Oil Securities Ltd - Issue of ETFS Oil Securities Ltd

ETFS Oil Securities Limited (the "Issuer").

The Issuer is a public company incorporated and registered in Jersey under the Companies (Jersey) Law 1991 (as amended) with registered number 88371.

The shares in the Issuer are held entirely by ETFS Holdings (Jersey) Limited ("HoldCo"), a holding company incorporated in Jersey. The shares in HoldCo are directly owned by ETF Securities Limited ("ETFSL") which is also incorporated in Jersey. The Issuer is neither directly or indirectly owned or controlled by any other party to the programme.

The Issuer has been established as a special purpose vehicle for the purpose of issuing the Energy Securities as asset-backed securities.

The principal activity of the Issuer is issuing several classes of debt security (the "Energy Securities") which are backed by derivative contracts (the "Energy Contracts") which provide exposure to movements in the prices of oil futures contracts of different maturities and carbon emissions allowance futures contracts. The Issuer has established a programme under which Energy Securities may be issued from time to time, in the form of nine classes providing exposure to different types of oil futures contracts ("Oil Securities") and one class providing exposure to carbon emissions allowance futures contracts ("Emissions Securities").

Energy Securities can be created and Redeemed on a daily basis by financial institutions ("Authorised Participants") who (i) have entered into an agreement entitled "Authorised Participant Agreement" with the Issuer; (ii) have certified to the Issuer as to their status under the Financial Services and Markets Act 2000 ("FSMA"); and (iii) have certified to the Issuer that they are not collective investment schemes regulated under Council Directive No. 85/611/EEC as undertakings for collective investment in transferable securities (except that other holders of Energy Securities may also redeem Energy Securities if there are no Authorised Participants). All other parties must buy and sell Energy Securities through trading on an exchange or market on which the Energy Securities are admitted to trading.

The Issuer achieves a matching exposure to the Energy Securities by holding corresponding Energy Contracts purchased from one or more Oil Major Companies. An Oil Major Company is a company which is either: a member of any of the six western oil majors (Shell (LSE: RDSB.L - news) , Exxon Mobil (NYSE: XOM - news) , BP, Total (Brussels: FP.BR - news) , Chevron (NYSE: CVX - news) and Eni (EUREX: E1NT.EX - news) ), or any other company which owns oil or has assets linked to the oil price and has an investment grade credit rating. Energy Contracts are purchased or to be purchased from an Oil Major Company pursuant to an omnibus Agreement with such Oil Major Company (an "Energy Purchase Agreement") entitling the Issuer on cancellation thereof or sale back to the Oil Major Company to payment of an amount calculated by reference to the formula set out at C.15 (the "Price"). At the date of this Prospectus, the Issuer has entered into arrangements with one Oil Major Company only - Shell Trading Switzerland. Shell Treasury provides credit support for the payment obligations of Shell Trading Switzerland under the Energy Contracts.

Energy Securities are constituted under an agreement between the Issuer and the trustee for Security Holders, the Law Debenture Trust Corporation p.l.c. (the "Trustee") entitled the "Trust Instrument". The Trustee holds all rights and entitlements under the Trust Instrument on trust for any person identified on the registers as holding the Energy Securities (the "Security Holders"). The Issuer and the Trustee have entered into a separate Security Deed in respect of each pool of Energy Contracts attributable to any class of Energy Security (each a "Pool (NasdaqGS: POOL - news) ") and the rights and entitlements held by the Trustee under each Security Deed are held by the Trustee on trust for the Security Holders of the relevant class of Energy Security.

ETFS Management Company (Jersey) Limited ("ManJer"), a company which is wholly-owned by ETFSL, supplies, or will arrange the supply of, all management and administration services to the Issuer and pays all the management and administration costs of the Issuer in return for a fee payable by the Issuer.

Not applicable; financial statements have been made up as at the date of this Prospectus.

Not applicable; there has been no material adverse change in the prospects of the Issuer since the date of its last published audited financial statements

The underlying for the Energy Securities of each class, on which they are secured, is the Energy Contracts of the same class, the Energy Purchase Agreement pursuant to which they are purchased (to the extent attributable to that class) and letters of credit issued in favour of the Issuer in respect of an Oil Major Company's obligations to the Issuer under the Energy Purchase Agreement (the "Letters of Credit") in respect of that class.

The Energy Purchase Agreement, the Energy Contracts provided thereunder and the Letters of Credit have characteristics that demonstrate capacity to produce funds to service any payments due and payable on the Energy Securities. Energy Securities of each class are backed by Energy Contracts with corresponding terms and each time an Energy Security is created or redeemed a matching amount of Energy Contracts are purchased or cancelled by the Issuer. Energy Contracts will be purchased from one or more Oil Major Companies.

The Issuer will decline applications for Energy Securities if it cannot for any reason purchase corresponding Energy Contracts from an Oil Major Company.

At the date of this Prospectus, the Issuer has entered into arrangements with one Oil Major Company only - Shell Trading Switzerland. Shell Treasury provides credit support for Shell Trading Switzerland.

Under the Energy Purchase Agreement there are limits, both daily and in aggregate, on the number of Energy Contracts that can be created or cancelled at any time. Creations and redemptions of Energy Securities are subject to both daily limits and total aggregate limits, to match the limits on Energy Contracts.

Shell Trading Switzerland was incorporated in Switzerland with the name Shell Trading Switzerland AG in accordance with the provisions of the Swiss Code of Obligations on 11 April 2005 (with company number CH-170.3.028.260-0) and is a wholly owned subsidiary of Shell Overseas Holdings Limited which is itself a wholly-owned member of the Shell Group.

Shell Treasury was incorporated and registered in England and Wales pursuant to the Companies Act 1985 on 17 November (Xetra: A0Z24E - news) 1997 with company number 3469401 and is a wholly-owned subsidiary of The Shell Petroleum Company Limited which is itself a wholly-owned member of the Shell Group.

The Issuer is a special purpose company whose only assets are the Energy Contracts and so the ability of the Issuer to meet its obligations in relation to Energy Securities will be wholly dependent on its receipt of payments under Energy Contracts from Oil Major Companies as described in B.30.

Not applicable; there is no active management of the assets of the Issuer.

Further Energy Securities of any class may be issued but each time an Energy Security of any class is issued corresponding Energy Contracts of the same class will be created and will form part of the corresponding Pool. Such newly issued Energy Securities will be fungible with all existing Energy Securities of the same class and will be backed by the assets of the same Pool.

Energy Securities are constituted by the Trust Instrument. Under the terms of the Trust Instrument, the Trustee acts as Trustee for the Security Holders of each class of Energy Security.

The obligations of the Issuer in respect of each class of Energy Security are secured by a charge over the equivalent class of Energy Contracts under the Energy Purchase Agreement and Letters of Credit.

A diagrammatic representation of the principal aspects of the structure as currently in place appears below:

Authorised Participants will approach the Issuer with requests to create or redeem Energy Securities at the price calculated on the relevant day in accordance with the formula set out and described in C.15. The Issuer will then purchase or redeem the equivalent number of Energy Contracts from the Oil Major Companies, as applicable.

Application moneys for all Energy Securities must be paid by Authorised Participants directly to the relevant Oil Major Company from whom the corresponding Energy Contracts are being purchased by the Issuer, via CREST. Legal title is transferred by means of the CREST system and evidenced by an entry on the register of Security Holders maintained by the Issuer's registrar - Computershare Investor Services (Jersey) Limited. If an Authorised Participant does not make payment for the full amount of Energy Securities applied for on the due date for payment or the following business day, the Issuer may elect by notice to the Authorised Participant to cancel the application.

A Security Holder who is also an Authorised Participant may, at any time, by lodging a redemption request (in such form as the Issuer will determine from time to time) with the Issuer, require the redemption of all or any of its Energy Securities at the Price on the day such redemption request is submitted. A Security Holder who is not also an Authorised Participant may only require the Redemption of any of its Energy Securities if, at the time, there are no Authorised Participants and the Security Holder submits a valid redemption request on such day. Payment on the redemption of an Energy Security will be made by the Oil Major Company directly to the relevant Authorised Participant Redeeming the Energy Security, via CREST.

The Energy Contracts are and will be with the Oil Major Companies. An Oil Major Company is a company which is either: a member of any of the six western oil majors (Shell, Exxon Mobil, BP, Total, Chevron and Eni), or any other company which owns oil, the rights to oil or has assets linked to the oil price and has an investment grade credit rating. However, the aggregate amount of Energy Contracts which may be purchased from such latter companies must be less than half the aggregate number of Energy Contracts in any Pool.

Shell Trading Switzerland was incorporated in Switzerland with the name Shell Trading Switzerland AG in accordance with the provisions of the Swiss Code of Obligations on 11 April 2005 (with company number CH-170.3.028.260-0) and is a wholly owned subsidiary of Shell Overseas Holdings Limited which is itself a wholly owned member of the Shell Group. It currently has no holdings or interest in any other companies and carries on no other activities other than the entering into of Energy Contracts with the Issuer and ancillary finance and hedging arrangements with other members of the Shell Group to facilitate the performance of its obligations under the Energy Purchase Agreement.

At the date of this Prospectus, the Issuer has only entered into arrangements with one Oil Major Company - Shell Trading Switzerland.

These Final Terms relate to the issue of the following classes of Energy Securities to be issued pursuant to the Final Terms:

The following are the aggregate number of Energy Securities to which these Final Terms apply:

Energy Securities are financial instruments designed to track the price of oil or emissions allowance futures. Energy Securities enable investors to gain exposure to movements in futures prices without needing to purchase or take physical delivery of oil or carbon emissions allowances or to trade in futures contracts, and to buy and sell that interest through trading that security on an exchange. Energy Securities are designed to give investors a "total return" similar to that which could be achieved from a fully paid/collateralised position in futures contracts of the relevant maturity but without having to manage a futures position. Unlike managing a futures position, Energy Securities involve no rolling, margin calls, expiry or futures brokerage.

The Oil Securities being issued pursuant to the Final Terms are denominated in U.S. Dollars

Not applicable; the Energy Securities are freely transferable

Energy Securities constitute direct and unconditional payment obligations of the Issuer which rank pari passu among themselves.

Each Energy Security carries the right on redemption to payment of the higher of (i) the Principal Amount (as set out in C.12) for that class, and (ii) the price of that class of that Energy Security on the applicable day determined using the formula set out and described in C.15.

Energy Securities are constituted under the Trust Instrument. The Trustee holds all rights and entitlements under the Trust Instrument on trust for the Security Holders. The Issuer and the Trustee have entered into a separate Security Deed in respect of each Pool and the rights and entitlements held by the Trustee under each Security Deed are held by the Trustee on trust for the Security Holders of that particular class of Energy Security. Under the terms of each Security Deed, the Issuer has assigned to the Trustee by way of security the contractual rights of the Issuer relating to such class under the Energy Purchase Agreement, and granted a first-ranking floating charge in favour of the Trustee over all of the Issuer's rights in relation to the secured property attributable to the applicable Pool.

The Energy Purchase Agreement, the Authorised Participant Agreements, the Energy Contracts and all rights of the Issuer in relation to the Letter of Credit, to the extent applicable to each class of Energy Security, are all the subject of security granted by the Issuer in favour of the Trustee under the Security Deeds.

The Issuer holds separate pools of assets for each class of securities so that holders of a particular class of Energy Security will only have recourse to security granted by the Issuer over the Energy Contracts of that same class.

Application has been made to the UK Listing Authority for all Energy Securities issued within 12 months of the date of this Prospectus to be admitted to the Official List and to the London Stock Exchange (LSE: LSE.L - news) , which operates a Regulated Market, and for all such Energy Securities to be admitted to trading on the Main Market of the London Stock Exchange, which is part of its Regulated Market for listed securities (being securities admitted to the Official List). It is the Issuer's intention that all Energy Securities issued after the date of this document will also be admitted to trading on the Main Market.

No application has been or is currently being made for any other classes of Oil Securities or the Carbon Securities to be admitted to listing or trading on any exchange or market outside the UK but the Issuer may cause such application to be made in respect of the Energy Securities of any or all classes on any such exchanges or markets in its discretion.

Each Energy Security issued pursuant to the Final terms has a Principal Amount as follows:

Price

The price of each Energy Security is the same as the price of the underlying Energy Contract which is calculated in accordance with the following formula:

PC_(i,t) = {P1_(i,t) x E1 (KSE: 017940.KS - news) _(i,t) + P2_(i,t) x E2_(i,t)} x M_(i,t)

The multiplier (M_(i,t)), next entitlement (E2_(i,t)), near entitlement (E1_(i,t)), next contract price (P2_(i,t)) and near contract price (P1_(i,t)) are all published daily by the Issuer on its website at www.etfsecurities.com/osl.

This pricing formula reflects applicable fees as well as the prices of the relevant underlying futures contracts.

Underlying futures contract prices

The Energy Securities being issued pursuant to the Final Terms are priced by reference to two underlying futures contracts of different maturities.

The near contract price (P1_(i,t)) and next contract price (P2_(i,t)) are prices for the first year and second year, second year and third year, and third year and fourth year December month contracts respectively.

Entitlement

The near entitlement (E1_(i,t)) and next entitlement (E2_(i,t)) are the weighting applied to the near contract price and next contract price respectively.

Over time (because futures contracts expire) the pricing formula needs to involve a change from the near contract to the next contract (a process known as "rolling") and this is done on specified days called the "roll period". During each roll period the weights roll from the near entitlement to the next entitlement in accordance with formulae designed to reproduce the effect of selling the near contract and applying the proceeds in acquiring the next contract. In that process, if the near contract price is higher than the next contract price then the sum of the near entitlement and the next entitlement will increase, whereas if the opposite is true (the near contract price is lower than the next contract price) then the sum of the near entitlement and the next entitlement will decrease.

Multiplier

The multiplier (M_(i,t)) is adjusted on each business day in the Ice Futures Oil Market by the equivalent to an interest return net of all fees (the "Daily Adjustment"). The Daily Adjustment (which may be negative) will be an annualised rate equal to (i) a rate agreed from time to time between the Issuer and the relevant Oil Major Company reflecting the benefit or cost to the Oil Major Company of selling Energy Contracts to the Issuer (the "the Other Adjustment"); less (ii) the fees payable by the Issuer to ManJer of 0.49 per cent per annum.

The price of an Energy Security will therefore vary with prices of the underlying-referenced future contracts but also depending on the proportion of each futures contract reflected in the price as contracts are "rolled" and to take account of applicable fees.

Not applicable; the Energy Securities are undated securities and have no specified maturity date and no expiry date.

CREST

The Issuer is a participating issuer in CREST, a paperless system for the settlement of transfers and holding of securities.

Settlement of creations and redemptions

On creation or redemption of the Energy Securities, settlement will occur (provided certain conditions are met) on the third business day following receipt of the relevant creation or redemption request on a delivery versus payment basis within CREST.

Prices for each class of Energy Contract are calculated on each pricing day and redemptions of Energy Securities and the corresponding Energy Contracts will be at the Price on the day on which the redemption request is received.

Each Energy Contract and Energy Security is priced by reference to two futures contracts, referred to as the near contract and the next contract. There are different rules for determining the near contract and next contract for each class of Energy Security. A multiplier is then used to adjust the price to reflect fees paid to ManJer and any other adjustment agreed with the Oil Major Company. The detailed formula is set out in C.15 above.

Each Authorised Participant and relevant Oil Major Company must notify any objection to the Issuer's price calculation by 10.00 a.m. on the business day following that on which the Price was determined.

The Energy Securities are backed by matching Energy Contracts purchased from an Oil Major Company. As at the date of this Prospectus, Energy Contracts are only entered into with one Oil Major Company - Shell Trading Switzerland.

The Energy Contracts backing the Energy Securities being issued pursuant to the Final Terms are priced by reference to oil futures contracts. The futures market pricing benchmark used is West Texas Intermediate crude oil based on the New York Mercantile Exchange's WTI Contracts. Information on these futures contracts can be found on the website of the relevant exchange (http://www.cmegroup.com).