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▶ What are the VelocityShares Commodity ETNs?
The VelocityShares Commodity Exchange Traded Notes (the “ETNs”) are issued by Credit Suisse AG (“Credit Suisse”) acting through its Nassau branch. The ETNs are senior, unsecured obligations of Credit Suisse which are designed to provide sophisticated investors with daily trading tools to manage daily trading risks. The ETNs enable investors to gain leveraged long or leveraged inverse exposure to the relevant underlying index (as defined below) minus the investor fee on a daily basis.
▶ What are the investment objectives of the ETNs?
Each series of ETNs is designed to provide leveraged long or leveraged inverse exposure to the S&P GSCI® Gold Index ER, the S&P GSCI® Silver Index ER, the S&P GSCI® Platinum Index ER, the S&P GSCI® Palladium Index ER, the S&P GSCI® Copper Index ER , the S&P GSCI® Brent Crude Index ER, the S&P GSCI® Crude Oil Index ER, and the S&P GSCI® Natural Gas Index ER (each, an “underlying index”), as described in the applicable pricing supplement. The Daily ETN Performance will be linked to the Daily Index Performance of the relevant underlying index times the relevant leverage amount (2x, -2x, 3x or -3x) plus a daily accrual equal to the return that could be earned on a notional capital reinvestment at the three month U.S. Treasury rate as reported on Bloomberg under ticker USB3MTA.
▶ Do the ETNs match/replicate a direct position in the physical commodities?
No. The ETNs do not represent an investment in physical commodities. Each series of ETNs is linked to the applicable underlying index as described in the applicable pricing supplement. Each applicable underlying index is comprised of futures contracts on a single commodity.
▶ How is the Closing Indicative Value of the ETNs calculated?
The Closing Indicative Value will be based on the Daily ETN Performance (which will be linked to the Daily Index Performance of the relevant underlying index times the relevant leverage amount plus a daily accrual) minus a daily investor fee.
▶ Where can I find additional information about the underlying index?
The ETNs are linked to the applicable underlying index. The underlying indices are published by Standard & Poor’s Financial Services, LLC. For additional information, please refer to “The Indices” section in the applicable pricing supplement.
▶ What are the underlying indices?
Each underlying index comprises futures contracts on a single commodity and is calculated according to the methodology of the S&P GSCI® Index (the “S&P GSCI”). The fluctuations in the values of the underlying indices are intended generally to correlate with changes in the prices of such physical commodities in global markets. The S&P GSCI® Gold Index ER, the S&P GSCI® Silver Index ER, the S&P GSCI® Platinum Index ER and the S&P GSCI® Palladium Index ER, S&P GSCI® Copper Index ER, the S&P GSCI® Brent Crude Index ER, the S&P GSCI® Crude Oil Index ER, and the S&P GSCI® Natural Gas Index ER are composed entirely of gold, silver, platinum, palladium, copper , Brent crude oil, WTI crude oil, or natural gas futures contracts, respectively. Each underlying index is an excess return index.
▶ Are the ETNs subject to intraday purchase risk?
Yes. For each series of the ETNs, the leveraged exposure, as a function of the Closing Indicative Value, is fixed each night and does not change intraday as the level of the applicable underlying index moves. This process is detailed in the applicable pricing supplement within the Risk Factors section under “The ETNs are subject to intraday purchase risk”.
▶ Do the ETNs seek to achieve their stated investment objectives for periods longer than one day?
No. The ETNs do not attempt to, and should not be expected to, provide returns which achieve their stated investment objectives for holding periods other than a single day.
▶ What type of investor is an appropriate candidate for the ETNs?
The ETNs are intended to be daily trading tools for sophisticated investors to manage daily trading risks using a short-term investment. The ETNs are riskier than securities that have intermediate or long-term investment objectives, and may not be suitable for investors who plan to hold them for longer than one day. Accordingly, the ETNs should be purchased only by knowledgeable investors who understand the potential consequences of investing in the applicable underlying index and of seeking daily compounding leveraged long or leveraged inverse investment results, as applicable. Investors should actively and frequently monitor their investment in the ETNs, even intra-day.
▶ What is the Daily Investor Fee?
On any Index Business day, the Daily Investor Fee for each series of the ETNs will be equal to the product of (1) the Closing Indicative Value for such series of ETNs on the immediately preceding Index Business Day times (2)(a) the Investor Fee Factor for such series of ETNs times (b) 1/365 times (c) d, where d is the number of calendar days from and including the immediately prior Index Business Day to but excluding the date of determination. The Daily Investor Fee is deemed to be zero on any day that is not an Index Business Day. The Investor Fee Factor is 1.35% per annum for the gold, platinum, palladium, copper, Brent crude, and crude oil ETNs (Bloomberg tickers “UGLD”, “DGLD”, “LPLT”, “IPLT”, “LPAL”, “IPAL”, “LCPR”, “SCPR”, “UOIL”, “DOIL”, “UWTI”, “DWTI”).
The Investor Fee Factor is 1.65% per annum for the silver and the natural gas ETNs (Bloomberg tickers “USLV”, “DSLV”, “UGAZ”, “DGAZ”).
These fees are described more fully in the applicable pricing supplement.
▶ How can I track the value of my ETN?
On each Index Business Day, an Intraday Indicative Value (an approximation of the intrinsic value) of each series of the ETNs is calculated and disseminated over the Consolidated Tape and/or other major market data vendors every 15 seconds. A Closing Indicative Value of each series of the ETNs is calculated and is disseminated over the Consolidated Tape and/or other major market data vendors at the end of each Index Business Day. See Exhibit 1. Because each underlying index comprises futures contracts that may trade on markets with different hours of trading than the NYSE Arca, each underlying index may reach its final level on each Index Business Day before the close of trading on the NYSE Arca. Therefore, as long as any of the ETNs are listed for trading on the NYSE Arca, such ETNs may continue to trade in the afternoon on each Index Business Day for a period of time after the futures contracts included in the applicable underlying index have finished trading for such Index Business Day.