What does 'wikifolio certificates are collateralized' mean?
In brief:
With certificates, some investors face the question of issuer risk (what happens if the issuing company cannot meet its payment obligations?). All wikifolio certificates are extensively hedged against this risk. This collateralization solution is free of charge for you as an investor.
In detail:
- To fulfill its obligations, Lang & Schwarz keeps the equivalent value of all outstanding wikifolio certificates largely in securities or in cash holdings.
- Securities and cash holdings together form the so-called hedge (collateral).
- The securities are kept in a custody account at the principal bank. The cash accounts are held at various banks and in some cases are kept exclusively for collateral purposes.
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- The custodian appointed by Lang & Schwarz is responsible for regularly checking the stock of securities and calculating the degree of collateralization. If a collateralization event occurs, the custodian takes over the liquidation of collateral and the subsequent payment of the proceeds to the creditors.
- The deposited securities portfolios fulfill the sole purpose of collateralizing the wikifolio certificates. Regarding bank deposits which are held at the principal bank, collateral is provided for the part which is not otherwise being used for transactions by Lang & Schwarz Aktiengesellschaft or Lang & Schwarz TradeCenter AG & Co. KG.
- The collateral available for the creditors of the certificates will be utilized solely for these creditors and not for other creditors of Lang & Schwarz.
- The realization proceeds (less realization costs and custodian fees) will be paid to the creditors of the certificates.
- If the creditors’ claims exceed the realization proceeds, the remaining claims are known as default claims. These are satisfied from the general assets that an insolvency administrator can liquidate at Lang & Schwarz Aktiengesellschaft.
- For example: If the realization proceeds after deduction of costs amount to 95 percent, 5 percent of the claims from the creditors of the certificates remain to be satisfied from the general assets available to all creditors.
- A wikifolio index certificate is a bearer bond and not a fund or any other type of UCITS. It is therefore not classed as a special asset as it is defined in the German Capital Investment Code (Kapitalanlagegesetzbuch).
- Given the fact that an individualized collateralization of the wikifolio index certificates is not the intention and that the bank deposits held at the principal bank are partly used for other transactions within Lang & Schwarz, a separation from Lang & Schwarz Aktiengesellschaft’s own assets, pursuant to article 92 (1) clause 2 of the German Capital Investment Code (KAGB), is not possible.
Team Treuhand GmbH have been appointed as custodians. They belong to the Noerr Group. This consists of:
- Noerr Partnergesellschaft mbB
- Noerr Consulting AG
- TEAM Treuhand GmbH
- NOERR AG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft
Noerr Partnergesellschaft mbB is a corporate law firm with over 500 lawyers, tax advisors, auditors and management consultants spread across 16 locations in Germany, Europe, and the USA. For more information about Noerr, please visit www.noerr.com.
Where can I find the collateralization conditions for each wikifolio certificate?
- Collateralization is contractually agreed for all wikifolio certificates. For wikifolio certificates issued after March 8, 2017, there is a corresponding section in the respective base prospectus which gives information about the collateralization. A description of the collateralization can also be found in the custodial reports.
- The current base prospectus can be viewed on Lang & Schwarz’s website.
- Custodial reports can also be viewed on Lang & Schwarz’s website.