disclosed in the notes of the financial statements.
A Series of Carbon ETC Securities may be listed on the official list of one or more of the following stock exchanges and be admitted to trading on
the regulated market or other main market thereof: Euronext Dublin, the Frankfurt Stock Exchange and/or such other stock exchanges and regulated
markets or main markets as may be agreed between the Company and the Programme Administrator. As of the date of approval of these financial
statements, the Carbon ETC Securities are listed on the Frankfurt Stock Exchange. The Carbon ETC Securities were admitted on the exchange as of
23 November 2023.
Key performance indicators
The Company is a Special Purpose Vehicle (the ''SPV'') whose sole business is the issue of asset-backed securities. The Company has established
a programme for the issue of Carbon ETC Securities whose return is linked to the performance of Allowance(s). Each series of Carbon ETC Securities
will be separate (or ‘ring-fenced’) from each other series of Carbon ETC Securities. The best benchmark is the price of the relevant Allowances in
which the proceeds of the Carbon ETC Securities are invested in. For all Series, the performance closely follows the movement in the Allowances
linked to the Series. To date only one Series has been issued and the relevant Allowances are EUAs.
The Directors confirm that the key performance indicators as disclosed below are those that are used to assess the performance of the Company.
Xtrackers (Jersey) ETC PLC
3
Directors' report (continued)
Key performance indicators (continued)
During the period:
the net fair value gain on EUAs at fair value amounted to EUR 46,585;
the net fair value loss on financial liabilities designated at fair value through profit or loss amounted to EUR 42,795; and
there were two subscriptions in the following new Series of Carbon ETC Securities:
Maturity
date
CCY
Nominal
1
Carbon ETC Securities
30
-
Sep
-
2100
EUR
2
,941
The prices of Allowance(s) are as follows:
Series
Allowance
CCY
Price per
EUA
as at
31 Dec 2023
Price per
EUA
as at
17 Nov 2023 -
date of
Series issue
Series 1 EUA EUR 77.25 76.28
The price of the EUAs have increased during the period.
As at 31 December 2023:
The Company’s total Carbon ETC Securities issued had a fair value of EUR 3,858,710;
The Company has invested in EUAs with a fair value of EUR 3,862,500 (includes EAUs in relation to the Product Fee);
The net assets were EUR 2; and
The Company had the following Carbon ETC Securities in issue:
Series
Description
Maturity
date
Ccy
Nominal
(in
units)
Allowances
held
Number of
Allowances
1
Carbon ETC Securities 30-Sep-2100
EUR
2,941 EUA 50,000
Future developments
The Directors expect that the present level of activity will be sustained for the foreseeable future. The Board will continue to seek new opportunities
for the Company and will continue to ensure proper management of the current portfolio of Series of the Company.
Going concern
The Company’s financial statements for the period ended 31 December 2023 have been prepared on a going concern basis. The Series of Carbon
ETC Securities is referenced to a specific asset and any loss derived from the asset will be ultimately borne by the relevant Carbon ETC
Securityholders. The Directors anticipate that assets are readily realisable and hence, will continue to generate enough cash flows on an ongoing basis
to meet the financial liabilities as they fall due. The Carbon ETC Securities in issue as at 31 December 2023 have a final maturity of 30 September
2100. The Directors do not foresee any material net redemptions in the next twelve months that would trigger going concern issues.
A high-level analysis was made on the liquidity and performance of the Company following the financial period end 31 December 2023. The Directors
note that there has been a positive change in the value of the EUAs since the launch of the Programme and the level of activity has remained stable
post the financial period end. The Directors have also noted that the Programme Administrator has taken measures to ensure business continuity.
Russia-Ukraine conflict
Russia began an invasion of Ukraine on 24 February 2022. None of the Authorised Participants in the primary market are Russian entities and hence
would not be subject to the Russian sanctions. The Directors also assessed that none of the operations of the counterparties are based in Ukraine. The
Directors will continue to monitor the situation and appropriate steps will be taken for the smooth running of the Companies' business. There is no
impact on the ability of investors to redeem due to the sanctions. No other geopolitical matters have been noted to have an impact on the going concern.
Business risks and principal uncertainties
The Company is subject to various risks. The key risks facing the Company relate to their use of financial instruments, their exposure to EUAs and
other risks (i.e. market risk, credit risk, liquidity risk, operational risk and climate risk) arising from the EUAs which are set out in note 15 to the
financial statements.
Xtrackers (Jersey) ETC PLC
4
Directors' report(continued)
Business risks and principal uncertainties (continued)
Climate risk
The Directors acknowledge that climate change is an emerging risk impacting the global economy and will continue to be of interest to all stakeholders
with a focus on how climate change is expected to impact the societal response and the regulatory environment in the future. However, having
considered such factors relating to climate change. While the demand for the Allowances will be correlated to climate change, the Directors have
determined that there are no immediate impacts of climate change on the business operations of the Company. Further details are provided in note
15 to the financial statements.
Results and dividends for the period
The results for the period are set out on page 12. The Directors do not recommend the payment of a dividend for the period under review.
Changes in Directors, Secretary and Registered Office
There has been no change in Directors, Company Secretary and Registered Office during the period.
Directors, Secretary and their interests
None of the Directors or the Company Secretary who held office on 31 December 2023 held any shares or Carbon ETC Securities in the Company
at that date, or during the period. There were no contracts of any significance in relation to the business of the Company in which the Directors had
any interest. As disclosed in note 19, Related Party Transactions, Paul Michael Monahan and Vinod Kumar Rajput, directors of the Company are
employees of the Corporate Services Provider. Apex Financial Services (Nominees) Limited and Apex Financial Services (Nominees 2) Limited are
affiliates of the Corporate Services Provider and Carbon Accounts Administrator. See note 19 for full details of the relationships entered into between
the Company and its related parties.
Shares and shareholders
The issued share capital of the Company is GBP 2 divided into 2 ordinary shares of GBP 1 each (the "Shares"). The Company is owned by two
nominee companies, which hold the issued share capital for the benefit of a purpose trust established pursuant to a declaration of trust on 18 January
2023. The trustee of the purpose trust is Apex Financial Services (Trustees) Limited, and the enforcer is Apex (EP) Limited (“AEPL”). As the issued
ordinary shares are beneficially held by the purpose trust, AEPL is considered to be the ‘controller’ of the Company as the purpose trust gives them
the ability to appoint and/or remove Apex Financial Services (Trustees) Limited. AEPL is a subsidiary of Apex Financial Services Jersey Limited,
which is regulated by the Jersey Financial Services Commission.
Subsequent events
Subsequent events have been disclosed in note 22 to the financial statements.
Independent auditors
In accordance with the Companies (Jersey) Law 1991, KPMG Channel Islands Limited, Chartered Accountants and Recognised Auditors have been
appointed as the Company’s independent auditors and, have expressed their willingness to continue in office.
On behalf of the Board
Director
Date: 24 April 2024
Xtrackers (Jersey) ETC PLC
5
Statement of Directors' responsibilities
The Directors are responsible for preparing the Directors’ report and financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial period. Under that law they are required to prepare the
financial statements in accordance with International Financial Reporting Standards as adopted by the EU and applicable law.
Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Company and of its profit or loss for that period. In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable, relevant and reliable;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the
financial statements;
assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic
alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply
with the Companies (Jersey) Law, 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
The Directors are also required by the Transparency (Directive 2004/109/EC) (Amendment) (No. 2) Regulations 2015 (the ''Regulations'') to
include a Directors’ report containing a fair review of the business and a description of the principal risks and uncertainties facing the Company.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Programme Administrator’s
website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the Directors’ Report
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company; and
the Directors’ report includes a fair review of the development and performance of the business and the position of the Company, together
with a description of the principal risks and uncertainties that they face. The principal risks facing the Company are outlined in note 15 of
the financial statements.
We consider the Directors’ report and financial statements, taken as a whole, is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s position and performance, business model and strategy.
On behalf of the Board
Director
Date: 24 April 2024
Independent Auditor's Report to the Members of Xtrackers
(Jersey) ETC PLC
6
Our opinion is unmodified
We have audited the financial statements of Xtrackers (Jersey) ETC PLC (the “Company”), which comprise the statement
of financial position as at 31 December 2023, the statements of comprehensive income, changes in equity and cash flows
for the period from 18 October 2022 (date of incorporation) to 31 December 2023, and notes, comprising material
accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
give a true and fair view of the financial position of the Company as at 31 December 2023, and of the Company’s
financial performance and cash flows for the period from 18 October 2022 (date of incorporation) to 31 December
2023.
are prepared in accordance with International Financial Reporting Standards as adopted by the EU; and
have been properly prepared in accordance with the Companies (Jersey) Law, 1991.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of
the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as required by the Crown
Dependencies' Audit Rules and Guidance. We believe that the audit evidence we have obtained is a sufficient and
appropriate basis for our opinion.
Key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of
the financial statements and include the most significant assessed risks of material misstatement (whether or not due to
fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. In arriving at our audit opinion above, the key audit matters were as follows:
The risk
Our response
Valuation of EU
Allowances at fair value
(EUAs)
€3,858,710
Refer to note 3(e)
accounting policy and note
9 disclosures
Basis:
EUAs at fair value represent 99.9% of the
Company’s total assets.
The EUAs act as collateral for the financial
liabilities designated at fair value through
profit or loss (“the Carbon Securities”)
issued by the Company. The EUAs are
accounted for at fair value.
The Company determines fair value by
revaluing the quantity of EUAs held at the
reporting date to the last market prices
published by the sources described in the
financial statements.
Risk:
The reported fair value of EUAs held may
be materially misstated and is a significant
Our audit procedures included:
Assessed the design and
implementation of controls over
valuation of EUAs.
Engaged our valuation specialists
(
iRadar) to independently price the
EUAs to a third party pricing
source, recalculate the value
taking into consideration quantity
held and, compared the
recalculated values to those
determined by the Company.
Assessed the fair value
di
sclosures in the financial
statements for compliance with
IFRS requirements.