C. In the event of the proviso above, if the asset manager and the Authorized Participant agree, the Investor may deposit cash ("Substitute Cash ") in lieu of the Paid-In Assets, not representing the Portfolio Deposit File ("Non-Portfolio Assets"). In such case, the asset manager must settle the Substitute Cash with the
Authorized Participant every day according to the Authorized Participant Agreement (the Authorized settlement with the cash paid by the investors):
following rules and the Participant makes the
¾ Calculation of Substitute Cash: Substitute Cash shall be equal to 115% of the sum of the value of the Non-Portfolio Assets based on the closing price on the creation request date and the costs incurred by the asset manager in purchasing the Non-Portfolio Assets with the Substitute Cash in the securities market. ¾ Settlement of Substitute Cash: If the rate of Substitute Cash is less than the rate specified above, the asset manager must collect additional cash from the Authorized Participant to satisfy the rate above. ¾ Return of income from Substitute Cash: The asset manager must return any interest or other income arising during the period of buying the Non-Portfolio Assets to the investors through the Authorized Participant.
If an investor requests the creation of the Fund with paid-in assets other than as set forth in Paragraph B above, the Authorized Participant must sell or purchase securities so as to bring the paid-in assets in conformity with the Portfolio Deposit File (“Sale and Purchase of Paid-In Assets”) and then request the asset manager to create the Fund. If the Authorized Participant sells or purchases the paid-in assets, it may use a brokerage account in the name of the investor or a joint
account in the name of the Authorized non-resident foreign corporation that must must use a joint account.
Participant. If sell or purchase
Things to Look out for in the Sale and Purchase of the Paid-In Assets
The Authorized Participant will do its best in the sale of the paid-in assets to protect the
investor’s interest pursuant to Paragraph D above.
However, as the result of the sale and
purchase are not always satisfactory, the investor should keep the following in mind:
¾ The investor may not raise any objection to the Authorized Participant’s decision relating to the sale and purchase of the paid-in assets (e.g., the timing, price, and volume of sale and purchase of securities, etc.).
The investor enjoys all profits and bears all losses arising from the sale and purchase of the paid-in assets.
If the Sale and Purchase of Paid-In Assets is not feasible despite best efforts of the Authorized Participant because it is impossible to sell or purchase the securities in the Portfolio Deposit File or because of other reasons, the Authorized Participant must notify the Investor thereof immediately in writing and may not request the creation of the Fund.
If the Authorized Participant does not make a request to the asset manager to create the Fund, if the investor revokes its request to create the Fund, or if the asset manager does not approve the creation of the Fund, the Authorized