NET ASSET VALUE
The Bank of
New York Mellon Corporation (BONY) calculates each Funds NAV at the close of
regular trading (normally 4:00 p.m. Eastern time) every day the NYSE is open.
NAV is calculated by deducting all of the Funds liabilities from the total
value of its assets and dividing the result by the number of Shares
outstanding, rounding to the nearest cent. All valuations are subject to review
by the Trusts Board of Trustees or its delegate.
In determining
NAV, expenses are accrued and applied daily and securities and other assets for
which market quotations are available are valued at market value. Stocks and
other equity securities are valued at the last sales price that day based on
the official closing price of the exchange where the security is primarily
traded. The NAV for each Fund will be calculated and disseminated daily.
The NYSE Arca
will disseminate every 15 seconds throughout the trading day through the
facilities of the Consolidated Tape Association the approximate value of Shares
of the applicable Fund, an amount representing on a per share basis the sum of
the current value of the Deposit Securities based on their then current market
price and the estimated Cash Component. As the respective international local
markets close, the market value of the Deposit Securities will continue to be
updated for foreign exchange rates for the remainder of the U.S. trading day at
the prescribed 15 second interval. The value of each Underlying Index will not
be calculated and disseminated intra day. The value and return of each
Underlying Index is calculated once each trading day by the Index Provider
based on prices received from the respective international local markets.
The value of
each Funds portfolio securities is based on the securities closing price on
local markets when available. If a securitys market price is not readily
available or does not otherwise accurately reflect the fair value of the
security, the security will be valued by another method that the Adviser
believes will better reflect fair value in accordance with the Trusts
valuation policies and procedures approved by the Board of Trustees. Each Fund
may use fair value pricing in a variety of circumstances, including but not
limited to, situations when the value of a security in a Funds portfolio has
been materially affected by events occurring after the close of the market on
which the security is principally traded (such as a corporate action or other
news that may materially affect the price of a security) or trading in a
security has been suspended or halted. Fair value pricing involves subjective
judgments and it is possible that a fair value determination for a security is
materially different than the value that could be realized upon the sale of the
security. In addition, fair value pricing could result in a difference between
the prices used to calculate a Funds NAV and the prices used by the Funds
Underlying Index. This may adversely affect a Funds ability to track its
Underlying Index. With respect to securities that are primarily listed on
foreign exchanges, the value of a Funds portfolio securities may change on
days when you will not be able to purchase or sell your Shares.
FUND SERVICE
PROVIDERS
BONY, 101 Barclay Street, New York, NY 10286,
is the administrator, custodian and fund accounting and transfer agent for each
Fund. Clifford Chance US LLP, 31 West
52nd Street, New York, NY 10019, serves as legal counsel to the Funds.
,
serves as the Funds independent registered public accounting firm. The independent registered public accounting
firm is responsible for auditing the annual financial statements of the Funds.
INDEX PROVIDERS
The Red Rocks
Developed Markets Infrastructure Index
sm
and Red Rocks Emerging
Markets Infrastructure Index
sm
are calculated and maintained by Red
Rocks Capital, LLC (Red Rocks). Red Rocks is not affiliated with the Trust,
the Adviser or the Distributor. The Adviser has entered into a license
agreement with Red Rocks to use the Red Rocks Developed Markets Infrastructure
Index
sm
and Red Rocks Emerging Markets
21
Infrastructure Index
sm
. The Funds
are entitled to use the Red Rocks Developed Markets Infrastructure Index
sm
and Red Rocks Emerging Markets Infrastructure Index
sm
pursuant to a sub-licensing agreement with
the Adviser.
DISCLAIMERS
Set forth below is a list of each Fund and the
Underlying Index upon which it is based.
Fund
|
|
Underlying Index
|
PowerShares
Developed Markets Infrastructure Portfolio
|
|
Red Rocks Developed Markets Infrastructure
Index
sm
|
PowerShares
Emerging Markets Infrastructure Portfolio
|
|
Red Rocks Emerging Infrastructure Index
sm
|
Red Rocks Developed Markets Infrastructure Index
sm
and Red Rocks
Emerging Markets Infrastructure Index
sm
, are trade names and
trademarks of Red Rocks and have been licensed for use for certain purposes by
PowerShares. PowerShares Red Rocks
Developed Markets Infrastructure Index
sm
and Red Rocks Emerging
Markets Infrastructure Index
sm
are not sponsored, endorsed, sold or
promoted by Red Rocks and Red Rocks makes no representation regarding the
advisability of trading in such products.
RED ROCKS MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
THE RESULTS TO BE OBTAINED BY ANY PERSON OR ENTITY FROM THE USE OF THE RED
ROCKS DEVELOPED MARKETS INFRASTRUCTURE INDEX
sm
AND RED ROCKS
EMERGING MARKETS INFRASTRUCTURE INDEX
sm
, TRADING BASED ON THE RED
ROCKS DEVELOPED MARKETS INFRASTRUCTURE INDEX
sm
AND RED ROCKS
EMERGING MARKETS INFRASTRUCTURE INDEX
sm
, OR ANY DATA INCLUDED
THEREIN IN CONNECTION WITH THESE PRODUCTS, OR FOR ANY OTHER USE. RED ROCKS EXPRESSLY
22
DISCLAIMS ALL WARRANTIES
AND CONDITIONS, EXPRESS, STATUTORY OR IMPLIED.
RED ROCKS HEREBY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES AND
CONDITIONS OF MERCHANTABILITY, TITLE OR FITNESS FOR A PARTICULAR PURPOSE OR USE
WITH RESPECT TO THE RED ROCKS DEVELOPED MARKETS INFRASTRUCTURE INDEX
sm
AND RED ROCKS EMERGING MARKETS INFRASTRUCTURE INDEX
sm
OR ANY DATA
INCLUDED THEREIN.
The Adviser does not
guarantee the accuracy and/or the completeness of the Underlying Indexes or any
data included therein, and the Adviser shall have no liability for any errors,
omissions, or interruptions therein. The Adviser makes no warranty, express or
implied, as to results to be obtained by the Funds, owners of the Shares of the
Funds or any other person or entity from the use of the Underlying Indexes or
any data included therein. The Adviser makes no express or implied warranties,
and expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the Underlying Indexes or any data
included therein. Without limiting any of the foregoing, in no event shall the
Adviser have any liability for any special, punitive, direct, indirect or
consequential damages (including lost profits) arising out of matters relating
to the use of the Underlying Indexes even if notified of the possibility of
such damages.
OTHER INFORMATION
Section 12(d)(1) of the 1940 Act
restricts investments by investment companies in the securities of other
investment companies, including Shares of the Funds. Registered investment companies are permitted
to invest in the Funds beyond the limits set forth in Section 12(d)(1) subject
to certain terms and conditions set forth in an SEC exemptive order issued to
the Trust, including that such investment companies enter into an agreement
with the Trust.
Continuous Offering
The method by which Creation Unit
Aggregations of Fund Shares are created and traded may raise certain issues
under applicable securities laws.
Because new Creation Unit Aggregations of Shares are issued and sold by
the Funds on an ongoing basis, a distribution, as such term is used in the
Securities Act of 1933, as amended (the Securities Act), may occur at any
point. Broker-dealers and other persons
are cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery requirement and liability provisions of the Securities Act.
For example, a broker-dealer firm or its
client may be deemed a statutory underwriter if it takes Creation Unit
Aggregations after placing an order with the Distributor, breaks them down into
constituent Shares and sells such Shares directly to customers, or if it
chooses to couple the creation of a supply of new Shares with an active selling
effort involving solicitation of secondary market demand for Shares. A determination of whether one is an
underwriter for purposes of the Securities Act must take into account all the
facts and circumstances pertaining to the activities of the broker-dealer or
its client in the particular case, and the examples mentioned above should not
be considered a complete description of all the activities that could lead to a
characterization as an underwriter.
Broker-dealer firms should also note that
dealers who are not underwriters but are effecting transactions in Shares,
whether or not participating in the distribution of Shares, are generally
required to deliver a Prospectus. This
is because the prospectus delivery exemption in Section 4(3) of the
Securities Act is not available in respect of such transactions as a result of Section 24(d) of
the 1940 Act. As a result, broker-dealer
firms should note that dealers who are not underwriters but are participating
in a distribution (as contrasted with ordinary secondary market transactions)
and thus dealing with the Shares that are part of an overallotment within the
meaning of Section 4(3)(a) of the Securities Act would be unable to
take advantage of the prospectus delivery exemption provided by Section 4(3) of
the Securities Act. The Trust, however,
has received from the SEC an exemption from the prospectus delivery obligation
in ordinary secondary market transactions under certain circumstances, on the
condition that purchasers are provided with a product description of the
Shares. Firms that incur a prospectus
delivery obligation with respect to Shares are reminded that, under the
Securities Act Rule 153, a prospectus delivery obligation under Section 5(b)(2) of
the Securities Act owed to an exchange member in connection with a sale on the is
23
satisfied by the fact that the prospectus is
available at the upon
request. The prospectus delivery
mechanism provided in Rule 153 is only available with respect to
transactions on an exchange.
24
For More Information
For more detailed information on the Trust,
the Funds and the Shares, you may request a copy of the Funds SAI. The SAI provides detailed information about
the Funds, and is incorporated by reference into this Prospectus. This means that the SAI, for legal purposes,
is a part of this Prospectus. If you
have questions about the Funds or Shares or you wish to obtain the SAI free of
charge, please:
Call: Invesco Aim Distributors, Inc. at
1-800-337-4246
Monday through Friday
8:00 a.m. to 5:00 p.m. Central Time
Write:
PowerShares Exchange-Traded Fund Trust II
c/o Invesco Aim
Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
Visit: www.PowerShares.com
Information about the Funds (including the
SAI) can be reviewed and copied at SECs Public Reference Room, in Washington,
D.C. and information on the operation of the Public Reference Room may be
obtained by calling the Commission at 1-202-942-8090. Reports and other
information about the Funds are available on the EDGAR Database on the
Commissions Internet site at www.sec.gov, and copies of this information may
be obtained, after paying a duplicating fee, by electronic request at the
following e-mail address:
publicinfo@sec.gov
or by writing
the Commissions Public Reference Section, Washington, D.C. 20549-0102.
No person is authorized to give any
information or to make any representations about the Funds and their Shares not
contained in this Prospectus and you should not rely on any other
information. Read and keep the Prospectus
for future reference.
DEALERS EFFECTING TRANSACTIONS IN THE FUNDS
SHARES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, ARE GENERALLY
REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO ANY OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS
.
The Trusts registration number under the
1940 Act is 811-21977.
25
PowerShares Exchange-Traded Fund Trust II
301 West Roosevelt Road
Wheaton, IL 60187
800.983.0903
www.PowerShares.com
The information in this
Statement of Additional Information is not complete and may be changed. The Trust may not sell these securities until
the registration statement filed with the Securities and Exchange Commission is
effective. This Statement of Additional
Information is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any jurisdiction where the offer or sale is
not permitted.
Subject to Completion
Preliminary
Statement of Additional Information dated March 24, 2008
Investment Company Act File No. 811-21977
PowerShares Exchange-Traded Fund Trust II
STATEMENT OF ADDITIONAL INFORMATION
Dated ,
2008
This Statement
of Additional Information is not a prospectus.
It should be read in conjunction with the Prospectus dated ,
2008 for the PowerShares
Developed Markets Infrastructure Portfolio and PowerShares Emerging Markets
Infrastructure Portfolio
, each a series of the PowerShares
Exchange-Traded Fund Trust II (the Trust), as it may be revised from time to
time. Capitalized terms used herein that
are not defined have the same meaning as in the Prospectus, unless otherwise
noted. A copy of the Prospectus may be
obtained without charge by writing to the Trusts Distributor, Invesco Aim
Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, or by calling toll free (800) 337-4246.
TABLE OF CONTENTS
|
Page
|
|
|
General Description of the Trust and the
Funds
|
2
|
Exchange Listing and Trading
|
2
|
Investment Restrictions and Policies
|
3
|
Investment Restrictions
|
3
|
Investment Policies and Risks
|
4
|
General Considerations and Risks
|
7
|
Management
|
9
|
Brokerage Transactions
|
16
|
Additional Information Concerning the Trust
|
16
|
Creation and Redemption of Creation Unit Aggregations
|
20
|
Taxes
|
32
|
Federal Tax Treatment of Futures and Options Contracts
|
35
|
Determination of NAV
|
35
|
Dividends and Distributions
|
36
|
Miscellaneous Information
|
36
|
Appendix A
|
A-1
|
GENERAL DESCRIPTION OF THE TRUST AND THE
FUNDS
The Trust was
organized as a Massachusetts business trust on October 10, 2006 and is
authorized to have multiple series or portfolios. The Trust is an open-end management
investment company, registered under the Investment Company Act of 1940, as
amended (the 1940 Act). The Trust
currently consists of 31 portfolios.
This Statement of Additional Information relates to the PowerShares Developed Markets Infrastructure
Portfolio and PowerShares Emerging Markets Infrastructure Portfolio
(each
a Fund and, together the Funds).
Each of the Funds is non-diversified and, as such, such Funds
investments are not required to meet certain diversification requirements under
the 1940 Act. The shares of the Funds
are referred to herein as Shares or Fund Shares.
The other 28
funds of the Trust, the the PowerShares VRDO Tax-Free Weekly Portfolio,
PowerShares Dynamic Asia Pacific Portfolio, PowerShares Dynamic Europe
Portfolio, PowerShares FTSE RAFI Japan Portfolio, PowerShares Dynamic Developed
International Opportunities Portfolio, PowerShares Global Water Portfolio,
PowerShares Global Clean Energy Portfolio, PowerShares FTSE RAFI Asia Pacific
ex-Japan Small-Mid Portfolio, PowerShares FTSE RAFI Developed Markets ex-U.S.
Small-Mid Portfolio, PowerShares FTSE RAFI Europe Small-Mid Portfolio,
PowerShares FTSE RAFI Asia Pacific ex-Japan Portfolio, PowerShares FTSE RAFI
Developed Markets ex-U.S. Portfolio, PowerShares FTSE RAFI Europe Portfolio,
PowerShares FTSE RAFI Emerging Markets Portfolio, PowerShares International
Listed Private Equity Portfolio, PowerShares Emerging Markets Soverign Debt
Portfolio, PowerShares 1-30 Laddered Treasury Portfolio, PowerShares Insured
New York Municipal Bond Portfolio, PowerShares Insured California Municipal
Bond Portfolio, PowerShares Insured
National Municipal Bond Portfolio, PowerShares Preferred Portfolio,
PowerShares FTSE RAFI International Real Estate Portfolio, PowerShares DWA
Emerging Markets Technical Leaders Portfolio, PowerShares DWA Developed Markets
Technical Leaders Portfolio, PowerShares Autonomic Balanced Growth NFA Global
Asset Portfolio, PowerShares Autonomic Balanced NFA Global Asset Portfolio,
PowerShares Autonomic Growth NFA Global Asset Portfolio, and PowerShares High
Yield Corporate Bond Portfolio, are offered through six separate prospectuses.
The Funds are
managed by Invesco PowerShares Capital Management LLC (the Adviser).
The Funds offer and issue Shares at net asset
value (NAV) only in aggregations of a specified number of Shares (each a Creation
Unit or a Creation Unit Aggregation), generally in exchange for a basket of
equity securities included in the relevant Underlying Indices (the Deposit
Securities), together with the deposit of a specified cash payment (the Cash
Component). Each of the Funds has
applied to list its Shares on the Stock
Exchange LLC (the
or the Exchange). Fund Shares will
trade on the Exchange at market prices that may be below, at or above NAV. Shares are redeemable only in Creation Unit
Aggregations and, generally, in exchange for portfolio securities and a specified
cash payment. Creation Units are
aggregations of 100,000 Shares. In the
event of the liquidation of a Fund, the Trust may lower the number of Shares in
a Creation Unit.
The Trust reserves the right to offer a cash
option for creations and redemptions of Fund Shares. Fund Shares may be issued in advance of
receipt of Deposit Securities subject to various conditions including a
requirement to maintain on deposit with the Trust cash at least equal to 115%
of the market value of the missing Deposit Securities. See the Creation and Redemption of Creation
Unit Aggregations section. In each
instance of such cash creations or redemptions, transaction fees may be imposed
that will be higher than the transaction fees associated with in kind creations
or redemptions. In all cases, such fees
will be limited in accordance with the requirements of the Securities and
Exchange Commission (the SEC) applicable to management investment companies
offering redeemable securities.
EXCHANGE LISTING AND TRADING
There can be no assurance that the
requirements of the Exchange necessary to maintain the listing of Shares of a
Fund will continue to be met. The
Exchange may, but are not required to, remove the Shares of a Fund from listing
if (i) following the initial 12-month period beginning at the commencement
of trading of a Fund, there are fewer than 50 beneficial owners of the Shares
of the Fund for 30 or more consecutive trading days; (ii) the value of the
Underlying Indices is no longer calculated or available; or (iii) such
other event shall occur or condition exist that, in the opinion of the
Exchange, makes further dealings on the Exchange inadvisable. The Exchange will remove the Shares of a Fund
from listing and trading upon termination of such Fund.
2
As in the case of other stocks traded on the
Exchange, brokers commissions on transactions will be based on negotiated
commission rates at customary levels.
The Trust reserves the right to adjust the
price levels of the Shares in the future to help maintain convenient trading
ranges for investors. Any adjustments
would be accomplished through stock splits or reverse stock splits, which would
have no effect on the net assets of each Fund.
INVESTMENT RESTRICTIONS AND POLICIES
Investment Objectives
The investment
objective of the PowerShares
Developed Markets Infrastructure Portfolio
is to provide
investment results that correspond generally to the price and yield (before the
Funds fees and expenses) of the index called the
Red Rocks Developed Markets Infrastructure
Index
sm
(the Underlying Index).
The investment objective of the PowerShares Emerging Markets Infrastructure
Portfolio
is to provide investment results that correspond generally
to the price and yield (before the Funds fees and expenses) of the index
called the
Red Rocks Emerging
Markets Infrastructure Index
sm
(the Underlying Index).
INVESTMENT RESTRICTIONS
The Board of Trustees of the Trust (the Board
or the Trustees) has adopted as fundamental policies the Funds respective
investment restrictions numbered (1) through (7) below. Each Fund, as a fundamental policy, may not:
(1)
Invest 25% or more of the value of its total
assets in securities of issuers in any one industry or group of industries,
except to the extent that the Underlying Index that the Fund replicates,
concentrates in an industry or group of industries. This restriction does not apply to
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
(2)
Borrow money, except that the Fund may (i) borrow
money from banks for temporary or emergency purposes (but not for leverage or
the purchase of investments) up to 10% of its total assets and (ii) make other
investments or engage in other transactions permissible under the 1940 Act that
may involve a borrowing, provided that the combination of (i) and (ii) shall
not exceed 33 1/3% of the value of the Funds total assets (including the
amount borrowed), less the Funds liabilities (other than borrowings).
(3)
Act as an underwriter of another issuers
securities, except to the extent that the Fund may be deemed to be an
underwriter within the meaning of the Securities Act of 1933 (the Securities
Act) in connection with the purchase and sale of portfolio securities.
(4)
Make loans to other persons, except through (i) the
purchase of debt securities permissible under the Funds investment policies, (ii) repurchase
agreements or (iii) the lending of portfolio securities, provided that no
such loan of portfolio securities may be made by the Fund if, as a result, the
aggregate of such loans would exceed 331/3% of the value of the Funds total
assets.
(5)
Purchase or sell physical commodities unless
acquired as a result of ownership of securities or other instruments (but this
shall not prevent the Fund (i) from purchasing or selling options, futures
contracts or other derivative instruments, or (ii) from investing in
securities or other instruments backed by physical commodities).
(6)
Purchase or sell real estate unless acquired
as a result of ownership of securities or other instruments (but this shall not
prohibit the Fund from purchasing or selling securities or other instruments
backed by real estate or of issuers engaged in real estate activities).
(7)
Issue senior securities, except as permitted
under the 1940 Act.
3
Except for restriction (2), if a percentage
restriction is adhered to at the time of investment, a later increase in
percentage resulting from a change in market value of the investment or the
total assets, or the sale of a security out of the portfolio, will not
constitute a violation of that restriction.
The foregoing fundamental investment policies
cannot be changed as to a Fund without approval by holders of a majority of
the Funds outstanding voting securities. As defined in the 1940 Act, this
means the vote of (i) 67% or more of a Funds shares present at a meeting,
if the holders of more than 50% of the Funds shares are present or represented
by proxy, or (ii) more than 50% of the Funds shares, whichever is less.
In addition to the foregoing fundamental
investment policies, each Fund is also subject to the following non-fundamental
restrictions and policies, which may be changed by the Board of Trustees
without shareholder approval. Each Fund
may not:
(1)
Sell securities short, unless the Fund owns
or has the right to obtain securities equivalent in kind and amount to the
securities sold short at no added cost, and provided that transactions in
options, futures contracts, options on futures contracts or other derivative
instruments are not deemed to constitute selling securities short.
(2)
Purchase securities on margin, except that
the Fund may obtain such short-term credits as are necessary for the clearance
of transactions; and provided that margin deposits in connection with futures
contracts, options on futures contracts or other derivative instruments shall
not constitute purchasing securities on margin.
(3)
Purchase securities of open-end or
closed-end investment companies except in compliance with the 1940 Act,
although the Fund may not acquire any securities of registered open-end
investment companies or registered unit investment trusts in reliance on
Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
(4)
Invest in direct interests in oil, gas or
other mineral exploration programs or leases; however, the Fund may invest in
the securities of issuers that engage in these activities.
(5)
Invest in illiquid securities if, as a
result of such investment, more than 15% of the Funds net assets would be
invested in illiquid securities.
The investment objective of each Fund is a
non-fundamental policy that can be changed by the Board of Trustees without
approval by shareholders.
INVESTMENT POLICIES AND RISKS
Correlation and Tracking Error
. Correlation measures the degree of
association between the returns of a Fund and its Underlying Index. Each Fund seeks a correlation over time of
0.95 or better between the Funds performance and the performance of the
Underlying Index; a figure of 1.00 would indicate perfect correlation. Correlation is calculated at each Funds
fiscal year-end by comparing the Funds average daily total returns, before
fees and expenses, to the Underlying Indexs average daily total returns over
the prior one-year period or since inception if the Fund has been in existence
for less than one year. Another means of
evaluating the degree of correlation between the returns of a Fund and its
Underlying Index is to assess the tracking error between the two. Tracking error means the variation between
each Funds annual return and the return of its Underlying Index, expressed in
terms of standard deviation. Each Fund
seeks to have a tracking error of less than 5%, measured on a daily basis over
a one year period by taking the standard deviation of the difference in the
Funds returns versus the Underlying Indexs returns.
Loans of Portfolio Securities
. Each Fund may lend its investment securities
to approved borrowers. Any gain or loss
on the market price of the securities loaned that might occur during the term
of the loan would be for the account of the Fund. These loans cannot exceed 33 1/3% of each
Funds total assets.
4
Approved borrowers are brokers, dealers,
domestic and foreign banks, or other financial institutions that meet credit or
other requirements as established by, and subject to the review of, the Trusts
Board, so long as the terms, the structure and the aggregate amount of such
loans are not inconsistent with the 1940 Act and the rules and regulations
thereunder or interpretations of the SEC, which require that (a) the
borrowers pledge and maintain with the Fund collateral consisting of cash, an
irrevocable letter of credit issued by a bank, or securities issued or
guaranteed by the U.S. Government having a value at all times of not less than
102% of the value of the securities loaned (on a mark to market basis); (b) the
loan be made subject to termination by the Fund at any time; and (c) the
Fund receives reasonable interest on the loan.
From time to time, a Fund may return a part of the interest earned from
the investment of collateral received from securities loaned to the borrower
and/or a third party that is unaffiliated with the Fund and that is acting as a
finder.
Repurchase Agreements
. Each Fund may enter into repurchase
agreements, which are agreements pursuant to which securities are acquired by
the Fund from a third party with the understanding that they will be
repurchased by the seller at a fixed price on an agreed date. These agreements may be made with respect to
any of the portfolio securities in which the Fund is authorized to invest. Repurchase agreements may be characterized as
loans secured by the underlying securities.
Each Fund may enter into repurchase agreements with (i) member
banks of the Federal Reserve System having total assets in excess of $500
million and (ii) securities dealers (Qualified Institutions). The Adviser will monitor the continued
creditworthiness of Qualified Institutions.
The use of repurchase agreements involves
certain risks. For example, if the
seller of securities under a repurchase agreement defaults on its obligation to
repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could
involve costs or delays. If the seller
becomes insolvent and subject to liquidation or reorganization under applicable
bankruptcy or other laws, the Funds ability to dispose of the underlying
securities may be restricted. Finally,
it is possible that the Fund may not be able to substantiate its interest in
the underlying securities. To minimize
this risk, the securities underlying the repurchase agreement will be held by
the custodian at all times in an amount at least equal to the repurchase price,
including accrued interest. If the
seller fails to repurchase the securities, the Fund may suffer a loss to the
extent proceeds from the sale of the underlying securities are less than the
repurchase price.
The resale price reflects the purchase price
plus an agreed upon market rate of interest.
The collateral is marked to market daily.
Reverse Repurchase Agreements
. Each Fund may enter into reverse repurchase
agreements, which involve the sale of securities with an agreement to
repurchase the securities at an agreed upon price, date and interest payment
and have the characteristics of borrowing.
The securities purchased with the funds obtained from the agreement and
securities collateralizing the agreement will have maturity dates no later than
the repayment date. Generally the effect
of such transactions is that the Fund can recover all or most of the cash
invested in the portfolio securities involved during the term of the reverse
repurchase agreement, while in many cases the Fund is able to keep some of the
interest income associated with those securities. Such transactions are only advantageous if
the Fund has an opportunity to earn a greater rate of return on the cash
derived from these transactions than the interest cost of obtaining the same
amount of cash. Opportunities to realize
earnings from the use of the proceeds equal to or greater than the interest
required to be paid may not always be available and the Fund intends to use the
reverse repurchase technique only when the Adviser believes it will be
advantageous to the Fund. The use of
reverse repurchase agreements may exaggerate any interim increase or decrease
in the value of the Funds assets. The
custodian bank will maintain a separate account for the Fund with securities
having a value equal to or greater than such commitments. Under the 1940 Act, reverse repurchase agreements
are considered loans.
Money Market Instruments
. Each Fund may invest a portion of its assets
in high quality money market instruments on an ongoing basis to provide
liquidity. The instruments in which each
Fund may invest include: (i) short term obligations issued by the U.S.
Government; (ii) negotiable certificates of deposit (CDs), fixed time
deposits and bankers acceptances of U.S. and foreign banks and similar
institutions; (iii) commercial paper rated at the date of purchase Prime
1 by Moodys Investors Service, Inc. or A-1+ or A-1 by Standard &
Poors Ratings Group, a division of The McGraw-Hill Companies, Inc., or,
if unrated, of comparable quality as determined by the Adviser; (iv) repurchase
agreements; and (v) money market mutual funds. CDs are short term negotiable obligations of
commercial banks. Time deposits are non
negotiable deposits maintained in banking institutions for specified
5
periods of time at stated interest rates. Bankers acceptances are time drafts drawn on
commercial banks by borrowers, usually in connection with international
transactions.
Investment Companies
. Each Fund may invest in the securities of
other investment companies (including money market funds). Under the 1940 Act, each Funds investment in
investment companies is limited to, subject to certain exceptions, (i) 3%
of the total outstanding voting stock of any one investment company, (ii) 5%
of the Funds total assets with respect to any one investment company and (iii) 10%
of the Funds total assets of investment companies in the aggregate.
Illiquid Securities
. Each Fund may invest up to an aggregate
amount of 15% of its net assets in illiquid securities. Illiquid securities include securities
subject to contractual or other restrictions on resale and other instruments
that lack readily available markets.
Futures and Options
. Each Fund may enter into U.S. futures
contracts, options and options on futures contracts. These futures contracts and options will be
used to simulate full investment in the Underlying Index, to facilitate trading
or to reduce transaction costs. Each
Fund will only enter into futures contracts and options on futures contracts
that are traded on a U.S. exchange. Each
Fund will not use futures or options for speculative purposes.
A call option gives a holder the right to
purchase a specific security or an index at a specified price (exercise price)
within a specified period of time. A put
option gives a holder the right to sell a specific security or an index at a
specified price within a specified period of time. The initial purchaser of a call option pays
the writer, i.e., the party selling the option, a premium which is paid at
the time of purchase and is retained by the writer whether or not such option
is exercised. Each Fund may purchase put
options to hedge its portfolio against the risk of a decline in the market
value of securities held and may purchase call options to hedge against an
increase in the price of securities it is committed to purchase. Each Fund may write put and call options
along with a long position in options to increase its ability to hedge against
a change in the market value of the securities it holds or is committed to
purchase.
Futures contracts provide for the future sale
by one party and purchase by another party of a specified amount of a specific
instrument or index at a specified future time and at a specified price. Stock index contracts are based on indices
that reflect the market value of common stock of the firms included in the
indices. Each Fund may enter into
futures contracts to purchase security indices when the Adviser anticipates
purchasing the underlying securities and believes prices will rise before the
purchase will be made. Assets committed
to futures contracts will be segregated by the custodian to the extent required
by law.
An option on a futures contract, as
contrasted with the direct investment in such a contract, gives the purchaser
the right, in return for the premium paid, to assume a position in the
underlying futures contract at a specified exercise price at any time prior to
the expiration date of the option. Upon
exercise of an option, the delivery of the futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writers futures margin account that represents the
amount by which the market price of the futures contract exceeds (in the case
of a call) or is less than (in the case of a put) the exercise price of the
option on the futures contract. The
potential for loss related to the purchase of an option on a futures contract
is limited to the premium paid for the option plus transaction costs. Because the value of the option is fixed at
the point of purchase, there are no daily cash payments by the purchaser to
reflect changes in the value of the underlying contract; however, the value of
the option changes daily and that change would be reflected in the NAV of each
Fund. The potential for loss related to
writing call options on equity securities or indices is unlimited. The potential for loss related to writing put
options is limited only by the aggregate strike price of the put option less
the premium received.
Each Fund may purchase and write put and call
options on futures contracts as a hedge against changes in value of its
portfolio securities, or in anticipation of the purchase of securities, and may
enter into closing transactions with respect to such options to terminate
existing positions. There is no
guarantee that such closing transactions can be effected.
Restrictions on the Use of Futures Contracts
and Options on Futures Contracts
. The Commodity Futures Trading Commission has
eliminated limitations on futures trading by certain regulated entities,
including registered
6
investment companies, and consequently
registered investment companies may engage in unlimited futures transactions
and options thereon provided that the investment adviser to the company claims
an exclusion from regulation as a commodity pool operator. In connection with its management of the
Trust, the Adviser has claimed such an exclusion from registration as a
commodity pool operator under the Commodity Exchange Act (the CEA). Therefore, it is not subject to the
registration and regulatory requirements of the CEA. There are no limitations on the extent to
which each Fund may engage in non-hedging transactions involving futures and
options thereon, except as set forth in the Funds Prospectuses and this
Statement of Additional Information.
Upon entering into a futures contract, each
Fund will be required to deposit with the broker an amount of cash or cash
equivalents in the range of approximately 5% to 7% of the contract amount (this
amount is subject to change by the exchange on which the contract is
traded). This amount, known as initial
margin, is in the nature of a performance bond or good faith deposit on the
contract and is returned to each Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied. Subsequent payments, known as variation
margin, to and from the broker will be made daily as the price of the index
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable, a process known as marking-to-market.
At any time prior to expiration of a futures contract, each Fund may elect to
close the position by taking an opposite position, which will operate to
terminate each Funds existing position in the contract.
Swap Agreements
. Swap agreements are contracts between parties
in which one party agrees to make periodic payments to the other party (the Counterparty)
based on the change in market value or level of a specified rate, index or
asset. In return, the Counterparty
agrees to make periodic payments to the first party based on the return of a
different specified rate, index or asset.
Swap agreements will usually be done on a net basis, each Fund receiving
or paying only the net amount of the two payments. The net amount of the excess, if any, of each
Funds obligations over its entitlements with respect to each swap is accrued
on a daily basis and an amount of cash or highly liquid securities having an
aggregate value at least equal to the accrued excess is maintained in an
account at the Trusts custodian bank.
In addition, the Fund may enter into credit
default swap contracts for hedging purposes or to add leverage to the Fund. In
a credit default swap, two parties enter into an agreement whereby one party
pays the other a fixed periodic coupon for the specified life of the agreement.
The selling party makes no payments unless a specified credit event occurs.
Credit events are typically defined to include a material default, bankruptcy
or debt restructuring for a specified reference asset. If such a credit event
occurs, the party makes a payment to the first party, and the swap then
terminates.
GENERAL CONSIDERATIONS AND RISKS
A discussion of the risks associated with an
investment in the Funds is contained in the Prospectus in the Principal Risks
of Investing in the Funds and Additional Risks sections. The discussion below supplements, and should
be read in conjunction with, these sections of the Funds Prospectus.
An investment in a Fund should be made with
an understanding that the value of the Funds portfolio securities may
fluctuate in accordance with changes in the financial condition of the issuers
of the portfolio securities, the value of securities in general and other
factors that affect the market.
An investment in a Fund should also be made
with an understanding of the risks inherent in an investment in equity
securities, including the risk that the financial condition of issuers may
become impaired or that the general condition of the securities market may
deteriorate (either of which may cause a decrease in the value of the portfolio
securities and thus in the value of Fund Shares). Securities are susceptible to general
securities market fluctuations and to volatile increases and decreases in value
as market confidence and perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors, including expectations regarding government,
economic, monetary and fiscal policies, inflation and interest rates, economic
expansion or contraction, and global or regional political, economic or banking
crises.
Holders of common stock incur more risk than
holders of preferred stock and debt obligations because common stockholders, as
owners of the issuer, have generally inferior rights to receive payments from
the issuer in comparison with the rights of creditors, or holders of debt
obligations or preferred stock. Further,
unlike debt
7
securities which typically have a stated
principal amount payable at maturity (whose value, however, is subject to
market fluctuations prior thereto), or preferred stock which typically has a
liquidation preference and which may have stated optional or mandatory
redemption provisions, common stock has neither a fixed principal amount nor a
maturity.
The existence of a liquid trading market for
certain securities may depend on whether dealers will make a market in such
securities. There can be no assurance
that a market will be made or maintained or that any such market will be or
remain liquid. The price at which
securities may be sold and the value of a Funds Shares will be adversely
affected if trading markets for the Funds portfolio securities are limited or
absent, or if bid/ask spreads are wide.
Risks of Futures and Options Transactions
. There are several risks accompanying the
utilization of futures contracts and options on futures contracts. First, while each Fund plans to utilize
futures contracts only if an active market exists for such contracts, there is
no guarantee that a liquid market will exist for the contract at a specified
time.
Furthermore, because, by definition, futures
contracts project price levels in the future and not current levels of
valuation, market circumstances may result in a discrepancy between the price
of the stock index future and the movement in the Underlying Index. In the event of adverse price movements, each
Fund would continue to be required to make daily cash payments to maintain its
required margin. In such situations, if
the Fund has insufficient cash, it may have to sell portfolio securities to
meet daily margin requirements at a time when it may be disadvantageous to do
so. In addition, each Fund may be
required to deliver the instruments underlying futures contracts it has sold.
The risk of loss in trading futures contracts
or uncovered call options in some strategies (e.g., selling uncovered stock
index futures contracts) is potentially unlimited. Each Fund does not plan to use futures and
options contracts in this way. The risk
of a futures position may still be large as traditionally measured due to the
low margin deposits required. In many
cases, a relatively small price movement in a futures contract may result in
immediate and substantial loss or gain to the investor relative to the size of
a required margin deposit. Each Fund,
however, intends to utilize futures and options contracts in a manner designed
to limit their risk exposure to levels comparable to direct investment in
stocks.
Utilization of futures and options on futures
by the Funds involves the risk of imperfect or even negative correlation to the
Underlying Index if the index underlying the futures contract differs from the
Underlying Index.
There is also the risk of loss by a Fund of
margin deposits in the event of bankruptcy of a broker with whom the Fund has
an open position in the futures contract or option; however, this risk is
substantially minimized because (a) of the regulatory requirement that the
broker has to segregate customer funds from its corporate funds, and (b) in
the case of regulated exchanges in the United States, the clearing corporation
stands behind the broker to make good losses in such a situation. The purchase of put or call options could be
based upon predictions by the Adviser as to anticipated trends, which
predictions could prove to be incorrect and a part or all of the premium paid
therefore could be lost.
Because the futures market imposes less
burdensome margin requirements than the securities market, an increased amount
of participation by speculators in the futures market could result in price
fluctuations. Certain financial futures
exchanges limit the amount of fluctuation permitted in futures contract prices
during a single trading day. The daily
limit establishes the maximum amount by which the price of a futures contract
may vary either up or down from the previous days settlement price at the end
of a trading session. Once the daily
limit has been reached in a particular type of contract, no trades may be made
on that day at a price beyond that limit.
It is possible that futures contract prices could move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting the Fund to
substantial losses. In the event of adverse
price movements, the Fund would be required to make daily cash payments of
variation margin.
Although each Fund intends to enter into
futures contracts only if there is an active market for such contracts, there
is no assurance that an active market will exist for the contracts at any particular
time.
8
Risks of Swap Agreements
. The risk of loss with respect to swaps
generally is limited to the net amount of payments that each Fund is
contractually obligated to make. Swap
agreements are also subject to the risk that the swap counterparty will default
on its obligations. If such a default
were to occur, each Fund will have contractual remedies pursuant to the
agreements related to the transaction.
However, such remedies may be subject to bankruptcy and insolvency laws
which could affect the Funds rights as a creditor (e.g., the Fund may not
receive the net amount of payments that it contractually is entitled to
receive). Each Fund, however, intends to
utilize swaps in a manner designed to limit its risk exposure to levels
comparable to direct investments in stocks.
MANAGEMENT
The general supervision of the duties
performed by the Adviser for the Funds under the investment advisory agreement
(the Investment Advisory Agreement) is the responsibility of the Board of
Trustees. The Trust currently has six
Trustees. Five Trustees have no
affiliation or business connection with the Adviser or any of its affiliated persons
and do not own any stock or other securities issued by the Adviser. These are the non-interested or independent
Trustees (Independent Trustees). The
other Trustee (the Management Trustee) is affiliated with the Adviser.
The
Independent Trustees of the Trust, their term of office and length of time
served, their principal business occupations during the past five years, the
number of portfolios in the Fund Complex (defined below) overseen by each
Independent Trustee and other directorships, if any, held by the Trustee are
shown below. The Fund Complex includes
all open- and closed-end funds (including all of their portfolios) advised by
the Adviser and any funds that have an investment adviser that is an affiliated
person of the Adviser. As of the date of
this Statement of Additional Information, the Fund Complex consists of the
Trusts 31 portfolios, 3 other exchange-traded fund with 72 portfolios advised
by the Adviser and 225 other portfolios advised by an affiliated person of the
Adviser.
Name, Address and Age
of Independent Trustees
|
|
Position(s)
Held with
Trust
|
|
Term of
Office and
Length of
Time
Served*
|
|
Principal Occupation(s) During Past 5 Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen by
Independent
Trustees
|
|
Other
Directorships
Held by
Independent
Trustees
|
Ronn R. Bagge (49)
YQA Capital Management,
LLC 1755 S. Naperville
Rd., Suite 100 Wheaton, IL 60187
|
|
Trustee
|
|
Since 2007
|
|
YQA Capital Management LLC
(July 1998-Present); formerly Owner/CEO of Electronic Dynamic Balancing
Co., Inc. (high-speed rotating equipment service provider)
|
|
103
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
Marc M. Kole (46)
c/o PowerShares Capital
Management LLC 301
West Roosevelt Road
Wheaton, IL 60187
|
|
Trustee
|
|
Since 2007
|
|
Assistant Vice President and Controller,
Priority Health (September 2005-Present); formerly, Interim CFO,
Priority Health (July 2006-April 2007); Senior Vice President of
Finance, United Healthcare (health insurance)
(July 2004-July 2005); Senior Vice President of Finance, Oxford
Health Plans (June 2000-July 2004)
|
|
103
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
D. Mark McMillan (44)
c/o PowerShares Capital
Management LLC 301
West Roosevelt Road
Wheaton, IL 60187
|
|
Trustee
|
|
Since 2007
|
|
Partner, Bell, Boyd & Lloyd LLP
(1989-Present)
|
|
103
|
|
None
|
|
|
|
|
|
|
|
|
|
|
|
Philip M. Nussbaum (45)
c/o PowerShares Capital
Management LLC 301
West Roosevelt Road
Wheaton, IL 60187
|
|
Trustee
|
|
Since 2007
|
|
Chairman, Performance Trust Capital
Partners (formerly Betzold, Berg, Nussbaum & Heitman, Inc.)
(November 2004-Present); formerly Managing Director, Communication
Institute (May 2002-August 2003); Executive Vice President of
Finance, Betzold, Berg, Nussbaum & Heitman, Inc.
(March 1994-July 1999)
|
|
103
|
|
None
|
9
Name, Address and Age
of Independent Trustees
|
|
Position(s)
Held with
Trust
|
|
Term of
Office and
Length of
Time
Served*
|
|
Principal Occupation(s) During Past 5 Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen by
Independent
Trustees
|
|
Other
Directorships
Held by
Independent
Trustees
|
Donald H.
Wilson (47)
c/o PowerShares Capital
Management LLC 301
West Roosevelt Road
Wheaton, IL 60187
|
|
Trustee
|
|
Since 2007
|
|
President and Chief Financial Officer,
AMCORE Financial, Inc. (August 2007-Present); Executive Vice
President and Chief Financial Officer, AMCORE Financial, Inc. (bank
holding company) (February 2006-Present); formerly, Senior Vice
President and Treasurer, Marshall & Ilsley Corp. (bank holding
company) (May 1995-February 2006)
|
|
103
|
|
None
|
*
This is the period for which
the Trustee began serving the Trust.
Each Trustee serves an indefinite term, until his successor is elected.
The Trustee who is affiliated with the
Adviser or affiliates of the Adviser and the executive officers of the Trust,
their term of office and length of time served, their principal business
occupations during the past five years, the number of portfolios in the Fund
Complex overseen by the Management Trustee and the other directorships, if any,
held by the Trustee, are shown below.
Name, Address and Age
of Management Trustee
|
|
Position(s)
Held with
Trust
|
|
Term of
Office and
Length of
Time
Served*
|
|
Principal Occupation(s) During Past 5
Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen by
Management
Trustees
|
|
Other
Directorships
Held by
Management
Trustees
|
H. Bruce Bond (44)
PowerShares Capital
Management LLC 301
West Roosevelt Road
Wheaton, IL 60187
|
|
Trustee and Chief Executive Officer
|
|
Since 2006
|
|
Managing Director, PowerShares Capital
Management LLC (August 2002-Present); Manager, Nuveen Investments (April 1998
August 2002)
|
|
99
|
|
None
|
Name, Address and Age
of Executive Officer
|
|
Position(s) Held
with Trust
|
|
Term of
Office and
Length of
Time Served*
|
|
Principal Occupation(s) During Past 5 Years
|
Bruce T.
Duncan (52)
PowerShares Capital
Management LLC 301 West
Roosevelt Road Wheaton, IL 60187
|
|
Chief Financial Officer, Treasurer and Secretary
|
|
Since 2007
|
|
Senior Vice President of Finance,
PowerShares Capital Management LLC (September 2005-Present); Private
Practice Attorney (2000-2005); Vice President of Investor Relations, The
ServiceMaster Company (1994-2000); Vice President of Taxes, The ServiceMaster
Company (1990-2000)
|
|
|
|
|
|
|
|
Kevin R. Gustafson (41)
PowerShares Capital Management LLC 301 West Roosevelt Road Wheaton, IL 60187
|
|
Chief Compliance Officer
|
|
Since 2007
|
|
General Counsel and Chief Compliance
Officer, PowerShares Capital Management LLC (September 2004-Present);
Attorney, Nyberg & Gustafson (2001-2004); Attorney, Burke, Warren,
McKay & Serritella, P.C. (1997-2000)
|
*
This is the period for which
the Trustee/Officer began serving the Trust.
Each Officer serves an indefinite term, until his successor is elected.
For each
Trustee, the dollar range of equity securities beneficially owned by the
Trustee in the Trust and in all registered investment companies overseen by the
Trustee is shown below.
10
Name of Trustee
|
|
Dollar Range of Equity
Securities in the
PowerShares
Developed Markets
Infrastructure Portfolio
(As of December 31, 2007)
|
|
Dollar Range of Equity
Securities in the
PowerShares
Emerging Markets
Infrastructure Portfolio
(As of
December
31, 2007)
|
|
Aggregate Dollar Range of
Equity Securities in All
Registered Investment
Companies Overseen by
Trustee in Family of
Investment Companies
(As of December 31, 2007)
|
Ronn R.
Bagge
|
|
None
|
|
None
|
|
over $100,000
|
Marc M. Kole
|
|
None
|
|
None
|
|
over $100,000
|
D. Mark
McMillan
|
|
None
|
|
None
|
|
$10,001 - $50,000
|
Philip M.
Nussbaum
|
|
None
|
|
None
|
|
over $100,000
|
Donald H.
Wilson
|
|
None
|
|
None
|
|
over $100,000
|
H. Bruce
Bond
|
|
None
|
|
None
|
|
over $100,000
|
As of the date of this Statement of
Additional Information, as to each Independent Trustee and his immediate family
members, no person owned beneficially or of record securities in an investment
adviser or principal underwriter of a Fund, or a person (other than a
registered investment company) directly or indirectly controlling, controlled
by or under common control with an investment adviser or principal underwriter
of a Fund.
The
Trust and the PowerShares Exchange-Traded Fund Trust (the Initial Trust) pay
each Independent Trustee an annual retainer of $155,000 for their service as
Trustee, half of which is allocated pro rata between the funds of the Trust and
the Initial Trust, and the other half of which is allocated between the funds
of the Trust and the funds of the Initial Trust based on average net assets.
Each committee chair receives an additional fee of $10,000 per year, allocated
in the same manner as the retainer. The Trust also reimburses each Trustee for
travel and other out-of-pocket expenses incurred in attending Board and
committee meetings.
The
Funds have a deferred compensation plan (the DC Plan), which allows each
Independent Trustee to defer payment of all, or a portion, of the fees the
Trustee receives for serving on the Board of Trustees throughout the year. Each
eligible Trustee generally may elect to have the deferred amounts credited with
a return equal to the total return on one to five of the funds of the Initial
Trust or the Trust that are offered as investment options under the DC Plan. At
the Trustees election, distributions are either in one lump sum payment, or in
the form of equal annual installments over a period years designated by the
Trustee. The rights of an eligible Trustee and the beneficiaries to the amounts
held under the DC Plan are unsecured and such amounts are subject to the claims
of the creditors of the Funds. The Independent Trustees are not eligible for
any pension or profit sharing plan.
The
Board of Trustees of the Trust met four times during the fiscal year ended October 31,
2007.
The
Board has an Audit Committee consisting of the five Independent Trustees. Messrs. Bagge,
Kole, McMillan, Nussbaum and Wilson currently serve as members of the Audit
Committee. The Audit Committee has the responsibility, among other things, to: (i) approve
and recommend to the Board the selection of the Trusts independent registered
public accounting firm, (ii) review the scope of the independent
registered public accounting firms audit activity, (iii) review the
audited financial statements and (iv) review with such independent
registered public accounting firm the adequacy and the effectiveness of the
Trusts internal controls. During the fiscal year ended October 31, 2007,
the Audit Committee held two meetings.
The
Board also has a Nominating and Governance Committee consisting of the five
Independent Trustees. Messrs. Bagge, Kole, McMillan, Nussbaum and Wilson
currently serve as members of the Nominating and Governance Committee. The
Nominating and Governance Committee has the responsibility, among other things,
to identify and recommend individuals for Board membership, and evaluate
candidates for Board membership. The Board will consider recommendations for
trustees from shareholders. Nominations from shareholders should be in writing
and sent to the Secretary of the Trust to the attention of the Chairman of the
Nominating and Governance Committee as described below under the caption
Shareholder Communications. During the fiscal year ended October 31,
2007, the Nominating and Governance Committee held two meetings.
The
Trustees fees are allocated among the funds of the Trust based on net assets.
The following sets forth the fees paid to each Trustee for the fiscal year
ended October 31, 2007 (none of which was paid by the Funds, which had not
commenced operations as of October 31, 2007):
Name of Trustee
|
|
Aggregate
Compensation From
Trust
|
|
Pension or
Retirement
Benefits accrued as
part of
Fund Expenses
|
|
Total Compensation Paid
From Fund Complex (1)
|
|
Ronn R. Bagge
|
|
$
|
5,529
|
|
N/A
|
|
$
|
159,890
|
|
Marc M. Kole
|
|
$
|
5,134
|
|
N/A
|
|
$
|
126,082
|
|
D. Mark McMillan
|
|
$
|
5,134
|
|
N/A
|
|
$
|
149,082
|
|
Philip M. Nussbaum
|
|
$
|
5,529
|
|
N/A
|
|
$
|
159,890
|
|
Donald H. Wilson
|
|
$
|
5,134
|
|
N/A
|
|
$
|
121,082
|
|
H. Bruce Bond
|
|
N/A
|
|
N/A
|
|
N/A
|
|
(1) The
amounts shown in this column represent the aggregate compensation paid by all
of the series of the Trust and the series of the Initial Trust as of October 31,
2007 before deferral by the Trustees under the DC Plan. As of October 31,
2007, the values of the deferral accounts for Messrs. Bagge, McMillan and
Nussbaum pursuant to the DC Plan were $3,590, $32,986 and $35,706,
respectively.
Effective
April 1, 2008, each Independent Trustee receives an annual retainer of
$155,000, half of which is allocated pro rata between the Trust and the Initial
Trust, and the other half of which is allocated between the funds of the Trust
and the funds of the Initial Trust based on average net assets (the
Retainer). Each committee chair receives an additional fee of $10,000 per
year, allocated in the same manner. In addition to the Retainer, each
Independent Trustee receives an annual retainer of $40,000 from other Trusts in
the Fund complex.
11
As of the date of this SAI, the officers and Trustees of the Trust, in
the aggregate, own less than 1% of the shares of each Fund.
Investment
Adviser
. The Adviser provides investment tools and
portfolios for advisers and investors. The Adviser is committed to
theoretically sound portfolio construction and empirically verifiable investment
management approaches. Its asset management philosophy and investment
discipline is deeply rooted in the application of intuitive factor analysis and
model implementation to enhance investment decisions.
The Adviser
acts as investment adviser for, and manages the investment and reinvestment of,
the assets of the Funds. The Adviser also administers the Trusts business
affairs, provides office facilities and equipment and certain clerical,
bookkeeping and administrative services, and permits any of its officers or
employees to serve without compensation as Trustees or officers of the Trust if
elected to such positions.
Portfolio Managers
. The Adviser uses a team of
portfolio managers (the Portfolio Managers), investment strategists and other
investment specialists. This team approach brings together many disciplines and
leverages the Advisers resources. John W. Southard Jr., CFA, MBA, oversees all
research, portfolio management and trading operations of the Adviser. In this
capacity, he oversees the team of the Portfolio Managers responsible for the
day-to-day management of the funds. The Portfolio Manager who leads the team of
Portfolio Managers in the day-to-day management of the Funds is Mr. Hubbard.
As of November 30,
2007, in addition to 21 Funds of the Trust, Mr. Southard managed the 70
portfolios of the Initial Trust with a total of approximately $13.2 billion in
assets, no other pooled investment vehicles and 9 exchange-traded funds traded
in Europe with approximately $532 million in assets.
As of November 30,
2007, in addition to 21 Funds of the Trust, Mr. Hubbard managed the 70
portfolios of the Initial Trust with a total of approximately $13.2 billion in
assets, no other pooled investment vehicles and 9 exchange-traded funds traded
in Europe with approximately $532 million in assets.
As of November 30, 2007, Mr. Kernagis
managed 7 portfolios of the Trust with a total of approximately $81 million in
assets, no other pooled investment vehicles and 9 exchange-traded funds traded in
Europe with a total of approximately $532 million in assets.
12
As of November 30,
2007, in addition to 21 Funds of the Trust, Mr. Reitmann managed the 70
portfolios of the Initial Trust with a total of approximately $13.2 billion in
assets, no other pooled investment vehicles and 9 exchange-traded funds traded
in Europe with approximately $532 million in assets.
As of November 30,
2007, in addition to 14 Funds of the Trust, Mr. Stoneberg managed the 70
portfolios of the Initial Trust with a total of approximately $13.1 billion in
assets, no other pooled investment vehicles and 9 exchange-traded funds traded
in Europe with a total of approximately $532 million in assets.
As of November 30,
2007, in addition to 14 Funds of the Trust, Mr. Trampe managed the 70
portfolios of the Initial Trust with a total of approximately $13.1 billion in
assets, no other pooled investment vehicles and 9 exchange-traded funds traded
in Europe with a total of approximately $532 million in assets.
Although the
Funds that are managed by the Portfolio Managers may have different
investment strategies, each has a portfolio objective of replicating its
Underlying Index. The Adviser does not believe that management of the different
Funds presents a material conflict of interest for the Portfolio Managers or
the Adviser.
The Portfolio
Managers are compensated with a fixed salary amount by the Adviser. The
Portfolio Managers are eligible, along with other senior employees of the Adviser,
to participate in a year-end discretionary bonus pool. The Compensation
Committee of the Adviser will review management bonuses and, depending upon the
size, the bonuses may be approved in advance by the Committee. There is no
policy regarding, or agreement with, the Portfolio Managers or any other senior
executive of the Adviser to receive bonuses or any other compensation in
connection with the performance of any of the accounts managed by the Portfolio
Managers. As of October 31, 2007, Messrs. Southard, Hubbard,
Kernagis, Trampe, Reitmann and Stoneberg did not own any securities of the
Trust.
Investment
Advisory Agreement
. Pursuant to the Investment
Advisory Agreement, the Adviser is responsible for all expenses of the Funds,
including the cost of transfer agency, custody, fund administration, legal,
audit and other services, except interest, taxes, brokerage expenses,
distribution fees, if any, litigation expenses and other extraordinary
expenses. For its services to each Fund, each Fund has agreed to pay an annual
fee, paid monthly, equal to a percentage of its average daily net assets set
forth in the chart below (the Advisory Fee).
Fund
|
|
Fee
|
|
PowerShares
Developed Markets Infrastructure Portfolio
|
|
|
%
|
PowerShares
Emerging Markets Infrastructure Portfolio
|
|
|
%
|
The Adviser
has overall responsibility for the general management and administration of the
Trust. The Adviser provides an investment program for the Funds and manages the
investment of the Funds assets.
Under the
Investment Advisory Agreement, the Adviser will not be liable for any error of
judgment or mistake of law or for any loss suffered by a Fund in connection
with the performance of the Investment Advisory Agreement, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its duties or from reckless disregard of its
duties and obligations thereunder. The Investment Advisory Agreement continues
until April 30, 2009, and thereafter only if approved annually by the
Board, including a majority of the Independent Trustees. The Investment
Advisory Agreement terminates automatically upon assignment and is terminable
at any time without penalty as to a Fund by the Board, including a majority of
the Independent Trustees, or by vote of the holders of a majority of that Funds
outstanding voting securities on 60 days written notice to the Adviser, or by
the Adviser on 60 days written notice to the Fund.
PowerShares Capital Management LLC, organized February 7, 2003, is
located at 301 West Roosevelt Road, Wheaton, Illinois 60187. On September 18,
2006, INVESCO Ltd. acquired Invesco PowerShares Capital Management LLC. INVESCO
Ltd. is an independent global investment manager.
Administrator
. The Bank of New York Mellon (BONY
or the Administrator) serves as administrator for the Funds. Its principal
address is 101 Barclay Street, New York, New York 10286. BONY serves as
administrator for the Trust pursuant to an administrative services agreement
(the Administrative Services Agreement). Under the
13
Administrative Services Agreement, BONY is obligated on a continuous
basis, to provide such administrative services as the Board reasonably deems
necessary for the proper administration of the Trust and each Fund. BONY will
generally assist in all aspects of the Trusts and the Funds operations,
including supply and maintain office facilities (which may be in BONYs
own offices), statistical and research data, data processing services,
clerical, accounting, bookkeeping and record keeping services (including,
without limitation, the maintenance of such books and records as are required
under the 1940 Act and the rules thereunder, except as maintained by other
agency agents), internal auditing, executive and administrative services, and
stationery and office supplies; prepare reports to shareholders or investors;
prepare and file tax returns; supply financial information and supporting data
for reports to and filings with the SEC; supply supporting documentation for
meetings of the Board; provide monitoring reports and assistance regarding
compliance with the Declaration of Trust, by-laws, investment objectives and
policies and with federal and state securities laws; and negotiate arrangements
with, and supervise and coordinate the activities of, agents and others to
supply services.
As
compensation for the foregoing services, BONY receives certain out-of-pocket
costs, transaction fees and asset-based fees which are accrued daily and paid
monthly by the Adviser from the Advisory Fee.
Custodian, Transfer Agent and Fund Accounting Agent
.
BONY, located at 101 Barclay Street, New York, New York 10286, also serves as
custodian for the Funds pursuant to a custodian agreement (the Custodian
Agreement). As custodian, BONY holds the Funds assets, calculates the NAV of
the Shares and calculates net income and realized capital gains or losses. BONY
also serves as transfer agent of the Funds pursuant to a Transfer Agency
Agreement. Further, BONY serves as Fund accounting agent pursuant to a fund
accounting agreement (the Fund Accounting Agreement). As compensation for the
foregoing services, BONY receives certain out-of-pocket costs, transaction fees
and asset-based fees which are accrued daily and paid monthly by the Adviser
from the Advisory Fee.
Distributor
. A I M Distributors, Inc.
(the Distributor) is the distributor of the Funds Shares. Its principal
address is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The
Distributor has entered into a distribution agreement (the Distribution
Agreement) with the Trust pursuant to which it distributes Fund Shares. Shares
are continuously offered for sale by each Fund through the Distributor only in
Creation Unit Aggregations, as described in the Prospectuses and below under
the heading Creation and Redemption of Creation Units.
Aggregations
.
Fund Shares in less than Creation Unit Aggregations are not distributed by the
Distributor. The Distributor will deliver the applicable Prospectus and, upon
request, this Statement of Additional Information to persons purchasing
Creation Unit Aggregations and will maintain records of both orders placed with
it and confirmations of acceptance furnished by it. The Distributor is a
broker-dealer registered under the Securities Exchange Act of 1934 (the Exchange
Act) and a member of the Financial Industry Regulatory Authority (FINRA).
The
Distribution Agreement for the Funds provides that it may be terminated as
to a Fund at any time, without the payment of any penalty, on at least 60 days
written notice by the Trust to the Distributor (i) by vote of a majority
of the Independent Trustees or (ii) by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund. The Distribution
Agreement will terminate automatically in the event of its assignment (as
defined in the 1940 Act).
The
Distributor may also enter into agreements with securities dealers (Soliciting
Dealers) who will solicit purchases of Creation Unit Aggregations of Fund
Shares. Such Soliciting Dealers may also be Participating Parties (as
defined in Procedures for Creation of Creation Unit Aggregations below) and
DTC Participants (as defined in DTC Acts as Securities Depository below).
Index
Providers
. Set forth below is a list of each Fund and
the Underlying Index upon which it is based.
Fund
|
|
Underlying Index
|
PowerShares Developed Markets Infrastructure
Portfolio
|
|
Red Rocks
Developed Markets Infrastructure Index
sm
|
PowerShares Emerging Markets Infrastructure Portfolio
|
|
Red Rocks
Emerging Markets Infrastructure Index
sm
|
14
Red Rocks Developed Markets Infrastructure Index
sm
and Red Rocks
Emerging Markets Infrastructure Index
sm
,
are trade names and trademarks of Red Rocks and have been licensed for use for
certain purposes by PowerShares. PowerShares Red Rocks Developed Markets
Infrastructure Index
sm
and Red Rocks Emerging Markets Infrastructure
Index
sm
are not sponsored, endorsed, sold or promoted
by Red Rocks and Red Rocks makes no representation regarding the advisability
of trading in such products.
RED
ROCKS MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED
BY ANY PERSON OR ENTITY FROM THE USE OF THE RED ROCKS DEVELOPED MARKETS
INFRASTRUCTURE INDEX
sm
AND RED ROCKS EMERGING MARKETS INFRASTRUCTURE
INDEX
sm
, TRADING BASED ON THE RED ROCKS
DEVELOPED MARKETS INFRASTRUCTURE INDEX AND RED ROCKS EMERGING MARKETS
INFRASTRUCTURE INDEX
sm
, OR ANY DATA INCLUDED THEREIN IN
CONNECTION WITH THESE PRODUCTS, OR FOR ANY OTHER USE. RED ROCKS EXPRESSLY
DISCLAIMS ALL WARRANTIES AND CONDITIONS, EXPRESS, STATUTORY OR IMPLIED. RED
ROCKS HEREBY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES AND CONDITIONS OF
MERCHANTABILITY, TITLE OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT
TO THE RED ROCKS DEVELOPED MARKETS INFRASTRUCTURE INDEX
sm
AND RED ROCKS
EMERGING MARKETS INFRASTRUCTURE INDEX
sm
OR ANY DATA INCLUDED THEREIN.
The Adviser does not
guarantee the accuracy and/or the completeness of the Underlying Indexes or any
data included therein, and the Adviser shall have no liability for any errors,
omissions, or interruptions therein. The Adviser makes no warranty, express or
implied, as to results to be obtained by the Funds, owners of the Shares of the
Funds or any other person or entity from the use of the Underlying Indexes or
any data included therein. The Adviser makes no express or implied warranties,
and expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the Underlying Indexes or any data
included therein. Without limiting any of the foregoing, in no event shall the
Adviser have any liability for any special, punitive, direct, indirect or
consequential damages (including lost profits) arising out of matters relating
to the use of the Underlying Indexes even if notified of the possibility of
such damages.
15
BROKERAGE TRANSACTIONS
The policy of
the Trust regarding purchases and sales of securities is that primary
consideration will be given to obtaining the most favorable prices and
efficient executions of transactions. Consistent with this policy, when
securities transactions are effected on a stock exchange, the Trusts policy is
to pay commissions that are considered fair and reasonable without necessarily
determining that the lowest possible commissions are paid in all circumstances.
In seeking to determine the reasonableness of brokerage commissions paid in any
transaction, the Adviser relies upon its experience and knowledge regarding
commissions generally charged by various brokers. The sale of Fund Shares by a
broker-dealer is not a factor in the selection of broker-dealers.
In seeking to
implement the Trusts policies, the Adviser effects transactions with those
brokers and dealers that the Adviser believes provide the most favorable prices
and are capable of providing efficient executions. The Adviser and its
affiliates do not currently participate in soft dollar transactions.
The Adviser
assumes general supervision over placing orders on behalf of the Funds for the
purchase or sale of portfolio securities. If purchases or sales of portfolio
securities by the Funds and one or more other investment companies or clients
supervised by the Adviser are considered at or about the same time,
transactions in such securities are allocated among the Fund, the several
investment companies and clients in a manner deemed equitable to all by the
Adviser. In some cases, this procedure could have a detrimental effect on the
price or volume of the security as far as the Funds are concerned. However, in
other cases, it is possible that the ability to participate in volume
transactions and to negotiate lower brokerage commissions will be beneficial to
the Funds. The primary consideration is prompt execution of orders at the most
favorable net price.
ADDITIONAL INFORMATION CONCERNING
THE TRUST
The Trust is
an open-end management investment company registered under the 1940 Act. The
Trust was organized as a Massachusetts business trust on October 10, 2006
pursuant to a Declaration of Trust.
The Trust is authorized to issue an unlimited number of shares in one
or more series or funds. The Trust currently is comprised of 31 funds.
The Board of Trustees of the Trust has the right to establish additional series in
the future, to determine the preferences, voting powers, rights and privileges
thereof and to modify such preferences, voting powers, rights and privileges,
and terminate any series without shareholder approval.
Each Share
issued by a Fund has a pro rata interest in the assets of the Fund. Fund Shares
have no preemptive, exchange, subscription or conversion rights except as may be
determined by the Trustees and are freely transferable. Each Share of a Fund is
entitled to participate equally in dividends and distributions declared by the
Board with respect to the Fund, and in the net distributable assets of the Fund
on liquidation.
Shareholders
are entitled to vote on any matter as required by the 1940 Act or other
applicable laws but otherwise the Trustees are permitted to take any action
without seeking the consent of shareholders. The Trustees may, without
shareholder approval, amend the Trusts Declaration of Trust in any respect or
authorize the merger or consolidation of the Trust or any Fund into another
trust or entity, reorganize the Trust, or any Fund into another trust or entity
or a series or class of another entity, sell all or substantially all
of the assets of the Trust or any Fund to another entity, or a series or class of
another entity, or terminate the Trust or any Fund.
A Fund is not
required to hold an annual meeting of shareholders, but the Fund will call
special meetings of shareholders whenever required by the 1940 Act or by the
terms of the Declaration of Trust.
Each Share has
one vote with respect to matters upon which a shareholder vote is required
consistent with the requirements of the 1940 Act and the rules promulgated
thereunder. Shares of all funds, including the Funds, of the Trust vote
together as a single class except as otherwise required by the 1940 Act,
or if the matter being voted on affects only a particular fund, and, if a
matter affects a particular fund differently from other funds, the shares of
that fund will vote separately on such matter.
16
The Trusts
Declaration of Trust provides that by becoming a shareholder of a Fund, each
shareholder shall be expressly held to have agreed to be bound by the
provisions of the Declaration. The holders of Fund shares are required to
disclose information on direct or indirect ownership of Fund shares as may be
required to comply with various laws applicable to the Fund or as otherwise
determined by the Trustees, and ownership of Fund shares may be disclosed
by the Fund if so required by law or regulation or as the Trustees may otherwise
determine.
Under
Massachusetts law applicable to Massachusetts business trusts, shareholders of
such a trust may, under certain circumstances, be held personally liable as
partners for its obligations. However, the Declaration of Trust of the Trust
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or
the Trustees. The Trusts Declaration of Trust further provides for
indemnification out of the assets and property of the Trust for all losses and
expenses of any shareholder held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust or Fund itself was unable to meet its
obligations. The Trust believes the likelihood of the occurrence of these
circumstances is remote.
The Trusts
Declaration also provides that a Trustee acting in his or her capacity of
trustee is not personally liable to any person other than the Trust or its
shareholders, for any act, omission, or obligation of the Trust. The
Declaration further provides that a Trustee or officer is liable to the Trust
or its shareholders only for his or her bad faith, willful misfeasance, gross
negligence or reckless disregard of his or her duties, and shall not be liable
for errors of judgment or mistakes of fact or law. The Declaration requires the
Trust to indemnify any persons who are or who have been Trustees, officers or
employees of the Trust for any liability for actions or failure to act except
to the extent prohibited by applicable federal law. In making any determination
as to whether any person is entitled to the advancement of expenses in
connection with a claim for which indemnification is sought, such person is
entitled to a rebuttable presumption that he or she did not engage in conduct
for which indemnification is not available.
The
Declaration provides that any Trustee who serves as chair of the Board or of a
committee of the Board, lead independent Trustee, or audit committee financial
expert, or in any other similar capacity will not be subject to any greater
standard of care or liability because of such position.
The Trusts
Declaration provides a detailed process for the bringing of derivative actions
by shareholders in order to permit legitimate inquiries and claims while
avoiding the time, expense, distraction, and other harm that can be caused to a
Fund or its shareholders as a result of spurious shareholder demands and
derivative actions. Prior to bringing a derivative action, a demand by the
complaining shareholder must first be made on the Trustees. The Declaration details
various information, certifications, undertakings and acknowledgements that
must be included in the demand. Following receipt of the demand, the Trustees
have a period of 90 days, which may be extended by an additional 60 days,
to consider the demand. If a majority of the Trustees who are considered
independent for the purposes of considering the demand determine that
maintaining the suit would not be in the best interests of the Fund, the
Trustees are required to reject the demand and the complaining shareholder may not
proceed with the derivative action unless the shareholder is able to sustain
the burden of proof to a court that the decision of the Trustees not to pursue
the requested action was not a good faith exercise of their business judgment on
behalf of the Fund. Trustees are not considered to have a personal financial
interest by virtue of being compensated for their services as Trustees.
If a demand is
rejected, the complaining shareholder will be responsible for the costs and
expenses (including attorneys fees) incurred by the Fund in connection with
the consideration of the demand, if a court determines that the demand was made
without reasonable cause or for an improper purpose. If a derivative action is
brought in violation of the Declaration, the shareholders bringing the action may be
responsible for the Funds costs, including attorneys fees.
The
Declaration further provides that a Fund shall be responsible for payment of
attorneys fees and legal expenses incurred by a complaining shareholder only
if required by law, and any attorneys fees that the fund is obligated to pay
on the basis of hourly rates shall be calculated using reasonable hourly rates.
The Declaration also requires that actions by shareholders against a Fund be
brought only in a certain federal court in Illinois, or if not permitted to be
brought in federal court, then in an Illinois state court, and that the right
to jury trial be waived to the full extent permitted by law.
17
The Trust does
not have information concerning the beneficial ownership of Shares held by DTC
Participants (as defined below).
Shareholders may make inquiries by writing to the Trust, c/o the
Distributor, Invesco Aim Distributors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173.
Control
Persons
. As of the date of this SAI, the Adviser
beneficially owned all of the voting securities of each Fund.
Book Entry
Only System
. The following information supplements and
should be read in conjunction with the section in the Prospectuses
entitled Book Entry.
DTC Acts as
Securities Depository for Fund Shares
. Shares of the
Funds are represented by securities registered in the name of DTC or its
nominee and deposited with, or on behalf of, DTC.
DTC, a limited
purpose trust company, was created to hold securities of its participants (the DTC
Participants) and to facilitate the clearance and settlement of securities
transactions among the DTC Participants in such securities through electronic
book entry changes in accounts of the DTC Participants, thereby eliminating the
need for physical movement of securities certificates. DTC Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom (and/or their representatives)
own DTC. More specifically, DTC is owned by a number of its DTC Participants
and by the NYSE, the AMEX and FINRA. Access to the DTC system is also available
to others such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a DTC Participant, either
directly or indirectly (the Indirect Participants).
Beneficial
ownership of Shares is limited to DTC Participants, Indirect Participants and
persons holding interests through DTC Participants and Indirect Participants. Ownership
of beneficial interests in Shares (owners of such beneficial interests are
referred to herein as Beneficial Owners) is shown on, and the transfer of
ownership is effected only through, records maintained by DTC (with respect to
DTC Participants) and on the records of DTC Participants (with respect to
Indirect Participants and Beneficial Owners that are not DTC Participants). Beneficial
Owners will receive from or through the DTC Participant a written confirmation
relating to their purchase and sale of Shares.
Conveyance of
all notices, statements and other communications to Beneficial Owners is
effected as follows. Pursuant to the Depositary Agreement between the Trust and
DTC, DTC is required to make available to the Trust upon request and for a fee
to be charged to the Trust a listing of the Shares of the Funds held by each
DTC Participant. The Trust shall inquire of each such DTC Participant as to the
number of Beneficial Owners holding Shares, directly or indirectly, through
such DTC Participant. The Trust shall provide each such DTC Participant with
copies of such notice, statement or other communication, in such form, number
and at such place as such DTC Participant may reasonably request, in order
that such notice, statement or communication may be transmitted by such
DTC Participant, directly or indirectly, to such Beneficial Owners. In
addition, the Trust shall pay to each such DTC Participant a fair and reasonable
amount as reimbursement for the expenses attendant to such transmittal, all
subject to applicable statutory and regulatory requirements.
Fund
distributions shall be made to DTC or its nominee, Cede & Co., as the
registered holder of all Fund Shares. DTC or its nominee, upon receipt of any
such distributions, shall immediately credit DTC Participants accounts with
payments in amounts proportionate to their respective beneficial interests in
Shares of the Fund as shown on the records of DTC or its nominee. Payments by
DTC Participants to Indirect Participants and Beneficial Owners of Shares held
through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts
of customers in bearer form or registered in a street name, and will be
the responsibility of such DTC Participants.
The Trust has
no responsibility or liability for any aspect of the records relating to or
notices to Beneficial Owners, or payments made on account of beneficial
ownership interests in such Shares, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests, or for
any other aspect of the relationship
18
between DTC
and the DTC Participants or the relationship between such DTC Participants and
the Indirect Participants and Beneficial Owners owning through such DTC
Participants.
DTC may decide
to discontinue providing its service with respect to Shares at any time by
giving reasonable notice to the Trust and discharging its responsibilities with
respect thereto under applicable law. Under such circumstances, the Trust shall
take action to find a replacement for DTC to perform its functions at a
comparable cost.
Proxy
Voting
. The Board of Trustees of the Trust has
delegated responsibility for decisions regarding proxy voting for securities
held by each Fund to the Adviser. The Adviser will vote such proxies in
accordance with its proxy policies and procedures, which are included in
Appendix A to this Statement of Additional Information. The Board of Trustees
will periodically review each Funds proxy voting record.
The Trust is
required to disclose annually the Funds complete proxy voting record on Form N-PX
covering the period July 1 through June 30 and file it with the SEC
no later than August 31. Form N-PX for the Funds also will be
available at no charge upon request by calling 800.983.0903 or by writing to
PowerShares Exchange-Traded Fund Trust II at 301 West Roosevelt Road, Wheaton,
Illinois 60187. The Funds Form N-PX will also be available on the SECs
website at www.sec.gov.
Quarterly
Portfolio Schedule
. The Trust is required to disclose,
after its first and third fiscal quarters, the complete schedule of each
Funds portfolio holdings with the SEC on Form N-Q. The Trust will also
disclose a complete schedule of each Funds portfolio holdings with the
SEC on Form N-CSR after its second and fourth quarters. Form N-Q for
the Funds will be available on the SECs website at http://www.sec.gov. The
Funds Form N-Q, when available, may also be reviewed and copied at
the SECs Public Reference Room in Washington, D.C. and information on the
operation of the Public Reference Room may be obtained by calling
202.942.8090. The Funds Form N-Q and Form N-CSR will be available
without charge, upon request, by calling 630.933.9600 or 800.983.0903 or by
writing to PowerShares Exchange-Traded Fund Trust II at 301 West Roosevelt
Road, Wheaton, Illinois 60187.
Portfolio
Holdings Policy
. The Trust has adopted a policy
regarding the disclosure of information about the Trusts portfolio holdings. The
Board of Trustees of the Trust must approve all material amendments to this
policy.
The Funds portfolio
holdings are publicly disseminated each day the Funds are open for business
through financial reporting and news services, including publicly accessible
Internet web sites. In addition, a basket composition file, which includes the
security names and share quantities to deliver in exchange for Fund shares,
together with estimates and actual cash components, is publicly disseminated
daily prior to the opening of the via
the National Securities Clearing Corporation (NSCC). The basket represents
one Creation Unit of each Fund. The Trust, the Adviser and will
not disseminate non-public information concerning the Trust.
Codes of
Ethics
. Pursuant to Rule 17j-1 under the 1940
Act, the Board of Trustees has adopted a Code of Ethics for the Trust and
approved Codes of Ethics adopted by the Adviser and the Distributor
(collectively the Codes). The Codes are intended to ensure that the interests
of shareholders and other clients are placed ahead of any personal interest,
that no undue personal benefit is obtained from the persons employment
activities and that actual and potential conflicts of interest are avoided.
The Codes
apply to the personal investing activities of Trustees and officers of the
Trust, the Adviser and the Distributor (Access Persons). Rule 17j-1 and
the Codes are designed to prevent unlawful practices in connection with the
purchase or sale of securities by Access Persons. Under the Codes, Access
Persons are permitted to engage in personal securities transactions, but are
required to report their personal securities transactions for monitoring
purposes. The Codes permit personnel subject to the Codes to invest in
securities subject to certain limitations, including securities that may be
purchased or held by a Fund. In addition, certain Access Persons are required
to obtain approval before investing in initial public offerings or private
placements. The Codes are on file with the SEC, and are available to the
public.
19
CREATION AND REDEMPTION OF
CREATION UNIT AGGREGATIONS
Creation
.
The Trust issues and sells Shares of each Fund only in Creation Unit
Aggregations on a continuous basis through the Distributor, without a sales
load, at their NAVs next determined after receipt, on any Business Day (as
defined below), of an order in proper form.
A Business
Day is any day on which the NYSE is open for business. As of the date of this
Statement of Additional Information, the NYSE observes the following
holidays: New Years Day, Martin Luther
King, Jr. Day, Washingtons Birthday, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Deposit
of Securities and Deposit or Delivery of Cash.
The consideration for purchase of Creation Unit
Aggregations of a Fund generally consists of the in-kind deposit of a
designated portfolio of equity securities (the Deposit Securities) per each
Creation Unit Aggregation constituting a substantial replication of the
securities included in the Underlying Index (Fund Securities) and an amount
of cash (the Cash Component) computed as described below. Together, the
Deposit Securities and the Cash Component constitute the Fund Deposit, which
represents the minimum initial and subsequent investment amount for a Creation
Unit Aggregation of a Fund.
The
Cash Component is sometimes also referred to as the Balancing Amount. The
Cash Component serves the function of compensating for any differences between
the NAV per Creation Unit Aggregation and the Deposit Amount (as defined
below). The Cash Component is an amount equal to the difference between the NAV
of the Fund Shares (per Creation Unit Aggregation) and the Deposit Amountan
amount equal to the market value of the Deposit Securities. If the Cash
Component is a positive number (i.e., the NAV per Creation Unit Aggregation
exceeds the Deposit Amount), the creator will deliver the Cash Component. If
the Cash Component is a negative number (i.e., the NAV per Creation Unit
Aggregation is less than the Deposit Amount), the creator will receive the Cash
Component.
The
Custodian, through the NSCC (discussed below), makes available on each Business
Day, prior to the opening of business on the (currently
9:30 a.m., Eastern time), the list of the names and the required number of
shares of each Deposit Security to be included in the current Fund Deposit
(based on information at the end of the previous Business Day) for each Fund.
Such Fund
Deposit is applicable, subject to any adjustments as described below, in order
to effect creations of Creation Unit Aggregations of the Fund until such time
as the next announced composition of the Deposit Securities is made available.
The identity
and number of shares of the Deposit Securities required for a Fund Deposit for
a Fund changes as rebalancing adjustments and corporate action events are
reflected within the Fund from time to time by the Adviser, with a view to the
investment objective of the Fund. The composition of the Deposit Securities may also
change in response to adjustments to the weighting or composition of the
securities of the Underlying Index. In addition, the Trust reserves the right
to permit or require the substitution of an amount of cashi.e., a cash in
lieu amountto be added to the Cash Component to replace any Deposit Security
that may not be available in sufficient quantity for delivery or that may not
be eligible for transfer through the systems of DTC or the Clearing Process
(discussed below), if any, or which might not be eligible for trading by an
Authorized Participant (as defined below) or the investor for which it is
acting or other relevant reason. Brokerage commissions incurred in connection
with the acquisition of Deposit Securities not eligible for transfer through
the systems of DTC, and hence not eligible for transfer through the Clearing
Process (discussed below), if any, will be at the expense of the Fund and will
affect the value of all Shares; but the Adviser, subject to the approval of the
Board of Trustees, may adjust the transaction fee within the parameters
described above to protect ongoing shareholders. The adjustments described
above will reflect changes known to the Adviser on the date of announcement to
be in effect by the time of delivery of the Fund Deposit, in the composition of
the Underlying Index or resulting from certain corporate actions.
In addition to
the list of names and numbers of securities constituting the current Deposit
Securities of a Fund Deposit, the Custodian, through the NSCC, also makes
available on each Business Day, the estimated Cash Component, effective through
and including the previous Business Day, per outstanding Creation Unit
Aggregation of the Fund.
20
Procedures
for Creation of Creation Unit Aggregations
. To be
eligible to place orders with the Distributor and to create a Creation Unit
Aggregation of a Fund, an entity must be (i) a Participating Party,
i.e., a broker dealer or other participant in the clearing process through the
Continuous Net Settlement System of the NSCC (the Clearing Process), a
clearing agency that is registered with the SEC; or (ii) a DTC Participant
(see the Book Entry Only System section), and, in each case, must have executed
an agreement with the Distributor, with respect to creations and redemptions of
Creation Unit Aggregations (Participant Agreement) (discussed below). A
Participating Party and DTC Participant are collectively referred to as an Authorized
Participant. Investors should contact the Distributor for the names of
Authorized Participants that have signed a Participant Agreement. All Fund
Shares, however created, will be entered on the records of DTC in the name of
Cede & Co. for the account of a DTC Participant.
All orders to
create Creation Unit Aggregations must be received by the Distributor no later
than the closing time of the regular trading session on the (Closing
Time) (ordinarily 4:00 p.m., Eastern time) in each case on the date such
order is placed in order for creation of Creation Unit Aggregations to be
effected based on the NAV of Shares of a Fund as next determined on such date
after receipt of the order in proper form. In the case of custom orders, the
order must be received by the Distributor no later than 3:00 p.m. Eastern
time on the trade date. A custom order may be placed by an Authorized
Participant in the event that the Trust permits or requires the substitution of
an amount of cash to be added to the Cash Component to replace any Deposit
Security which may not be available in sufficient quantity for delivery or
which may not be eligible for trading by such Authorized Participant or
the investor for which it is acting or other relevant reason. The date on which
an order to create Creation Unit Aggregations (or an order to redeem Creation
Unit Aggregations, as discussed below) is placed is referred to as the Transmittal
Date. Orders must be transmitted by an Authorized Participant by telephone or
other transmission method acceptable to the Distributor pursuant to procedures
set forth in the Participant Agreement, as described below (see the Placement
of Creation Orders Using Clearing Process and the Placement of Creation
Orders Outside Clearing Process sections). Severe economic or market
disruptions or changes, or telephone or other communication failure may impede
the ability to reach the Distributor or an Authorized Participant.
All orders
from investors who are not Authorized Participants to create Creation Unit
Aggregations shall be placed with an Authorized Participant, as applicable, in
the form required by such Authorized Participant. In addition, the
Authorized Participant may request the investor to make certain
representations or enter into agreements with respect to the order, e.g., to
provide for payments of cash, when required. Investors should be aware that
their particular broker may not have executed a Participant Agreement and
that, therefore, orders to create Creation Unit Aggregations of a Fund have to
be placed by the investors broker through an Authorized Participant that has
executed a Participant Agreement. In such cases there may be additional
charges to such investor. At any given time, there may be only a limited
number of broker dealers that have executed a Participant Agreement. Those placing
orders for Creation Unit Aggregations through the Clearing Process should
afford sufficient time to permit proper submission of the order to the
Distributor prior to the Closing Time on the Transmittal Date. Orders for
Creation Unit Aggregations that are effected outside the Clearing Process are
likely to require transmittal by the DTC Participant earlier on the Transmittal
Date than orders effected using the Clearing Process. Those persons placing
orders outside the Clearing Process should ascertain the deadlines applicable
to DTC and the Federal Reserve Bank wire system by contacting the operations
department of the broker or depository institution effectuating such transfer
of Deposit Securities and Cash Component.
For domestic
securities, orders to create Creation Units of the Funds may be placed
through the Clearing Process utilizing procedures applicable to domestic funds
(Domestic Funds) (see Placement of Creation Orders Using Clearing Process)
or outside the Clearing Process utilizing the procedures applicable to domestic
funds. For foreign securities orders, most will be placed outside of the
clearing process utilizing the procedures applicable for foreign funds (see Placement
of Creation Orders Outside Clearing ProcessDomestic Funds and Placement of
Creation Orders Outside Clearing ProcessForeign Funds).
Placement
of Creation Orders Using Clearing Process
. The
Clearing Process is the process of creating or redeeming Creation Unit
Aggregations through the Continuous Net Settlement System of the NSCC. Fund
Deposits made through the Clearing Process must be delivered through a
Participating Party that has executed a Participant Agreement. The Participant
Agreement authorizes the Distributor to transmit through the Custodian to NSCC,
on behalf of the Participating Party, such trade instructions as are necessary
to effect the Participating Partys creation order. Pursuant to such trade
instructions to NSCC, the Participating Party agrees to deliver the requisite
Deposit
21
Securities and
the Cash Component to the Trust, together with such additional information as may be
required by the Distributor. An order to create Creation Unit Aggregations
through the Clearing Process is deemed received by the Distributor on the
Transmittal Date if (i) such order is received by the Distributor not
later than the Closing Time on such Transmittal Date and (ii) all other
procedures set forth in the Participant Agreement are properly followed.
Placement of
Creation Orders Outside Clearing ProcessDomestic Funds
.
Fund Deposits made outside the Clearing Process must be delivered through a DTC
Participant that has executed a Participant Agreement pre-approved by the
Adviser and the Distributor. A DTC Participant who wishes to place an order
creating Creation Unit Aggregations to be effected outside the Clearing Process
does not need to be a Participating Party, but such orders must state that the
DTC Participant is not using the Clearing Process and that the creation of
Creation Unit Aggregations will instead be effected through a transfer of
securities and cash directly through DTC. The Fund Deposit transfer must be
ordered by the DTC Participant on the Transmittal Date in a timely fashion so
as to ensure the delivery of the requisite number of Deposit Securities through
DTC to the account of the Fund by no later than 11:00 a.m., Eastern time,
of the next Business Day immediately following the Transmittal Date.
All questions
as to the number of Deposit Securities to be delivered, and the validity, form and
eligibility (including time of receipt) for the deposit of any tendered
securities, will be determined by the Trust, whose determination shall be final
and binding. The amount of cash equal to the Cash Component must be transferred
directly to the Custodian through the Federal Reserve Bank wire transfer system
in a timely manner so as to be received by the Custodian no later than 2:00 p.m.,
Eastern time, on the next Business Day immediately following such Transmittal
Date. An order to create Creation Unit Aggregations outside the Clearing
Process is deemed received by the Distributor on the Transmittal Date if (i) such
order is received by the Distributor not later than the Closing Time on such
Transmittal Date; and (ii) all other procedures set forth in the
Participant Agreement are properly followed. However, if the Custodian does not
receive both the required Deposit Securities and the Cash Component by 11:00 a.m.
and 2:00 p.m., respectively, on the next Business Day immediately
following the Transmittal Date, such order will be canceled. Upon written
notice to the Distributor, such canceled order may be resubmitted the
following Business Day using a Fund Deposit as newly constituted to reflect the
then current Deposit Securities and Cash Component. The delivery of Creation
Unit Aggregations so created will occur no later than the third (3rd) Business
Day following the day on which the purchase order is deemed received by the
Distributor.
Additional
transaction fees may be imposed with respect to transactions effected
outside the Clearing Process (through a DTC participant) and in the limited
circumstances in which any cash can be used in lieu of Deposit Securities to
create Creation Units. (See Creation Transaction Fee section below.)
Placement
of Creation Orders Outside Clearing ProcessForeign Funds
.
A standard creation order must be placed by 4:00 p.m., Eastern time, for
purchases of Shares. In the case of custom orders, the order must be received
by the Distributor no later than 3:00 p.m., Eastern time. The Distributor
will inform the Transfer Agent, the Adviser and the Custodian upon receipt
of a creation order. The Custodian will then provide such information to the
appropriate sub-custodian.
The Custodian
shall cause the sub-custodian for each Fund to maintain an account into which
the Authorized Participant shall deliver, on behalf of itself or the party on
whose behalf it is acting, the securities included in the Fund Deposit (or the
cash value of all or part of such of such securities, in the case of a
permitted or required cash purchase or cash in lieu amount), with any
appropriate adjustments as advised by the Trust. Deposit Securities must be
delivered to an account maintained at the applicable local sub-custodian(s). Orders
to purchase Creation Unit Aggregations must be received by the Distributor from
an Authorized Participant on its behalf or another investors behalf by the
closing time of the regular trading session on the Exchange on the relevant
Business Day. However, when a relevant local market is closed due to local
market holidays, the local market settlement process will not commence until
the end of the local holiday period. Settlement must occur by 2:00 p.m.,
Eastern time, on the contractual settlement date.
The Authorized
Participant must also make available no later than 2:00 p.m., Eastern
time, on the contractual settlement date, by means approved by the Trust,
immediately available or same day funds sufficient to the Trust to pay the Cash
Component next determined after acceptance of the purchase order, together with
the applicable purchase transaction fee. Any excess funds will be returned
following settlement of the issue of the Creation Unit Aggregation.
22
In accordance with each Funds Participant
Agreement, Creation Unit Aggregations will be issued to an Authorized
Participant, notwithstanding the fact that the corresponding Fund Deposits have
not been received in part or in whole, in reliance on the undertaking of the
Authorized Participant to deliver the missing Deposit Securities as soon as
possible, which undertaking shall be secured by the Authorized Participants
delivery and maintenance of collateral consisting of cash in the form of U.S.
dollars in immediately available funds having a value (marked-to-market daily)
at least equal to 115%, which the Investment Adviser may change from time to
time of the value of the missing Deposit Securities. Such cash collateral must be delivered no
later than 2:00 p.m., Eastern time, on the contractual settlement
date. The Participant Agreement will
allow the Fund to purchase the missing Deposit Securities at any time and will
subject the Authorized Participant to liability for any shortfall between the
cost to the Trust of purchasing such securities and the value of the
collateral.
Acceptance of Orders for Creation Unit
Aggregations
.
The Trust reserves the absolute right to reject a creation order
transmitted to it by the Distributor in respect of a Fund if: (i) the
order is not in proper form; (ii) the investor(s), upon obtaining the Fund
Shares ordered, would own 80% or more of the currently outstanding shares of
any Fund; (iii) the Deposit Securities delivered are not as disseminated
for that date by the Custodian, as described above; (iv) acceptance of the
Deposit Securities would have certain adverse tax consequences to the Fund; (v) acceptance
of the Fund Deposit would, in the opinion of counsel, be unlawful; (vi) acceptance
of the Fund Deposit would otherwise, in the discretion of the Trust or the
Adviser, have an adverse effect on the Trust or the rights of beneficial
owners; or (vii) in the event that circumstances outside the control of
the Trust, the Custodian, the Distributor and the Adviser make it for all
practical purposes impossible to process creation orders. Examples of such circumstances include acts
of God; public service or utility problems such as fires, floods, extreme
weather conditions and power outages resulting in telephone, telecopy and
computer failures; market conditions or activities causing trading halts;
systems failures involving computer or other information systems affecting the
Trust, the Adviser, the Distributor, DTC, NSCC, the Custodian or sub-custodian
or any other participant in the creation process, and similar extraordinary
events. The Distributor shall notify a
prospective creator of a Creation Unit and/or the Authorized Participant acting
on behalf of such prospective creator of its rejection of the order of such
person. The Trust, the Custodian, any
sub-custodian and the Distributor are under no duty, however, to give
notification of any defects or irregularities in the delivery of Fund Deposits
nor shall any of them incur any liability for the failure to give any such notification.
All questions as to the number of shares of
each security in the Deposit Securities and the validity, form, eligibility,
and acceptance for deposit of any securities to be delivered shall be
determined by the Trust, and the Trusts determination shall be final and
binding.
Creation Transaction Fee
. Investors will be required to pay a fixed
creation transaction fee, described below, payable to BONY regardless of the
number of creations made each day. An
additional charge of up to four times the fixed transaction fee (expressed as a
percentage of the value of the Deposit Securities) may be imposed for cash
creations (to offset the Trusts brokerage and other transaction costs
associated with using cash to purchase the requisite Deposit Securities). Investors are responsible for the costs of
transferring the securities constituting the Deposit Securities to the account
of the Trust.
The Standard Creation/Redemption Transaction
Fee for each Fund will be $ . The Maximum Creation/Redemption Transaction
Fee each Fund will be $ .
Redemption of Fund Shares in Creation Units
Aggregations
.
Fund Shares may be redeemed only in Creation Unit Aggregations at their
NAV next determined after receipt of a redemption request in proper form by a
Fund through the Transfer Agent and only on a Business Day. A Fund will not redeem Shares in amounts less
than Creation Unit Aggregations.
Beneficial owners must accumulate enough Shares in the secondary market
to constitute a Creation Unit Aggregation in order to have such Shares redeemed
by the Trust. There can be no assurance,
however, that there will be sufficient liquidity in the public trading market
at any time to permit assembly of a Creation Unit Aggregation. Investors should expect to incur brokerage
and other costs in connection with assembling a sufficient number of Fund
Shares to constitute a redeemable Creation Unit Aggregation.
With respect to a Fund, the Custodian,
through the NSCC, makes available prior to the opening of business on the
Exchange (currently 9:30 a.m., Eastern time) on each Business Day, the
identity of the Fund Securities that will be applicable (subject to possible
amendment or correction) to redemption requests received in proper form (as
23
described below) on that day. Fund Securities received on redemption may
not be identical to Deposit Securities that are applicable to creations of
Creation Unit Aggregations.
Unless cash redemptions are available or specified
for a Fund, the redemption proceeds for a Creation Unit Aggregation generally
consist of Fund Securitiesas announced on the Business Day of the request for
redemption received in proper formplus or minus cash in an amount equal to the
difference between the NAV of the Fund Shares being redeemed, as next
determined after a receipt of a request in proper form, and the value of the
Fund Securities (the Cash Redemption Amount), less a redemption transaction
fee as listed above. In the event that the
Fund Securities have a value greater than the NAV of the Fund Shares, a
compensating cash payment equal to the difference is required to be made by or
through an Authorized Participant by the redeeming shareholder.
The right of redemption may be suspended or
the date of payment postponed (i) for any period during which the is
closed (other than customary weekend and holiday closings); (ii) for any
period during which trading on the is suspended or restricted; (iii) for
any period during which an emergency exists as a result of which disposal of
the Shares of the Fund or determination of a Funds NAV is not reasonably
practicable; or (iv) in such other circumstances as is permitted by the
SEC.
Redemption Transaction Fee
. A redemption transaction fee is imposed to
offset transfer and other transaction costs that may be incurred by a
Fund. An additional variable charge for
cash redemptions (when cash redemptions are available or specified) for a Fund
may be imposed. Investors will also bear
the costs of transferring the Fund Securities from the Trust to their account
or on their order. Investors who use the
services of a broker or other such intermediary in addition to an Authorized
Participant to effect a redemption of a Creation Unit Aggregation may be
charged an additional fee of up to four times the fixed transaction fee for
such services. The redemption
transaction fees for a Fund are the same as the creation fees set forth above.
Placement of Redemption Orders Using Clearing
Process
. Orders
to redeem Creation Unit Aggregations must be delivered through an Authorized
Participant that has executed a Participant Agreement. Investors other than Authorized Participants
are responsible for making arrangements for an order to redeem to be made
through an Authorized Participant. An
order to redeem Creation Unit Aggregations is deemed received by the Trust on
the Transmittal Date if: (i) such order is received by the Custodian not
later than the Closing Time on the Transmittal Date; and (ii) all other procedures
set forth in the Participant Agreement are properly followed.
An order to redeem Creation Unit Aggregations
using the Clearing Process made in proper form but received by the Trust after
4:00 p.m., Eastern time, will be deemed received on the next Business Day
immediately following the Transmittal Date and will be effected at the NAV next
determined on such next Business Day.
The requisite Fund Securities and the Cash Redemption Amount will be
transferred by the third NSCC Business Day following the date on which such
request for redemption is deemed received.
Placement of Redemption Orders Outside
Clearing ProcessDomestic Funds
. Orders to redeem Creation Unit Aggregations
outside the Clearing Process must be delivered through a DTC Participant that
has executed the Participant Agreement.
A DTC Participant who wishes to place an order for redemption of
Creation Unit Aggregations to be effected outside the Clearing Process does not
need to be a Participating Party, but such orders must state that the DTC
Participant is not using the Clearing Process and that redemption of Creation
Unit Aggregations will instead be effected through transfer of Fund Shares
directly through DTC. An order to redeem
Creation Unit Aggregations outside the Clearing Process is deemed received by
the Trust on the Transmittal Date if (i) such order is received by the
Transfer Agent not later than 4:00 p.m., Eastern time on such Transmittal
Date; (ii) such order is accompanied or followed by the requisite number
of Shares of the Fund, which delivery must be made through DTC to the Custodian
no later than 11:00 a.m., Eastern time (for the Fund Shares), on the next
Business Day immediately following such Transmittal Date (the DTC Cut-Off-Time)
and 2:00 p.m., Eastern time, for any Cash Component, if any owed to the
Fund; and (iii) all other procedures set forth in the Participant
Agreement are properly followed. After
the Trust has deemed an order for redemption outside the Clearing Process
received, the Trust will initiate procedures to transfer the requisite Fund
Securities which are expected to be delivered within three Business Days and
the Cash Redemption Amount, if any owed to the redeeming Beneficial Owner to
the Authorized Participant on behalf of the redeeming Beneficial Owner by the
third Business Day following the Transmittal Date on which such redemption
order is deemed received by the Trust.
24
Placement of Redemption Orders Outside
Clearing ProcessForeign Funds
. A standard order for redemption must be
received by 4:00 p.m., Eastern time, for redemptions of Shares. In the case of custom redemptions, the order
must be received by the Distributor no later than 3:00 p.m., Eastern
time. Arrangements satisfactory to the
Trust must be in place for the Participating Party to transfer the Creation
Units through DTC on or before the settlement date. Redemptions of Shares for Fund Securities
will be subject to compliance with applicable U.S. federal and state securities
laws and the Funds (whether or not it otherwise permits cash redemptions)
reserve the right to redeem Creation Units for cash to the extent that the
Funds could not lawfully deliver specific Fund Securities upon redemptions or
could not do so without first registering the Deposit Securities under such
laws.
The delivery of Fund Securities to redeeming
investors generally will be made within three Business Days. However, due to the schedule of holidays in
certain countries, the delivery of in-kind redemption proceeds may take longer
than three Business Days after the day on which the redemption request is
received in proper form. In such cases,
the local market settlement procedures will not commence until the end of the
local holiday periods. See Regular Holidays
for a list of the local holidays in the foreign countries relevant to the
Funds.
A redeeming Beneficial Owner, or Authorized
Participant action on behalf of such Beneficial Owner, when taking delivery of
shares of Fund Securities upon redemption of shares of the Funds must maintain
appropriate security arrangements with a qualified broker-dealer, bank or other
custody provider in each jurisdiction in which any of the Fund Securities are
customarily traded, to which account the Fund Securities will be delivered.
In accordance with the relevant Authorized
Participants agreement, in the event that the Authorized Participant has
submitted a redemption request in proper form but is unable to transfer all or
part of the Creation Unit Aggregation to be redeemed to the Funds Transfer
Agent, the Distributor will nonetheless accept the redemption request in
reliance on the undertaking by the Authorized Participant to deliver the
missing shares as soon as possible. Such
undertaking shall be secured by the Authorized Participant to deliver the
missing shares as soon as possible. Such
understanding shall be secured by the Authorized Participants delivery and
maintenance of collateral consisting of cash having a value (marked-to-market
daily) at least equal to 115% of the value of the missing shares, which the
Investment Adviser may change from time to time.
The current procedures for collateralization
of missing shares require, among other things, that any cash collateral shall
be in the form of U.S. dollars in immediately-available funds and shall be held
by the Custodian and marked-to-market daily, and that the fees of the Custodian
and any relevant sub-custodians in respect of the delivery, maintenance and
redelivery of the cash collateral shall be payable by the Authorized
Participant. The Authorized Participants
agreement will permit the Trust, on behalf of the relevant Fund, to purchase
the missing shares or acquire the Deposit Securities and the Cash Component
underlying such shares at any time and will subject the Authorized Participant
to liability for any shortfall between the cost to the Trust of purchasing such
shares, Deposit Securities or Cash Component and the value of the collateral.
The calculation of the value of the Fund
Securities and the Cash Redemption Amount to be delivered/received upon
redemption will be made by the Custodian according to the procedures set forth
under Determination of NAV computed on the Business Day on which a redemption
order is deemed received by the Trust.
Therefore, if a redemption order in proper form is submitted to the
Transfer Agent by a DTC Participant not later than Closing Time on the
Transmittal Date, and the requisite number of Shares of the Fund are delivered
to the Custodian prior to the DTC Cut-Off-Time, then the value of the Fund
Securities and the Cash Redemption Amount to be delivered/received will be
determined by the Custodian on such Transmittal Date. If, however, a redemption order is submitted
to the Custodian by a DTC Participant not later than the Closing Time on the
Transmittal Date, but either (i) the requisite number of Shares of the
relevant Fund are not delivered by the DTC Cut-Off-Time, as described above, on
the Transmittal Date, or (ii) the redemption order is not submitted in
proper form, then the redemption order will not be deemed received as of the
Transmittal Date. In such case, the
value of the Fund Securities and the Cash Redemption Amount to be
delivered/received will be computed on the Business Day that the order is
deemed received by the Trust, i.e., the Business Day on which the Fund Shares
of the relevant Fund are delivered through DTC to the Custodian by the DTC
Cut-Off-Time on such Business Day pursuant to a properly submitted redemption
order.
If it is not possible to effect deliveries of
the Fund Securities, the Trust may in its discretion exercise its option to
redeem such Fund Shares in cash, and the redeeming Beneficial Owner will be
required to receive its redemption
25
proceeds in cash. In addition, an investor may request a
redemption in cash that a Fund may, in its sole discretion, permit. In either case, the investor will receive a
cash payment equal to the NAV of its Fund Shares based on the NAV of Shares of
the relevant Fund next determined after the redemption request is received in
proper form (minus a redemption transaction fee and additional charge for
requested cash redemptions specified above, to offset the Funds brokerage and
other transaction costs associated with the disposition of Fund
Securities). A Fund may also, in its
sole discretion, upon request of a shareholder, provide such redeemer a
portfolio of securities that differs from the exact composition of the Fund
Securities, or cash lieu of some securities added to the Cash Component, but in
no event will the total value of the securities delivered and the cash
transmitted differ from the NAV.
Redemptions of Fund Shares for Fund Securities will be subject to
compliance with applicable federal and state securities laws and the Fund
(whether or not it otherwise permits cash redemptions) reserves the right to
redeem Creation Unit Aggregations for cash to the extent that the Trust could
not lawfully deliver specific Fund Securities upon redemptions or could not do
so without first registering the Fund Securities under such laws. An Authorized Participant or an investor for
which it is acting subject to a legal restriction with respect to a particular
security included in the Fund Securities applicable to the redemption of a
Creation Unit Aggregation may be paid an equivalent amount of cash. The Authorized Participant may request the
redeeming Beneficial Owner of the Fund Shares to complete an order form or to
enter into agreements with respect to such matters as compensating cash
payment, beneficial ownership of shares or delivery instructions.
Regular Holidays
. Each Fund generally intends to effect
deliveries of Creation Units and Portfolio Securities on a basis of T plus
three Business Days (i.e., days on which the national securities exchange is
open). Each Fund may effect deliveries
of Creation Units and Portfolio Securities on a basis other than T plus three
in order to accommodate local holiday schedules, to account for different
treatment among foreign and U.S. markets of dividend record dates and
ex-dividend dates or under certain other circumstances. The ability of the Trust to effect in-kind
creations and redemptions within three Business Days of receipt of an order in
good form is subject, among other things, to the condition that, within the
time period from the date of the order to the date of delivery of the
securities, there are no days that are holidays in the applicable foreign
market. For every occurrence of one or
more intervening holidays in the applicable foreign market that are not
holidays observed in the U.S. equity market, the redemption settlement cycle
will be extended by the number of such intervening holidays. In addition to holidays, other unforeseeable
closings in a foreign market due to emergencies may also prevent the Trust from
delivering securities within normal settlement period.
The securities delivery cycles currently
practicable for transferring portfolio securities to redeeming investors,
coupled with foreign market holiday schedules, will require a delivery process
longer than seven calendar days for some Funds, in certain circumstances. The holidays applicable to each Fund during
such periods are listed below, as are instances where more than seven days will
be needed to deliver redemption proceeds.
Although certain holidays may occur on different dates in subsequent
years, the number of days required to deliver redemption proceeds in any given
year is not expected to exceed the maximum number of days listed below for each
Fund. The proclamation of new holidays,
the treatment by market participants of certain days as informal holidays
(e.g., days on which no or limited securities transactions occur, as a result
of substantially shortened trading hours), the elimination of existing holidays
or changes in local securities delivery practices, could affect the information
set forth herein at some time in the future.
The dates in calendar year 2008 in which the regular holidays affecting the relevant securities markets of the below listed countries are as follows:
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ARGENTINA
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Jan.1
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May 1
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Nov. 6
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March 20
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June 6
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Dec. 24
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March 21
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July 9
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Dec. 25
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March 31
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August 18
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Dec. 31
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26
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AUSTRALIA
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Jan.1
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March 21
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May 19
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August 13
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Jan.28
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March 24
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June 2
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October 6
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March 3
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April 25
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June 9
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Nov. 4
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March 10
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May 5
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August 4
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Dec. 25
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Dec. 26
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AUSTRIA
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Jan.1
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May 12
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Dec. 24
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March 21
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May 22
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Dec. 25
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March 24
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August 15
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Dec. 26
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May 1
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Dec. 8
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Dec. 31
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|
|
|
|
|
BELGIUM
|
|
|
|
|
|
|
Jan.1
|
|
May 2
|
|
Nov. 11
|
|
March 21
|
|
May 17
|
|
Dec. 25
|
|
March 24
|
|
July 21
|
|
Dec. 26
|
|
May 1
|
|
August 15
|
|
|
|
|
|
|
|
|
|
|
|
BRAZIL
|
|
|
|
|
|
|
|
Jan.1
|
|
March 21
|
|
July 9
|
|
Dec. 31
|
Jan.25
|
|
April 21
|
|
Nov. 20
|
|
|
Feb. 4
|
|
May 1
|
|
Dec. 24
|
|
|
Feb. 5
|
|
May 22
|
|
Dec. 25
|
|
|
|
|
|
|
|
|
|
|
|
CANADA
|
|
|
|
|
|
|
|
Jan.1
|
|
May 21
|
|
Sept. 3
|
|
Dec. 26
|
Jan.2
|
|
June 25
|
|
October 8
|
|
|
Feb. 19
|
|
July 2
|
|
Nov. 12
|
|
|
April 6
|
|
August 6
|
|
Dec. 25
|
|
|
|
|
|
|
|
|
|
|
|
CHILE
|
|
|
|
|
|
|
Jan.1
|
|
August 15
|
|
Dec. 25
|
|
March 21
|
|
Sept. 18
|
|
Dec. 31
|
|
May 1
|
|
Sept. 19
|
|
|
|
May 21
|
|
Dec. 8
|
|
|
|
|
|
|
|
|
|
|
CHINA
|
|
|
|
|
|
|
|
Jan.1
|
|
Feb. 11
|
|
May 7
|
|
October 6
|
Jan.21
|
|
Feb. 12
|
|
May 26
|
|
October 7
|
Feb. 4
|
|
Feb. 13
|
|
July 4
|
|
October 13
|
Feb. 5
|
|
May 1
|
|
Sept. 1
|
|
Nov. 11
|
Feb. 6
|
|
May 2
|
|
October 1
|
|
Nov. 27
|
Feb. 7
|
|
May 5
|
|
October 2
|
|
Dec. 25
|
Feb. 8
|
|
May 6
|
|
October 3
|
|
|
|
|
|
|
|
|
|
|
DENMARK
|
|
|
|
|
|
|
Jan.1
|
|
April 18
|
|
Dec. 24
|
|
March 20
|
|
May 1
|
|
Dec. 25
|
|
March 21
|
|
May 12
|
|
Dec. 26
|
|
March 24
|
|
June 5
|
|
Dec. 31
|
|
|
|
|
|
|
|
|
|
27
|
|
FINLAND
|
|
|
|
|
|
|
Jan.1
|
|
June 20
|
|
Dec. 31
|
|
March 21
|
|
Dec. 24
|
|
|
|
March 24
|
|
Dec. 25
|
|
|
|
May 1
|
|
Dec. 26
|
|
|
|
|
|
|
|
|
|
|
|
FRANCE
|
|
|
|
|
|
|
Jan.1
|
|
May 8
|
|
Dec. 25
|
|
March 21
|
|
June 14
|
|
Dec. 26
|
|
March 24
|
|
August 15
|
|
|
|
May 1
|
|
Nov. 11
|
|
|
|
|
|
|
|
|
|
|
|
GERMANY
|
|
|
|
|
|
|
|
Jan.1
|
|
May 1
|
|
October 3
|
|
Dec. 31
|
Feb. 4
|
|
May 12
|
|
Dec. 24
|
|
|
March 21
|
|
May 22
|
|
Dec. 25
|
|
|
March 24
|
|
August 15
|
|
Dec. 26
|
|
|
|
|
|
|
|
|
|
|
|
GREECE
|
|
|
|
|
|
|
|
Jan.1
|
|
March 25
|
|
June 16
|
|
Dec. 26
|
March 10
|
|
April 25
|
|
August 15
|
|
|
March 21
|
|
April 28
|
|
October 28
|
|
|
March 24
|
|
May 1
|
|
Dec. 25
|
|
|
|
|
|
|
|
|
|
|
|
HONG KONG
|
|
|
|
|
|
|
|
Jan.1
|
|
March 24
|
|
July 1
|
|
Dec. 25
|
Feb. 6
|
|
April 4
|
|
Sept. 15
|
|
Dec. 26
|
Feb. 7
|
|
May 1
|
|
October 1
|
|
Dec. 31
|
Feb. 8
|
|
May 12
|
|
October 7
|
|
|
March 21
|
|
June 9
|
|
Dec. 24
|
|
|
|
|
|
|
|
|
|
|
|
INDONESIA
|
|
|
|
|
|
|
|
Jan.1
|
|
April 7
|
|
Sept. 29
|
|
Dec. 25
|
Jan.10
|
|
May 1
|
|
October 1
|
|
Dec. 26
|
Jan.11
|
|
May 20
|
|
October 2
|
|
Dec. 29
|
Feb. 7
|
|
July 28
|
|
October 3
|
|
Dec. 31
|
March 20
|
|
July 30
|
|
Dec. 8
|
|
|
March 21
|
|
August 18
|
|
Dec. 24
|
|
|
|
|
|
|
|
|
|
|
|
IRELAND
|
|
|
|
|
|
|
|
Jan.1
|
|
May 1
|
|
October 27
|
|
Dec. 29
|
March 17
|
|
May 5
|
|
Dec. 24
|
|
|
March 21
|
|
June 2
|
|
Dec. 25
|
|
|
March 24
|
|
August 4
|
|
Dec. 26
|
|
|
|
|
|
|
|
|
|
|
|
ITALY
|
|
|
|
|
|
|
Jan.1
|
|
June 2
|
|
Dec. 25
|
|
March 21
|
|
August 15
|
|
Dec. 26
|
|
April 25
|
|
Dec. 8
|
|
Dec. 31
|
|
May 1
|
|
Dec. 24
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
JAPAN
|
|
|
|
|
|
|
|
Jan.1
|
|
Feb. 11
|
|
July 21
|
|
Nov. 3
|
Jan.2
|
|
March 20
|
|
Sept. 15
|
|
Nov. 24
|
Jan.3
|
|
April 29
|
|
Sept. 23
|
|
Dec. 23
|
Jan.14
|
|
May 5
|
|
October 13
|
|
Dec. 31
|
|
|
|
|
|
|
|
|
|
MALAYSIA
|
|
|
|
|
|
|
|
Jan.1
|
|
March 20
|
|
Sept. 1
|
|
Dec. 8
|
Jan.10
|
|
May 1
|
|
October 1
|
|
Dec. 25
|
Feb. 1
|
|
May 19
|
|
October 2
|
|
Dec. 29
|
Feb. 6
|
|
May 20
|
|
October 3
|
|
|
Feb. 7
|
|
May 30
|
|
October 27
|
|
|
Feb. 8
|
|
June 7
|
|
October 28
|
|
|
|
|
|
|
|
|
|
|
|
MEXICO
|
|
|
|
|
|
|
Jan.1
|
|
March 21
|
|
Nov. 20
|
|
Feb. 4
|
|
May 1
|
|
Dec. 12
|
|
March 17
|
|
Sept. 16
|
|
Dec. 25
|
|
March 20
|
|
Nov. 17
|
|
|
|
|
|
|
|
|
|
|
|
NETHERLANDS
|
|
|
|
|
|
|
Jan.1
|
|
May 1
|
|
|
|
March 21
|
|
May 12
|
|
|
|
March 24
|
|
Dec. 25
|
|
|
|
April 30
|
|
Dec. 26
|
|
|
|
|
|
|
|
|
|
|
|
NEW ZEALAND
|
|
|
|
|
|
|
Jan.1
|
|
Feb. 6
|
|
June 2
|
|
Jan.2
|
|
March 21
|
|
October 27
|
|
Jan.21
|
|
March 24
|
|
Dec. 25
|
|
Jan.28
|
|
April 25
|
|
Dec. 26
|
|
|
|
|
|
|
|
|
|
NORWAY
|
|
|
|
|
|
|
Jan.1
|
|
May 1
|
|
Dec. 26
|
|
March 20
|
|
May 12
|
|
Dec. 31
|
|
March 21
|
|
Dec. 24
|
|
|
|
March 24
|
|
Dec. 25
|
|
|
|
|
|
|
|
|
|
|
|
PHILIPPINES
|
|
|
|
|
|
|
Jan.1
|
|
June 12
|
|
Dec. 25
|
|
Feb. 25
|
|
August 21
|
|
Dec. 30
|
|
March 20
|
|
October 1
|
|
Dec. 31
|
|
March 21
|
|
Dec. 24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
|
|
PORTUGAL
|
|
|
|
|
|
|
|
Jan.1
|
|
April 25
|
|
June 13
|
|
Dec. 25
|
Feb. 5
|
|
May 1
|
|
Dec. 1
|
|
Dec. 26
|
March 21
|
|
May 22
|
|
Dec. 8
|
|
|
March 24
|
|
June 10
|
|
Dec. 24
|
|
|
|
|
|
|
|
|
|
|
|
SINGAPORE
|
|
|
|
|
|
|
|
Jan.1
|
|
May 1
|
|
October 1
|
|
Dec. 17
|
Feb. 7
|
|
May 19
|
|
October 27
|
|
Dec. 25
|
Feb. 8
|
|
May 20
|
|
October 28
|
|
|
March 21
|
|
August 9
|
|
Dec. 8
|
|
|
|
|
|
|
|
|
|
|
|
SOUTH AFRICA
|
|
|
|
|
|
|
Jan.1
|
|
May 1
|
|
Dec. 25
|
|
March 21
|
|
June 16
|
|
Dec. 26
|
|
March 24
|
|
Sept. 24
|
|
|
|
April 28
|
|
Dec. 16
|
|
|
|
|
|
|
|
|
|
|
|
SOUTH KOREA
|
|
|
|
|
|
|
|
Jan.1
|
|
April 10
|
|
July 17
|
|
Dec. 31
|
Feb. 6
|
|
May 1
|
|
August 15
|
|
|
Feb. 7
|
|
May 5
|
|
Sept. 5
|
|
|
Feb. 8
|
|
May 12
|
|
October 3
|
|
|
April 9
|
|
June 6
|
|
Dec. 25
|
|
|
|
|
|
|
|
|
|
|
|
SPAIN
|
|
|
|
|
|
|
|
Jan.1
|
|
March 24
|
|
July 25
|
|
Dec. 26
|
Jan.7
|
|
May 1
|
|
August 15
|
|
|
March 20
|
|
May 2
|
|
Dec. 8
|
|
|
March 21
|
|
May 15
|
|
Dec. 25
|
|
|
|
|
|
|
|
|
|
|
|
SWEDEN
|
|
|
|
|
|
|
Jan.1
|
|
June 6
|
|
Dec. 26
|
|
March 21
|
|
June 20
|
|
Dec. 31
|
|
March 24
|
|
Dec. 24
|
|
|
|
May 1
|
|
Dec. 25
|
|
|
|
|
|
|
|
|
|
|
|
SWITZERLAND
|
|
|
|
|
|
|
|
Jan.1
|
|
May 1
|
|
Sept. 11
|
|
Dec. 31
|
Jan.2
|
|
May 12
|
|
Dec. 8
|
|
|
March 19
|
|
May 22
|
|
Dec. 24
|
|
|
March 21
|
|
August 1
|
|
Dec. 25
|
|
|
March 24
|
|
August 15
|
|
Dec. 26
|
|
|
|
|
|
|
|
|
|
|
|
TAIWAN
|
|
|
|
|
|
|
Jan.1
|
|
Feb. 7
|
|
April 4
|
|
Feb. 4
|
|
Feb. 8
|
|
May 1
|
|
Feb. 5
|
|
Feb. 11
|
|
June 9
|
|
Feb. 6
|
|
Feb. 28
|
|
October 10
|
|
|
|
|
|
|
|
|
|
|
30
|
|
THAILAND
|
|
|
|
|
|
|
|
Jan.1
|
|
April 15
|
|
July 1
|
|
Dec. 5
|
Feb. 20
|
|
May 1
|
|
July 18
|
|
Dec. 10
|
April 7
|
|
May 5
|
|
August 12
|
|
|
April 14
|
|
May 20
|
|
October 23
|
|
|
|
|
|
|
|
|
|
|
|
UNITED KINGDOM
|
|
|
|
|
|
|
Jan.1
|
|
May 26
|
|
|
|
March 21
|
|
August 25
|
|
|
|
March 24
|
|
Dec. 25
|
|
|
|
May 5
|
|
Dec. 26
|
|
|
|
|
|
|
|
|
|
|
|
UNITED STATES
|
|
|
|
|
|
|
Jan.1
|
|
May 26
|
|
Nov. 11
|
|
Jan.21
|
|
July 4
|
|
Nov. 27
|
|
Feb. 18
|
|
Sept. 1
|
|
Dec. 25
|
|
March 21
|
|
October 13
|
|
|
|
|
|
|
|
|
|
|
|
VENEZUELA
|
|
|
|
|
|
|
Jan.1
|
|
May 1
|
|
August 18
|
|
Feb. 4
|
|
May 5
|
|
Dec. 8
|
|
Feb. 5
|
|
May 26
|
|
Dec. 25
|
|
March 19
|
|
June 24
|
|
|
|
March 20
|
|
July 24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SETTLEMENT PERIODS GREATER THAN SEVEN DAYS FOR YEAR 2008
Beginning of
Settlement Period
|
|
End of
Settlement
Period
|
|
Days in
Settlement
Period
|
|
|
|
|
|
|
|
|
|
Argentina
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
03/19/08
|
|
03/27/08
|
|
8
|
|
China
|
|
02/04/08
|
|
02/14/08
|
|
10
|
|
|
|
02/05/08
|
|
02/15/08
|
|
10
|
|
|
|
02/06/08
|
|
02/18/08
|
|
12
|
|
|
|
04/28/08
|
|
05/08/08
|
|
10
|
|
|
|
04/29/08
|
|
05/09/08
|
|
10
|
|
|
|
04/30/08
|
|
05/12/08
|
|
12
|
|
|
|
09/26/08
|
|
10/08/08
|
|
12
|
|
|
|
09/29/08
|
|
10/09/08
|
|
10
|
|
|
|
09/30/08
|
|
10/10/08
|
|
10
|
|
Croatia
|
|
12/19/08
|
|
12/29/08
|
|
10
|
|
|
|
12/22/08
|
|
12/30/08
|
|
8
|
|
|
|
12/23/08
|
|
01/02/09
|
|
10
|
|
Czech
Republic
|
|
12/19/08
|
|
12/29/08
|
|
10
|
|
|
|
12/22/08
|
|
12/30/08
|
|
8
|
|
|
|
12/23/08
|
|
12/31/08
|
|
8
|
|
Denmark
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
03/19/08
|
|
03/27/08
|
|
8
|
|
31
Finland
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
03/19/08
|
|
03/27/08
|
|
8
|
|
Indonesia
|
|
09/26/08
|
|
10/06/08
|
|
10
|
|
|
|
09/29/08
|
|
10/07/08
|
|
8
|
|
|
|
09/30/08
|
|
10/08/07
|
|
8
|
|
Japan
|
|
12/26/08
|
|
01/05/09
|
|
10
|
|
|
|
12/29/08
|
|
01/06/09
|
|
8
|
|
|
|
12/30/08
|
|
01/07/09
|
|
8
|
|
Mexico
|
|
03/14/08
|
|
03/24/08
|
|
10
|
|
Norway
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
03/19/08
|
|
03/27/08
|
|
8
|
|
Philippines
|
|
12/24/08
|
|
01/02/09
|
|
9
|
|
Russia *
|
|
12/26/07
|
|
01/08/08
|
|
13
|
|
|
|
12/27/07
|
|
01/09/08
|
|
13
|
|
|
|
12/28/07
|
|
01/10/08
|
|
13
|
|
Sweden
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
|
|
03/19/08
|
|
03/27/08
|
|
8
|
|
Turkey
|
|
12/04/08
|
|
12/12/08
|
|
8
|
|
|
|
12/05/08
|
|
12/15/08
|
|
10
|
|
Venezuela
|
|
03/14/08
|
|
03/24/08
|
|
10
|
|
|
|
03/17/08
|
|
03/25/08
|
|
8
|
|
|
|
03/18/08
|
|
03/26/08
|
|
8
|
|
* Settlement cycle in Russia is negotiated on a deal by deal
basis. Above data reflects a hypothetical T + 3 Cycle Covers market closings
that have been confirmed as of 11/1/07. Holidays are subject to change without
notice.
TAXES
Each Fund intends to qualify for and to elect
to be treated as a regulated investment company (a RIC) under Subchapter M of
the Internal Revenue Code. To qualify
for treatment as a RIC, a company must annually distribute at least 90% of its
net investment company taxable income (which includes dividends, interest and
net capital gains) and meet several other requirements relating to the nature
of its income and the diversification of its assets.
Each Fund is treated as a separate
corporation for federal income tax purposes.
Each Fund, therefore, is considered to be a separate entity in
determining its treatment under the rules for RICs described herein and in
the Prospectus. Losses in one Fund do
not offset gains in another Fund and the requirements (other than certain
organizational requirements) for qualifying for RIC status are determined at
the Fund level rather than the Trust level.
Each Fund will be subject to a 4% excise tax
on certain undistributed income if it does not distribute to its shareholders
in each calendar year at least 98% of its ordinary income for the calendar year
plus 98% of its net capital gains for twelve months ended October 31 of
such year. Each Fund intends to declare
and distribute dividends and distributions in the amounts and at the times
necessary to avoid the application of this 4% excise tax.
As a result of tax requirements, the Trust on
behalf of each Fund has the right to reject an order to purchase Shares if the
purchaser (or group of purchasers) would, upon obtaining the Shares so ordered,
own 80% or more of the outstanding Shares of the Fund and if, pursuant to
section 351 of the Internal Revenue Code, the Fund would have a basis in the
Deposit Securities different from the market value of such securities on the
date of deposit. The Trust also has the
right to require information necessary to determine beneficial Share ownership
for purposes of the 80% determination.
32
Each
Fund may make investments that are subject to special federal income tax rules,
such as investments in structured notes, swaps, options, futures contracts and
non-U.S. corporations classified as passive foreign investment companies.
Those special tax rules can, among other things, affect the timing of income or
gain, the treatment of income as capital or ordinary and the treatment of
capital gain or loss as long-term or short-term. The application of these
special rules would therefore also affect the character of distributions made
by each Fund. The Funds may need to borrow money or dispose of some of its
investments earlier than anticipated in order to meet their distribution
requirements.
Distributions
from a Funds net investment income, including any net short-term capital
gains, if any, and distributions of income from securities lending, are taxable
as ordinary income. Distributions
reinvested in additional Shares of a Fund through the means of a dividend
reinvestment service will be taxable dividends to shareholders acquiring such
additional Shares to the same extent as if such dividends had been received in
cash. Distributions of net long-term
capital gains, if any, in excess of net short-term capital losses are taxable
as long-term capital gains, regardless of how long shareholders have held the
Shares.
Dividends
declared by the Funds in October, November or December and paid to shareholders
of record of such months during the following January may be treated as having
been received by such shareholders in the year the distributions were declared.
Long-term capital gains of noncorporate taxpayers
generally are taxed at a maximum rate of 15% for taxable years beginning before
January 1, 2011. In addition, for
these tax years, some ordinary dividends declared and paid by a Fund to
noncorporate shareholders may qualify for taxation at the lower reduced tax
rates applicable to long-term capital gains, provided that holding period and
other requirements are met by the Fund and the shareholder. Without future congressional action, the
maximum rate of long-term capital gains will return to 20% in 2011, and all
dividends will be taxed at ordinary income rates. Each Fund will report to shareholders
annually the amounts of dividends received from ordinary income, the amount of
distributions received from capital gains and the portion of dividends which
may qualify for the dividends received deduction. In addition, each Fund will report the amount
of dividends to individual shareholders eligible for taxation at the lower
reduced tax rates applicable to long-term capital gains.
If, for any calendar year, the total distributions
made exceed the Trusts current and accumulated earnings and profit, the excess
will, for U.S. federal income tax purposes, be treated as a tax free return of
capital to each shareholder up to the amount of the shareholders basis in his
or her shares, and thereafter as gain from the sale of shares. The amount
treated as a tax free return of capital will reduce the shareholders adjusted
basis in his or her shares, thereby increasing his or her potential gain or
reducing his or her potential loss on the subsequent sale of his or her shares.
The sale, exchange or redemption of Shares may give
rise to a gain or loss. In general, any
gain or loss realized upon a taxable disposition of Shares will be treated as
long-term capital gain or loss if the Shares have been held for more than one
year. Otherwise, the gain or loss on the
taxable disposition of Shares will be treated as short-term capital gain or
loss. A loss realized on a sale or
exchange of Shares of a Fund may be disallowed if other substantially identical
Shares are acquired (whether through the automatic reinvestment of dividends or
otherwise) within a sixty-one (61) day period beginning thirty (30) days before
and ending thirty (30) days after the date that the Shares are disposed
of. In such a case, the basis of the
Shares acquired must be adjusted to reflect the disallowed loss. Any loss upon the sale or exchange of Shares
held for six (6) months or less is treated as long-term capital loss to
the extent of any capital gain dividends received by the shareholders. Distribution of ordinary income and capital
gains may also be subject to state and local taxes.
Distributions of ordinary income paid to
shareholders who are nonresident aliens or foreign entities that are not
effectively connected to the conduct of a trade or business within the United
States will generally be subject to a 30% United States withholding tax unless
a reduced rate of withholding or a withholding exemption is provided under
applicable treaty law. However,
shareholders who are nonresident aliens or foreign entities will generally not
be subject to United States withholding or income tax on gains realized on the
sale of Shares or on dividends from capital gains unless (i) such gain or
capital gain dividend is effectively connected with the conduct of a trade or
business within the United States, or (ii) in the case of an individual
shareholder, the shareholder is present in the United States for a period or
periods aggregating 183 days or more during the year of the sale or capital
gain dividend and certain other conditions are met. Gains on the sale of Shares and dividends
that are effectively connected with the conduct of a trade or business within
the United States will generally be subject to United States federal net income
taxation at regular income tax rates.
Dividends paid by a Fund to shareholders who are nonresident aliens or
foreign entities that are derived from short-term capital gains and qualifying
net interest income (including income from original issue discount and market
discount), and that are properly designated by a Fund as short-term capital
gain dividends or interest-related dividends, will generally not be subject
to United States withholding tax, provided that the income would not be subject
to federal income tax if earned directly by the foreign shareholder. These provisions relating to distributions to
shareholders who are nonresident aliens or foreign entities generally would
apply to distributions with respect to taxable years of a Fund beginning before
January 1, 2008. In addition,
capital gains distributions attributable to gains from U.S. real property
interests (including certain U.S. real property holding corporations and which
may include certain REITs and certain REIT capital gain dividends) will
generally be subject to United States withholding tax and may give rise to an
obligation on the part of the foreign shareholder to file a United States tax
return. Nonresident shareholders are
urged to consult their own tax advisors concerning the applicability of the
United States withholding tax.
33
Some shareholders may be subject to a withholding
tax on distributions of ordinary income, capital gains and any cash received on
redemption of Creation Units (backup withholding). Generally, shareholders subject to backup
withholding will be those for whom no certified taxpayer identification number
is on file with a Fund or who, to the Funds knowledge, have furnished an
incorrect number. When establishing an
account, an investor must certify under penalty of perjury that such number is
correct and that such investor is not otherwise subject to backup withholding.
Dividends and interest received by a Fund may give
rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and
the United States may reduce or eliminate such taxes.
Each Fund may be subject to certain taxes imposed by
the foreign country or countries in which it invests with respect to dividends,
capital gains and interest income. Under
the Internal Revenue Code, if more than 50% of the value of a Funds total
assets at the close of any taxable year consists of stocks or securities of
foreign corporations, the Fund may elect, for U.S. federal tax purposes, to
treat any foreign countrys income or withholding taxes paid by the Fund that
can be treated as income taxes under U.S. income tax principles, as paid by its
shareholders. Each Fund expects to
qualify for and intends to make this election.
For any year that a Fund makes such an election, each shareholder will
be required to include in its income an amount equal to its allocable share of
such taxes paid by the Fund to the foreign government and the shareholder will
be entitled, subject to certain limitations, to either deduct its allocable
share of such foreign income taxes in computing their taxable income or to use
it as a foreign tax credit against U.S. income taxes, if any. Generally, foreign investors will be subject
to an increased U.S. tax on their income resulting from a Funds election to pass-through
amounts of foreign taxes paid by the Fund, and will not be able to claim a
credit or deduction with respect to the foreign taxes paid by the Fund treated
as having been paid by them.
Each shareholder will be notified within 60 days
after the close of a Funds taxable year whether, pursuant to the election
described above, any foreign taxes paid by the Fund will be treated as paid by
its shareholders for that year and, if so, such notification will designate (i) such
shareholders portion of the foreign taxes paid to such country and (ii) the
portion of the Funds dividends and distributions that represents income
derived from sources within such country.
The amount of foreign taxes that may be credited against a shareholders
U.S. federal income tax liability generally will be limited, however, to an
amount equal to the shareholders U.S. federal income tax rate multiplied by
its foreign source taxable income. For
this purpose, a Funds gains and losses from the sale of securities, and
currency gains and losses, will generally be treated as derived from U.S.
sources. In addition, this limitation
must be applied separately to certain categories of foreign source income. As a consequence, certain shareholders may
not be able to claim a foreign tax credit for the full amount of their
proportionate share of foreign taxes paid by a Fund. A shareholders ability to claim a credit for
foreign taxes paid by a Fund may also be limited by applicable holding period
requirements.
The foregoing discussion is a summary only and is
not intended as a substitute for careful tax planning. Purchasers of Shares should consult their own
tax advisors as to the tax consequences of investing in such Shares, including
under federal, state, local and other tax laws.
Finally, the foregoing discussion is based on applicable provisions of
the Internal Revenue Code, regulations, judicial authority and administrative
interpretations in effect on the date hereof.
Changes in applicable authority could materially affect the conclusions
discussed above, and such changes often occur.
34
FEDERAL TAX TREATMENT OF FUTURES AND OPTIONS CONTRACTS
Each Fund is required for federal income tax
purposes to mark to market and recognize as income for each taxable year its
net unrealized gains and losses on certain futures contracts as of the end of
the year as well as those actually realized during the year. Gain or loss from futures and options
contracts on broad-based indexes required to be marked to market will be 60%
long-term and 40% short-term capital gain or loss. Application of this rule may alter the
timing and character of distributions to shareholders. Each Fund may be required to defer the
recognition of losses on futures contracts, options contracts and swaps to the
extent of any unrecognized gains on offsetting positions held by the Fund.
In order for a Fund to continue to qualify for
federal income tax treatment as a RIC, at least 90% of its gross income for a
taxable year must be derived from qualifying income, i.e., dividends, interest,
income derived from loans or securities, gains from the sale of securities or
of foreign currencies or other income derived with respect to the Funds
business of investing in securities (including net income derived from an
interest in certain qualified publicly traded partnerships). It is anticipated that any net gain realized
from the closing out of futures or options contracts will be considered gain
from the sale of securities or derived with respect to each Funds business of
investing in securities and therefore will be qualifying income for purposes of
the 90% gross income requirement.
Each Fund distributes to shareholders at least
annually any net capital gains which have been recognized for federal income
tax purposes, including unrealized gains at the end of the Funds fiscal year
on futures or options transactions. Such
distributions are combined with distributions of capital gains realized on a
Funds other investments and shareholders are advised on the nature of the
distributions.
DETERMINATION OF NAV
The following information supplements and should be
read in conjunction with the section in the Prospectus entitled Net Asset
Value.
BONY calculates each Funds
NAV at the close of regular trading (normally 4:00 p.m. Eastern time) every day
the NYSE is open. NAV is calculated by deducting all of the Funds liabilities
from the total value of its assets and dividing the result by the number of
Shares outstanding, rounding to the nearest cent. All valuations are subject to
review by the Trusts Board of Trustees or its delegate.
In determining NAV, expenses
are accrued and applied daily and securities and other assets for which market
quotations are available are valued at market value. Stocks and other equity
securities are valued at the last sales price that day based on the official
closing price of the exchange where the security is primarily traded. The NAV
for each Fund will be calculated and disseminated daily.
The NYSE Arca will
disseminate every 15 seconds throughout the trading day through the facilities
of the Consolidated Tape Association the approximate value of Shares of the
applicable Fund, an amount representing on a per share basis the sum of the
current value of the Deposit Securities based on their then current market
price and the estimated Cash Component. As the respective international local
markets close, the market value of the Deposit Securities will continue to be
updated for foreign exchange rates for the remainder of the U.S. trading day at
the prescribed 15 second interval. The value of each Underlying Index will not
be calculated and disseminated intra day. The value and return of each
Underlying Index is calculated once each trading day by the Index Provider
based on prices received from the respective international local markets.
The value of each Funds portfolio securities is based on the
securities closing price on local markets when available. If a securitys
market price is not readily available or does not otherwise accurately reflect
the fair value of the security, the security will be valued by another method
that the Adviser believes will better reflect fair value in accordance with the
Trusts valuation policies and procedures approved by the Board of Trustees.
Each Fund may use fair value pricing in a variety of circumstances, including
but not limited to, situations when the value of a security in a Funds
portfolio has been materially affected by events occurring after the close of
the market on which the security is principally traded (such as a corporate
action or other news that may materially affect the price of a security) or
trading in a security has been suspended or halted. Fair value pricing involves
subjective judgments and it is possible that a fair value determination for a
security is materially different than the value that could be realized upon the
sale of the security. In addition, fair value pricing could result in a
difference between the prices used to calculate a Funds NAV and the prices
used by the Funds Underlying Index. This may adversely affect a Funds ability
to track its Underlying Index. With respect to securities that are primarily
listed on foreign exchanges, the value of a Funds portfolio securities may
change on days when you will not be able to purchase or sell your Shares.
35
listed on foreign exchanges, the value of a Funds
portfolio securities may change on days when you will not be able to purchase
or sell your Shares.
DIVIDENDS AND DISTRIBUTIONS
The following information supplements and should be
read in conjunction with the section in the Prospectuses entitled Dividends,
Distributions and Taxes.
General Policies
.
Ordinarily, dividends from net investment income, if any, are declared
and paid quarterly. Distributions of net
realized securities gains, if any, generally are declared and paid once a year,
but the Trust may make distributions on a more frequent basis. The Trust reserves the right to declare
special distributions if, in its reasonable discretion, such action is
necessary or advisable to preserve the status of each Fund as a RIC or to avoid
imposition of income or excise taxes on undistributed income.
Dividends and other distributions on Fund Shares are
distributed, as described below, on a pro rata basis to Beneficial Owners of
the Shares. Dividend payments are made
through DTC Participants and Indirect Participants to Beneficial Owners then of
record with proceeds received from a Fund.
Dividend Reinvestment Service
. No reinvestment service is provided by the
Trust. Broker-dealers may make available
the DTC book-entry Dividend Reinvestment Service for use by Beneficial Owners
of the Fund for reinvestment of their dividend distributions. Beneficial Owners should contact their broker
to determine the availability and costs of the service and the details of
participation therein. Brokers may
require Beneficial Owners to adhere to specific procedures and timetables.
MISCELLANEOUS INFORMATION
Counsel
. Clifford Chance US LLP, 31 West 52nd Street,
New York, New York 10019, is counsel to the Trust.
Independent Registered Public Accounting Firm
. , serves as the
Funds independent registered public accounting firm. They audit the Funds financial statements
and perform other related audit services.
36
APPENDIX
A
POWERSHARES
CAPITAL MANAGEMENT LLC
|PROXY
AND CORPORATE ACTION VOTING
POLICIES
AND PROCEDURES
I.
POLICY
PowerShares Capital Management LLC (the Adviser)
may act as discretionary investment adviser for various clients, including
clients governed by the Employee Retirement Income Security Act of 1974 (ERISA)
and registered open-end investment companies (mutual funds). The Advisers authority to vote proxies or
act with respect to other shareholder actions is established through the
delegation of discretionary authority under our investment advisory
contracts. Therefore, unless a client
(including a named fiduciary under ERISA) specifically reserves the right, in
writing, to vote its own proxies or to take shareholder action with respect to
other corporate actions requiring shareholder actions, the Adviser will vote
all proxies and act on all other actions in a timely manner as part of its full
discretionary authority over client assets in accordance with these Policies
and Procedures. Corporate actions may
include, for example and without limitation, tender offers or exchanges,
bankruptcy proceedings, and class actions.
When voting proxies or acting with respect to
corporate actions for clients, the Advisers utmost concern is that all
decisions be made solely in the best interest of the client (and for ERISA
accounts, plan beneficiaries and participants, in accordance with the letter
and spirit of ERISA). Adviser will act
in a prudent and diligent manner intended to enhance the economic value of the
assets of the clients account.
II.
PURPOSE
The purpose of these Policies and Procedures is to
memorialize the procedures and policies adopted by Adviser to enable it to
comply with its fiduciary responsibilities to clients and the requirements of Rule 206(4)-6
under the Investment Advisers Act of 1940, as amended (Advisers Act). These Policies and Procedures also reflect
the fiduciary standards and responsibilities set forth by the Department of
Labor for ERISA accounts.
III.
PROCEDURES
John Southard is ultimately responsible for ensuring
that all proxies received by the Adviser are voted in a timely manner and in a
manner consistent with the Advisers determination of the clients best
interests. Although many proxy proposals
can be voted in accordance with the Advisers established guidelines (see Section V.
below, Guidelines), the Adviser recognizes that some proposals require
special consideration which may dictate that the Adviser makes an exception to
the Guidelines.
John Southard is also responsible for ensuring that
all corporate action notices or requests which require shareholder action
received by Adviser are addressed in a timely manner and consistent action is
taken across all similarly situated client accounts.
IV.
PROCEDURES
FOR ADDRESSING CONFLICTS OF INTEREST
Examples of potential conflicts of interest include
situations where the Adviser or an affiliate, or personnel of either entity:
·
Manages a
pension plan of a company whose management is soliciting proxies;
·
Has a material
business relationship with a proponent of a proxy proposal and this business
relationship may influence how the proxy vote is cast;
A-1
·
Has a business
or personal relationship with participants in a proxy contest, corporate
directors or candidates for directorships.
Where a proxy proposal raises a material conflict
between the Advisers interests and a clients interest, including a mutual
fund client, the Adviser will resolve such a conflict in the manner described
below.
The Adviser shall review each proxy to assess the
extent, if any, to which there may be a material conflict between the interests
of the applicable client on the one hand and the Adviser and its affiliates,
directors, officers, employees (and other similar persons) on the other hand (a
potential conflict). The Adviser shall
perform this assessment on a proposal-by-proposal basis, and a potential
conflict with respect to one proposal in a proxy shall not indicate that a
potential conflict exists with respect to any other proposal in such
proxy. If the Adviser determines that a
potential conflict may exist, it shall resolve any such conflict in a manner
that is in the collective best interests of the applicable client and the
Advisers other clients (excluding any client that may have a potential
conflict).
Without limiting the generality of the foregoing,
the Adviser may resolve a potential conflict in any of the following manners: (i) If
the proposal that gives rise to a potential conflict is specifically addressed
in the Advisers Proxy Voting Policies and Procedures, the Adviser may vote the
proxy in accordance with the predetermined policies and guidelines set forth in
such Proxy Voting Policies and Procedures; provided that such predetermined
policies and guidelines involve little discretion on the part of the Adviser; (ii) The
Adviser may disclose the potential conflict to the client and obtain the clients
consent before directing the Adviser to vote in the manner approved by the
client; (iii) The Adviser may engage an independent third-party to
determine how the proxy should be voted; or (iv) The Adviser may establish
an ethical wall or other informational barriers between the person(s) that
are involved in the potential conflict and the person(s) making the voting
decision in order to insulate the potential conflict from the decision maker.
The Adviser shall use commercially reasonable efforts to determine whether a
potential conflict may exist, and a potential conflict shall be deemed to exist
if and only if one or more of the Advisers senior account representatives
actually knew or reasonably should have known of the potential conflict.
In certain circumstances, in accordance with a
clients investment advisory contract (or other written directive) or where the
Adviser has determined that it is in the clients best interest, the Adviser
will not vote proxies received. The
following are certain circumstances where the Adviser will limit its role in
voting proxies:
1.
Client Maintains Proxy Voting Authority
: Where client specifies in writing that it
will maintain the authority to vote proxies itself or that it has delegated the
right to vote proxies to a third party, the Adviser will not vote the
securities and will direct the relevant custodian to send the proxy material
directly to the client. If any proxy
material is received by the Adviser, it will promptly be forwarded to the client
or specified third party.
2.
Terminated Account
:
Once a client account has been terminated with the Adviser in accordance
with its investment advisory agreement, the Adviser will not vote any proxies
received after the termination. However,
the client may specify in writing that proxies should be directed to the client
(or a specified third party) for action.
3.
Limited Value
: If the
Adviser determines that the value of a clients economic interest or the value
of the portfolio holding is indeterminable or insignificant, Adviser may
abstain from voting a clients proxies.
The Adviser also will not vote proxies received for securities that are
no longer held by the clients account.
In addition, the Adviser generally will not vote securities where the
economic value of the securities in the client account is less than $500.
4.
Securities Lending Programs
:
When securities are out on loan, they are transferred into the borrowers
name and are voted by the borrower, in its discretion. However, where the Adviser determines that a
proxy vote (or other shareholder action) is materially important to the clients
account, the Adviser may recall the security for purposes of voting.
5.
Unjustifiable Costs
:
In certain circumstances, after doing a cost-benefit analysis, the
Adviser may abstain from voting where the cost of voting a clients proxy would
exceed any anticipated benefits to the client of the proxy proposal.
A-2
V.
RECORD
KEEPING
In accordance with Rule 204-2 under the
Advisers Act, the Adviser will maintain for the time periods set forth in the Rule (i) these
proxy voting procedures and policies, and all amendments thereto; (ii) all
proxy statements received regarding client securities (provided however, that
the Adviser may rely on the proxy statement filed on EDGAR as its records); (iii) a
record of all votes cast on behalf of clients; (iv) records of all client
requests for proxy voting information and a copy of any written response by the
Adviser to any such client request; (v) any documents A-2 prepared by the
Adviser that were material to making a decision how to vote or that
memorialized the basis for the decision; and (vi) all records relating to
requests made to clients regarding conflicts of interest in voting the proxy.
Adviser will describe in its Part II of Form ADV
(or other brochure fulfilling the requirement of Rule 204-3) its proxy
voting policies and procedures and will inform clients how they may obtain
information on how the Adviser voted proxies with respect to the clients
portfolio securities. Clients may obtain
information on how their securities were voted or a copy of the Advisers
Policies and Procedures by written request addressed to the Adviser. The Adviser will coordinate with all mutual
fund clients to assist in the provision of all information required to be filed
by such mutual funds on Form N-PX.
VI.
GUIDELINES
Each proxy issue will be considered
individually. The following guidelines
are a partial list to be used in voting proposals contained in the proxy
statements, but will not be used as rigid rules.
A.
Oppose
The Adviser will generally vote against any
management or shareholder proposal that potentially has the effect of
restricting the ability of shareholders to realize the full potential value of
their investment. Proposals in this
category would include:
1.
Issues
regarding the issuers Board entrenchment and anti-takeover measures such as
the following:
a.
Proposals to
stagger board members terms;
b.
Proposals to
limit the ability of shareholders to call special meetings;
c.
Proposals to
require super majority votes;
d.
Proposals
requesting excessive increases in authorized common or preferred shares where
management provides no explanation for the use or need of these additional
shares;
e.
Proposals
regarding fair price provisions;
f.
Proposals
regarding poison pill provisions; and
g.
Proposals
permitting green mail.
2.
Restrictions
related to social, political or special interest issues that potentially may
have a negative effect on the ability of shareholders to realize the full
potential value of their investment, unless specific client guidelines
supercede.
B.
Approve
When voting on common management sponsored
initiatives, the Adviser generally votes in support of management. These issues include:
1.
Election of
directors recommended by management, except if there is a proxy fight.
A-3
2.
Election of
auditors recommended by management, unless seeking to replace if there exists a
dispute over policies.
3.
Date and place
of annual meeting.
4.
Limitation on
charitable contributions or fees paid to lawyers.
5.
Ratification of
directors actions on routine matters since previous annual meeting.
6.
Shareholder
proposals for confidential voting, allowing shareholders to later divulge their
votes to management on a selective basis
if a legitimate reason arises.
7.
Limiting
directors liability and allowing indemnification of directors and/or officers
after reviewing the applicable laws and extent of protection requested.
8.
Elimination of
preemptive rights. Preemptive rights
give current shareholders the opportunity to maintain their current percentage
ownership through any subsequent equity offerings. These provisions are no longer common in the
U.S., and can restrict managements ability to raise new capital.
The Adviser generally approves the elimination of
preemptive rights, but will oppose the elimination of limited preemptive
rights, e.g., on proposed issues representing more than an acceptable level of
total dilution.
9.
Employee Stock
Purchase Plan
10.
Establishment of 401(k) Plan
C.
Case-by-Case
The Adviser will review each issue in this category
on a case-by-case basis. These matters
include:
1.
Director
compensation.
2.
Eliminate
director mandatory retirement policy.
3.
Rotate annual
meeting location/date.
4.
Option and
stock grants to management and directors.
5.
Proposals to
reincorporate into another state.
D. Special Policy with Respect to the PowerShares
Autonomic Balanced Growth NFA Global Asset Portfolio, PowerShares Autonomic
Balanced NFA Global Asset Portfolio, PowerShares Autonomic Growth NFA Global
Asset Portfolio, PowerShares Listed Private Equity Portfolio, PowerShares
International Listed Private Equity Portfolio and PowerShares Lux Nanotech
Portfolio
With respect to the PowerShares
Autonomic Balanced Growth NFA Global Asset Portfolio, PowerShares Autonomic
Balanced NFA Global Asset Portfolio, PowerShares Autonomic Growth NFA Global
Asset Portfolio, PowerShares International Listed Private Equity Portfolio and
PowerShares Lux Nanotech Portfolio, the Adviser will vote proxies in accordance
with Section 12(d)(1)(F), which requires that the Adviser vote the shares
in the portfolio of the PowerShares Autonomic Balanced Growth NFA Global Asset
Portfolio, PowerShares Autonomic Balanced NFA Global Asset Portfolio,
PowerShares Autonomic Growth NFA Global Asset Portfolio, PowerShares
International Listed Private Equity Portfolio and PowerShares Lux Nanotech
Portfolio in the same proportion as the vote of all other holders of such
security.
A-4
POWERSHARES EXCHANGE-TRADED FUND TRUST II
PART C.
OTHER INFORMATION
Item 23. Exhibits.
(a)
Amended and Restated Declaration of Trust of the
Registrant*****.
(b)
By-laws of the Registrant**.
(c)
Not applicable.
(d)
(1)
Form of Investment Advisory Agreement
between the Registrant and PowerShares Capital Management LLC****.
(e)
Not applicable.
(f)
Not applicable.
(g)(i)
Form of Custody Agreement between Registrant
and The Bank of New York**.
(g)(ii)
Form of Foreign Custody Manager Agreement
between Registrant and The Bank of New York**.
(h)
a.
Form of Fund Administration and Accounting
Agreement between Registrant and The Bank of New York**.
b.
Form of Transfer Agency and Service
Agreement between Registrant and The Bank of New York**.
c.
Form of Participant Agreement between AIM
Distributors, Inc., The Bank of New York and the Participant**.
d.
Form of
Sublicense Agreement between the Registrant and PowerShares Capital Management
LLC**.
(i)
1.
Opinion and Consent
of Clifford Chance US LLP, with respect to the PowerShares Dynamic Asia Pacific
Portfolio, PowerShares Dynamic Europe Portfolio, PowerShares Dynamic Developed
International Opportunities Portfolio, PowerShares FTSE RAFI Asia Pacific
ex-Japan Portfolio, PowerShares FTSE RAFI Developed Markets ex-U.S. Portfolio,
PowerShares FTSE RAFI Europe Portfolio, PowerShares FTSE RAFI Japan Portfolio,
PowerShares Global Water Portfolio and PowerShares Global Clean Energy
Portfolio**.
2.
Opinion and Consent
of Bingham McCutchen, LLP, with respect to
the PowerShares Dynamic Asia Pacific Portfolio, PowerShares Dynamic Europe
Portfolio, PowerShares Dynamic Developed International Opportunities Portfolio,
PowerShares FTSE RAFI Asia Pacific ex-Japan Portfolio, PowerShares FTSE RAFI
Developed Markets ex-U.S. Portfolio, PowerShares FTSE RAFI Europe Portfolio,
PowerShares FTSE RAFI Japan Portfolio, PowerShares Global Water Portfolio and
PowerShares Global Clean Energy Portfolio**.
3.
Opinion and Consent of Clifford Chance US LLP,
with respect to the PowerShares FTSE RAFI Asia Pacific ex-Japan Small-Mid Portfolio,
PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio,
PowerShares FTSE RAFI Europe Small-Mid Portfolio, PowerShares FTSE RAFI
Emerging Markets Portfolio and PowerShares International Listed Private Equity
Portfolio******.
4.
Opinion and Consent of Bingham McCutchen, LLP
with respect to the PowerShares FTSE RAFI Asia Pacific ex-Japan Small-Mid
Portfolio, PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio,
PowerShares FTSE RAFI Europe Small-Mid Portfolio, PowerShares FTSE RAFI
Emerging Markets Portfolio and PowerShares International Listed Private Equity
Portfolio******.
5.
Opinion and Consent
of Clifford Chance US LLP, with respect to PowerShares Emerging Markets
Sovereign Debt Portfolio and PowerShares 1-30 Laddered Treasury Portfolio*******.
6.
Opinion and Consent
of Bingham McCutchen, LLP, with respect to PowerShares Emerging Markets
Sovereign Debt Portfolio and PowerShares 1-30 Laddered Treasury Portfolio*******.
7.
Opinion
and Consent of Clifford Chance US LLP, with respect to PowerShares High Yield Corporate
Bond Portfolio and PowerShares Preferred Portfolio**********.
8.
Opinion
and Consent of Bingham McCutchen, LLP, with respect to PowerShares High Yield Corporate
Bond Portfolio and PowerShares Preferred Portfolio**********.
9.
Opinion and Consent
of Clifford Chance US LLP, with respect to PowerShares National Municipal Bond
Portfolio, PowerShares Investment Grade Corporate Bond Portfolio, PowerShares
Aggregate Bond Portfolio, PowerShares 1-20 Laddered Treasury Portfolio,
PowerShares 1-10 Laddered Treasury Portfolio and PowerShares 1-5 Laddered
Treasury Portfolio, to be filed by amendment.
10.
Opinion
and Consent of Bingham McCutchen, LLP, with respect to PowerShares National
Municipal Bond Portfolio, PowerShares Investment Grade Corporate Bond
Portfolio, PowerShares Aggregate Bond Portfolio, PowerShares 1-20 Laddered
Treasury Portfolio, PowerShares 1-10 Laddered Treasury Portfolio and
PowerShares 1-5 Laddered Treasury Portfolio, to be filed by amendment.
11.
Opinion
and Consent of Clifford Chance US LLP, with respect to PowerShares Insured
National Municipal Bond Portfolio, PowerShares Insured New York Municipal Bond
Portfolio and PowerShares Insured California Municipal
Bond Portfolio ********.
12.
Opinion and Consent of
Bingham McCutchen, LLP, with respect to PowerShares Insured National Municipal
Bond Portfolio, PowerShares Insured New York Municipal Bond Portfolio and
PowerShares Insured California Municipal Bond Portfolio ********.
13.
Opinion and Consent of
Clifford Chance US LLP, with respect to the PowerShares VRDO Tax-Free Weekly Portfolio*********.
14.
Opinion and Consent of
Bingham McCutchen, LLP, with respect to the PowerShares VRDO Tax-Free Weekly Portfolio*********.
15.
Opinion and Consent of
Clifford Chance US LLP, with respect to the PowerShares FTSE RAFI International
Real Estate Portfolio***********.
16.
Opinion and Consent of Bingham
McCutchen, LLP, with respect to the PowerShares FTSE RAFI International Real
Estate Portfolio***********.
17.
Opinion and Consent of
Clifford Chance US LLP, with respect to the PowerShares DWA Developed Markets
Technical Leaders Portfolio and the PowerShares DWA Emerging Market Technical
Leaders Portfolio************.
18.
Opinion
and Consent of Bingham McCutchen, LLP, with respect to the PowerShares DWA
Developed Markets Technical Leaders Portfolio and the PowerShares DWA Emerging
Market Technical Leaders Portfolio************.
19.
Opinion
and Consent of Clifford Chance US LLP with respect to the PowerShares Global
Nuclear Portfolio ***************.
20.
Opinion
and Consent of Bingham McCutchen, LLP with respect to the PowerShares Global
Nuclear Portfolio ***************.
21.
Opinion
and Consent of Clifford Chance US LLP, with respect to the PowerShares
Autonomic Growth NFA Global Asset Portfolio, PowerShares Autonomic Balanced
Growth NFA Global Asset Portfolio and PowerShares Autonomic Balanced NFA Global
Asset Portfolio*************.
22.
Opinion
and Consent of Bingham McCutchen, LLP, with respect to the PowerShares
Autonomic Growth NFA Global Asset Portfolio, PowerShares Autonomic Balanced
Growth NFA Global Asset Portfolio and PowerShares Autonomic Balanced NFA Global
Asset Portfolio*************.
23.
Opinion
and consent of Clifford Chance US LLP, with respect to PowerShares Emerging
Markets Infrastructure Portfolio and PowerShares Developed Markets Infrastructure
Portfolio, to be filed by amendment.
24.
Opinion
and consent of Bingham McCutchen, LLP, with respect to PowerShares Emerging
Markets Infrastructure Portfolio and PowerShares Developed Markets
Infrastructure Portfolio, to be filed by amendment.
(j)
1.
Consent
of Independent Registered Public Accounting Firm, with respect to the
PowerShares Emerging Markets Infrastructure Portfolio, PowerShares Developed
Markets Infrastructure Portfolio, PowerShares Investment Grade Corporate Bond
Portfolio, PowerShares Aggregate Bond Portfolio, PowerShares 1-20 Laddered
Treasury Portfolio, PowerShares 1-10 Laddered Treasury Portfolio and
PowerShares 1-5 Laddered Treasury Portfolio, to be filed by amendment.
2.
Consent
of Independent Registered Public Accounting Firm, with respect to the
PowerShares Global Nuclear Portfolio*************.
3.
Consent
of Independent Registered Public Accounting Firm, with regard to the
PowerShares Autonomic Growth NFA Global Asset Portfolio, PowerShares Autonomic
Balanced Growth NFA Global Asset Portfolio and PowerShares Autonomic Balanced
NFA Global Asset Portfolio*************.
4.
Consent
of Independent Registered Public Accounting Firm, with regard to PowerShares
1-30 Laddered Treasury Portfolio, PowerShares DWA Developed Markets Technical
Leaders Portfolio, PowerShares DWA Emerging Markets Technical Leaders
Portfolio, PowerShares Dynamic Asia Pacific Portfolio, PowerShares Dynamic
Developed International Opportunities Portfolio, PowerShares Dynamic Europe
Portfolio, PowerShares Emerging Markets Sovereign Debt Portfolio, PowerShares
FTSE RAFI Asia Pacific ex-Japan Portfolio, PowerShares FTSE RAFI Asia Pacific
ex-Japan Small-Mid Portfolio, PowerShares FTSE RAFI Developed Markets ex-U.S.
Portfolio, PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio,
PowerShares FTSE RAFI Emerging Markets Portfolio, PowerShares FTSE RAFI Europe
Portfolio, PowerShares FTSE RAFI Europe Small-Mid Portfolio, PowerShares FTSE
RAFI International Real Estate Portfolio, PowerShares FTSE RAFI Japan
Portfolio, PowerShares Global Clean Energy Portfolio, PowerShares Global Water
Portfolio, PowerShares High Yield Corporate Bond Portfolio, PowerShares Insured
California Municipal Bond Portfolio, PowerShares Insured National Municipal
Bond Portfolio, PowerShares Insured New York Municipal Bond Portfolio,
PowerShares International Listed Private Equity Portfolio, PowerShares
Preferred Portfolio and PowerShares VRDO Tax-Free Weekly Portfolio**************.
(k)
Not
applicable.
C-1
(l)
Not applicable.
(m)
Not applicable.
(n)
Not applicable.
(o)
Not applicable.
(p)
a.
Code of Ethics of the Registrant and PowerShares
Capital Management LLC**.
b.
Code of Ethics of A I M Distributors, Inc.*.
Other.
(a)
Powers of Attorney**.
* Incorporated
by reference to the Trusts Registration Statement, filed on November 7,
2006.
** Incorporated
by reference to Pre-Effective Amendment No.1, filed on June 6, 2007.
*** Incorporated
by reference to Post-Effective Amendment No.1, filed on June 13, 2007.
**** Incorporated
by reference to Post-Effective Amendment No.2, filed on July 17, 2007
***** Incorporated
by reference to Post-Effective Amendment No.7, filed on September 20,
2007.
****** Incorporated
by reference to Post-Effective Amendment No.10, filed on September 24,
2007.
******* Incorporated
by reference to Post-Effective Amendment No.12, filed on October 3, 2007.
******** Incorporated
by reference to Post-Effective Amendment No.15, filed on October 3, 2007.
********* Incorporated
by reference to Post-Effective Amendment No.20, filed on November 2, 2007.
********** Incorporated
by reference to Post-Effective Amendment No.21, filed on November 2, 2007.
*********** Incorporated
by reference to Post-Effective Amendment No. 25, filed on December 26,
2007.
************ Incorporated
by reference to Post-Effective Amendment No. 26, filed on December 26,
2007.
************* Incorporated
by reference to Post-Effective Amendment No. 31, filed on January 22, 2008.
************** Incorporated
by reference to Post-Effective Amendment No. 36, filed on February 29, 2008.
*************** Incorporated
by reference to Post-Effective Amendment No. 37, filed on March 24, 2008.
Item 24
.
Persons Controlled by or
Under Common Control with the Fund.
PROVIDE A LIST OR DIAGRAM OF ALL PERSONS DIRECTLY OR
INDIRECTLY CONTROLLED BY OR UNDER COMMON CONTROL WITH THE REGISTRANT. FOR ANY PERSON CONTROLLED BY ANOTHER PERSON,
DISCLOSE THE PERCENTAGE OF VOTING SECURITIES OWNED BY THE IMMEDIATELY
CONTROLLING PERSON OR OTHER BASIS OF THAT PERSONS CONTROL. FOR EACH COMPANY, ALSO PROVIDE THE STATE OR
OTHER SOVEREIGN POWER UNDER THE LAWS OF WHICH THE COMPANY IS ORGANIZED.
None.
Item 25. Indemnification.
STATE THE GENERAL EFFECT OF ANY CONTRACT, ARRANGEMENTS
OR STATUTE UNDER WHICH ANY DIRECTOR, OFFICER, UNDERWRITER OR AFFILIATED PERSON
OF THE REGISTRANT IS INSURED OR INDEMNIFIED AGAINST ANY LIABILITY INCURRED IN
THEIR OFFICIAL CAPACITY, OTHER THAN INSURANCE PROVIDED BY ANY DIRECTOR, OFFICER,
AFFILIATED PERSON, OR UNDERWRITER FOR THEIR OWN PROTECTION.
Reference is made to Article IX of the Registrants Declaration of
Trust:
The Registrant (also, the Trust) is organized as a Massachusetts
business trust and is operated pursuant to a Declaration of Trust, dated October 10,
2006 and Amended and Restated as of September 17, 2007 (the Declaration
of Trust), that permits the Registrant to indemnify every person who is, or
has been, a Trustee, officer, employee or agent of the Trust, including persons
who serve at the request of the Trust as directors, trustees, officers,
employees or agents of
C-2
another organization in which the Trust has an interest as a shareholder,
creditor or otherwise (hereinafter referred to as a Covered Person), shall be
indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been such a
Trustee, director, officer, employee or agent and against amounts paid or
incurred by him in settlement thereof.
No indemnification
shall be provided hereunder to a Covered Person to the extent such
indemnification is prohibited by applicable federal law.
The rights of
indemnification herein provided may be insured against by policies maintained
by the Trust, shall be severable, shall not affect any other rights to which
any Covered Person may now or hereafter be entitled, shall continue as to a
person who has ceased to be such a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Subject to
applicable federal law, expenses of preparation and presentation of a defense
to any claim, action, suit or proceeding subject to a claim for indemnification
under this Section 9.5 shall be advanced by the Trust prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 9.5.
To the extent that
any determination is required to be made as to whether a Covered Person engaged
in conduct for which indemnification is not provided as described herein, or as
to whether there is reason to believe that a Covered Person ultimately will be
found entitled to indemnification, the Person or Persons making the
determination shall afford the Covered Person a rebuttable presumption that the
Covered Person has not engaged in such conduct and that there is reason to
believe that the Covered Person ultimately will be found entitled to
indemnification.
As used in this Section 9.5,
the words claim, action, suit or proceeding shall apply to all claims,
demands, actions, suits, investigations, regulatory inquiries, proceedings or
any other occurrence of a similar nature, whether actual or threatened and
whether civil, criminal, administrative or other, including appeals, and the
words liability and expenses shall include without limitation, attorneys
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
Further Indemnification.
Nothing
contained herein shall affect any rights to indemnification to which any
Covered Person or other Person may be entitled by contract or otherwise under
law or prevent the Trust from entering into any contract to provide
indemnification to any Covered Person or other Person. Without limiting
the foregoing, the Trust may, in connection with the acquisition of assets
subject to liabilities pursuant to Section 4.2 hereof or a reorganization
or consolidation pursuant to Section 10.2 hereof, assume the obligation to
indemnify any Person including a Covered Person or otherwise contract to
provide such indemnification, and such indemnification shall not be subject to
the terms of this Article IX.
Amendments and Modifications.
Without
limiting the provisions of Section 11.1(b) hereof, in no event will
any amendment, modification or change to the provisions of this Declaration or
the By-laws adversely affect in any manner the rights of any Covered Person to (a) indemnification
under Section 9.5 hereof in connection with any proceeding in which such
Covered Person becomes involved as a party or otherwise by virtue of being or
having been a Trustee, officer or employee of the Trust or (b) any
insurance payments under policies maintained by the Trust, in either case with
respect to any act or omission of such Covered Person that occurred or is
alleged to have occurred prior to the time such amendment, modification or
change to this Declaration or the By-laws.
C-3
Item 26. Business and Other
Connections of the Investment Adviser.
DESCRIBE ANY OTHER BUSINESS, PROFESSION, VOCATION OR EMPLOYMENT OF A
SUBSTANTIAL NATURE IN WHICH THE INVESTMENT ADVISER AND EACH DIRECTOR, OFFICER
OR PARTNER OF THE INVESTMENT ADVISER, IS OR HAS BEEN, ENGAGED WITHIN THE LAST
TWO FISCAL YEARS FOR HIS OR HER OWN ACCOUNT OR IN THE CAPACITY OF DIRECTOR,
OFFICER, EMPLOYEE, PARTNER OR TRUSTEE.
(DISCLOSE THE NAME AND PRINCIPAL BUSINESS ADDRESS OF ANY COMPANY FOR
WHICH A PERSON LISTED ABOVE SERVES IN THE CAPACITY OF DIRECTOR, OFFICER,
EMPLOYEE, PARTNER OR TRUSTEE, AND THE NATURE OF THE RELATIONSHIP.)
Reference is made to the caption Management of the Funds in the
Prospectus constituting Part A which is included in this Registration
Statement and Management in the Statement of Additional Information
constituting Part B which is included in this Registration Statement.
LISTED BELOW ARE THE OFFICERS AND TRUSTEES OF POWERSHARES CAPITAL
MANAGEMENT LLC:
The information as to the trustees and executive
officers of PowerShares Capital Management LLC is set forth in PowerShares
Capital Management LLCs Form ADV filed with the Securities and Exchange
Commission on February 21, 2003 (Accession No.: 429865831611B82) and
amended through the date hereof, is incorporated herein by reference.
Item 27. Principal Underwriters.
STATE THE NAME OF EACH
INVESTMENT COMPANY (OTHER THAN THE REGISTRANT) FOR WHICH EACH PRINCIPAL
UNDERWRITER CURRENTLY DISTRIBUTING SECURITIES OF THE REGISTRANT ALSO ACTS AS A
PRINCIPAL UNDERWRITER, DEPOSITOR OR INVESTMENT ADVISER.
The sole principal
underwriter for the Fund is A I M Distributors, Inc. which acts as
distributor for the Registrant and the following other funds:
AIM CORE
ALLOCATION PORTFOLIO SERIES
Series C
Series M
AIM
COUNSELOR SERIES TRUST
AIM
Advantage Health Sciences Fund
AIM
Floating Rate Fund
AIM
Multi-Sector Fund
AIM
Structured Core Fund
AIM
Structured Growth Fund
AIM
Structured Value Fund
AIM EQUITY FUNDS
AIM
Capital Development Fund
AIM
Charter Fund
AIM
Constellation Fund
AIM
Diversified Dividend Fund
AIM
Large Cap Basic Value Fund
AIM
Large Cap Growth Fund
AIM
Select Basic Value Fund
AIM FUNDS GROUP
AIM
Basic Balanced Fund
AIM
European Small Company Fund
AIM
Global Value Fund
AIM
International Small Company Fund
AIM
Mid Cap Basic Value Fund
AIM
Select Equity Fund
AIM
Small Cap Equity Fund
AIM GROWTH SERIES
AIM
Basic Value Fund
AIM
Conservative Allocation Fund
AIM
Global Equity Fund
AIM Growth Allocation Fund
AIM
Income Allocation Fund
AIM
International Allocation Fund
AIM
Mid Cap Core Equity Fund
AIM
Moderate Allocation Fund
AIM
Moderate Growth Allocation Fund
AIM
Moderately Conservative Allocation Fund
AIM
Small Cap Growth Fund
AIM
INTERNATIONAL MUTUAL FUNDS
AIM
Asia Pacific Growth Fund
AIM
European Growth Fund
AIM
Global Aggressive Growth Fund
AIM
Global Growth Fund
C-4
AIM
International Core Equity Fund
AIM
International Growth Fund
AIM INVESTMENT FUNDS
AIM
China Fund
AIM
Developing Markets Fund
AIM
Enhanced Short Bond Fund
AIM
Global Health Care Fund
AIM
International Bond Fund
AIM
Japan Fund
AIM
Trimark Endeavor Fund
AIM
Trimark Fund
AIM
Trimark Small Companies Fund
AIM INVESTMENT SECURITIES FUNDS
AIM
Global Real Estate Fund
AIM
High Yield Fund
AIM
Income Fund
AIM
Intermediate Government Fund
AIM
Limited Maturity Treasury Fund
AIM
Money Market Fund
AIM
Municipal Bond Fund
AIM
Real Estate Fund
AIM
Short Term Bond Fund
AIM
Total Return Bond Fund
AIM SECTOR FUNDS
AIM
Energy Fund
AIM
Financial Services Fund
AIM
Gold & Precious Metals Fund
AIM
Leisure Fund
AIM
Technology Fund
AIM
Utilities Fund
AIM SPECIAL OPPORTUNITIES FUNDS
AIM
Opportunities I Fund
AIM
Opportunities II Fund
AIM
Opportunities III Fund
AIM STOCK
FUNDS
AIM
Dynamics Fund
AIM
S&P 500 Index Fund
AIM
SUMMIT FUND
AIM TAX-EXEMPT FUNDS
AIM
High Income Municipal Fund
AIM
Tax-Exempt Cash Fund
AIM
Tax-Free Intermediate Fund
AIM TREASURERS SERIES TRUST
Premier
Portfolio
Premier
Tax-Exempt Portfolio
C-5
Premier
U.S. Government Money Portfolio
AIM
VARIABLE INSURANCE FUNDS
AIM
V.I. Basic Balanced Fund
AIM
V.I. Basic Value Fund
AIM
V.I. Capital Appreciation Fund
AIM
V.I. Capital Development Fund
AIM
V.I. Core Equity Fund
AIM
V.I. Demographic Trends Fund
AIM
V.I. Diversified Dividend Fund
AIM
V.I. Diversified Income Fund
AIM
V.I. Dynamics Fund
AIM
V.I. Financial Services Fund
AIM
V.I. Global Equity Fund
AIM
V.I. Global Health Care Fund
AIM
V.I. Global Real Estate Fund
AIM
V.I. Government Securities Fund
AIM
V.I. High Yield Fund
AIM
V.I. International Core Equity Fund
AIM
V.I. International Growth Fund
AIM
V.I. Large Cap Growth Fund
AIM
V.I. Leisure Fund
AIM
V.I. Mid Cap Core Equity Fund
AIM
V.I. Money Market Fund
AIM
V.I. Small Cap Equity Fund
AIM
V.I. Small Cap Growth Fund
AIM V.I.
Technology Fund
AIM V.I. Utilities Fund
NAME AND PRINCIPAL
BUSINESS ADDRESS*
|
|
POSITIONS AND OFFICES WITH
REGISTRANT
|
|
POSITIONS AND OFFICES WITH
UNDERWRITER
|
Gary K. Wendler
|
|
None
|
|
Director
|
John M. Zerr
|
|
None
|
|
Director, Senior Vice President, Secretary and Chief
Legal Officer
|
John Cooper
|
|
None
|
|
Executive Vice President
|
Brian Lee
|
|
None
|
|
Executive Vice President
|
Philip A. Taylor
|
|
None
|
|
Director
|
* The principal business address for all directors and
executive officers is Invesco Aim Distributors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173
PROVIDE
THE INFORMATION REQUIRED BY THE FOLLOWING TABLE FOR ALL COMMISSIONS AND OTHER
COMPENSATION RECEIVED DIRECTLY, OR INDIRECTLY, FROM THE FUND DURING THE LAST
FISCAL YEAR BY EACH PRINCIPAL UNDERWRITER WHO IS NOT AN AFFILIATED PERSON OF
THE FUND OR ANY AFFILIATED PERSON OF AN AFFILIATED PERSON:
Not
applicable.
C-6
Item 28. Location of Accounts
and Records.
STATE THE NAME AND ADDRESS OF EACH PERSON MAINTAINING
PRINCIPAL POSSESSION OF EACH ACCOUNT, BOOK OR OTHER DOCUMENT REQUIRED TO BE
MAINTAINED BY SECTION 31(A) OF THE 1940 ACT [15 U.S.C. 80A-30(A)] AND
THE RULES UNDER THAT SECTION.
The books, accounts and other documents required by Section 31(a) under
the Investment Company Act of 1940, as amended, and the rules promulgated
thereunder are maintained in the physical possession of The Bank of New York
Mellon.
Item 29. Management Services.
PROVIDE A SUMMARY OF THE SUBSTANTIVE PROVISIONS OF ANY
MANAGEMENT-RELATED SERVICE CONTRACT NOT DISCUSSED IN PART A OR PART B,
DISCLOSING THE PARTIES TO THE CONTRACT AND THE TOTAL AMOUNT PAID AND BY WHOM,
FOR THE FUNDS LAST THREE FISCAL YEARS.
Not applicable.
Item 30. Undertakings.
Registrant hereby undertakes that whenever a Shareholder
or Shareholders who meet the requirements of Section 16(c) of the
1940 Act inform the Board of Trustees of his or their desire to communicate
with other Shareholders of the Fund the Trustee will inform such Shareholder(s) as
to the approximate number of Shareholders of record and the approximate costs
of mailing or afford said Shareholders access to a list of Shareholders.
Registrant hereby undertakes to furnish each person to
whom a Prospectus is delivered with a copy of the Registrants annual report to
shareholders, upon request and without charge.
C-7
SIGNATURES
Pursuant to the
requirements of the Securities Act of 1933, as amended, and the Investment
Company Act of 1940, as amended, the Registrant Certifies that it has duly
caused this Registration Statement to be signed on its behalf by the undersigned,
duly authorized, in the City of Wheaton and State of Illinois, on the 24th day
of March, 2008.
|
PowerShares
Exchange-Traded Fund Trust II
|
|
|
|
|
|
By:
|
/s/ Harold Bruce Bond
|
|
|
Title: Harold Bruce Bond, President
|
Pursuant to the requirements of the Securities Act of
1933, this registration statement has been signed below by the following
persons in the capacities indicated on the dates indicated.
SIGNATURE
|
|
TITLE
|
|
DATE
|
|
|
|
|
|
|
|
|
|
|
/s/ Harold Bruce Bond
|
|
President and Chairman
|
|
March 24, 2008
|
Harold Bruce Bond
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Bruce T. Duncan
|
|
Chief Financial Officer, Treasurer and Secretary
|
|
March 24, 2008
|
Bruce T. Duncan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*/s/ Ronn R.
Bagge
|
|
Trustee
|
|
March 24, 2008
|
Ronn R. Bagge
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*/s/ Marc M.
Kole
|
|
Trustee
|
|
March 24, 2008
|
Marc M. Kole
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*/s/ D. Mark
McMillan
|
|
Trustee
|
|
March 24, 2008
|
D. Mark McMillan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*/s/ Philip M.
Nussbaum
|
|
Trustee
|
|
March 24, 2008
|
Philip M. Nussbaum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*/s/ Donald H.
Wilson
|
|
Trustee
|
|
March 24, 2008
|
Donald H. Wilson
|
|
|
|
|
|
|
|
|
|
|
*By: /s/ Stuart M.
Strauss
|
|
|
|
March 24, 2008
|
Stuart M. Strauss
Attorney-In-Fact
|
|
|
|
|
C-8
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