As filed with the Securities and Exchange Commission on October 25, 2016
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
POWERSHARES DB G10 CURRENCY HARVEST FUND
(Registrant)
(Exact name
of registrant as specified in its charter)
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Delaware |
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16-6562496 (Registrant) |
(State of Organization) |
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(I.R.S. Employer Identification Number) |
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c/o Invesco PowerShares Capital Management LLC
3500 Lacey Road, Suite 700
Downers Grove, Illinois 60515
(800) 983-0903 |
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Anna Paglia c/o Invesco PowerShares Capital Management LLC
3500 Lacey Road, Suite 700
Downers Grove, Illinois 60515
(800) 983-0903 |
(Address, including zip code, and telephone number including area code, of registrants principal executive offices) |
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(Name, address, including zip code, and telephone number, including area code, of agent for service) |
Copies to:
James
C. Munsell, Esq.
Sidley Austin LLP
787 Seventh Avenue
New
York, New York 10019
Approximate date of commencement of proposed sale to the public:
As promptly as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same
offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Accelerated filer |
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☒ |
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Non-accelerated filer |
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☐ (Do not check if a smaller reporting company) |
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Smaller reporting company |
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CALCULATION OF REGISTRATION FEE
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Title of Securities
being included in this registration statement |
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Earlier
Registration Statement Number |
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Unsold Number of Shares from Earlier Registration Statement |
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Filing fee paid for Unsold Shares |
PowerShares DB G10 Currency Harvest Fund Common Units of
Beneficial Interest |
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333-192126 |
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45,200,000 |
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$76,121.59 |
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Pursuant to the provisions of Rule 415(a)(6) under the Securities Act of 1933, as amended, the issuer is
including on this new registration statement both the unsold securities and the filing fees paid in connection with such unsold securities that was covered by the earlier registration statement as provided in the following table. The filing fees in
the below table will continue to be applied to such unsold securities.
The
registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
POWERSHARES DB G10 CURRENCY HARVEST FUND
45,200,000 Common Units of Beneficial Interest
PowerShares DB G10 Currency Harvest Fund, or the Fund, is organized as a Delaware statutory
trust. The Fund issues common units of beneficial interest, or Shares, which represent units of fractional undivided beneficial interest in and ownership of the Fund.
Authorized Participants may sell the Shares they purchase from the Fund in blocks of 200,000 Shares, called Baskets, to other investors at
prices that are expected to reflect, among other factors, the trading price of the Shares on the NYSE Arca Inc., or the NYSE Arca, and the supply of and demand for Shares at the time of sale and are expected to fall between net asset value, or NAV,
and the trading price of the Shares on the NYSE Arca at the time of sale.
The Shares trade on the NYSE Arca under the symbol
DBV.
Invesco PowerShares Capital Management LLC serves as the Managing Owner, commodity pool operator and commodity trading
advisor of the Fund. The Fund trades exchange-traded futures on the currencies comprising the Deutsche Bank G10 Currency Future Harvest Index® Excess Return, or the Index, with a view
to tracking the Index over time. The Fund also earns interest income from United States Treasury Securities, or Treasury Income, and dividends from its holdings in money market mutual funds (affiliated or otherwise), or Money Market Income.
The Index is designed to reflect the return from investing on a 2:1 leveraged basis in long currency futures positions for certain
currencies associated with relatively high yielding interest rates and in short currency futures positions for certain currencies associated with relatively low yielding interest rates. The Index is designed to exploit the trend that currencies
associated with relatively high interest rates, on average, tend to rise in value relative to currencies associated with relatively low interest rates. The Index exploits this trend using both long and short futures positions, which is expected to
provide more consistent and less volatile returns than could be obtained by taking long positions only or short positions only.
The Index, at any time, is comprised of six of the following Group of Ten, or G10, currencies:
United States Dollars, Euros, Japanese Yen, Canadian Dollars, Swiss Francs, British Pounds, Australian Dollars, New Zealand Dollars, Norwegian Krone and Swedish Krona, or, collectively, the Eligible Index Currencies. At any time, the Index is
comprised of long futures positions in the three Eligible Index Currencies associated with the highest interest rates and short futures positions in the three Eligible Index Currencies associated with the lowest interest rates. The Indexs six
component currencies from time-to-time, comprised of the three long and three short futures positions, are referred to as the Index Currencies and are used to calculate the value of the Index.
Allocations among the Eligible Index Currencies are adjusted quarterly to take into account changes in the relevant interest rates. To track
the Index, the Fund generally will establish long futures positions in the three Eligible Index Currencies associated with the highest interest rates and short futures positions in the three Eligible Index Currencies associated with the lowest
interest rates and will adjust its holdings quarterly as the Index is adjusted. However, if the United States Dollar, or USD, is among the Index Currencies from time-to-time, the Fund will not establish a long or short futures position (as the case
may be) in USD, because USD is the Funds home currency and, as a consequence, the Fund never can enjoy profit or suffer loss from long or short futures positions in USD.
When the USD is not associated with the highest or lowest interest rates among the Eligible Index Currencies, the aggregate notional value
of the Funds futures contracts at the time they are established will be double the value of the Funds holdings of United States Treasury Securities and money market mutual funds (affiliated or otherwise), which means the Fund will have a
leverage ratio at such time of 2:1. If the USD is associated with the highest or lowest interest rates among the Eligible Index Currencies, the aggregate notional value of the Funds futures contracts at the time they are established will be
approximately 1.66 times the value of the Funds holdings of United States Treasury Securities and money market mutual funds (affiliated or otherwise), which means the Fund will have a leverage ratio at such time of approximately 1.66:1. The
Funds ability to track the Index will not be affected by the presence or absence of the USD among the Index Currencies. Because the notional value of the Funds futures positions can rise or fall over time, the leverage ratio could be
higher or lower between quarterly adjustments of the Index Currencies.
Except when aggregated in Baskets, the Shares are not redeemable
securities.
INVESTING IN
THE SHARES INVOLVES SIGNIFICANT RISKS.
PLEASE REFER TO THE RISKS YOU FACE BEGINNING ON PAGE
20.
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Futures trading is volatile and even a small movement in market
prices could cause large losses. |
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You could lose all or substantially all of your
investment. |
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The success of the Funds trading program depends upon the
skill of the Managing Owner and its trading principals. |
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Investors pay fees in connection with their investment in Shares
including asset-based fees of 0.75% per annum. Additional charges include brokerage fees of approximately 0.05% per annum in the aggregate. |
Authorized Participants may offer to the public, from time-to-time, Shares from any Baskets they create.
Shares offered to the public by Authorized Participants will be offered at a per-Share offering price that will vary depending on, among other factors, the trading price of the Shares on the NYSE Arca, the NAV per Share and the supply of and demand
for the Shares at the time of the offer. Shares initially comprising the same Basket but offered by Authorized Participants to the public at different times may have different offering prices. Authorized Participants will not receive from the Fund,
the Managing Owner or any of their affiliates, any fee or other compensation in connection with their sale of Shares to the public.
An
Authorized Participant may receive commissions or fees from investors who purchase Shares through their commission or fee-based brokerage accounts. In addition, the Managing Owner pays a distribution services fee to Invesco Distributors, Inc. and
pays a marketing services fee to Deutsche Bank Securities Inc. without reimbursement from the Fund. For more information regarding items of compensation paid to FINRA members, please see the Plan of Distribution section on page 101.
These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has
the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
The Fund is not a mutual fund or any other type of investment company within the meaning of the Investment Company Act of 1940, as amended,
and is not subject to regulation thereunder.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF
PARTICIPATING IN THIS POOL NOR HAS THE COMMISSION PASSED UPON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
, 2016
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE
AWARE THAT COMMODITY INTEREST TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON
REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO
SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT
CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL AT PAGE 56 AND A STATEMENT OF THE PERCENTAGE RETURNS NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 15.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL.
THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGES 21 THROUGH 33.
THIS PROSPECTUS DOES NOT INCLUDE ALL OF THE INFORMATION OR EXHIBITS IN THE REGISTRATION STATEMENT OF THE FUND. YOU CAN READ AND COPY THE
ENTIRE REGISTRATION STATEMENT AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE SEC IN WASHINGTON, D.C.
THE FUND FILES
QUARTERLY AND ANNUAL REPORTS WITH THE SEC. YOU CAN READ AND COPY THESE REPORTS AT THE SEC PUBLIC REFERENCE FACILITIES IN WASHINGTON, D.C. PLEASE CALL THE SEC AT 1-800-SEC-0330 FOR FURTHER INFORMATION.
THE FILINGS OF THE FUND ARE POSTED AT THE
SEC WEBSITE AT HTTP://WWW.SEC.GOV.
REGULATORY
NOTICES
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND, THE MANAGING OWNER, THE AUTHORIZED PARTICIPANTS OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO SELL OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY OFFER,
SOLICITATION, OR SALE OF THE SHARES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION, OR SALE IS NOT AUTHORIZED OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER, SOLICITATION, OR SALE.
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THE BOOKS AND RECORDS OF THE FUND ARE MAINTAINED AS FOLLOWS: ALL MARKETING MATERIALS ARE
MAINTAINED AT THE OFFICES OF INVESCO DISTRIBUTORS, INC., 11 GREENWAY PLAZA, SUITE 1000, HOUSTON, TEXAS 77046-1173, TELEPHONE NUMBER (800) 983-0903; BASKET CREATION AND REDEMPTION BOOKS AND RECORDS, ACCOUNTING AND CERTAIN OTHER FINANCIAL BOOKS
AND RECORDS (INCLUDING FUND ACCOUNTING RECORDS, LEDGERS WITH RESPECT TO ASSETS, LIABILITIES, CAPITAL, INCOME AND EXPENSES, THE REGISTRAR, TRANSFER JOURNALS AND RELATED DETAILS) AND TRADING AND RELATED DOCUMENTS RECEIVED FROM FUTURES COMMISSION
MERCHANTS ARE MAINTAINED BY THE BANK OF NEW YORK MELLON, 2 HANSON PLACE, BROOKLYN, NEW YORK 11217, TELEPHONE NUMBER (718) 315-7500. ALL OTHER BOOKS AND RECORDS OF THE FUND (INCLUDING MINUTE BOOKS AND
OTHER GENERAL CORPORATE RECORDS, TRADING RECORDS AND RELATED REPORTS AND OTHER ITEMS RECEIVED FROM THE FUNDS COMMODITY BROKERS) ARE MAINTAINED AT THE FUNDS PRINCIPAL OFFICE, C/O INVESCO POWERSHARES CAPITAL MANAGEMENT LLC, 3500 LACEY
ROAD, SUITE 700, DOWNERS GROVE, ILLINOIS 60515; TELEPHONE NUMBER (800) 983-0903. SHAREHOLDERS WILL HAVE THE RIGHT, DURING NORMAL BUSINESS HOURS, TO HAVE ACCESS TO AND COPY (UPON PAYMENT OF REASONABLE REPRODUCTION COSTS) SUCH BOOKS AND RECORDS
IN PERSON OR BY THEIR AUTHORIZED ATTORNEY OR AGENT. MONTHLY ACCOUNT STATEMENTS CONFORMING TO COMMODITY FUTURES TRADING COMMISSION (THE CFTC) AND THE NATIONAL FUTURES ASSOCIATION (THE NFA) REQUIREMENTS ARE POSTED ON THE
MANAGING OWNERS WEBSITE AT HTTP://WWW.INVESCOPOWERSHARES.COM. ADDITIONAL REPORTS MAY BE POSTED ON THE MANAGING OWNERS WEBSITE IN THE DISCRETION OF THE MANAGING OWNER OR AS REQUIRED BY REGULATORY AUTHORITIES. THERE WILL SIMILARLY
BE DISTRIBUTED TO SHAREHOLDERS, NOT MORE THAN 90 DAYS AFTER THE CLOSE OF THE FUNDS FISCAL YEAR, CERTIFIED AUDITED FINANCIAL STATEMENTS AND (IN NO EVENT LATER THAN MARCH 15 OF THE IMMEDIATELY FOLLOWING YEAR) THE TAX INFORMATION RELATING TO
SHARES OF THE FUND NECESSARY FOR THE PREPARATION OF SHAREHOLDERS ANNUAL FEDERAL INCOME TAX RETURNS.
THE DIVISION
OF INVESTMENT MANAGEMENT OF THE SECURITIES AND EXCHANGE COMMISSION REQUIRES THAT THE FOLLOWING STATEMENT BE PROMINENTLY SET FORTH HEREIN: THE FUND IS NOT A MUTUAL FUND OR ANY OTHER TYPE OF INVESTMENT COMPANY WITHIN THE MEANING OF THE
INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND IS NOT SUBJECT TO REGULATION THEREUNDER.
AUTHORIZED PARTICIPANTS MAY
BE REQUIRED TO DELIVER A PROSPECTUS WHEN TRANSACTING IN SHARES. SEE PLAN OF DISTRIBUTION.
Deutsche Bank
G10 Currency Future Harvest Index® is a registered trademark of Deutsche Bank AG. All rights reserved.
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POWERSHARES DB G10 CURRENCY HARVEST FUND
Table of Contents
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PART TWO
STATEMENT OF ADDITIONAL
INFORMATION
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SUMMARY
This summary of material information contained or incorporated by reference in this Prospectus is intended for quick reference only and
does not contain all of the information that may be important to you. The remainder of this Prospectus contains more detailed information. You should read the entire Prospectus, including the information incorporated by reference in this Prospectus,
before deciding to invest in Shares. Please see the section Incorporation by Reference of Certain Documents on page 105 for information on how you can obtain the information that is incorporated by reference in this Prospectus. This
Prospectus is dated , 2016.
The Fund
PowerShares DB G10 Currency Harvest Fund, or the Fund, was formed as a Delaware statutory trust on April 12, 2006. The Fund was
originally named DB Currency Index Value Fund and changed its name to PowerShares DB G10 Currency Harvest Fund effective July 20, 2006. The Fund issues common units of beneficial interest, or Shares, which represent
units of fractional undivided beneficial interest in and ownership of the Fund. The term of the Fund is perpetual (unless terminated earlier in certain circumstances). The principal offices of the Fund are located at c/o Invesco PowerShares
Capital Management LLC, 3500 Lacey Road, Suite 700, Downers Grove, IL 60515, and its telephone number is (800)
983-0903.
Shares Listed on the NYSE Arca
The Shares are listed on the NYSE Arca under the symbol DBV. Secondary market purchases and sales of Shares are subject to
ordinary brokerage commissions and charges.
Purchases and Sales in the Secondary Market, on the NYSE Arca
The Shares trade on the NYSE Arca.
Baskets may be created or redeemed directly with the Fund only by Authorized Participants. It is expected that Baskets will be created when
the market price per Share is at a premium to the NAV
per Share. Similarly, it is expected that Baskets will be redeemed when the market price per Share is at a discount to the NAV per Share. Retail investors seeking to purchase or sell Shares on
any day are expected to effect such transactions in the secondary market, on the NYSE Arca, at the market price per Share, rather than in connection with the creation or redemption of Baskets.
The market price of the Shares may not be identical to the NAV per Share, but these valuations are expected to be very close. Investors are
able to use the intra-day indicative value, or the IIV, per Share to determine if they want to purchase in the secondary market via the NYSE Arca. The IIV per Share is based on the prior days final NAV, adjusted four times per minute
throughout the trading day to reflect the continuous price changes of the Funds futures positions, which provide a continuously updated estimated NAV per Share.
Retail investors may purchase and sell Shares through traditional brokerage accounts. Purchases or sales of Shares may be subject to
customary brokerage commissions. Investors are encouraged to review the terms of their brokerage accounts for applicable charges.
Pricing Information Available on the NYSE Arca and Other Sources
The following table lists additional NYSE Arca symbols and their meanings with
respect to the Fund and the Index:
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DBV |
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Market price per Share on NYSE Arca |
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FBV |
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Indicative IIV per Share |
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FBV.NV |
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End of day NAV of the Fund |
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DBCFHX |
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Intra-day and Index closing level as of close of
NYSE Arca from the prior day |
The intra-day data in the above table is published once every fifteen seconds throughout each trading day.
The Index Sponsor calculates and publishes the closing level of the Index daily. The Managing Owner publishes the NAV of the Fund and
the NAV per Share daily. Additionally, the Index Sponsor calculates and publishes the intra-day Index level, and the Index Sponsor calculates, and the Managing Owner publishes, the IIV per Share (quoted in USD) once every fifteen seconds throughout
each trading day.
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All of the foregoing information is published as follows:
The intra-day level of the Index (symbol: DBCFHX) and the IIV per Share (symbol: FBV) (each quoted in USD) are published once every fifteen
seconds throughout each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owners website at http://www.invescopowershares.com, or any successor thereto.
The current trading price per Share (symbol: DBV) (quoted in USD) is published continuously as trades occur throughout each trading day on
the consolidated tape, Reuters and/or Bloomberg and on the Managing Owners website at http://www.invescopowershares.com, or any successor thereto.
The most recent end-of-day Index closing level (symbol: DBCFHX) is published as of the close of business for the NYSE Arca each trading day
on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owners website at http://www.invescopowershares.com, or any successor thereto.
The most recent end-of-day NAV of the Fund (symbol: FBV.NV) is published as of the close of business on Reuters and/or Bloomberg and on the
Managing Owners website at http://www.invescopowershares.com, or any successor thereto. In addition, the most recent end-of-day NAV of the Fund (symbol: FBV.NV) is published the following morning on the consolidated tape.
All of the foregoing information with respect to the Index is also published at https://index.db.com.
The Index Sponsor obtains information for inclusion in, or for use in the calculation of, the Index from sources the Index Sponsor considers
reliable. None of the Index Sponsor, the Managing Owner, the Fund or any of their respective affiliates accepts responsibility for or guarantees the accuracy and/or completeness of the Index or any data included in the Index.
CUSIP Number
The Funds CUSIP number is 73935Y102.
Risk Factors
An investment in Shares is speculative and involves a high degree of risk. The summary risk factors set forth below are intended merely to
highlight certain risks of the Fund. The Fund has additional risks that are set forth elsewhere in this Prospectus.
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Past performance is not necessarily indicative of future results; all or substantially all of an investment in the Fund could be lost. |
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The trading of the Fund takes place in very volatile markets. |
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Because the Funds trading will be leveraged, a relatively small movement in the price of a futures contract owned by the Fund may cause greater losses. |
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Investment in foreign exchange related products is subject to many factors which contribute or increase potential volatility, including, but not limited to: |
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National debt levels and trade deficits, including changes in balances of payments and trade; |
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Domestic and foreign inflation rates and investors expectations concerning inflation rates; |
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Domestic and foreign interest rates and investors expectations concerning interest rates; |
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Currency exchange rates; |
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Investment and trading activities of mutual funds, hedge funds and currency funds; |
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Global or regional political, economic or financial events and situations; |
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Supply and demand changes which influence the foreign exchange rates of various currencies; |
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Monetary policies of governments (including exchange control programs, restrictions on local exchanges or markets and limitations on foreign investment in a country or on investment by residents of a country in other
countries), trade restrictions, currency devaluations and revaluations; |
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Governmental intervention in the currency market, directly and by regulation, in order to influence currency prices; and |
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Expectations among market participants that a currencys value soon will change. |
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The Fund is subject to the fees and expenses described herein (in addition to the amount of any commissions charged by the investors broker in connection with an investors purchase of Shares) and will be
successful only if significant losses are avoided. |
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The Fund is subject to fees and expenses in the aggregate amount of approximately 0.80% per annum as described herein and will be successful only if its annual returns from futures trading (held for investment
purposes), plus its annual Treasury Income and Money Market Income (held for margin and/or cash management purposes), exceed such fees and expenses of approximately 0.80% per annum. The Fund is expected to earn Treasury Income equal to
0.24% per annum, based upon the yield of 3-month United States Treasury Securities as of September 30, 2016, or a maximum of $0.06 per annum per Share at $25.00 as the NAV per Share. The Fund is also expected to earn Money Market Income
equal to 0.36% per annum as of September 30, 2016, or a maximum of $0.09 per annum per Share at $25.00 as the NAV per Share. Because the Fund invests a portion of its assets in Treasury Securities and the money market mutual funds, its
expected income from each of its holdings will be approximately $0.05 and $0.01, respectively, for an aggregate amount of approximately $0.06. Therefore, based upon the difference between the sum of the Treasury Income plus the Money Market Income
and the annual fees and expenses, the Fund will be required to earn approximately 0.56% per annum, or $0.14 per annum per Share at $25.00 as the NAV per Share, in order for an investor to break-even on an investment during the first twelve
months of an investment. Actual
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Treasury Income and Money Market Income could be higher or lower than the current levels. |
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There can be no assurance that the Shares will achieve profits or avoid losses, significant or otherwise. |
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As of the date of this prospectus, the futures contracts associated with the Index Currencies, or the Fund Contracts, are not subject to speculative position limits. There can be no assurance that the Fund Contracts
will not become subject to speculative position limits. Should the Fund Contracts become subject to speculative position limits, the Funds positions in the Fund Contracts might be required to be aggregated with positions in other accounts that
the Managing Owner owns or for which it controls trading unless the investment team managing the Fund qualifies as an independent account controller under current law or regulations proposed by the CFTC. If the CFTC does not extend or
renew the independent account controller exemption from aggregation, or if the exemption were otherwise unavailable, to the extent that the Managing Owner avails itself of the exemption, it may be required to aggregate the Funds positions in
Fund Contracts in multiple other accounts or commodity pools. In that case, the Funds ability to issue new Baskets or the Funds ability to reinvest income in additional Fund Contracts may be impaired or limited to the extent that these
activities would cause the Fund to exceed the potential future position limits. Limiting the size of the Fund to stay within these position limits may affect the correlation between the price of the Shares, as traded on the NYSE Arca, and the NAV.
The inability to create additional Baskets could result in Shares trading at a premium or discount to NAV of the Fund. |
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Performance of the Fund may not track the Index during particular periods or over the long term. Such tracking error may cause the Fund to outperform or underperform the Index. |
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Certain potential conflicts of interest exist between the Managing Owner, the Commodity Broker (as defined
herein) and their affiliates and the Shareholders. For example, the Commodity Broker may have a conflict of interest between its execution of trades for the Fund and for its other customers. More specifically, the Commodity Broker will benefit from
executing |
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orders for other clients, whereas the Fund may be harmed to the extent that the Commodity Broker has fewer resources to allocate to the Funds accounts due to the existence of such other
clients. Proprietary trading by the affiliates of the Managing Owner and the Commodity Broker may create conflicts of interest from time-to-time because such proprietary trades may take a position that is opposite of that of the Fund or may compete
with the Fund for certain positions within the marketplace. See Conflicts of Interest for a more complete disclosure of various conflicts. Although the Managing Owner has established procedures designed to resolve certain of these
conflicts equitably, the Managing Owner has not established formal procedures to resolve all potential conflicts of interest. Consequently, investors may be dependent on the good faith of the respective parties subject to such conflicts to resolve
them equitably. Although the Managing Owner attempts to monitor these conflicts, it is extremely difficult, if not impossible, for the Managing Owner to ensure that these conflicts will not, in fact, result in adverse consequences to the Fund.
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The Trustee
Wilmington Trust Company, or the Trustee, a Delaware trust company, is the sole trustee of the Fund. The Trustee delegated to the Managing
Owner all of the power and authority to manage the business and affairs of the Fund and has only nominal duties and liabilities to the Fund.
Investment Objective
The Fund seeks to track changes, whether positive or negative, in the level of the Deutsche Bank G10 Currency Future Harvest Index® Excess Return, or the Index, over time, plus the excess, if any, of the sum of the Funds Treasury Income and Money Market Income over the expenses of the Fund. For the avoidance of
doubt, the Fund invests in futures contracts in an attempt to track its Index. The Fund holds Treasury Securities and money market mutual funds for margin and/or cash management purposes only.
The Index is designed to reflect the return from investing on a 2:1 leveraged basis in long
currency futures positions for certain currencies associated with relatively high yielding interest rates and in short currency futures positions for certain currencies associated with relatively low yielding interest rates. The Index is designed to
exploit the trend that currencies associated with relatively high interest rates, on average, tend to rise in value relative to currencies associated with relatively low interest rates. The Index exploits this trend using both long and short futures
positions, which is expected to provide more consistent and less volatile returns than could be obtained by taking long positions only or short positions only.
Advantages of investing in the Fund include:
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Ease and Flexibility of Investment. The Shares trade on the NYSE Arca and provide institutional and retail investors with indirect access to the currency futures markets. The Shares may be bought and sold
on the NYSE Arca like other exchange-listed securities. Retail investors may purchase and sell Shares through traditional brokerage accounts. |
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Shares May Provide A More Cost Effective Alternative. Investing in the Shares can be easier and less expensive for an investor than constructing and trading a comparable foreign currency futures portfolio.
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The Fund May Provide Gains on Both the Upside and Downside Price Movements of the Index Currencies. The Index will rise as a result of any upward price movement of the Index Currencies that are expected to
gain relative to the USD by investing in long futures positions on such Index Currencies. The Index also will rise as a result of any downward price movement of the Index Currencies that are expected to lose relative to the USD by investing in short
futures positions on such Index Currencies. |
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Margin. Shares are eligible for margin accounts. |
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Diversification. The Shares may help to diversify a portfolio because historically the Index has tended to exhibit low to negative correlation with both equities and conventional bonds.
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Transparency. The Shares provide a more direct investment in currencies than mutual funds or exchange-traded funds that invest in currency-linked products or otherwise gain indirect exposure to currencies,
which may have implicit imbedded costs, credit risk and other potentially opaque features. |
Investing in the Fund
does not insulate Shareholders from certain risks, including price volatility.
The sponsor of the Index, or the Index Sponsor, is
Deutsche Bank Securities Inc. The composition of the Index may be adjusted in the Index Sponsors discretion.
A general
description of the Index (including, but not limited to, the underlying formulae and all other Index terms and conditions), or the General Description, is included on the Index Sponsors website at https://index.db.com, or any successor
thereto. The information included in the Index description, or the Description (which is Exhibit B of the Fifth Amended and Restated Trust Declaration of the Fund, as amended from time-to-time, or the Trust Declaration), may be provided in greater
detail than that which is included in the General Description. Any material changes to the terms and conditions of the Index as disclosed in future versions of the General Description will be deemed to amend such corresponding terms and conditions
that are included in the Description, unless otherwise determined at the sole discretion of the Index Sponsor. The Index Sponsor may, in its sole discretion and for housekeeping purposes, amend and restate the Description to conform it to reflect
material changes to the General Description.
The currencies that are eligible for inclusion in the Index, or Eligible Index Currencies,
are the currencies of The Group of Ten, or G10, countries, which include the following currencies:
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Eligible Index Currency |
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Symbol |
United States Dollar |
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USD |
Euro |
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EUR |
Japanese Yen |
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JPY |
Canadian Dollar |
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CAD |
Swiss Franc |
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CHF |
British Pound |
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GBP |
Australian Dollar |
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AUD |
New Zealand Dollar |
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NZD |
Norwegian Krone |
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NOK |
Swedish Krona |
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SEK |
Futures contracts referencing each of the Eligible Index Currencies (except USD) currently are traded on the
Chicago Mercantile Exchange, or CME, although currency futures contracts on the Eligible Index Currencies also trade on other exchanges in the United States and the Fund may invest in such contracts.
At any time, the Index is comprised of long futures positions in the three Eligible Index Currencies associated with the highest interest
rates and short futures positions in the three Eligible Index Currencies associated with the lowest interest rates. The Indexs six component currencies from time-to-time, comprised of the three long and three short futures positions, are
referred to as the Index Currencies and are used to calculate the value of the Index. The composition of the Index may be adjusted in the event that the Index Sponsor is not able to calculate the closing prices of the Index Currencies.
The Index Sponsor calculates the Index on both an excess return basis and a total return basis. The excess return basis calculation reflects
the change in market value of the applicable underlying currency futures only. The total return basis calculation, which reflects the sum of the change in market value of the applicable underlying currency futures plus the return on 3-month U.S.
Treasury bills. The Fund seeks to track changes, whether positive or negative, in the level of the Index calculated on an excess return basis, over time, plus the excess, if any, of the sum of the Funds Treasury Income and Money Market Income
over the expenses of the Fund. For the avoidance of doubt, the Fund invests in futures contracts in an attempt to track its Index. The Fund holds Treasury Securities and money market mutual funds for margin and/or cash management purposes only.
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The Fund will make distributions at the discretion of the Managing Owner. To the extent that
the Funds actual and projected Treasury Income and the Funds actual and projected Money Market Income exceeds the actual and projected fees and expenses of the Fund, the Managing Owner expects periodically to make distributions of the
amount of such excess. The Managing Owner currently does not expect to make distributions with respect to the Funds capital gains. Depending on the Funds performance for the taxable year and your own tax situation for such year, your
income tax liability for the taxable year for your allocable share of the Funds net ordinary income or loss and capital gain or loss may exceed any distributions you receive with respect to such year.
In order to determine which Eligible Index Currencies to include in the Index from time-to-time, the Index Sponsor will review the
composition of the Index on a quarterly basis as described in Description of the Deutsche Bank G10 Currency Future Harvest Index® Excess Return.
The Index Sponsor will review the three month Libor rate for each Eligible Index Currency other than NZD, SEK, NOK, CAD and AUD. The Index
Sponsor will review the 3 month rate of the New Zealand Bank Bill for NZD. The Index Sponsor will review the three month Stibor rate and the three month Nibor rate of the SEK and NOK, respectively. The Index Sponsor will review the 3 month Canada
Bankers Acceptance Rate for CAD. The Index Sponsor will review the Australian Bank Bill Short Term 3 Month Mid rate for AUD. The Libor, Stibor and Nibor rates for the Eligible Index Currencies, as applicable, mean the London, Stockholm and Norway
interbank offered rates for overnight deposits, respectively, each of which is published by Reuters on pages libor01 and libor02 with respect to Libor and pages SIDE and NIBR with respect to Stibor and Nibor. The Eligible Index Currencies are then
ranked according to yield. The three highest yielding and three lowest yielding are selected as Index Currencies for inclusion in calculating the Index. If two Index Currencies have the same yield, then the previous quarters ranking will be
used.
The Index is re-weighted quarterly. Upon re-weighting, the high yielding Index Currencies are allocated a base weight of 33 1/3%
and the low yielding Index Currencies are allocated a base weight
of -33 1/3%. These new weights are applied during the Index Re-Weighting Period, as described in Description of the Deutsche Bank G10 Currency Future Harvest Index® Excess Return.
The CME-traded futures contract of each applicable
Index Currency that is closest to expiration is used in the Index calculation. The futures contracts on the Index Currencies are rolled during the Index Re-Weighting Period. The new futures contract on an Index Currency that has the next closest
expiration date is selected. The calculation of the Index on an excess return basis is the weighted return on the change in price of the futures contracts on the Index Currencies.
A 3-month U.S. Treasury bill return is then calculated and included to calculate the total return index. Please refer to Exhibit B of the
Trust Declaration for the mathematical formulae of the Index.
The Index has been calculated using historical data since March 12,
1993. The Index is composed of notional amounts of each Index Currency. The notional amounts of the Index Currencies included in the Index are based on the Index Closing Level as of the Index Re-Weighting Period. The Index Closing Level reflects an
arithmetic weighted return of the change in the Index Currencies exchange rates against the USD since March 12, 1993. March 1993 was chosen as a starting period because it represents the earliest date on which reliable data for all the Eligible
Index Currencies exists. On March 12, 1993, the closing Index level was USD 100. Between March 12, 1993 to August 31, 2016, the Index level as calculated on an excess return basis has ranged from as high as USD 315.27 (July 25, 2007)
to as low as USD 94.03 (July 30, 1993). Past Index results are not necessarily indicative of future changes, positive or negative, in the Index.
To track the Index, the Fund generally will establish long futures positions in the three Eligible Index Currencies associated with the
highest interest rates and short futures positions in the three Eligible Index Currencies associated with the lowest interest rates and will adjust its holdings quarterly as the Index is adjusted. However, if the USD is among the Index Currencies
from time-to-time, the Fund will not establish a long or short futures position (as the case may be) in USD, because USD is the Funds home currency and, as a consequence, the Fund never can enjoy profit or suffer loss from long or short
futures positions in USD. When the USD is not associated with the highest or lowest interest rates
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among the Eligible Index Currencies, the aggregate notional value of the Funds futures contracts at the time they are established will be double the value of the Funds holdings of
United States Treasury Securities and money market mutual funds (affiliated or otherwise), which means the Fund will have a leverage ratio at such time of 2:1. If the USD is associated with the highest or lowest interest rates among the Eligible
Index Currencies, the aggregate notional value of the Funds futures contracts at the time they are established will be approximately 1.66 times the value of the Funds holdings of United States Treasury Securities and money market mutual
funds (affiliated or otherwise), which means the Fund will have a leverage ratio at such time of approximately 1.66:1. Holding futures positions with a notional amount in excess of the Funds NAV constitutes a form of leverage. The use of
leverage will increase the potential for both trading profits and losses, depending on the changes, positive and negative, in the Index. The Funds ability to track the Index will not be affected by the presence or absence of the USD among the
Index Currencies. Because the notional value of the Funds futures positions can rise or fall over time, the leverage ratio could be higher or lower between quarterly adjustments of the Index Currencies.
The use of long and short positions in the construction of the Index causes the Index to rise as a result of any upward price movement of
Index Currencies expected to gain relative to the USD and to rise as a result of any downward price movement of Index Currencies expected to lose relative to the USD. The inclusion of both long and short positions is also expected to reduce the
country specific foreign exchange risk of the Index (and, therefore, risk in connection with an investment in the Fund) relative to a directional (outright long or short) exposure to any or all of the Index Currencies.
There can be no assurance that the use of both long and short positions will reduce the volatility of the Index during any or all market
cycles or performance periods, or that the Fund will achieve its objectives.
As a result of its use of leverage, the Fund will be
required to deposit a greater proportion of its net assets as margin, not expected to exceed 10% of net assets. This represents margin deposit requirements approximately twice as great as would be required if the Fund did not use leverage.
Similarly, as a result of its use of leverage, the Fund will trade more
futures contracts and incur more brokerage commission expense than it would if it did not use leverage. The additional amount of brokerage commission expense generally will be proportional to the
Funds leverage ratio.
The Fund holds a portfolio of futures contracts (for investment purposes) on the Eligible Index Currencies
and United States Treasury Securities for deposit with the Funds Commodity Broker as margin and United States Treasury Securities, cash and money market mutual funds (affiliated or otherwise) on deposit with the Custodian (for cash management
purposes).
Under the Trust Declaration, Wilmington Trust Company, the Trustee of the Fund, has delegated to the Managing Owner the
exclusive management and control of all aspects of the business of the Fund. The Trustee has no duty or liability to supervise or monitor the performance of the Managing Owner, nor does the Trustee have any liability for the acts or omissions of the
Managing Owner.
There can be no assurance that the Fund will achieve its investment objective or avoid substantial losses.
Shares Should Track Closely the Value of the Index
The Shares are intended to provide investment results that generally correspond to the changes, positive or negative, in the levels of the
Index over time.
The value of the Shares is expected to fluctuate in relation to changes in the value of the Funds portfolio. The
market price of the Shares may not be identical to the NAV per Share, but these two valuations are expected to be very close.
The Fund
holds a leveraged portfolio of both long and short futures contracts on the Index Currencies which comprise the Index from time-to-time (other than the USD), each of which are traded on various currency futures markets in the United
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States. The Fund also holds United States Treasury Securities for deposit with the Funds Commodity Broker as margin and United States Treasury Securities, cash and money market mutual funds
(affiliated or otherwise) on deposit with the Custodian (for cash management purposes).
The Funds portfolio is traded with a view
to tracking the Index over time, whether the Index is rising, falling or flat over any particular period. The Fund is not managed by traditional methods, which typically involve effecting changes in the composition of the Funds
portfolio on the basis of judgments relating to economic, financial and market considerations with a view to obtaining positive results under all market conditions. To maintain the correspondence between the composition and weightings of the Index
Currencies of the Index to the Fund, the Managing Owner adjusts the portfolio on a quarterly basis to conform to periodic changes in the composition and relative weightings of the Index Currencies. The Managing Owner aggregates certain of the
adjustments and makes changes to the portfolio at least monthly or more frequently in the case of significant changes to the Index.
The Managing Owner
Invesco PowerShares Capital Management LLC, a Delaware limited liability company, serves as Managing Owner of
the Fund. The Managing Owner was formed on February 7, 2003. The Managing Owner is an affiliate of Invesco Ltd. The Managing Owner was formed to be the managing owner of investment vehicles such as exchange-traded funds and has been managing
non-commodity futures based exchange-traded funds since 2003 and a commodity futures based exchange-traded fund since 2014. The Managing Owner serves as the commodity pool operator and commodity trading advisor of the Fund. The Managing Owner is
registered as a commodity pool operator, commodity trading advisor and swap firm with the Commodity Futures Trading Commission, or the CFTC, and is a member of the National Futures Association, or the NFA. As a registered commodity pool operator and
commodity trading advisor, with respect to the Fund, the
Managing Owner must comply with various regulatory requirements under the Commodity Exchange Act and the rules and regulations of the CFTC and the NFA, including investor protection requirements,
antifraud prohibitions, disclosure requirements, and reporting and recordkeeping requirements. The Managing Owner also is subject to periodic inspections and audits by the CFTC and NFA.
An investment in the Shares is speculative and involves a high degree of risk.
The principal office of the Managing Owner is located at 3500 Lacey Road, Suite 700, Downers Grove, IL 60515. The telephone number of the
Managing Owner is (800) 983-0903.
PowerShares® is a registered service
mark of Invesco PowerShares Capital Management LLC.
The Fund pays the Managing Owner a Management Fee, monthly in arrears, in an amount
equal to 0.75% per annum of the daily NAV of the Fund. The Management Fee is paid in consideration of the Managing Owners commodity futures trading advisory services.
The Fund may, for cash management purposes, invest in money market mutual funds that are managed by affiliates of the Managing Owner. The
indirect portion of the management fee that the Fund may incur through such investment is in addition to the Management Fee paid to the Managing Owner. The Managing Owner has contractually agreed to waive the fees that it receives in an amount equal
to the indirect management fees that the Fund incurs through its investments in affiliated money market mutual funds through June 20, 2017.
The Commodity Broker
A variety of executing brokers execute futures transactions on behalf of the Fund. Such executing brokers give-up all such transactions to
Morgan Stanley & Co. LLC, a Delaware limited liability company, which serves as the Funds clearing broker, or Commodity Broker. In its capacity as clearing broker, the Commodity Broker executes and clears each of the Funds
futures transactions and performs certain administrative services for the Fund. The Commodity Broker is registered with the CFTC as a futures commission merchant and is a member of the NFA in such capacity.
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The Fund pays to the Commodity Broker all brokerage commissions, including applicable exchange
fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with trading activities. On average, total charges paid to the Commodity Broker are
expected to be less than USD 6.00 per round-turn trade, although the Commodity Brokers brokerage commissions and trading fees are determined on a contract-by-contract basis. The Managing Owner
estimates the brokerage commissions and fees will be approximately 0.05% of the NAV of the Fund in any year, although the actual amount of brokerage commissions and fees in any year or any part of any year may be greater.
A round-turn trade is a completed transaction involving both a purchase and a liquidating sale, or a sale followed by a covering purchase.
The Administrator, Custodian and Transfer Agent
The Bank of New York Mellon is the administrator, or the Administrator, of the Fund and has entered into an Administration Agreement in
connection therewith. The Bank of New York Mellon serves as custodian, or Custodian, of the Fund and has entered into a Global Custody Agreement, or Custody Agreement, in connection therewith. The Bank of New York Mellon serves as the transfer
agent, or Transfer Agent, of the Fund and has entered into a Transfer Agency and Service Agreement in connection therewith.
The Bank of
New York Mellon, a banking corporation organized under the laws of the State of New York with trust powers, has an office at 2 Hanson Place, Brooklyn, N.Y. 11217. The Bank of New York Mellon is subject to supervision by the New York State Banking
Department and the Board of Governors of the Federal Reserve System. Information regarding the NAV of the Fund, creation and redemption transaction fees and the names of the parties that have executed a Participant Agreement may be obtained from The
Bank of New York Mellon by calling the following number: (718) 315-7500. A copy of the Administration Agreement is available for inspection at The Bank of New York Mellons office identified above.
Pursuant to the Administration Agreement, the Administrator performs or supervises the performance of services necessary for the
operation and administration of the Fund (other than making
investment decisions), including receiving and processing orders from Authorized Participants to create and redeem Baskets, NAV calculations, accounting and other fund administrative services.
The Administrator retains certain financial books and records, including: Basket creation and redemption books and records, Fund accounting records, ledgers with respect to assets, liabilities, capital, income and expenses, the registrar, transfer
journals and related details and trading and related documents received from futures commission merchants, c/o The Bank of New York Mellon, 2 Hanson Place, Brooklyn, New York 11217, telephone number
(718) 315-7500.
The Administration Agreement is continuously in effect unless terminated
on at least 90 days prior written notice by either party to the other party. Notwithstanding the foregoing, the Administrator may terminate the Administration Agreement upon 30 days prior written notice if the Fund has materially failed
to perform its obligations under the Administration Agreement.
The Administration Agreement provides for the exculpation and
indemnification of the Administrator from and against any costs, expenses, damages, liabilities or claims (other than those resulting from the Administrators own bad faith, negligence or willful misconduct) which may be imposed on, incurred by
or asserted against the Administrator in performing its obligations or duties under the Administration Agreement. Key terms of the Administration Agreement are summarized under the heading Material Contracts.
The Administrators monthly fees are paid on behalf of the Fund by the Managing Owner out of the Management Fee.
The Administrator and any of its affiliates may from time-to-time purchase or sell Shares for their own account, as agent for their
customers and for accounts over which they exercise investment discretion.
The Transfer Agent receives a transaction processing fee in
connection with orders from Authorized Participants to create or redeem Baskets in the amount of USD 500 per order. These transaction processing fees are paid directly by the Authorized Participants and not by the Fund.
The Fund is expected to retain the services of one or more additional service providers to assist with certain tax reporting requirements of
the Fund and its Shareholders.
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Invesco Distributors, Inc.
Invesco Distributors, Inc., or Invesco Distributors, assists the Managing Owner with certain functions and duties relating to distribution
and marketing, including reviewing and approving marketing materials. Invesco Distributors retains all marketing materials at c/o Invesco Distributors, Inc., 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. Investors may contact Invesco
Distributors toll-free in the U.S. at (800) 983-0903. The Fund has entered into a Distribution Services Agreement with Invesco Distributors. Invesco Distributors is affiliated with the Managing Owner.
The Managing Owner, out of the Management Fee, pays Invesco Distributors for performing its duties on behalf of the Fund and may pay Invesco
Distributors additional compensation in consideration of the performance by Invesco Distributors of additional services. Such additional services may include, among other services, the development and implementation of a marketing plan and the
utilization of Invesco Distributors resources, which include an extensive broker database and a network of internal and external wholesalers.
Invesco Advisers Inc.
Invesco Advisers Inc., a Delaware corporation, or Invesco Advisers, is the commodity trading advisor of the Trust and the Fund and is an
affiliate of the Managing Owner. The Managing Owner may utilize the Invesco Advisers trading desk to place trades for the Fund. Invesco Advisers receives no compensation for providing this service.
Invesco Advisers has been registered with the CFTC as a commodity pool operator since January 1, 2000, commodity trading advisor since
November 8, 1984 and a swap firm since January 8, 2013 and has been a member of the NFA since February 11, 1986. Its principal place of business is 1555 Peachtree Street NE, Atlanta, Georgia 30309, telephone number
(404) 439-3271. The registration of Invesco Advisers with the CFTC and its membership in the NFA must not be taken as an indication that either the CFTC or the NFA has recommended or approved Invesco Advisers, the Trust or each Fund.
Index Sponsor
The Managing Owner, on behalf of the Fund, has appointed Deutsche Bank Securities Inc. to serve as the index sponsor, or the Index Sponsor.
The Index
Sponsor calculates and publishes the daily index levels and the indicative intraday index levels. Additionally, the Index Sponsor also calculates the IIV per Share of the Fund throughout each
business day.
The Managing Owner pays the Index Sponsor a licensing fee and an index services fee out of the Management Fee for
performing its duties.
Marketing Agent
The Managing Owner, on behalf of the Fund, has appointed Deutsche Bank Securities Inc., or the Marketing Agent, to assist the Managing Owner
by providing support to educate institutional investors about the Deutsche Bank indices and to complete governmental or institutional due diligence questionnaires or requests for proposals related to the Deutsche Bank indices.
The Managing Owner pays the Marketing Agent a marketing services fee out of the Management Fee.
The Marketing Agent will not open or maintain customer accounts or handle orders for the Fund. The Marketing Agent has no responsibility for
the performance of the Fund or the decisions made or actions taken by the Managing Owner.
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Number for Investors
Investors may contact the Managing Owner toll free in the U.S. at (800) 983-0903.
Limitation of Liabilities
You cannot lose more than your investment in the Shares. Shareholders are entitled to limitation on liability equivalent to the limitation on
liability enjoyed by stockholders of a Delaware business corporation for profit.
Creation and Redemption
of Shares
The Fund creates and redeems Shares from time-to-time, but only in one or more Baskets. A Basket is a block of 200,000
Shares. Baskets may be created or redeemed only by Authorized Participants. Except when aggregated in Baskets, the Shares are not redeemable securities. Authorized Participants pay a transaction fee of USD 500 in connection with
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each order to create or redeem a Basket. Authorized Participants may sell the Shares included in the Baskets they purchase from the Fund to other investors.
See Creation and Redemption of Shares for more details.
The Offering
Unless otherwise agreed to by the Managing Owner and the Authorized Participant as provided in the next sentence, the Fund issues Shares in
Baskets to Authorized Participants continuously on the creation order settlement date as of
2:45 p.m., Eastern time, on the business day immediately
following the date on which a valid order to create a Basket is accepted by the Fund, at the NAV of 200,000 Shares as of the closing time of the NYSE Arca or the last to close of the exchanges on which the Funds futures contracts are traded,
whichever is later, on the date that a valid order to create a Basket is accepted by the Fund. Upon submission of a creation order, the Authorized Participant may request the Managing Owner to agree to a creation order settlement date up to 3
business days after the creation order date.
Authorized Participants
Baskets may be created or redeemed only by Authorized Participants. Each Authorized Participant must (1) be a registered broker-dealer
or other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions, (2) be a participant in DTC, and (3) have entered into an
agreement with the Fund and the Managing Owner (a Participant Agreement). The Participant Agreement sets forth the procedures for the creation and redemption of Baskets and for the delivery of cash required for such creations or redemptions. A list
of the current Authorized Participants can be obtained from the Administrator. See Creation and Redemption of Shares for more details.
NAV
NAV means the total assets of the Fund including, but not limited to, all cash and cash equivalents or other debt securities less total
liabilities of the Fund, each determined on the basis of generally accepted accounting principles in the
United States, consistently applied under the accrual method of accounting.
NAV
per Share is the NAV of the Fund divided by the number of outstanding Shares.
See Description of the Shares; Certain Material
Terms of the Trust Declaration NAV for more details.
Clearance and Settlement
The Shares are evidenced by global certificates that the Fund issues to DTC. The Shares are available only in book-entry form. Shareholders
may hold their Shares through DTC, if they are participants in DTC, or indirectly through entities that are participants in DTC.
Segregated Accounts/Treasury Income and Money Market Income
The proceeds of the continuous offering of the Shares are deposited
in cash in a segregated account in the name of the Fund at the Custodian (or another eligible financial institution, as applicable) in accordance with CFTC investor protection and segregation requirements. The Fund is credited with 100% of the
interest earned on its average net assets on deposit with the Custodian or such other financial institution each week. The Managing Owner expects to invest non-margin assets in United States government securities (which include any security issued
or guaranteed as to principal or interest by the United States), or any certificate of deposit for any of the foregoing, including United States Treasury bonds, United States Treasury securities and issues of agencies of the United States
government, and certain cash and cash equivalent items such as money market mutual funds (affiliated or otherwise), certificates of deposit (under nine months) and time deposits or other instruments permitted by applicable rules and regulations for
cash management purposes. The Fund is expected to earn Treasury Income equal to 0.24% per annum, based upon the yield of 3-month United States Treasury Securities as of September 30, 2016, or a
maximum of $0.06 per annum per Share at $25.00 as the NAV per Share. The Fund is also expected to earn Money Market Income equal to 0.36% per annum as of September 30, 2016, or a maximum of $0.09 per annum per Share at $25.00 as the NAV
per Share.
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Because the Fund invests a portion of its assets in each of the Treasury Securities and the money market mutual funds, its expected income from each of its holdings will be approximately $0.05
and $0.01, respectively, for an aggregate amount of approximately $0.06. This income is used by the Fund to pay its expenses. See Fees and Expenses for more details.
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Fees and Expenses
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Management Fee |
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The Fund pays the Managing Owner a Management Fee,
monthly in arrears, in an amount equal to 0.75% per annum of the daily NAV of the Fund. The Management Fee is paid in consideration of the Managing Owners currency futures trading advisory services.
The Fund may, for cash management purposes, invest in money market mutual funds that are
managed by affiliates of the Managing Owner. The indirect portion of the management fee that the Fund may incur through such investment is in addition to the Management Fee paid to the Managing Owner. The Managing Owner has contractually agreed to
waive the fees that it receives in an amount equal to the indirect management fees that the Fund incurs through its investments in affiliated money market mutual funds through June 20, 2017.
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Organization and Offering Expenses |
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Expenses incurred in connection with organizing
the Fund and the initial offering of the Shares were paid by the Predecessor Managing Owner. Expenses incurred in connection with the continuous offering of Shares from commencement of the Funds trading operations up to and excluding February
23, 2015 were also paid by the Predecessor Managing Owner. Expenses incurred in connection with the continuous offering of Shares on and after February 23, 2015 are paid by the Managing Owner.
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Brokerage Commissions and Fees |
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The Fund pays to the Commodity Broker all
brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with its trading activities. On
average, total charges paid to the Commodity Broker are expected to be less than USD 6.00 per round-turn trade, although the Commodity Brokers brokerage commissions and trading fees are determined on a contract-by-contract basis. The Managing
Owner estimates the brokerage commissions and fees will be approximately 0.05% of the NAV of the Fund in any year, although the actual amount of brokerage commissions and fees in any year or any part of any year may be greater.
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Routine Operational, Administrative and Other Ordinary Expenses |
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The Managing Owner pays all of the routine
operational, administrative and other ordinary expenses of the Fund, including, but not limited to, computer services, the fees and expenses of the Trustee, license and service fees paid to Deutsche Bank Securities Inc., or DBSI, as Marketing Agent
and Index Sponsor, legal and accounting fees and expenses, tax preparation expenses, filing fees, and printing, mailing and duplication costs. |
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Non-Recurring Fees and Expenses |
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The Fund pays all the non-recurring and unusual
fees and expenses (referred to as extraordinary fees and expenses in the Trust Declaration), if any, of the Fund. Non-recurring and unusual fees and expenses are fees and expenses which are non-recurring and unusual in nature, such as legal claims
and liabilities, litigation costs or indemnification or other unanticipated expenses. Such non-recurring and unusual fees and expenses, by their nature, are unpredictable in terms of timing and amount.
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Management Fee and Expenses to be Paid First out of Treasury Income and Money Market Income |
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The Management Fee and the brokerage commissions
and fees of the Fund are paid first out of Treasury Income from the Funds holdings of United States Treasury Securities and Money Market Income from the Funds holdings of money market mutual funds (affiliated or otherwise) on deposit
with the Commodity Broker as margin, the Custodian, or otherwise. If the sum of the Treasury Income and the Money Market Income is not sufficient to cover the fees and expenses of the Fund during any period, the excess of such fees and expenses over
such Treasury Income and Money Market Income will be paid out of income from futures trading, if any, or from sales of the Funds United States Treasury Securities and/or holdings in money market mutual funds. For the avoidance of doubt, the
Fund invests in futures contracts in an attempt to track its Index. The Fund holds Treasury Securities and money market mutual funds for margin and/or cash management purposes only.
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Selling Commission |
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Retail investors may purchase and sell Shares through traditional brokerage accounts. Investors are expected to be charged a customary commission by their brokers in connection with purchases of Shares that will vary from investor
to investor. Investors are encouraged to review the terms of their brokerage accounts for applicable charges. |
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Breakeven Amounts
The estimated amount of all fees and expenses which are anticipated to be incurred by a new investor in Shares during the first twelve months
of investment is 0.80% per annum of the NAV of the Fund plus the amount of any commissions charged by the investors broker.
The Fund will be successful only if its annual returns from futures trading, plus its annual Treasury Income and Money Market Income exceed
such fees and expenses of approximately 0.80% per annum. The Fund is expected to earn Treasury Income equal to 0.24% per annum, based upon the yield of 3-month United States Treasury Securities as of September 30, 2016, or a maximum
of $0.06 per annum per Share at $25.00 as the NAV per Share. The Fund is also expected to earn Money Market Income equal to 0.36% per annum as of September 30, 2016, or a maximum of $0.09 per annum per Share at $25.00 as the NAV per Share.
Because the Fund invests a portion of its assets in each of the Treasury Securities and the money market mutual funds, its expected income from each of its holdings will be approximately $0.05 and $0.01, respectively, for an aggregate amount of
approximately $0.06. Therefore, based upon the difference between the sum of the current Treasury Income plus the Money Market Income and the annual fees and expenses, the Fund will be required to earn approximately 0.56% per annum, or $0.14
per annum per Share at $25.00 as the NAV per Share, in order for an investor to break-even on an investment during the first twelve months of an investment. Actual Treasury Income and Money Market Income could be higher or lower than the current
levels. For the avoidance of doubt, the Fund invests in futures contracts in an attempt to track its Index. The Fund holds Treasury Securities and money market mutual funds for margin and/or cash management purposes only.
Distributions
The Fund will make distributions at the discretion of the Managing Owner. To the extent that the Funds actual and projected Treasury
Income and the Funds actual and projected Money Market Income
exceeds the actual and projected fees and expenses of the Fund, the Managing Owner expects periodically to make distributions of the amount of such excess. The Managing Owner currently does not
expect to make distributions with respect to the Funds capital gains. Depending on the Funds performance for the taxable year and your own tax situation for such year, your income tax liability for the taxable year for your allocable
share of the Funds net ordinary income or loss and capital gain or loss may exceed any distributions you receive with respect to such year.
Fiscal Year
The Funds fiscal year ends on December 31 of each year.
U.S. Federal Income Tax Considerations
Subject to the discussion below in Material U.S. Federal Income Tax Considerations, the Fund will be classified as a partnership
for U.S. federal income tax purposes. Accordingly, the Fund will generally not incur U.S. federal income tax liability; rather, each beneficial owner of Shares will be required to take into account its allocable share of the Funds income,
gain, loss, deduction and other items for the Funds taxable year ending with or within the owners taxable year.
Additionally, please refer to the Material U.S. Federal Income Tax Considerations section below for information on the potential
U.S. federal income tax consequences of the purchase, ownership and disposition of Shares.
Breakeven Table
The Breakeven Table on the following page indicates the approximate percentage and dollar returns required for the value of an
initial USD 25.00 investment in a Share to equal the amount originally invested twelve months after issuance.
The Breakeven Table, as
presented, is an approximation only. The capitalization of the Fund does not directly affect the level of its charges as a percentage of its NAV, other than brokerage commissions.
-15-
Breakeven Table
|
|
|
|
|
|
|
|
|
|
|
Dollar Amount and Percentage of Expenses of the Fund1 |
|
Expense |
|
USD |
|
|
% |
|
Management Fee2 |
|
|
USD 0.19 |
|
|
|
0.75 |
% |
Organization and Offering Expense
Reimbursement3 |
|
|
USD 0.00 |
|
|
|
0.00 |
% |
Brokerage Commissions and Fees4 |
|
|
USD 0.01 |
|
|
|
0.05 |
% |
Routine Operational, Administrative and Other Ordinary Expenses5,6 |
|
|
USD 0.00 |
|
|
|
0.00 |
% |
Treasury Income and Money Market
Income7 |
|
|
USD (0.06 |
) |
|
|
(0.24 |
)% |
12-Month Breakeven8,9 |
|
|
USD 0.14 |
|
|
|
0.56 |
% |
1. |
The breakeven analysis set forth in this column assumes that the Shares have a constant month-end NAV and is based on USD 25.00 as the NAV per Share. See Charges on page 55 for an explanation of the expenses
included in the Breakeven Table. The Managing Owner will pay a marketing services fee to the Marketing Agent and an index services fee to the Index Sponsor. Because the marketing services fee and the index services fee are not paid by the Fund,
these fees are not included in the breakeven analysis. |
2. |
From the Management Fee, the Managing Owner is responsible for paying the fees and expenses of the Administrator, Invesco Distributors, the Index Sponsor and the Marketing Agent. |
The Fund may, for cash management purposes, invest in money market mutual funds that are managed by affiliates of the Managing Owner. The
indirect portion of the management fee that the Fund may incur through such investment is in addition to the Management Fee paid to the Managing Owner. Therefore, the Managing Owner has contractually agreed to waive the fees that it receives in an
amount equal to the indirect management fees that the Fund incurs through its investments in affiliated money market mutual funds through June 20, 2017, or the Money Market Management Fee Waiver. As of the date of this prospectus, the Money
Market Management Fee Waiver is approximately less than $0.01 per Share per annum.
3. |
The Predecessor Managing Owner was responsible for paying the organization and offering expenses up to and excluding February 23, 2015. The Managing Owner is responsible for paying the continuous offering costs of
the Fund from and including February 23, 2015. |
4. |
The actual amount of brokerage commissions and trading fees to be incurred will vary based upon the trading frequency of the Fund and the specific futures contracts traded. |
5. |
The Managing Owner is responsible for paying all routine operational, administrative and other ordinary expenses of the Fund. |
6. |
In connection with orders to create and redeem Baskets, Authorized Participants pay a transaction fee in the amount of USD 500 per order. Because these transaction fees are de minimis in amount, are charged
on a transaction-by-transaction basis (and not on a Basket-by-Basket basis), and are borne by the Authorized Participants, they have not been included in the Breakeven Table. |
7. |
Interest income currently is estimated to be earned at a rate of 0.24%, based upon the yield on 3-month United States Treasury Securities as of September 30, 2016, or the Treasury Income. Dividend income currently
is estimated to be earned at a rate of 0.36% from the Funds holdings of money market mutual funds (affiliated or otherwise) as of September 30, 2016, or the Money Market Income. Actual Treasury Income and Money Market Income could be
higher or lower than the current levels. For the avoidance of doubt, the Fund invests in futures contracts in an attempt to track its Index. The Fund holds Treasury Securities and money market mutual funds for margin and/or cash management purposes
only. |
8. |
The Fund is subject to (i) a Management Fee of 0.75% per annum and (ii) estimated brokerage commissions and fees of 0.05% per annum. The Fund is subject to fees and expenses in the aggregate amount
of approximately 0.80% per annum. The Fund will be successful only if its annual returns from the underlying futures contracts, including annual Treasury Income and Money Market Income exceed approximately 0.80% per annum. The Fund is
expected to earn Treasury Income equal to 0.24% per annum, based upon the yield of 3-month United States Treasury Securities as of September 30, 2016, or a maximum of $0.06 per annum per Share at $25.00 as the NAV per Share. The Fund is
also expected to earn Money Market Income equal to 0.36% per annum as of September 30, 2016, or a maximum of $0.09 per annum per Share at $25.00 as the NAV per Share. Because the Fund invests a portion of its assets in Treasury Securities
and the money market mutual funds, its expected income from each of its holdings will be approximately $0.05 and $0.01 respectively, for an aggregate amount of approximately $0.06. Therefore, based upon the difference between the sum of the current
Treasury Income plus the Money Market Income and the annual fees and expenses, the Fund will be required to earn approximately 0.56% per annum, or $0.14 per annum per Share at $25.00 as the NAV per Share, in order for an investor to break-even
on an investment during the first twelve months of an investment. The aggregate expense of $0.14 is disclosed above because of rounding. Actual Treasury Income and Money Market Income could be higher or lower than the current levels. For the
avoidance of doubt, the Fund invests in futures contracts in an attempt to track its Index. The Fund holds Treasury Securities and money market mutual funds for margin and/or cash management purposes only. |
9. |
You may pay customary brokerage commissions in connection with purchases of the Shares. Because such brokerage commission rates are set by your broker, they will vary from investor to investor and have not been included
in the Breakeven Table. Investors are encouraged to review the terms of their brokerage accounts for applicable charges. |
-16-
Incorporation by Reference of Certain Documents
The Securities and Exchange Commission, or the SEC, allows us to incorporate by reference into this Prospectus the information
that we file with it, meaning we can disclose important information to you by referring you to those documents already on file with the SEC.
This filing incorporates by reference the following documents, which we have previously filed with the SEC, in response to certain
disclosures:
|
|
|
The Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed February 29, 2016; |
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The Quarterly Reports on Form 10-Q for the quarterly periods ended on March 31, 2016 and June 30, 2016, filed May 10, 2016 and August 9, 2016, respectively; |
|
|
|
The Current Reports on Form 8-K, filed February 22, 2016, April 22, 2016, June 20, 2016 and October 25, 2016; and |
|
|
|
All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act since December 31, 2015, except for information furnished under Form 8-K, which is not deemed filed and not incorporated herein by
reference. |
Any statement contained in a document that is incorporated by reference will be modified or superseded for all
purposes to the extent that a statement contained in this Prospectus modifies or is contrary to that previous statement. Any statement so modified or superseded will not be deemed a part of this Prospectus except as so modified or superseded.
We will provide to you a copy of the filings that have been incorporated by reference in this Prospectus upon your request, at no
cost. Any request may be made by writing or calling us at the following address or telephone number:
Invesco PowerShares Capital
Management LLC
3500 Lacey Road, Suite 700
Downers Grove, IL 60515
Telephone: (800) 983-0903
These documents may also be accessed through our website at http://www.invescopowershares.com or as described herein under
Additional
Information. The information and other content contained on or linked from our website are not incorporated by reference in this Prospectus and should not be considered a part of this
Prospectus.
We file annual, quarterly, current reports and other information with the SEC. You may read and copy these materials at the
SECs Public Reference Room at 100 F Street, N.E., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site at
http://www.sec.gov that contains reports, proxy and information statements and other information regarding the Fund.
Reports to Shareholders
The Managing Owner will furnish you with an annual report of the Fund within 90 calendar days after the
end of the Funds fiscal year as required by the rules and regulations of the CFTC, including, but not limited to, an annual audited financial statement certified by independent registered public accountants and any other reports required by
any other governmental authority that has jurisdiction over the activities of the Fund. You also will be provided with appropriate information to permit you to file your U.S. federal and state income tax returns (on a timely basis) with respect to
your Shares. Monthly account statements conforming to CFTC and NFA requirements are posted on the Managing Owners website at http://www.invescopowershares.com. Additional reports may be posted on the Managing Owners website in the
discretion of the Managing Owner or as required by regulatory authorities.
Cautionary Note Regarding
Forward-Looking Statements
This Prospectus includes forward-looking statements that reflect
the Managing Owners current expectations about the future results, performance, prospects and opportunities of the Fund. The Managing Owner has tried to identify these forward-looking statements by using
words such as may, will, expect, anticipate, believe, intend, should, estimate or the negative of those terms or similar expressions. These forward-looking statements are based on information currently available to the Managing Owner and are subject to a number of risks, uncertainties and other factors, both known, such as those described in Risk
Factors in this Summary, in The Risks You Face and elsewhere in this Prospectus, and unknown, that
-17-
could cause the actual results, performance, prospects or opportunities of the Fund to differ materially from those expressed in, or implied by, these
forward-looking statements.
You should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, the Managing Owner undertakes no obligation to publicly update or revise any
forward-looking statements or the risks, uncertainties or other factors described in this Prospectus, as a result of new information, future events or changed circumstances or for any other reason after the
date of this Prospectus.
THE SHARES ARE SPECULATIVE AND
INVOLVE A HIGH DEGREE OF RISK.
[Remainder of page left blank intentionally.]
-18-
ORGANIZATION CHART
POWERSHARES DB G10 CURRENCY HARVEST FUND
-19-
THE RISKS YOU FACE
You could lose money investing in Shares. You should consider carefully the risks described below before making an investment decision.
You should also refer to the other information included in this Prospectus.
|
(1) |
The Value of the Shares Relates Directly to the Value of the Futures Contracts on the Index Currencies and Other Assets Held by the Fund and Fluctuations in the Price of These Assets Could Materially Adversely
Affect an Investment in the Shares. |
The Shares are designed to reflect as closely as possible the changes,
positive or negative, in the level of the Index, over time, through the Funds portfolio of exchange traded futures contracts on the Index Currencies. The value of the Shares relates directly to the value of the portfolio, less the liabilities
(including estimated accrued but unpaid expenses) of the Fund. The price of the Index Currencies may fluctuate widely. Several factors may affect the prices of the Index Currencies, including, but not limited to:
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National debt levels and trade deficits, including changes in balances of payments and trade; |
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Domestic and foreign inflation rates and investors expectations concerning inflation rates; |
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Domestic and foreign interest rates and investors expectations concerning interest rates; |
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Currency exchange rates; |
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Investment and trading activities of mutual funds, hedge funds and currency funds; |
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|
|
Global or regional political, economic or financial events and situations; |
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|
|
Supply and demand changes which influence the foreign exchange rates of various currencies;
|
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|
|
Monetary policies of governments (including exchange control programs, restrictions on local exchanges or markets and limitations on foreign investment in a country or on investment by residents of a country in other
countries), trade restrictions, currency devaluations and revaluations; |
|
|
|
Governmental intervention in the currency market, directly and by regulation, in order to influence currency prices; and |
|
|
|
Expectations among market participants that a currencys value soon will change. |
|
(2) |
NAV May Not Always Correspond to Market Price and, as a Result, Baskets May be Created or Redeemed at a Value that Differs from the Market Price of the Shares. |
The NAV per Share will change as fluctuations occur in the market value of its portfolio. Investors should be aware that the public trading
price of a Basket may be different from the NAV of a Basket (i.e., 200,000 Shares may trade at a premium over, or a discount to, NAV of a Basket) and similarly the public trading price per Share may be different from the NAV per Share. Consequently,
an Authorized Participant may be able to create or redeem a Basket at a discount or a premium to the public trading price per Share. This price difference may be due, in large part, to the fact that supply and demand forces at work in the secondary
trading market for Shares are closely related, but not identical to, the same forces influencing the prices of the Index Currencies trading individually or in the aggregate at any point in time. Investors also should note that the size of the Fund
in terms of total assets held may change substantially over time and from time-to-time as Baskets are created and redeemed.
Authorized Participants or their clients or customers may have an opportunity to realize a profit if they can purchase a Basket at a
discount to the public trading price of the Shares or can redeem a Basket at a premium over the public trading price of the Shares. The Managing Owner expects that the exploitation of such arbitrage opportunities by Authorized Participants and their
clients and customers will tend to cause the public trading price to track NAV per Share closely over time.
-20-
The value of a Share may be influenced by
non-concurrent trading hours between the NYSE Arca and the various futures exchanges on which the Index Currencies are traded. As a result, during periods when the NYSE Arca is open and the futures exchanges
on which the Index Currencies are traded are closed, trading spreads and the resulting premium or discount on the Shares may widen, and, therefore, increase the difference between the price of the Shares and the NAV of the Shares.
|
(3) |
The Funds Performance May Not Always Replicate Exactly the Changes in the Levels of its Index. |
It is possible that the Funds performance may not fully replicate the changes in the closing levels of the Index due to disruptions in
the markets for the Index Currencies or due to other extraordinary circumstances. In addition, the Fund is not able to replicate exactly the changes in the closing levels of the Index because the total return generated by the Fund is reduced by
expenses and transaction costs, including those incurred in connection with the Funds trading activities, and increased by Treasury Income from its holdings of United States Treasury Securities and Money Market Income from its holding of money
market mutual funds (affiliated or otherwise) held for margin and cash management purposes. Tracking the Index requires trading of the Funds portfolio with a view to tracking the Index over time and is dependent upon the skills of the Managing
Owner and its trading principals, among other factors. As of the date of this prospectus, the futures contracts associated with the Index Currencies, or the Fund Contracts, are not subject to speculative position limits. There can be no assurance
that the Fund Contracts will not become subject to speculative position limits. Should the Fund Contracts become subject to speculative position limits, the Funds positions in the Fund Contracts might be required to be aggregated with
positions in other accounts that the Managing Owner owns or for which it controls trading unless the investment team managing the Fund qualifies as an independent account controller under current law or regulations proposed by the CFTC.
If the CFTC does not extend or renew the independent account controller exemption from aggregation, or if the exemption were otherwise unavailable, to the extent that the Managing Owner avails itself of the exemption, it may be required to aggregate
the Funds positions in Fund Contracts in multiple other accounts or commodity pools. In that case, the Funds ability to issue new Baskets or the Funds
ability to reinvest income in additional Fund Contracts may be impaired or limited to the extent that these activities would cause the Fund to exceed the potential future position limits.
Limiting the size of the Fund to stay within these position limits may affect the correlation between the price of the Shares, as traded on the NYSE Arca, and the NAV. Additionally, the Fund on any given date may not have an effective registration
statement with the SEC with sufficient Shares available, which may limit the Funds ability to create new Baskets. The inability to create additional Baskets could result in Shares trading at a premium or discount to NAV of the Fund.
|
(4) |
The Fund Is Not Actively Managed and Tracks the Index During Periods in Which the Index Is Flat or Declining as Well as when the Index Is Rising. |
The Fund is not actively managed by traditional methods. Therefore, if positions in any one or more of the Index Currencies are declining in
value, the Fund will not close out such positions, except in connection with a change in the composition or weighting of the Index. The Managing Owner seeks to cause the NAV to track the Index during periods in which the Index is flat or declining
as well as when the Index is rising.
|
(5) |
The Dual Assumptions Underpinning the Index that High Yielding Interest Rates With Respect to Certain Eligible Index Currencies Suggest Taking Long Positions in Futures Contracts in Such
Currencies and Low Yielding Interest Rates With Respect to Certain Eligible Index Currencies Suggest Taking Short Positions in Futures Contracts in Such Currencies May Be Detrimental to the Value of Your Shares Should Either or Both Assumptions
Fail. |
The Index is expected to rise as a result of any upward price movement on long positions in futures
contracts on the Index Currencies when the prices of these long futures contracts increase relative to the USD. The Index also is expected to rise as a result of any downward price movement on short positions in futures contracts on the Index
Currencies when the prices of these short futures contracts decrease relative to the USD. Because the price of your Shares is expected to track the Index, if the price of the Funds long futures contracts decreases relative to
-21-
the USD or the price of the Funds short futures contracts increases relative to the USD on any or all of the Index Currencies, the value of your Shares may decrease. The decrease in the
value of your Shares will be amplified if both assumptions fail simultaneously (i.e., both the price of the Funds long futures contracts decreases relative to the USD and the price of the Funds short futures contracts increases relative
to the USD on any or all of the Index Currencies).
|
(6) |
Interest Rates Will Change Between Re-Weightings of the Index. |
The Index is re-weighted quarterly based upon the three highest and three lowest yielding Eligible Index Currencies at the time of
re-weighting. At any point in time between quarterly re-weightings, the Index Currencies may not be among the three highest or lowest yielding Eligible Index Currencies. Between quarterly re-weightings of the Index, a currency that was among the
three highest yielding Eligible Index Currencies could be among the three lowest yielding Eligible Index Currencies, or vice versa. Under such circumstances, the Fund may not be able to exploit efficiently the trend that currencies associated with
relatively high interest rates, on average, tend to rise in value relative to currencies associated with relatively low interest rates. If the interest rates associated with the Eligible Index Currencies change sufficiently during any quarter, the
Fund may find itself positioned such that the effects of this trend will cause the Fund to lose money. Even if the interest rates associated with the Eligible Index Currencies vary substantially between re-weightings, the Fund will not adjust its
portfolio of currency futures until the next quarterly re-weighting.
|
(7) |
The NYSE Arca May Halt Trading in the Shares Which Would Adversely Impact Your Ability to Sell Shares. |
The Shares are listed for trading on the NYSE Arca under the market symbol DBV. Trading in Shares may be halted due to market conditions or,
in light of NYSE Arca rules and procedures, for reasons that, in the view of the NYSE Arca, make trading in Shares inadvisable. In addition, trading is subject to trading halts caused by extraordinary market volatility pursuant to circuit
breaker rules that require trading to be halted for a specified period based on a specified market decline. There can be no assurance that the requirements necessary to maintain the listing of the Shares will continue to be met or will remain
unchanged. The Fund will be terminated if the Shares are delisted.
|
(8) |
The Lack of An Active Trading Market for the Shares May Result in Losses on Your Investment in the Fund at the Time of Disposition of Your Shares. |
Although the Shares are listed and traded on the NYSE Arca, there can be no guarantee that an active trading market for the Shares will be
maintained. If you need to sell your Shares at a time when no active market for them exists, the price you receive for your Shares, assuming that you are able to sell them, likely will be lower than the price you would receive if an active market
did exist.
|
(9) |
The Shares Could Decrease in Value if Unanticipated Operational or Trading Problems Arise. |
The mechanisms and procedures governing the creation, redemption and offering of the Shares have been developed specifically for this
securities product. Consequently, there may be unanticipated problems or issues with respect to the mechanics of the operations of the Fund and the trading of the Shares that could have a material adverse effect on an investment in the Shares. In
addition, although the Fund is not actively managed by traditional methods, to the extent that unanticipated operational or trading problems or issues arise, the Managing Owners past experience and qualifications may not be
suitable for solving these problems or issues.
|
(10) |
As the Managing Owner and its Principals have a Limited History of Operating an Exchange-Traded Fund that Invests in a Broad Range of Commodity Futures Contracts, their Experience May be
Relatively Inadequate or Unsuitable to Manage the Fund. |
The Managing Owner manages a number of exchange-traded
funds that use financial futures as part of their investment strategy and, only for a limited time, has actively managed an exchange-traded fund related to a broad-based futures index. The past performance of these funds is no indication of the
Managing Owners ability to manage exchange-traded investment vehicles that track an index such as the Fund. There can be no assurance that the Managing Owner will be able to cause the NAV per Share of the Fund to closely track the changes in
the Index levels. If the experience of the Managing Owner and its principals is not relatively adequate or suitable to manage investment vehicles such as the Fund, the operations of the Fund may be adversely affected.
-22-
|
(11) |
You May Not Rely on Past Performance or Index Results in Deciding Whether to Buy Shares. |
Although past performance is not necessarily indicative of future results, the Funds performance history might (or might not) provide
you with more information on which to evaluate an investment in the Fund. Likewise, the Index has a history which might (or might not) be indicative of the future Index results, or of the future performance of the Fund. Therefore, you will have to
make your decision to invest in the Fund without relying on the Funds past performance history or the Indexs closing level history.
|
(12) |
Fewer Representative Index Currencies May Result In Greater Index Volatility. |
The ten Eligible Index Currencies are United States Dollars, Euro, Japanese Yen, Canadian Dollars, Swiss Francs, British Pounds, Australian
Dollars, New Zealand Dollars, Norwegian Krone and Swedish Krona. The Index is comprised of only six of the ten Eligible Index Currencies from time-to-time. Accordingly, the Index is concentrated in terms of the number of currencies represented. You
should be aware that other currency indices are more diversified in terms of the number of currencies included. Concentration in fewer currencies may result in a greater degree of volatility in the Index and the NAV of the Fund, which tracks the
Index under specific market conditions and over time.
|
(13) |
Leverage Will Fluctuate Between Index Re-Weighting Periods and May be Greater or Less than the Leverage on Each Index Re-Weighting Period. |
Although the Fund is not expected to establish positions that exceed a leverage ratio of 2:1 at the time of establishment, reinvestment of
collateral or movements in the market price of the Funds futures positions between the Index Re-Weighting Periods may increase or decrease the Funds leverage ratio. Any such increase or decrease, respectively, in the Funds leverage
ratio will magnify or decrease, respectively, the potential for loss or gain of the Funds futures positions and, in turn, the value of your Shares.
|
(14) |
Because the Funds Trading will be Leveraged, a Relatively Small Movement in the Price of a Contract May Cause Greater Losses. |
The Fund will take long futures positions in the high-yielding Eligible Index Currencies and will
take short futures positions in the low-yielding Eligible Index Currencies with a view to tracking the changes in the Index over time. Assuming that the USD is not one of the three highest or lowest yielding
currencies during any Index Re-Weighting Period, the long futures positions and short futures positions in the Index Currencies will each have a notional value approximately equal to the Funds NAV. Accordingly, if the USD is not one of the
three highest or lowest yielding currencies during any the Index Re-Weighting Period, the aggregate notional amount of the futures positions held by the Fund is expected to be approximately 200% of the Funds NAV, but it may increase due to the
reinvestment of collateral or the movements in the market price of the Funds future positions. If the USD is one of the three highest or lowest yielding currencies, the Fund will not establish a long or short futures position (as the case may
be) in USD, as the Fund never can enjoy profit or suffer loss from long or short futures positions in USD because USD is the Funds home currency. Consequently, if USD is one of the three highest or lowest yielding currencies, the aggregate
notional amount of the futures positions held by the Fund is expected to be approximately, but not in excess of, 166 2/3% of the Funds NAV. Holding futures positions with a notional amount in excess of the Funds NAV constitutes a form of
leverage. The use of leverage increases the potential for both trading profits and losses, depending on the changes in market value of the Index Currencies in which the Fund has long futures positions relative to the Index Currencies in which the
Fund has short futures positions.
The use of long and short positions in the construction of the Index causes the Index to rise as a
result of any upward price movement of Index Currencies expected to gain relative to the USD and to rise as a result of any downward price movement of Index Currencies expected to lose relative to the USD. The inclusion of both long and short
positions is also expected to reduce the country specific foreign exchange risk of the Index (and, therefore, risk in connection with an investment in the Fund) relative to a directional (outright long or short) exposure to any or all of the Index
Currencies.
-23-
There can be no assurance that the use of both long and short positions will reduce the
volatility of the Index during any or all market cycles or periods, or that the Fund will achieve its objectives. It is possible that, prior to an Index rebalancing, that Index Currencies expected to lose relative to the USD may rise and/or Index
Currencies expected to gain relative to the USD may fall. In such cases, the Fund may experience losses in both its long and short positions at the same time. Such losses will be greater as a result of the Funds use of leverage, reflected in
its long futures exposure to Index Currencies with a notional value of up to 100% of the Funds NAV and its short futures exposure to Index Currencies with a notional value of up to 100% of the Funds NAV. Under such circumstances, the
Funds losses would be greater as a result of its leverage than would be the case were it to limit its overall exposure to Index Currencies with a notional value of 100% of the Funds net assets.
As a result of its use of leverage, the Fund is required to deposit a greater proportion of its net assets as margin, not expected to exceed
10% of net assets. This represents margin deposit requirements approximately twice as great as would be required if the Fund did not use leverage. Similarly, as a result of its use of leverage, the Fund will trade more futures contracts and incur
more brokerage commission expense than it would if it did not use leverage. The additional amount of brokerage commission expense generally is proportional to the Funds leverage ratio.
|
(15) |
Short Selling Theoretically Exposes the Fund to Unlimited Losses. |
The Fund holds short futures positions in the three lowest-yielding Eligible Index Currencies (other
than the USD).
A long futures position in a foreign currency requires the Fund to purchase at a future date the equivalent in USD of a
fixed amount of a foreign currency at a fixed price in USD. The Fund profits if the price of the foreign currency rises relative to the USD while the contract is open and the Fund suffers losses if the price of the foreign currency falls relative to
the USD while the contract is open. Because the price in USD of the foreign currency cannot fall below zero, the Funds exposure to loss is limited to the value in USD of the fixed amount of the foreign currency at the time of the establishment
of the long futures contract.
By contrast, a short futures position in a foreign currency requires the Fund to deliver at a
future date an amount in USD equal to the price in USD of a fixed amount of the foreign currency at that future date. The Fund will profit if the price of the foreign currency falls relative to the USD while the contract is open and the Fund will
suffer loss if the price of the foreign currency rises relative to the USD while the contract is open. Because the price in USD of a fixed amount of the foreign currency could, in theory, rise to infinity, a short futures position exposes the Fund
to theoretically unlimited liability.
The Funds losses could result in the total loss of your investment.
|
(16) |
Price Volatility May Possibly Cause the Total Loss of Your Investment. |
Futures contracts have a high degree of price variability and are subject to occasional rapid and substantial changes. Consequently, you
could lose all or substantially all of your investment in the Fund.
The following table reflects various measures of volatility* of the
Index as calculated on an excess return basis**:
|
|
|
|
|
Volatility Type |
|
Volatility |
|
Daily volatility over full history |
|
|
10.04 |
% |
Average rolling 3-month daily volatility |
|
|
8.83 |
% |
Monthly return volatility |
|
|
8.96 |
% |
Average annual volatility |
|
|
9.14 |
% |
The following table reflects the daily volatility on an annual basis of the Index:
|
|
|
Year |
|
Daily Volatility |
1993*** |
|
8.67% |
1994 |
|
4.97% |
1995 |
|
13.93% |
1996 |
|
7.01% |
1997 |
|
7.73% |
1998 |
|
8.90% |
1999 |
|
5.70% |
2000 |
|
6.17% |
2001 |
|
5.37% |
2002 |
|
7.45% |
2003 |
|
6.69% |
2004 |
|
7.90% |
2005 |
|
5.41% |
2006 |
|
7.10% |
-24-
|
|
|
Year |
|
Daily Volatility |
2007 |
|
10.95% |
2008 |
|
21.86% |
2009 |
|
17.10% |
2010 |
|
12.86% |
2011 |
|
13.58% |
2012 |
|
7.00% |
2013 |
|
8.12% |
2014 |
|
5.79% |
2015 |
|
10.48% |
2016** |
|
8.66% |
* |
Volatility, for these purposes, means the following: |
Daily Volatility: The relative
rate at which the price of the Index moves up and down, found by calculating the annualized standard deviation of the daily change in price.
Monthly Return Volatility: The relative rate at which the price of the Index moves up and down, found by calculating the annualized
standard deviation of the monthly change in price.
Average Annual Volatility: The average of yearly volatilities for a given
sample period. The yearly volatility is the relative rate at which the price of the Index moves up and down, found by calculating the annualized standard deviation of the daily change in price for each business day in the given year.
** |
As of August 31, 2016. |
*** |
As of March 12, 1993. |
Past Index results are not necessarily indicative of future
changes, positive or negative, in the Index levels.
|
(17) |
Fees and Commissions are Charged Regardless of Profitability and May Result in Depletion of Assets. |
The Fund is directly subject to the fees and expenses described herein which are payable irrespective of profitability. Such fees and
expenses include asset-based fees of 0.75% per annum. Additional charges include brokerage fees of approximately 0.05% per annum in the aggregate and selling commissions. For the avoidance of doubt, selling commissions are not included in
the Funds breakeven calculation. The Fund is expected to earn Treasury Income equal to 0.24% per annum, based
upon the yield of 3-month United States Treasury Securities as of September 30, 2016, or a maximum of $0.06 per annum per Share at $25.00 as the NAV per Share. The Fund is also expected to
earn Money Market Income equal to 0.36% per annum as of September 30, 2016, or a maximum of $0.09 per annum per Share at $25.00 as the NAV per Share. Because the Funds current Treasury Income and/or Money Market Income does not
exceed its fees and expenses, the Fund will need to have a positive performance that exceeds the difference between the sum of the Funds Treasury Income, and/or Money Market Income and its fees and expenses in order to break-even. If the
aggregate of the Funds performance from its holding of futures contracts plus its Treasury Income and/or Money Market Income (earned from its margin and cash management function) do not exceed the Funds fees and expenses described
herein, then, the expenses of the Fund could, over time, result in losses to your investment therein. You may never achieve profits, significant or otherwise.
|
(18) |
You Cannot Be Assured of the Managing Owners Continued Services, Which Discontinuance May Be Detrimental to the Fund. |
You cannot be assured that the Managing Owner will be willing or able to continue to service the Fund for any length of time. If the
Managing Owner discontinues its activities on behalf of the Fund, the Fund may be adversely affected.
|
(19) |
Possible Illiquid Markets May Exacerbate Losses. |
Futures positions cannot always be liquidated at the desired price. It is difficult to execute a trade at a specific price when there is a
relatively small volume of buy and sell orders in a market. A market disruption, such as when foreign governments may take or be subject to political actions which disrupt the markets in their currency or major exports, can also make it difficult to
liquidate a position.
There can be no assurance that market illiquidity will not cause losses for the Fund. The large size of the
positions which the Fund may acquire increases the risk of illiquidity by both making its positions more difficult to liquidate and increasing the losses incurred while trying to do so.
-25-
|
(20) |
You May Be Adversely Affected by Redemption Orders that Are Subject To Postponement, Suspension or Rejection Under Certain Circumstances. |
The Fund may, in its discretion, suspend the right of redemption or postpone the redemption order settlement date, for (1) any period
during which an emergency exists as a result of which the redemption distribution is not reasonably practicable, or (2) such other period as the Managing Owner determines to be necessary for the protection of the Shareholders. In addition, the
Fund will reject a redemption order if the order is not in proper form as described in the participant agreement among the Authorized Participant, the Managing Owner, either in its own capacity or in its capacity as managing owner of the Fund, or if
the fulfillment of the order, in the opinion of its counsel, might be unlawful. Any such postponement, suspension or rejection could adversely affect a redeeming Authorized Participant. For example, the resulting delay may adversely affect the value
of the Authorized Participants redemption proceeds if the NAV of the Fund declines during the period of delay. The Fund disclaims any liability for any loss or damage that may result from any such suspension or postponement.
|
(21) |
Because the Futures Contracts Have No Intrinsic Value, the Positive Performance of Your Investment Is Wholly Dependent Upon an Equal and Offsetting Loss. |
Futures trading is a risk transfer economic activity. For every gain there is an equal and offsetting loss rather than an opportunity to
participate over time in general economic growth. Unlike most alternative investments, an investment in Shares does not involve acquiring any asset with intrinsic value. Overall stock and bond prices could rise significantly and the economy as a
whole prosper while Shares trade unprofitably.
|
(22) |
Failure of Currency Futures Markets to Exhibit Low to Negative Correlation to General Financial Markets Will Reduce Benefits of Diversification and May Exacerbate Losses to Your
Portfolio. |
Historically, currency futures returns have tended to exhibit low to negative correlation with
the returns of other assets such as stocks and bonds. Although currency futures trading can provide a diversification benefit to investor portfolios because of its low to negative correlation with other financial assets, the fact that the Index is
not 100% negatively correlated with financial assets such as stocks and bonds means that the Fund cannot be expected to be automatically profitable during unfavorable periods for the stock or bond market, or vice versa. If the Shares perform in a
manner that correlates with the general financial markets or do not perform successfully, you will obtain no diversification benefits by investing in the Shares and the Shares may produce no gains to offset your losses from other investments.
|
(23) |
Shareholders Will Not Have the Protections Associated With Ownership of Shares in an Investment Company Registered Under the Investment Company Act of 1940. |
The Fund is not registered as an investment company under the Investment Company Act of 1940 and is not required to register under such Act.
Consequently, Shareholders will not have the regulatory protections provided to investors in registered and regulated investment companies.
|
(24) |
Various Actual and Potential Conflicts of Interest May Be Detrimental to Shareholders. |
The Fund is subject to actual and potential conflicts of interest involving the Managing Owner, various commodity futures brokers,
Authorized Participants and Invesco Distributors. The Managing Owner and its principals, all of whom are engaged in other investment activities, are not required to devote substantially all of their time to the business of the Fund, which also
presents the potential for numerous conflicts of interest with the Fund. As a result of these and other relationships, parties involved with the Fund have a financial incentive to act in a manner other than in the best interests of the Fund and the
Shareholders. For example, if the Fund invests in affiliated money market mutual funds
-26-
for cash management purposes, the Managing Owner may select affiliated money market mutual funds that may pay dividends that are lower than non-affiliated money market mutual funds. The Managing
Owner has not established any formal procedure to resolve conflicts of interest. Consequently, investors are dependent on the good faith of the respective parties subject to such conflicts to resolve them equitably. Although the Managing Owner
attempts to monitor these conflicts, it is extremely difficult, if not impossible, for the Managing Owner to ensure that these conflicts do not, in fact, result in adverse consequences to the Shareholders.
The Fund may be subject to certain conflicts with respect to the Commodity Broker, including, but not limited to, conflicts that result from
receiving greater amounts of compensation from other clients, or purchasing opposite or competing positions on behalf of third party accounts traded through the Commodity Broker.
Because the Managing Owner and Invesco Distributors are affiliates, the Managing Owner has a disincentive to replace Invesco Distributors.
Furthermore, the Managing Owner did not conduct an arms length negotiation with respect to Invesco Distributors.
|
(25) |
Shareholders Will Be Subject to Taxation on Their Allocable Share of the Funds Taxable Income, Whether or Not They Receive Cash Distributions. |
Shareholders will be subject to U.S. federal income taxation and, in some cases, state, local, or foreign income taxation on their allocable
share of the Funds taxable income, whether or not they receive cash distributions from the Fund. Shareholders may not receive cash distributions equal to their share of the Funds taxable income or even the tax liability that results from
such income.
|
(26) |
Items of Income, Gain, Loss and Deduction With Respect to Shares could be Reallocated if the IRS does not Accept the Assumptions or Conventions Used by the Fund in Allocating Such Items.
|
U.S. federal income tax rules applicable to partnerships are complex and often difficult to apply to publicly
traded partnerships. The Fund will apply certain assumptions and conventions in an attempt to
comply with applicable rules and to report items of income, gain, loss and deduction to Shareholders in a manner that reflects the Shareholders beneficial interest in such tax items, but
these assumptions and conventions may not be in compliance with all aspects of the applicable tax requirements. It is possible that the United States Internal Revenue Service, or the IRS, will successfully assert that the conventions and assumptions
used by the Fund do not satisfy the technical requirements of the Internal Revenue Code of 1986, as amended, or the Code and/or Treasury Regulations and could require that items of income, gain, loss and deduction be adjusted or reallocated in a
manner that adversely affects one or more Shareholders.
|
(27) |
The Current Treatment of Long Term Capital Gains Under Current U.S. Federal Income Tax Law May Be Adversely Affected, Changed or Repealed in the Future. |
Under current law, long-term capital gains are taxed to non-corporate investors at reduced U.S. federal income tax rates. This tax treatment
may be adversely affected, changed or repealed by future changes in, or the expiration of, tax laws at any time.
PROSPECTIVE
INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS AND COUNSEL WITH RESPECT TO THE POSSIBLE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE SHARES; SUCH TAX CONSEQUENCES MAY DIFFER WITH RESPECT TO DIFFERENT INVESTORS.
|
(28) |
Failure of Futures Commission Merchants or Commodity Brokers to Segregate Assets May Increase Losses; Despite Segregation of Assets, the Fund Remains at Risk of Significant Losses Because
the Fund May Only Receive a Pro-Rata Share of the Assets or No Assets at All. |
The Commodity Exchange Act requires
a clearing broker to segregate all funds received from customers from such brokers proprietary assets. If the Commodity Broker fails to do so, the assets of the Fund might not be fully protected in the event of the Commodity Brokers
bankruptcy. Furthermore, in the event of the Commodity Brokers bankruptcy, the Fund could be limited to recovering either a pro rata share of all available funds segregated on behalf of the Commodity Brokers combined customer
-27-
accounts or the Fund may not recover any assets at all, even though certain property specifically traceable to the Fund was held by the Commodity Broker. The Commodity Broker may, from
time-to-time, have been the subject of certain regulatory and private causes of action. Such material actions, if any, are described under The Commodity Broker.
In the event of a bankruptcy or insolvency of any exchange or a clearing house, the Fund could experience a loss of the funds deposited
through its Commodity Broker as margin with the exchange or clearing house, a loss of any unrealized profits on its open positions on the exchange, and the loss of profits on its closed positions on the exchange.
|
(29) |
The Effect of Market Disruptions and Government Intervention Are Unpredictable and May Have an Adverse Effect on the Value of Your Shares. |
The global financial markets have in the past few years gone through pervasive and fundamental disruptions that have led to extensive and
unprecedented governmental intervention. Such intervention has in certain cases been implemented on an emergency basis, suddenly and substantially eliminating market participants ability to continue to implement certain strategies
or manage the risk of their outstanding positions. In addition as one would expect given the complexities of the financial markets and the limited time frame within which governments have felt compelled to take action these
interventions have typically been unclear in scope and application, resulting in confusion and uncertainty which in itself has been materially detrimental to the efficient functioning of the markets as well as previously successful investment
strategies.
The Fund may incur major losses in the event of disrupted markets and other extraordinary events in which historical
pricing relationships become materially distorted. The risk of loss from pricing distortions is compounded by the fact that in disrupted markets many positions become illiquid, making it difficult or impossible to close out positions against which
the markets are moving. The financing available to market participants from their banks, dealers and other counterparties is typically reduced in disrupted markets. Such a reduction may result in substantial losses to the affected market
participants. Market disruptions may from time to time cause dramatic losses, and such events can result in otherwise historically low-risk strategies performing with unprecedented volatility and risk.
|
(30) |
Regulatory Changes or Actions, Including the Implementation of the Dodd-Frank Act, May Alter the Operations and Profitability of the Fund |
The regulation of commodity interest transactions in the United States is a rapidly changing area of law and is subject to ongoing
modification by governmental and judicial action. Considerable regulatory attention has been focused on non-traditional investment pools that are publicly distributed in the United States. The Dodd-Frank Act regulates markets, market participants
and financial instruments that previously have been unregulated and substantially alters the regulation of many other markets, market participants and financial instruments. It is difficult to predict the impact of the Dodd-Frank Act on the Fund,
the Managing Owner, and the markets in which the Fund may invest, the NAV of the Fund or the market price of the Shares. The Dodd-Frank Act and the implementing regulation adopted by regulators could result in the Funds investment strategy
becoming non-viable or non-economic to implement. Therefore, the Dodd-Frank Act and regulations adopted pursuant to the Dodd-Frank Act could have a material adverse impact on the profit potential of the Fund and in turn the value of your Shares.
|
(31) |
Lack of Independent Advisers Representing Investors. |
The Managing Owner has consulted with counsel, accountants and other advisers regarding the formation and operation of the Fund. No counsel
has been appointed to represent you in connection with the Funds continuous offering of Shares. Accordingly, you should consult your own legal, tax and financial advisers regarding the desirability of an investment in the Shares.
|
(32) |
Possibility of Termination of the Fund May Adversely Affect Your Portfolio. |
The Managing Owner may withdraw from the Fund upon 120 days notice, which would cause the Fund to terminate unless a substitute
managing owner was obtained. Owners of 50% of the Shares have the power to terminate the Fund. If it is so exercised, investors who may wish to continue to invest in a vehicle that tracks the Funds Index will have to find
-28-
another vehicle, and may not be able to find another vehicle that offers the same features as the Fund. See Description of the Shares; Certain Material Terms of the Trust Declaration
Termination Events for a summary of termination events. Such detrimental developments could cause you to liquidate your investments and upset the overall maturity and timing of your investment portfolio. If the registrations with the CFTC or
memberships in the NFA of the Managing Owner or the Commodity Broker were revoked or suspended, such entity would no longer be able to provide services to the Fund.
|
(33) |
Shareholders Do Not Have the Rights Enjoyed by Investors in Certain Other Vehicles. |
As interests in an investment trust, the Shares have none of the statutory rights normally associated with the ownership of shares of a
corporation (including, for example, the right to bring oppression or derivative actions). In addition, the Shares have limited voting and distribution rights (for example, Shareholders do not have the right to elect
directors and the Fund is not required to pay regular distributions, although the Fund may pay distributions in the discretion of the Managing Owner).
|
(34) |
An Investment in the Shares May Be Adversely Affected by Competition From Other Methods of Investing in Currencies. |
The Fund constitutes a relatively new type of investment vehicle. The Fund competes with other financial vehicles, including mutual funds,
and other investment companies, ETFs, other index tracking commodity pools, actively traded commodity pools, hedge funds, traditional debt and equity securities issued by companies and foreign governments, other securities backed by or linked to
currencies, and direct investments in the underlying currencies or currencies futures contracts. Market and financial conditions, and other conditions beyond the Managing Owners control, may make it more attractive to invest in other financial
vehicles or to invest in such currencies directly, which could limit the market for the Shares and therefore reduce the liquidity of the Shares.
|
(35) |
Competing Claims Over Ownership of Intellectual Property Rights Related to the Fund Could Adversely Affect the Fund and an Investment in the Shares. |
While the Managing Owner believes that all intellectual property rights needed to operate the Fund are either owned by or licensed to the
Managing Owner or have been obtained, third parties may allege or assert ownership of intellectual property rights which may be related to the design, structure and operations of the Fund. To the extent any claims of such ownership are brought or
any proceedings are instituted to assert such claims, the negotiation, litigation or settlement of such claims, or the ultimate disposition of such claims in a court of law if a suit is brought, may adversely affect the Fund and an investment in the
Shares, for example, resulting in expenses or damages or the termination of the Fund.
|
(36) |
The Value of the Shares Will be Adversely Affected if the Fund is Required to Indemnify the Trustee or the Managing Owner. |
Under the Trust Declaration, the Trustee and the Managing Owner have the right to be indemnified for any liability or expense either incurs
without gross negligence or willful misconduct. That means the Managing Owner may require the assets of the Fund to be sold in order to cover losses or liability suffered by it or by the Trustee. Any sale of that kind would reduce the NAV of the
Fund and the value of the Shares.
|
(37) |
The NAV Calculation of the Fund May Be Overstated or Understated Due to the Valuation Method Employed When a Settlement Price is not Available on the Date of NAV Calculation.
|
Calculating the NAV of the Fund includes, in part, any unrealized profits or losses on open foreign exchange
futures contracts. Under normal circumstances, the NAV of the Fund reflects the settlement price of open foreign exchange futures contracts on the date when the NAV is being calculated. However, if a foreign exchange futures contract traded on an
exchange (both U.S. and, to the extent it becomes applicable, non-U.S. exchanges) could not be liquidated on such day (due to the operation of daily limits or other rules of the exchange upon which that position is traded or otherwise), the Managing
Owner may value such
-29-
futures contract pursuant to policies the Managing Owner has adopted, which are consistent with normal industry standards. In such a situation, there is a risk that the calculation of the NAV of
the Fund on such day will not accurately reflect the realizable market value of such foreign exchange futures contract. For example, daily limits are generally triggered in the event of a significant change in market price of a foreign exchange
futures contract. Therefore, as a result of the daily limit, the current settlement price is unavailable. Because the Managing Owner may value such futures contract pursuant to policies the Managing Owner has adopted, which are consistent with
normal industry standards, there is a risk that the resulting calculation of the NAV of the Fund could be under or overstated, perhaps to a significant degree. Although the Eligible Index Currencies that the Fund will invest in are not currently
subject to daily limits, the terms and conditions of these contracts may change in the future, and thus, may subject the Fund to the above-described risks.
|
(38) |
Exchange Rates on the Index Currencies Could be Volatile and Could Materially and Adversely Affect the Performance of the Shares. |
Foreign exchange rates are influenced by national debt levels and trade deficits, domestic and foreign inflation rates and investors
expectations concerning inflation rates, domestic and foreign interest rates and investors expectations concerning interest rates, currency exchange rates, investment and trading activities of mutual funds, hedge funds and currency funds; and
global or regional political, economic or financial events and situations. Additionally, foreign exchange rates on the Index Currencies may also be influenced by changing supply and demand for a particular Index Currency, monetary policies of
governments (including exchange control programs, restrictions on local exchanges or markets and limitations on foreign investment in a country or on investment by residents of a country in other countries), changes in balances of payments and
trade, trade restrictions, currency devaluations and revaluations. Also, governments from time-to-time intervene in the currency markets, directly and by regulation, in order to influence prices directly. Additionally, expectations among market
participants that a currencys value soon will change may also affect exchange rates on the Index Currencies. These events and actions are unpredictable. The resulting volatility in the exchange rates on the underlying Index Currencies may
materially and adversely affect the market value of the futures contracts on the Index Currencies, which would then negatively impact the value of your Shares.
|
(39) |
Substantial Sales of Index Currencies by the Official Sector Could Adversely Affect an Investment in the Shares. |
The official sector consists of central banks, other governmental agencies and multi-lateral
institutions that buy, sell and hold certain Index Currencies as part of their reserve assets. The official sector holds a significant amount of Index Currencies that can be mobilized in the open market. In the event that future economic, political
or social conditions or pressures require members of the official sector to sell their Index Currencies simultaneously or in an uncoordinated manner, the demand for Index Currencies might not be sufficient to accommodate the sudden increase in the
supply of certain Index Currencies to the market. Consequently, the price of an Index Currency may decline, which may then negatively impact the Shares.
|
(40) |
Although the Shares are Limited Liability Investments, Certain Circumstances such as Bankruptcy of the Fund or Indemnification of the Fund by the Shareholders will Increase a
Shareholders Liability. |
The Shares are limited liability investments; investors may not lose more than the
amount that they invest plus any profits recognized on their investment. However, Shareholders could be required, as a matter of bankruptcy law, to return to the estate of the Fund any distribution they received at a time when the Fund was in fact
insolvent or in violation of its Trust Declaration. In addition, although the Managing Owner is not aware of this provision ever having been invoked in the case of any public futures fund, Shareholders agree in the Trust Declaration that they will
indemnify the Fund for any harm suffered by it as a result of
|
|
|
Shareholders actions unrelated to the business of the Fund, or |
|
|
|
taxes separately imposed on the Fund by any state, local or foreign taxing authority.
|
-30-
|
(41) |
The Fund may Potentially Lose Money on its Holdings of Money Market Mutual Funds. |
Although a money market mutual fund seeks to preserve the value of an investment at $1.00 per share, the Fund may lose money by investing in
a money market mutual fund for cash management purposes. The share price of money market mutual funds can fall below the $1.00 share price. The Fund cannot rely on or expect a money market mutual funds adviser or its affiliates to enter into
support agreements or take other actions to maintain the money market mutual funds $1.00 share price. The credit quality of a money market mutual funds holdings can change rapidly in certain markets, and the default of a single holding
could have an adverse impact on the money market mutual funds share price. The money market mutual funds share price can also be negatively affected during periods of high redemption pressures and/or illiquid markets. Furthermore, the
SEC recently adopted amendments to money market mutual fund regulations that, when implemented, could impact a money market mutual funds operations and possibly negatively impact its return.
|
(42) |
Due to the Increased use of Technologies, Intentional and Unintentional Cyber Attacks Pose Operational and Information Security Risks. |
With the increased use of technologies such as the Internet and the dependence on computer systems to perform necessary business functions,
the Fund is susceptible to operational and information security risks. In general, cyber incidents can result from deliberate attacks or unintentional events. Cyber attacks include, but are not limited to gaining unauthorized access to digital
systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing
denial-of-service attacks on websites. Cyber security failures or breaches of the Funds third party service providers (including, but not limited to, Index Sponsor, the Administrator and transfer agent) or the issuers of the money market
mutual funds in which the Fund invests, have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, the inability of Fund shareholders to transact business, violations of applicable privacy and
other laws, regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs, and/or additional compliance costs. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future. The
Fund and its shareholders could be negatively impacted as a result. While the Managing Owner has established business continuity plans and systems to prevent such cyber attacks, there are inherent limitations in such plans and systems including the
possibility that certain risks have not been identified. Furthermore, the Fund cannot control the cyber security plans and systems put in place by Funds third party service providers. Cyber attacks may also cause disruptions to the futures
exchanges and clearinghouses through which the Fund invests in exchange-traded futures contracts, resulting in disruptions to the Funds investment objectives and resulting in financial losses.
|
(43) |
The Fund is Subject to Extensive Regulatory Reporting and Compliance. |
The Fund is subject to changing regulation of corporate governance and public disclosure that have increased the Funds risk of
noncompliance.
Because the Shares are publicly traded, the Fund is subject to certain rules and regulations of federal, state and
financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the SEC, the CFTC and
NYSE-ARCA, have in recent years issued new requirements and regulations, most notably the Sarbanes-Oxley Act of 2002. From time to time, since the adoption of the Sarbanes-Oxley Act of 2002, these authorities have continued to develop additional
regulations or interpretations of existing regulations. The Funds ongoing efforts to comply with these regulations and interpretations have resulted in, and are likely to continue resulting in, a diversion of managements time and
attention from focusing on Fund management to compliance related activities.
The Fund is responsible for establishing and maintaining
adequate internal control over financial reporting. The Funds internal control system is designed to provide reasonable assurance to its management regarding the preparation and fair presentation of published financial statements. All internal
control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may provide only reasonable assurance with respect to financial statement preparation and presentation.
-31-
|
(44) |
Current Discussions between the SEC and PricewaterhouseCoopers LLP regarding PricewaterhouseCoopers LLPs Independence Could Have Potentially Adverse Consequences for the Fund.
|
PricewaterhouseCoopers LLP informed the Fund that it has identified an issue related to its independence under
Rule 2-01(c)(1)(ii)(A) of Regulation S-X (referred to as the Loan Rule). The Loan Rule prohibits accounting firms, such as PricewaterhouseCoopers LLP, from being deemed independent if they have certain financial relationships with their audit
clients or certain affiliates of those clients. The Fund is required under various securities laws to have its financial statements audited by an independent accounting firm.
The Loan Rule specifically provides that an accounting firm would not be independent if it receives a loan from a lender that is a record or
beneficial owner of more than ten percent of an audit clients equity securities. For purposes of the Loan Rule, audit clients include the Fund as well as all registered investment companies advised by the Managing Owner and its affiliates,
including other subsidiaries of the Managing Owners parent company, Invesco Ltd. (collectively, the Invesco Fund Complex). PricewaterhouseCoopers LLP informed the Fund it has relationships with lenders who hold, as record owner, more than ten
percent of the shares of certain funds within the Invesco Fund Complex. These relationships call into question PricewaterhouseCoopers LLP independence under the Loan Rule with respect to those funds, as well as all other funds in the Invesco Fund
Complex.
On June 20, 2016, the SEC Staff issued a no-action letter to another mutual fund complex (see Fidelity
Management & Research Company et al., No-Action Letter) related to the audit independence issue described above. In that letter, the SEC confirmed that it would not recommend enforcement action against a fund that relied on audit services
performed by an audit firm that was not in compliance with the Loan Rule in certain specified circumstances. PricewaterhouseCoopers LLP has communicated that the circumstances which called into question its independence under the Loan Rule with
respect to the audits of the Invesco Fund Complex are consistent with circumstances described
in the no action letter. PricewaterhouseCoopers LLP also concluded that its objectivity and impartiality was not impaired with respect to the planning for and execution of the Funds audits
and that they have complied with PCAOB Rule 3526(b)(1) and (2), which are conditions to the Fund relying on the no action letter. Therefore, the Managing Owner, the Fund and PricewaterhouseCoopers LLP have concluded that PricewaterhouseCoopers LLP
can continue as the Funds independent registered public accounting firm. The Invesco Fund Complex intends to rely upon the no-action letter.
If in the future the independence of PricewaterhouseCoopers LLP is called into question under the Loan Rule by circumstances that are not
addressed in the SECs no-action letter, the Fund will need to take other action in order for the Funds filings with the SEC containing financial statements to be deemed compliant with applicable securities laws. Such additional actions
could result in additional costs, impair the ability of the Fund to issue new shares or have other material adverse effects on the Fund. In addition, the SEC has indicated that the no-action relief will expire 18 months from its issuance, after
which the Invesco Fund Complex will no longer be able to rely on the letter unless its term is extended or made permanent by the SEC Staff.
INVESTMENT OBJECTIVE
Investment Objective
The Fund seeks to track changes, whether positive or negative, in the level of the Deutsche Bank G10 Currency Future Harvest Index® Excess Return, or the Index, over time, plus the excess, if any, of the sum of the Funds Treasury Income and Money Market Income over the expenses of the Fund. For the avoidance of
doubt, the Fund invests in futures contracts in an attempt to track its Index. The Fund holds Treasury Securities and money market mutual funds for margin and/or cash management purposes only.
The Index is designed to reflect the return from investing on a 2:1 leveraged basis in long currency futures positions for certain
currencies associated with relatively high yielding interest rates and in short currency futures positions for certain currencies associated with relatively low yielding interest rates. The Shares are designed for investors who want a cost-effective
and convenient way to invest in a diversified index of currency futures.
-32-
The Index is designed to exploit the trend that currencies associated with relatively
high interest rates, on average, tend to rise in value relative to currencies associated with relatively low interest rates. This trend is consistent with economic theory regarding the correct price of a currency future, known as the Interest
Rate Parity formula or the Covered Interest Arbitrage formula, and can be seen in the historical trading patterns of currency futures.
The theoretical or fair market price of a currency future contract is derived from the spot FX rate, interest rates of
the two currencies and time to expiry of the currency future contract and represents an equilibrium relationship among the interest rates, spot markets and futures markets associated with the currencies in question. If an equilibrium relationship
does not exist between two currencies, arbitrage opportunities arise and the exploitation of these opportunities by arbitrageurs will tend to drive currency futures prices toward equilibrium. Application of the Interest Rate Parity formula
under circumstances in which currencies are not in an equilibrium relationship predicts that if the currency future is based on a rate ranging from a high yielding currency to a low yielding currency, the fair market price of the currency future
will be below the spot rate. The longer the time to the expiry of the currency future the greater the amount the fair market price of the currency future will be below the spot rate. If the spot rate stays approximately the same then, as you move
closer to the expiry of the currency future, the fair market price will increase. In other words, the currency future rate between a relatively high interest rate currency and low interest rate currency tends to increase over time (assuming spot is
relatively stable).
The Index exploits this trend using both long and short futures positions, which is expected to provide more
consistent and less volatile returns than could be obtained by taking long positions only or short positions only.
Advantages of
investing in the Fund include:
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|
Ease and Flexibility of Investment. The Shares trade on the NYSE Arca and provide institutional and retail investors with indirect access to the currency futures markets. The Shares may be bought and sold
on the NYSE Arca like other exchange-listed
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|
securities. Retail investors may purchase and sell Shares through traditional brokerage accounts. |
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|
Shares May Provide A More Cost Effective Alternative. Investing in the Shares can be easier and less expensive for an investor than constructing and trading a comparable foreign currency futures portfolio.
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|
The Fund May Provide Gains on Both the Upside and Downside Price Movements of the Index Currencies. The Index will rise as a result of any upward price movement of the Index Currencies that are expected to
gain relative to the USD by investing in long futures positions on such Index Currencies. The Index also will rise as a result of any downward price movement of the Index Currencies that are expected to lose relative to the USD by investing in short
futures positions on such Index Currencies. |
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Margin. Shares are eligible for margin accounts. |
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Diversification. The Shares may help to diversify a portfolio because historically the Index has tended to exhibit low to negative correlation with both equities and conventional bonds.
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Transparency. The Shares provide a more direct investment in currencies than mutual funds or exchange-traded funds that invest in currency-linked products or otherwise gain indirect exposure to currencies,
which may have implicit imbedded costs, credit risk and other potentially opaque features. |
To the extent that the
Funds actual and projected Treasury Income and Money Market Income exceeds the actual and projected fees and expenses of the Fund, the Managing Owner expects periodically to make distributions of the amount of such excess.
-33-
Investing in the Fund does not insulate Shareholders from certain risks, including price
volatility.
Role of Managing Owner
The Managing Owner serves as the commodity pool operator and commodity trading advisor of the Fund.
Specifically, the Managing Owner:
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|
selects the Trustee, Commodity Broker, Administrator, Index Sponsor, Custodian, Transfer Agent, Marketing Agent, distributor, and auditor; |
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negotiates various agreements and fees; |
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|
performs such other services as the Managing Owner believes that the Fund may from time-to-time require; and |
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|
monitors the performance results of the Funds portfolio and reallocates assets within the portfolio with a view to causing the performance of the Funds portfolio to track that of the Index over time.
|
The Managing Owner is registered as a commodity pool operator, commodity trading advisor and swap firm with the CFTC and
is a member of the NFA.
The principal office of the Managing Owner is located at c/o Invesco PowerShares Capital Management LLC,
3500 Lacey Road, Suite 700, Downers Grove, IL 60515. The telephone number of the Managing Owner is (800) 983-0903.
[Remainder of page
left blank intentionally.]
-34-
PERFORMANCE OF
POWERSHARES DB G10 CURRENCY HARVEST FUND (TICKER: DBV)
Name of Pool: PowerShares DB G10 Currency
Harvest Fund
Type of Pool: Public, Exchange-Listed Commodity Pool
Inception of Trading: September 2006
Aggregate Gross Capital Subscriptions as of August 31, 20161: $1,496,737,196
NAV as of August 31, 20162: $73,618,287
NAV per Share as of August 31, 20163:$24.54
Worst Monthly Drawdown4: (5.93)% January 2015
Worst Peak-to-Valley Drawdown5: (19.01)% April 2013 September 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly Rate
of Return |
|
|
2016 |
(%) |
|
|
2015 |
(%) |
|
|
2014 |
(%) |
|
|
2013 |
(%) |
|
|
2012 |
(%) |
|
|
2011 |
(%) |
January |
|
|
(0.60 |
) |
|
|
(5.93 |
) |
|
|
(1.89 |
) |
|
|
1.95 |
|
|
|
2.98 |
|
|
|
0.04 |
|
February |
|
|
(0.13 |
) |
|
|
4.34 |
|
|
|
1.60 |
|
|
|
0.08 |
|
|
|
4.24 |
|
|
|
0.55 |
|
March |
|
|
1.43 |
|
|
|
(0.64 |
) |
|
|
3.16 |
|
|
|
1.91 |
|
|
|
(2.03 |
) |
|
|
1.84 |
|
April |
|
|
0.30 |
|
|
|
0.24 |
|
|
|
(0.23 |
) |
|
|
0.85 |
|
|
|
(0.92 |
) |
|
|
3.21 |
|
May |
|
|
(0.51 |
) |
|
|
(2.37 |
) |
|
|
(0.12 |
) |
|
|
(2.99 |
) |
|
|
(5.32 |
) |
|
|
(1.43 |
) |
June |
|
|
3.12 |
|
|
|
(3.29 |
) |
|
|
0.27 |
|
|
|
(4.40 |
) |
|
|
4.85 |
|
|
|
(0.28 |
) |
July |
|
|
0.79 |
|
|
|
(0.98 |
) |
|
|
(0.83 |
) |
|
|
(0.28 |
) |
|
|
1.22 |
|
|
|
(0.65 |
) |
August |
|
|
0.90 |
|
|
|
(3.87 |
) |
|
|
0.99 |
|
|
|
(2.01 |
) |
|
|
(0.04 |
) |
|
|
(1.06 |
) |
September |
|
|
|
|
|
|
(0.67 |
) |
|
|
(1.66 |
) |
|
|
2.82 |
|
|
|
1.64 |
|
|
|
(5.28 |
) |
October |
|
|
|
|
|
|
4.28 |
|
|
|
0.00 |
|
|
|
0.82 |
|
|
|
0.28 |
|
|
|
6.36 |
|
November |
|
|
|
|
|
|
2.12 |
|
|
|
0.27 |
|
|
|
(1.28 |
) |
|
|
1.22 |
|
|
|
(2.33 |
) |
December |
|
|
|
|
|
|
(1.52 |
) |
|
|
(1.32 |
) |
|
|
(0.04 |
) |
|
|
1.63 |
|
|
|
(0.13 |
) |
Compound
Rate of Return6 |
|
|
5.37 (8 months |
% ) |
|
|
(8.49 |
)% |
|
|
0.13 |
% |
|
|
(2.79 |
)% |
|
|
9.74 |
% |
|
|
0.38 |
% |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
Footnotes to Performance Information
1.
Aggregate Gross Capital Subscriptions is the aggregate of all amounts ever contributed to the pool.
2. NAV is the
NAV of the pool as of August 31, 2016.
3. NAV per Share is the NAV of the pool divided by the total number of Shares
outstanding as of August 31, 2016.
4. Worst Monthly Drawdown is the largest single month loss sustained during the most
recent five calendar years and year to date (if applicable). Drawdown as used in this section of the Prospectus means losses experienced by the relevant pool over the specified period and is calculated on a rate of return basis, i.e.,
dividing net performance by beginning equity. Drawdown is measured on the basis of monthly returns only, and does not reflect intra-month figures. Month is the month of the Worst Monthly Drawdown.
5. Worst Peak-to-Valley Drawdown is the largest percentage decline in the NAV per Share during the most recent five calendar years
(and to the extent applicable, for a period beyond the most recent five calendar years if the starting date of the peak value extends beyond this period). This need not be a continuous decline, but can be a series of positive and negative returns
where the negative returns are larger than the positive returns. Worst Peak-to-Valley Drawdown represents the greatest percentage decline from any month-end NAV per Share that occurs without such month-end NAV per Share being equaled or
exceeded as of a subsequent month-end. For example, if the NAV per Share of a particular pool declined by $1 in each of January and February, increased by $1 in March and declined again by $2 in April, a peak-to-valley drawdown analysis
conducted as of the end of April would consider that drawdown to be still continuing and to be $3 in amount, whereas if the NAV per Share had increased by $2 in March, the January-February drawdown would have ended as of the end of
February at the $2 level.
6. Compound Rate of Return is calculated by multiplying on a compound basis each of the monthly
rates of return set forth in the chart above and not by adding or averaging such monthly rates of return. For periods of less than one year, the results are year-to-date.
THE FUNDS PERFORMANCE INFORMATION FROM INCEPTION UP TO AND EXCLUDING FEBRUARY 23, 2015 IS A REFLECTION OF THE PERFORMANCE ASSOCIATED
WITH DB COMMODITY SERVICES LLC, WHICH SERVED AS THE PREDECESSOR MANAGING OWNER. ALL THE PERFORMANCE INFORMATION ON AND AFTER FEBRUARY 23, 2015 REFLECTS THE PERFORMANCE ASSOCIATED WITH THE MANAGING OWNER.
-35-
DESCRIPTION OF THE DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST INDEX® EXCESS RETURN
The PowerShares DB G10 Currency Harvest Fund (the
Fund) is not sponsored or endorsed by Deutsche Bank AG, Deutsche Bank Securities Inc. or any subsidiary or affiliate of Deutsche Bank AG or Deutsche Bank Securities Inc. (collectively, Deutsche Bank). The Deutsche Bank G10
Currency Future Harvest Index® Excess Return (the DB Index) is the exclusive property of Deutsche Bank Securities Inc. Neither Deutsche Bank nor any other party involved in,
or related to, making or compiling the DB Index makes any representation or warranty, express or implied, concerning the DB Index, the Fund or the advisability of investing in securities generally. Neither Deutsche Bank nor any other party involved
in, or related to, making or compiling the DB Index has any obligation to take the needs of Invesco PowerShares Capital Management LLC, the sponsor of the Fund, or its clients into consideration in determining, composing or calculating the DB Index.
Neither Deutsche Bank nor any other party involved in, or related to, making or compiling the DB Index is responsible for or has participated in the determination of the timing of, prices at, quantities or valuation of the Fund. Neither Deutsche
Bank nor any other party involved in, or related to, making or compiling the DB Index has any obligation or liability in connection with the administration or trading of the Fund.
NEITHER DEUTSCHE BANK NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING THE DB INDEX, WARRANTS OR GUARANTEES THE
ACCURACY AND/OR THE COMPLETENESS OF THE DB INDEX OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. NEITHER DEUTSCHE BANK NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING
THE DB INDEX, MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY INVESCO POWERSHARES CAPITAL MANAGEMENT LLC FROM THE USE OF THE DB INDEX OR ANY DATA INCLUDED THEREIN. NEITHER DEUTSCHE BANK NOR ANY OTHER PARTY INVOLVED IN, OR
RELATED TO, MAKING OR COMPILING THE DB INDEX, MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DB INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DEUTSCHE BANK OR ANY OTHER PARTY INVOLVED IN, OR
RELATED TO, MAKING OR COMPILING THE DB INDEX HAVE ANY LIABILITY FOR DIRECT, INDIRECT, PUNITIVE, SPECIAL, CONSEQUENTIAL OR ANY OTHER DAMAGES OR LOSSES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. EXCEPT AS EXPRESSLY PROVIDED
TO THE CONTRARY, THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DEUTSCHE BANK AND INVESCO POWERSHARES CAPITAL MANAGEMENT LLC.
No purchaser, seller or holder of the shares of this Fund, or any other person or entity, should use or refer to any Deutsche Bank trade
name, trademark or service mark to sponsor, endorse, market or promote this Fund without first contacting Deutsche Bank to determine whether Deutsche Banks permission is required. Under no circumstances may any person or entity claim any
affiliation with Deutsche Bank without the written permission of Deutsche Bank.
A general description of the Index (including,
but not limited to, the underlying formulae and all other Index terms and conditions), or the General Description, is included on the Index Sponsors website at https://index.db.com, or any successor thereto. The information included in
Exhibit B of the Trust Declaration, which is the Index description, or the Description, may be provided in greater detail than that which is included in the General Description. Any material changes to the terms and conditions of the Index as
disclosed in future versions of the General Description will be deemed to amend such corresponding terms and conditions that are included in the Description, unless otherwise determined at the sole discretion of the Index Sponsor. The Index Sponsor
may, in its sole discretion and for housekeeping purposes, amend and restate the Description to conform it to reflect material changes to the General Description.
General
The sponsor of the Index, or the Index Sponsor, is Deutsche Bank Securities Inc. The composition of the Index may be adjusted in the Index
Sponsors discretion. The Index Sponsor may from time-to-time subcontract the provision of the calculation and other services described below to one or more third parties.
-36-
Index Calculation and Rules
The currencies that are eligible for inclusion in the Index, or Eligible Index Currencies, are the currencies of The Group of Ten, or G10,
countries, which include the following currencies:
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|
|
Eligible Index Currency |
|
Symbol |
United States Dollar |
|
USD |
Euro |
|
EUR |
Japanese Yen |
|
JPY |
Canadian Dollar |
|
CAD |
Swiss Franc |
|
CHF |
British Pound |
|
GBP |
Australian Dollar |
|
AUD |
New Zealand Dollar |
|
NZD |
Norwegian Krone |
|
NOK |
Swedish Krona |
|
SEK |
Futures contracts referencing each of the Eligible Index Currencies (except USD) currently are traded on the
Chicago Mercantile Exchange, or CME, although currency futures contracts on the Eligible Index Currencies also trade on other exchanges in the United States and the Fund may invest in such contracts.
At any time, the Index is comprised of long futures positions in the three Eligible Index Currencies associated with the highest interest
rates and short futures positions in the three Eligible Index Currencies associated with the lowest interest rates. The Indexs six component currencies from time-to-time, comprised of the three long and three short futures positions, are
referred to as the Index Currencies and are used to calculate the value of the Index. The composition of the Index may be adjusted in the event that the Index Sponsor is not able to calculate the closing prices of the Index Currencies.
The Index Sponsor calculates the Index on both an excess return basis and a total return basis. The excess return basis calculation reflects
the change in market value of the applicable underlying currency futures only. The total return basis calculation reflects the sum of the change in market value of the applicable underlying currency futures plus the return
on 3-month U.S. Treasury bills. The Fund seeks to track changes, whether positive or negative, in the level of the Index calculated on an excess return basis, over time, plus the excess, if any,
of the Funds Treasury Income and Money Market Income over expenses of the Fund. For the avoidance of doubt, the Fund invests in futures contracts in an attempt to track its Index. The Fund holds Treasury Securities and money market mutual
funds for margin and/or cash management purposes only.
The Fund will make distributions at the discretion of the Managing Owner. To the
extent that the Funds actual and projected Treasury Income and the Funds actual and projected Money Market Income exceeds the actual and projected fees and expenses of the Fund, the Managing Owner expects periodically to make
distributions of the amount of such excess. The Fund currently does not expect to make distributions with respect to its capital gains. Depending on the Funds performance for the taxable year and your own tax situation for such year, your
income tax liability for the taxable year for your allocable share of the Funds net ordinary income or loss and capital gain or loss may exceed any distributions you receive with respect to such year.
In order to determine which Eligible Index Currencies to include in the Index from time-to-time, the Index Sponsor will review the
composition of the Index on a quarterly basis 5 business days prior to the IMM Date. IMM Date means the third Wednesday of March, June, September and December, a traditional settlement date in the International Money Market.
The Index Sponsor will review the three month Libor rate for each Eligible Index Currency other than NZD, SEK, NOK, CAD and AUD. The Index
Sponsor will review the 3 month rate of the New Zealand Bank Bill for NZD. The Index Sponsor will review the three month Stibor rate and the three month Nibor rate of the SEK and NOK, respectively. The Index Sponsor will review the 3 month Canada
Bankers Acceptance Rate for CAD. The Index Sponsor will review the Australian Bank Bill Short Term 3 Month Mid rate for AUD. The Libor, Stibor and Nibor rates for the Eligible Index Currencies, as applicable, mean the London, Stockholm and Norway
interbank offered rates for overnight deposits, respectively, each of which is published by Reuters. The Eligible Index Currencies are then ranked according to yield. The three highest yielding and three lowest yielding are selected as Index
-37-
Currencies for inclusion in calculating the Index. If two Index Currencies have the same yield, then the previous quarters ranking will be used.
The Index is re-weighted quarterly. Upon re-weighting, the high yielding Index Currencies are allocated a base weight of 33 1/3% and the low
yielding Index Currencies are allocated a base weight of -33 1/3%. These new weights are applied during the Index re-weighting period, which takes place between the fourth and third Index Business Days prior to the applicable IMM Date, or Index
Re-Weighting Period.
The CME traded futures contract of each applicable Index Currency that is closest to expiration is used in the
Index calculation. The futures contracts on the Index Currencies are rolled during the Index Re-Weighting Period. The new futures contract on an Index Currency that has the next closest expiration date is selected. The calculation of the Index on an
excess return basis is the weighted return on the change in price of the futures contracts on the Index Currencies.
A 3-month U.S.
Treasury bill return is then calculated and included to calculate the total return index. Please refer to Exhibit B of the Trust Declaration for the mathematical formulae of the Index.
The Index has been calculated using historical data since March 12, 1993. The Index is composed of notional amounts of each Index
Currency. The notional amounts of the Index Currencies included in the Index are based on the Index Closing Level as of the Index Re-Weighting Period. The Index Closing Level reflects an arithmetic weighted return of the change in the Index
Currencies exchange rates against the USD since March 12, 1993. March 1993 was chosen as a starting period because it represents the earliest date on which reliable data for all the Eligible Index Currencies exists. On March 12, 1993, the
closing Index level was USD 100. Between March 12, 1993 to August 31, 2016, the Index level as calculated on an excess return basis has ranged from as high as USD 315.27 (July 25, 2007) to as low as USD 94.03 (July 30, 1993). Past Index
results are not necessarily indicative of future changes, positive or negative, in the Index.
To track the Index, the Fund generally
will establish long futures positions in the three Eligible Index Currencies associated with the highest interest rates and short futures positions in the three Eligible Index Currencies associated with the lowest interest
rates and will adjust its holdings quarterly as the Index is adjusted. However, if the United States Dollar, or USD, is among the Index Currencies from time-to-time, the Fund will not establish a
long or short futures position (as the case may be) in USD, because USD is the Funds home currency and, as a consequence, the Fund never can enjoy profit or suffer loss from long or short futures positions in USD. When the USD is not
associated with the highest or lowest interest rates among the Eligible Index Currencies, the aggregate notional value of the Funds futures contracts at the time they are established will be double the value of the Funds holdings of
United States Treasury Securities and money market mutual funds (affiliated or otherwise), which means the Fund will have a leverage ratio at such time of 2:1. If the USD is associated with the highest or lowest interest rates among the Eligible
Index Currencies, the aggregate notional value of the Funds futures contracts at the time they are established will be approximately 1.66 times the value of the Funds holdings of United States Treasury Securities and money market mutual
funds (affiliated or otherwise), which means the Fund will have a leverage ratio at such time of approximately 1.66:1. Holding futures positions with a notional amount in excess of the Funds NAV constitutes a form of leverage. The use of
leverage will increase the potential for both trading profits and losses, depending on the changes, positive and negative, in the Index. The Funds ability to track the Index will not be affected by the presence or absence of the USD among the
Index Currencies. Because the notional value of the Funds futures positions can rise or fall over time, the leverage ratio could be higher or lower between quarterly adjustments of the Index Currencies.
The use of long and short positions in the construction of the Index causes the Index to rise as a result of any upward price movement of
Index Currencies expected to gain relative to the USD and to rise as a result of any downward price movement of Index Currencies expected to lose relative to the USD. The inclusion of both long and short positions is also expected to reduce the
country specific foreign exchange risk of the Index (and, therefore, risk in connection with an investment in the Fund) relative to a directional (outright long or short) exposure to any or all of the Index Currencies.
There can be no assurance that the use of both long and short positions will reduce the volatility of the Index during any or all market
cycles or performance periods, or that the Fund will achieve its objectives. It is possible that, prior to an Index
-38-
rebalancing, that Index Currencies expected to lose relative to the USD may rise and/or Index Currencies expected to gain relative to the USD may fall. In such cases, the Fund may experience
losses in both its long and short positions at the same time. Such losses will be greater as a result of the Funds use of leverage, reflected in its long futures exposure to Index Currencies with a notional value of up to 100% of the
Funds NAV and its short futures exposure to Index Currencies with a notional value of up to 100% of the Funds NAV. Under such circumstances, the Funds losses would be greater as a result of its leverage than would be the case were
it to limit its overall exposure to Index Currencies with a notional value of 100% of the Funds NAV.
As a result of its use of
leverage, the Fund will be required to deposit a greater proportion of its net assets as margin, not expected to exceed 10% of net assets. This represents margin deposit requirements approximately twice as great as would be required if the Fund did
not use leverage. Similarly, as a result of its use of leverage, the Fund will trade more futures contracts and incur more brokerage commission expense than it would if it did not use leverage. The additional amount of brokerage commission expense
generally will be proportional to the Funds leverage ratio.
The Fund also holds United States Treasury Securities for deposit
with the Funds Commodity Broker as margin and United States Treasury Securities, cash and money market mutual funds (affiliated or otherwise) on deposit with the Custodian (for cash management purposes).
Under the Trust Declaration of the Fund, Wilmington Trust Company, the Trustee of the Fund, has delegated to the Managing Owner the
exclusive management and control of all aspects of the business of the Fund. The Trustee will have no duty or liability to supervise or monitor the performance of the Managing Owner, nor will the Trustee have any liability for the acts or omissions
of the Managing Owner.
There can be no assurance that the Fund will achieve its investment objective or avoid substantial losses.
Publication of Closing Levels and Adjustments
In order to calculate the indicative Index level, the Index Sponsor polls Reuters every 15 seconds to
determine the real time price of each underlying futures contract with respect to each Index Currency of the Index. The Index Sponsor then applies a set of rules to these values to create the
indicative level of the Index. These rules are consistent with the rules which the Index Sponsor applies at the end of each trading day to calculate the closing level of the Index.
The IIV per Share of the Fund is based on the prior days final NAV, adjusted four times per minute throughout the trading day to
reflect the continuous price changes of the Funds futures positions, which provides a continuously updated estimated NAV per Share.
The Index Sponsor calculates and publishes the closing level of the Index daily. The Managing Owner publishes the NAV of the Fund and the
NAV per Share daily. Additionally, the Index Sponsor calculates and publishes the intra-day Index level, and the Index Sponsor calculates, and the Managing Owner publishes, the IIV per Share of the Fund (quoted in USD) once every fifteen seconds
throughout each trading day.
All of the foregoing information is published as follows:
The intra-day level of the Index (symbol: DBCFHX) and the IIV per Share of the Fund (symbol: FBV) (each quoted in USD) are published once
every fifteen seconds throughout each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owners website at http://www.invescopowershares.com, or any successor thereto.
The current trading price per Share (symbol: DBV) (quoted in USD) is published continuously as trades occur throughout each trading day on
the consolidated tape, Reuters and/or Bloomberg and on the Managing Owners website at http://www.invescopowershares.com, or any successor thereto.
The most recent end-of-day Index closing level (symbol: DBCFHX) is published as of the close of the NYSE Arca each trading day on the
consolidated tape, Reuters and/or Bloomberg and on the Managing Owners website at http://www.invescopowershares.com, or any successor thereto.
The most recent end-of-day NAV of the Fund (symbol: FBV.NV) is published as of the close of business on Reuters and/or Bloomberg and on the
-39-
Managing Owners website at http://www.invescopowershares.com, or any successor thereto. In addition, the most recent end-of-day NAV of the Fund (symbol: FBV.NV) is published the
following morning on the consolidated tape.
All of the foregoing information with respect to the Index is also published at
https://index.db.com.
Any adjustments made to the Index will be published on both https://index.db.com and at
http://www.invescopowershares.com, or any successor(s) thereto.
The final NAV of the Fund and the final NAV per Share will be
calculated as of the closing time of the NYSE Arca or the last to close of the exchanges on which its Funds futures contracts are traded, whichever is later, and posted in the same manner. Although a time gap may exist between the close of the
NYSE Arca and the close of the CME, there is no effect on the NAV calculations as a result.
The Shares are intended to provide
investment results that generally correspond to the changes, positive and negative, in the levels of the Index over time. The value of the Shares is expected to fluctuate in relation to changes in the value of the Funds portfolio. The market
price of the Shares may not be identical to the NAV per Share, but these two valuations are expected to be very close. See The Risks You Face (2) NAV May Not Always Correspond to Market Price and, as a Result, Baskets may be
Created or Redeemed at a Value that Differs from the Market Price of the Shares.
There can be no assurance that the Fund will
achieve its investment objective or avoid substantial losses.
Change in the Methodology of the Index
The Index Sponsor will employ the methodology described above and its application of such methodology shall be conclusive and
binding. While the Index Sponsor currently intends to employ the above described methodology to calculate the Index, no assurance can be given that fiscal, market, regulatory, juridical or financial circumstances (including, but not limited to, any
changes to or any suspension or termination of or any other events affecting any Index Currency or a futures contract) will not arise that would, in the view of the Index Sponsor, necessitate a modification of or change to
such methodology and in such circumstances the Index Sponsor may make any such modification or change as it determines appropriate. The Index Sponsor may also make modifications to the terms of
the Index in any manner that it may deem necessary or desirable, including (without limitation) to correct any manifest or proven error or to cure, correct or supplement any defective provision of the Index. The Index Sponsor will publish notice of
any such modification or change.
Interruption of Index Calculation
Calculation of the Index may not be possible or feasible under certain events or circumstances, including, without limitation, a systems
failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance, that is beyond the reasonable control of the Index Sponsor
and that the Index Sponsor determines affects the Index or any Index Currency. Upon the occurrence of such force majeure events, the Index Sponsor may, in its discretion, elect one (or more) of the following options:
|
|
|
make such determinations and/or adjustments to the terms of the Index as it considers appropriate to determine any closing level on any such appropriate Index business day; and/or |
|
|
|
defer publication of the information relating to the Index until the next Index business day on which it determines that no force majeure event exists; and/or |
|
|
|
permanently cancel publication of the information relating to the Index. |
Additionally,
calculation of the Index may also be disrupted by an event that would require the Index Sponsor to calculate the closing price in respect of the relevant Index Currency on an alternative basis were such event to occur or exist on a day that is a
trading day for such Index Currency on the relevant exchange. If such an Index disruption event in relation to an Index Currency as described in the prior sentence occurs and continues for a period of five successive trading days for such Index
Currency on the relevant exchange, the Index Sponsor will, in its discretion, either
-40-
|
|
|
continue to calculate the relevant closing price for a further period of five successive trading days for such Index Currency on the relevant exchange or |
|
|
|
if such period extends beyond the five successive trading days, the Index Sponsor may elect to replace the exchange traded instrument with respect to a specific Index Currency and shall make all necessary adjustments to
the methodology and calculation of the Index as it deems appropriate. |
Historical Closing
Levels
Set out below are the closing levels based on historical data from March 12, 1993 to August 31, 2016.
The following Closing Levels table starts from March 12, 1993 and reflects both the high and low closing values, the annual Index
changes and Index changes since inception of the Index. Since March 13, 2003, CME currency futures close prices were used in the Index calculation. The Index Sponsor has not independently verified the CME currency futures close prices obtained
from Bloomberg. Since February 1, 2006, the Index Sponsor has obtained the CME currency futures close prices from Reuters. Prior to March 13, 2003, implied futures prices were calculated using the relevant currencies spot rates, money
market rates and USD money market rates obtained from Reuters, Bloomberg and WM Company. Implied futures prices are an accurate proxy for the futures close prices due to the high liquidity in foreign exchange forward markets.
It is not necessary to have a USD futures contract because the forward rate of the USD vis-à-vis the USD will be equal. Whenever USD was used to calculate the value of the Index, the futures price of USD was assumed to be 100.
The Index Sponsor used 3-month money market rates as a proxy for 3-month Libor fixings with respect to the USD on and prior to June 10,
1998.
The Index Sponsor used 3-month money market rates as a proxy for 3-month Libor fixings with respect to the EUR, JPY, GBP, CHF,
CAD and AUD on and prior to March 11, 1998.
The Index Sponsor used 3-month money market rates as a proxy for 3-month Libor fixings with
respect to the NZD on and prior to September 10, 2003.
The Index Sponsor used 3-month money market rates as a proxy for 3-month
Stibor fixings with respect to the SEK on and prior to December 9, 1998.
The Index Sponsor used 3-month money market rates as a
proxy for 3-month Nibor fixings with respect to the NOK on and prior to December 9, 1998.
The Libor, Stibor and Nibor rates for
the Eligible Index Currencies, as applicable, mean the London, Stockholm and Norway interbank offered rates for overnight deposits, respectively, each of which is published by Reuters on pages libor01 and libor02 with respect to Libor and pages SIDE
and NIBR with respect to Stibor and Nibor.
The Index Sponsor considers the use of 3-month money market rates as a proxy for Libor,
Stibor and Nibor to be appropriate because the difference between Libor, Stibor and Nibor rates and money market rates should not be material in light of the liquidity of the 3-month deposit markets.
The CME-traded futures contract of each applicable Index Currency that is closest to expiration is used in the Index calculation. The
futures contracts on the Index Currencies are rolled during the Index Re-Weighting Period. The new futures contract on an Index Currency that has the next closest expiration date is selected. The calculation of the Index on an excess return basis is
the weighted return on the change in price of the futures contracts on the Index Currencies.
The Index is calculated on both an excess
return basis and a total return basis. The excess return index reflects the return of the applicable underlying currencies. The total return is the sum of the return of the applicable underlying currencies plus the return of 3-month U.S. Treasury
bills. The following tables reflect both the excess return calculation and the total return calculation of the Index.
Cautionary Statement-Statistical Information
Various statistical information is presented on the following pages, relating to
the Closing Levels of the Index, on an annual and cumulative basis, including certain comparisons of the Index to other currencies indices. In reviewing such information, prospective investors should consider that:
-41-
|
|
|
Changes in Closing Levels of the Index during any particular period or market cycle may be volatile. |
|
|
|
|
|
Index |
|
Worst Peak- to-Valley Drawdown and Time Period |
|
Worst Monthly Drawdown and Month and Year |
Deutsch Bank G10
Currency Future
Harvest Index - ER |
|
(35.67)%, 6/07 01/09 |
|
(14.82)%, 10/08 |
For example, the Worst Peak-to-Valley Drawdown of the Index, represents the greatest percentage
decline from any month-end Closing Level, without such Closing Level being equaled or exceeded as of a subsequent month-end, which occurred during the above-listed time period.
The Worst Monthly Drawdown of the Index occurred during the above-listed month and year.
|
|
|
See The Risks You Face - (16) Price Volatility May Possibly Cause the Total Loss of Your Investment. |
|
|
|
Neither the fees charged by the Fund nor the execution costs associated with establishing futures positions in the Index Currencies are incorporated into the Closing Levels of the Index. Accordingly, such Index Levels
have not been reduced by the costs associated with an actual investment, such as the Fund, with an investment objective of tracking the Index. |
|
|
|
The Index was established in December 2005, and is independently calculated by the Index Sponsor. The Index calculation methodology and commodity futures contracts selection is the same before and after December 2005,
as described above. Accordingly, the Closing Levels of the Index, terms of the Index methodology and Index Currencies, reflect an element of hindsight at the time the Index was established. See The Risks You Face(11) You May Not
Rely on Past Performance or Index Results in
|
|
|
Deciding Whether to Buy Shares and (12) Fewer Representative Index Currencies May Result In Greater Index Volatility. |
WHILE THE FUNDS OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX
WAS ESTABLISHED IN DECEMBER 2005, CERTAIN INFORMATION RELATING TO THE INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE HYPOTHETICAL. HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR
TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUNDS PAST PERFORMANCE OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN INDEX CLOSING LEVELS. IN FACT, THERE
ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT
INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD MARCH 1993 THROUGH NOVEMBER 2005, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX METHODOLOGY, AND SELECTION OF INDEX CURRENCIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS,
INCLUDING THOSE DESCRIBED UNDER THE RISKS YOU FACE SET FORTH HEREIN, RELATED TO THE CURRENCIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUNDS EFFORTS TO TRACK THE INDEX OVER TIME WHICH
-42-
CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF THE INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE
FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER AND ITS TRADING PRINCIPALS HAVE LIMITED EXPERIENCE MANAGING THE DAY-TO-DAY OPERATIONS FOR THE FUND AND HAVE ONLY MANAGED
AN EXCHANGE-TRADED FUND THAT RELATES TO A BROAD-BASED COMMODITY INDEX FOR A SHORT PERIOD. BECAUSE THERE ARE LIMITED PERFORMANCE RESULTS OF THE MANAGING OWNER THAT ARE COMPARABLE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS
SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS. FOR THE AVOIDANCE OF DOUBT, NONE OF THE PERFORMANCE RELATED INFORMATION THAT IS COVERED HEREIN UP TO AND EXCLUDING THE CLOSING DATE CAN BE ATTRIBUTED TO
THE MANAGING OWNER.
THE PREDECESSOR MANAGING OWNER, AN INDIRECT WHOLLY OWNED SUBSIDIARY OF DEUTSCHE BANK AG, COMMENCED OPERATIONS IN
JANUARY 2006. AS THE PREDECESSOR MANAGING OWNER, THE PREDECESSOR MANAGING OWNER AND ITS TRADING PRINCIPALS MANAGED THE DAY-TO-DAY OPERATIONS FOR THE FUND FROM INCEPTION UP TO AND EXCLUDING THE CLOSING DATE. BECAUSE THERE ARE LIMITED TRADING RESULTS
TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS. IN RESPECT OF ANY PERIOD, FOR THE AVOIDANCE OF DOUBT, NONE OF THE
PERFORMANCE RELATED INFORMATION THAT IS COVERED HEREIN ON AND AFTER THE CLOSING DATE CAN BE ATTRIBUTED TO THE PREDECESSOR MANAGING OWNER.
THE FUNDS PERFORMANCE INFORMATION FROM INCEPTION UP TO AND EXCLUDING THE CLOSING DATE IS
A REFLECTION OF THE PERFORMANCE ASSOCIATED WITH THE PREDECESSOR MANAGING OWNER. THE MANAGING OWNER HAS SERVED AS MANAGING OWNER OF THE FUND SINCE THE CLOSING DATE, AND THE FUNDS PERFORMANCE INFORMATION SINCE THE CLOSING DATE IS A REFLECTION OF
THE PERFORMANCE ASSOCIATED WITH THE MANAGING OWNER. PAST PERFORMANCE OF THE FUND IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE.
[Remainder of page left blank intentionally.]
-43-
DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST INDEX® EXCESS RETURN
CLOSING LEVELS TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Level |
|
|
Index Changes |
|
|
High1 |
|
|
Low2 |
|
|
Annual3 |
|
|
Since Inception |
|
19934 |
|
|
105.60 |
|
|
|
94.03 |
|
|
|
-0.19 |
% |
|
|
-0.19 |
% |
1994 |
|
|
108.79 |
|
|
|
99.81 |
|
|
|
7.42 |
% |
|
|
7.22 |
% |
1995 |
|
|
110.52 |
|
|
|
94.16 |
|
|
|
2.66 |
% |
|
|
10.07 |
% |
1996 |
|
|
140.05 |
|
|
|
110.42 |
|
|
|
27.23 |
% |
|
|
40.05 |
% |
1997 |
|
|
146.72 |
|
|
|
137.83 |
|
|
|
2.58 |
% |
|
|
43.67 |
% |
1998 |
|
|
151.79 |
|
|
|
132.52 |
|
|
|
-6.35 |
% |
|
|
34.55 |
% |
1999 |
|
|
151.12 |
|
|
|
134.71 |
|
|
|
9.81 |
% |
|
|
47.76 |
% |
2000 |
|
|
158.57 |
|
|
|
146.79 |
|
|
|
4.73 |
% |
|
|
54.74 |
% |
2001 |
|
|
171.15 |
|
|
|
154.68 |
|
|
|
10.61 |
% |
|
|
71.15 |
% |
2002 |
|
|
199.51 |
|
|
|
172.25 |
|
|
|
15.76 |
% |
|
|
98.13 |
% |
2003 |
|
|
234.45 |
|
|
|
199.00 |
|
|
|
18.33 |
% |
|
|
134.45 |
% |
2004 |
|
|
252.36 |
|
|
|
230.02 |
|
|
|
6.69 |
% |
|
|
150.14 |
% |
2005 |
|
|
286.06 |
|
|
|
248.34 |
|
|
|
10.66 |
% |
|
|
176.81 |
% |
2006 |
|
|
280.48 |
|
|
|
254.18 |
|
|
|
1.00 |
% |
|
|
179.58 |
% |
2007 |
|
|
315.27 |
|
|
|
276.77 |
|
|
|
5.15 |
% |
|
|
193.98 |
% |
2008 |
|
|
295.87 |
|
|
|
200.14 |
|
|
|
-28.80 |
% |
|
|
109.32 |
% |
2009 |
|
|
260.64 |
|
|
|
196.13 |
|
|
|
21.91 |
% |
|
|
155.18 |
% |
2010 |
|
|
264.24 |
|
|
|
236.66 |
|
|
|
1.67 |
% |
|
|
159.45 |
% |
2011 |
|
|
274.83 |
|
|
|
241.88 |
|
|
|
1.18 |
% |
|
|
162.52 |
% |
2012 |
|
|
290.15 |
|
|
|
258.40 |
|
|
|
10.39 |
% |
|
|
189.79 |
% |
2013 |
|
|
310.79 |
|
|
|
276.57 |
|
|
|
-1.98 |
% |
|
|
184.05 |
% |
2014 |
|
|
295.63 |
|
|
|
276.74 |
|
|
|
0.92 |
% |
|
|
186.68 |
% |
2015 |
|
|
289.15 |
|
|
|
250.27 |
|
|
|
-7.53 |
% |
|
|
165.08 |
% |
20165 |
|
|
281.39 |
|
|
|
256.24 |
|
|
|
5.87 |
% |
|
|
180.35 |
% |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST INDEX® EXCESS RETURN OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND
NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUNDS FUTURE PERFORMANCE.
-44-
DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST INDEX® TOTAL RETURN
CLOSING LEVELS TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing Level |
|
|
Index Changes |
|
|
High1 |
|
|
Low2 |
|
|
Annual3 |
|
|
Since Inception |
|
19934 |
|
|
106.15 |
|
|
|
95.13 |
|
|
|
2.30 |
% |
|
|
2.30 |
% |
1994 |
|
|
116.32 |
|
|
|
102.32 |
|
|
|
12.15 |
% |
|
|
14.73 |
% |
1995 |
|
|
124.55 |
|
|
|
102.55 |
|
|
|
8.56 |
% |
|
|
24.55 |
% |
1996 |
|
|
166.84 |
|
|
|
125.01 |
|
|
|
33.95 |
% |
|
|
66.84 |
% |
1997 |
|
|
180.54 |
|
|
|
164.92 |
|
|
|
8.01 |
% |
|
|
80.19 |
% |
1998 |
|
|
195.70 |
|
|
|
172.90 |
|
|
|
-1.68 |
% |
|
|
77.17 |
% |
1999 |
|
|
203.96 |
|
|
|
177.49 |
|
|
|
15.12 |
% |
|
|
103.96 |
% |
2000 |
|
|
227.93 |
|
|
|
202.75 |
|
|
|
11.11 |
% |
|
|
126.61 |
% |
2001 |
|
|
259.57 |
|
|
|
226.67 |
|
|
|
14.55 |
% |
|
|
159.57 |
% |
2002 |
|
|
307.46 |
|
|
|
261.27 |
|
|
|
17.68 |
% |
|
|
205.47 |
% |
2003 |
|
|
365.18 |
|
|
|
306.83 |
|
|
|
19.55 |
% |
|
|
265.18 |
% |
2004 |
|
|
398.22 |
|
|
|
359.55 |
|
|
|
8.18 |
% |
|
|
295.05 |
% |
2005 |
|
|
465.10 |
|
|
|
392.65 |
|
|
|
14.23 |
% |
|
|
351.27 |
% |
2006 |
|
|
479.65 |
|
|
|
421.90 |
|
|
|
5.96 |
% |
|
|
378.18 |
% |
2007 |
|
|
554.63 |
|
|
|
477.16 |
|
|
|
9.96 |
% |
|
|
425.80 |
% |
2008 |
|
|
531.26 |
|
|
|
362.87 |
|
|
|
-27.80 |
% |
|
|
279.60 |
% |
2009 |
|
|
473.31 |
|
|
|
355.72 |
|
|
|
22.09 |
% |
|
|
363.44 |
% |
2010 |
|
|
480.08 |
|
|
|
430.07 |
|
|
|
1.81 |
% |
|
|
371.83 |
% |
2011 |
|
|
499.96 |
|
|
|
440.07 |
|
|
|
1.23 |
% |
|
|
377.64 |
% |
2012 |
|
|
528.33 |
|
|
|
470.29 |
|
|
|
10.48 |
% |
|
|
427.70 |
% |
2013 |
|
|
566.06 |
|
|
|
503.81 |
|
|
|
-1.93 |
% |
|
|
417.53 |
% |
2014 |
|
|
538.72 |
|
|
|
504.24 |
|
|
|
0.95 |
% |
|
|
422.47 |
% |
2015 |
|
|
527.74 |
|
|
|
453.32 |
|
|
|
-7.58 |
% |
|
|
382.87 |
% |
20165 |
|
|
513.81 |
|
|
|
467.26 |
|
|
|
6.06 |
% |
|
|
412.13 |
% |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST INDEX® TOTAL RETURN OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND
NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUNDS FUTURE PERFORMANCE.
See accompanying Notes and Legends.
-45-
INDEX CURRENCY WEIGHTS TABLE
DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST INDEX® EXCESS RETURN AND THE
DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST
INDEX® TOTAL RETURN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD |
|
|
EUR |
|
|
JPY |
|
|
CAD |
|
|
CHF |
|
|
GBP |
|
|
AUD |
|
|
NZD |
|
|
NOK |
|
|
SEK |
|
|
High1 |
|
|
Low2 |
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
|
High |
|
|
Low |
|
19934 |
|
|
-31.6 |
% |
|
|
-36.8 |
% |
|
|
33.8 |
% |
|
|
34.0 |
% |
|
|
-33.7 |
% |
|
|
-37.2 |
% |
|
|
0.0 |
% |
|
|
-36.8 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-31.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
33.9 |
% |
|
|
34.1 |
% |
|
|
33.9 |
% |
|
|
32.3 |
% |
1994 |
|
|
0.0 |
% |
|
|
-33.3 |
% |
|
|
-33.0 |
% |
|
|
32.5 |
% |
|
|
-33.1 |
% |
|
|
-32.5 |
% |
|
|
0.0 |
% |
|
|
-33.4 |
% |
|
|
-33.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
33.2 |
% |
|
|
0.0 |
% |
|
|
33.3 |
% |
|
|
33.6 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
33.4 |
% |
|
|
33.2 |
% |
1995 |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.7 |
% |
|
|
-35.7 |
% |
|
|
-33.1 |
% |
|
|
-39.1 |
% |
|
|
0.0 |
% |
|
|
35.9 |
% |
|
|
-33.7 |
% |
|
|
-36.8 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
32.4 |
% |
|
|
0.0 |
% |
|
|
33.0 |
% |
|
|
36.3 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
36.2 |
% |
|
|
34.6 |
% |
1996 |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.5 |
% |
|
|
-31.7 |
% |
|
|
-32.5 |
% |
|
|
-32.1 |
% |
|
|
0.0 |
% |
|
|
-31.5 |
% |
|
|
-33.3 |
% |
|
|
33.3 |
% |
|
|
0.0 |
% |
|
|
32.4 |
% |
|
|
33.3 |
% |
|
|
32.6 |
% |
|
|
33.3 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
33.2 |
% |
1997 |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-31.5 |
% |
|
|
-30.6 |
% |
|
|
-31.7 |
% |
|
|
-33.1 |
% |
|
|
-32.2 |
% |
|
|
-30.4 |
% |
|
|
33.2 |
% |
|
|
31.7 |
% |
|
|
31.9 |
% |
|
|
31.5 |
% |
|
|
32.6 |
% |
|
|
32.3 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
1998 |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-32.3 |
% |
|
|
-36.7 |
% |
|
|
-32.9 |
% |
|
|
-40.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-31.8 |
% |
|
|
-37.5 |
% |
|
|
32.3 |
% |
|
|
36.0 |
% |
|
|
34.2 |
% |
|
|
0.0 |
% |
|
|
34.2 |
% |
|
|
36.5 |
% |
|
|
0.0 |
% |
|
|
35.7 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
1999 |
|
|
32.6 |
% |
|
|
33.0 |
% |
|
|
-31.6 |
% |
|
|
-32.2 |
% |
|
|
-31.3 |
% |
|
|
-34.4 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-31.4 |
% |
|
|
-32.0 |
% |
|
|
31.6 |
% |
|
|
32.5 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
32.1 |
% |
|
|
34.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2000 |
|
|
31.9 |
% |
|
|
33.3 |
% |
|
|
-29.4 |
% |
|
|
-33.7 |
% |
|
|
-30.8 |
% |
|
|
-32.9 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-30.5 |
% |
|
|
-33.5 |
% |
|
|
31.6 |
% |
|
|
33.5 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
31.6 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
33.5 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2001 |
|
|
-33.1 |
% |
|
|
33.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-32.1 |
% |
|
|
-32.4 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-32.5 |
% |
|
|
-34.5 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
32.7 |
% |
|
|
0.0 |
% |
|
|
33.0 |
% |
|
|
34.1 |
% |
|
|
32.8 |
% |
|
|
34.1 |
% |
|
|
0.0 |
% |
|
|
-33.7 |
% |
2002 |
|
|
-33.2 |
% |
|
|
-32.9 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.1 |
% |
|
|
-31.6 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.5 |
% |
|
|
-32.7 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
33.3 |
% |
|
|
32.6 |
% |
|
|
33.5 |
% |
|
|
33.1 |
% |
|
|
33.5 |
% |
|
|
33.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2003 |
|
|
-33.0 |
% |
|
|
-33.2 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.0 |
% |
|
|
-33.4 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.5 |
% |
|
|
-34.2 |
% |
|
|
33.7 |
% |
|
|
0.0 |
% |
|
|
33.4 |
% |
|
|
33.2 |
% |
|
|
33.4 |
% |
|
|
33.9 |
% |
|
|
0.0 |
% |
|
|
34.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2004 |
|
|
0.0 |
% |
|
|
-34.6 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.2 |
% |
|
|
-33.5 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.0 |
% |
|
|
-34.7 |
% |
|
|
33.4 |
% |
|
|
34.1 |
% |
|
|
33.6 |
% |
|
|
32.6 |
% |
|
|
33.4 |
% |
|
|
32.3 |
% |
|
|
-33.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2005 |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-29.1 |
% |
|
|
-34.4 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-30.7 |
% |
|
|
-32.8 |
% |
|
|
30.7 |
% |
|
|
32.7 |
% |
|
|
31.2 |
% |
|
|
33.9 |
% |
|
|
32.7 |
% |
|
|
33.2 |
% |
|
|
0.0 |
% |
|
|
-33.2 |
% |
|
|
-30.2 |
% |
|
|
0.0 |
% |
2006 |
|
|
32.9 |
% |
|
|
36.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-32.6 |
% |
|
|
-38.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-32.9 |
% |
|
|
-39.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
33.2 |
% |
|
|
37.1 |
% |
|
|
33.7 |
% |
|
|
35.1 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.1 |
% |
|
|
-38.8 |
% |
2007 |
|
|
0.0 |
% |
|
|
33.3 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.2 |
% |
|
|
-33.7 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.2 |
% |
|
|
-33.1 |
% |
|
|
33.8 |
% |
|
|
0.0 |
% |
|
|
34.2 |
% |
|
|
32.9 |
% |
|
|
34.8 |
% |
|
|
32.8 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-34.1 |
% |
|
|
-32.3 |
% |
2008 |
|
|
0.0 |
% |
|
|
-44.2 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-34.8 |
% |
|
|
-50.7 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-35.2 |
% |
|
|
-43.3 |
% |
|
|
32.7 |
% |
|
|
0.0 |
% |
|
|
36.1 |
% |
|
|
32.9 |
% |
|
|
35.6 |
% |
|
|
36.1 |
% |
|
|
0.0 |
% |
|
|
36.6 |
% |
|
|
-34.6 |
% |
|
|
0.0 |
% |
2009 |
|
|
-31.2 |
% |
|
|
-35.2 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-31.0 |
% |
|
|
-35.8 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-32.2 |
% |
|
|
-35.6 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
33.7 |
% |
|
|
33.7 |
% |
|
|
33.7 |
% |
|
|
32.7 |
% |
|
|
33.4 |
% |
|
|
34.5 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2010 |
|
|
-32.1 |
% |
|
|
-34.8 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-30.7 |
% |
|
|
-36.5 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-31.4 |
% |
|
|
37.7 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
32.7 |
% |
|
|
34.6 |
% |
|
|
33.6 |
% |
|
|
34.9 |
% |
|
|
31.6 |
% |
|
|
35.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2011 |
|
|
-31.5 |
% |
|
|
-36.7 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-31.8 |
% |
|
|
-38.3 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.9 |
% |
|
|
-43.2 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
34.3 |
% |
|
|
35.3 |
% |
|
|
34.5 |
% |
|
|
36.3 |
% |
|
|
33.9 |
% |
|
|
36.5 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2012 |
|
|
0.0 |
% |
|
|
-36.2 |
% |
|
|
-32.1 |
% |
|
|
0.0 |
% |
|
|
30.2 |
% |
|
|
38.6 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-32.2 |
% |
|
|
-34.2 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
32.4 |
% |
|
|
33.4 |
% |
|
|
32.9 |
% |
|
|
33.2 |
% |
|
|
32.7 |
% |
|
|
33.8 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2013 |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-32.3 |
% |
|
|
-34.7 |
% |
|
|
-30.8 |
% |
|
|
-33.6 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-32.5 |
% |
|
|
-34.8 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
32.7 |
% |
|
|
32.6 |
% |
|
|
33.7 |
% |
|
|
33.7 |
% |
|
|
32.6 |
% |
|
|
33.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2014 |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.4 |
% |
|
|
-33.3 |
% |
|
|
-34.6 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-33.3 |
% |
|
|
-33.4 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
33.3 |
% |
|
|
33.2 |
% |
|
|
33.3 |
% |
|
|
33.3 |
% |
|
|
33.3 |
% |
|
|
33.4 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
2015 |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-34.2 |
% |
|
|
-36.8 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-34.4 |
% |
|
|
-35.5 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
34.4 |
% |
|
|
33.3 |
% |
|
|
34.5 |
% |
|
|
33.4 |
% |
|
|
35.1 |
% |
|
|
33.8 |
% |
|
|
-33.3 |
% |
|
|
-35.4 |
% |
20165 |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-31.4 |
% |
|
|
-33.7 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
-31.2 |
% |
|
|
-33.3 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
33.2 |
% |
|
|
32.5 |
% |
|
|
33.2 |
% |
|
|
32.8 |
% |
|
|
31.3 |
% |
|
|
33.3 |
% |
|
|
-31.1 |
% |
|
|
-33.6 |
% |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST INDEX® EXCESS RETURN (AND NOT THE
DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST INDEX® TOTAL RETURN) OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE
FUNDS FUTURE PERFORMANCE.
See accompanying Notes and Legends.
-46-
All Statistics based on data from March 12, 1993 to August 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
VARIOUS STATISTICAL MEASURES* |
|
INDEX ER6,7 |
|
|
INDEX TR6,7 |
|
|
DXY6,7 |
|
Annualized Changes to Index
Level8 |
|
|
4.5 |
% |
|
|
7.2 |
% |
|
|
0.1 |
% |
Average rolling 3-month daily
volatility9 |
|
|
8.8 |
% |
|
|
8.8 |
% |
|
|
7.8 |
% |
Sharpe Ratio10 |
|
|
0.51 |
|
|
|
0.52 |
|
|
|
-0.33 |
|
% of months with positive change |
|
|
63 |
% |
|
|
66 |
% |
|
|
48 |
% |
Average monthly positive return change |
|
|
1.9 |
% |
|
|
2.0 |
% |
|
|
1.9 |
% |
Average monthly negative return change |
|
|
-2.1 |
% |
|
|
-2.1 |
% |
|
|
-1.7 |
% |
|
|
|
|
ANNUALIZED INDEX LEVELS |
|
INDEX ER6,7 |
|
|
INDEX TR6,7 |
|
|
DXY6,7 |
|
1 year |
|
|
10.6 |
% |
|
|
10.8 |
% |
|
|
0.2 |
% |
3 year |
|
|
0.4 |
% |
|
|
0.5 |
% |
|
|
5.4 |
% |
5 year |
|
|
1.0 |
% |
|
|
1.1 |
% |
|
|
5.3 |
% |
7 year |
|
|
2.2 |
% |
|
|
2.2 |
% |
|
|
3.0 |
% |
10 year |
|
|
0.4 |
% |
|
|
1.2 |
% |
|
|
1.2 |
% |
15 year |
|
|
3.5 |
% |
|
|
4.8 |
% |
|
|
-1.1 |
% |
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN
INDICATION OF THE FUNDS FUTURE PERFORMANCE.
WHILE THE FUNDS OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS
TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN DECEMBER 2005, CERTAIN INFORMATION RELATING TO THE INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE HYPOTHETICAL. HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME
OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT
WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUNDS PAST PERFORMANCE OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN INDEX CLOSING LEVELS.
IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED
HEREIN RELATES TO THE PERIOD MARCH 1993 THROUGH NOVEMBER 2005, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX METHODOLOGY, AND SELECTION OF INDEX CURRENCIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE
DESCRIBED UNDER THE RISKS YOU FACE SET FORTH HEREIN, RELATED TO THE CURRENCIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUNDS EFFORTS TO TRACK THE INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE
PREPARATION OF THE INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES
AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER COMMENCED OPERATIONS IN JANUARY 2006. AS MANAGING OWNER, THE MANAGING OWNER AND ITS TRADING
PRINCIPALS HAVE BEEN MANAGING THE DAY-TO-DAY OPERATIONS FOR THE FUND AND RELATED PRODUCTS AND MANAGING FUTURES TRADING ACCOUNTS. BECAUSE THERE ARE LIMITED ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE
INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS. FOR THE AVOIDANCE OF DOUBT, NONE OF THE PERFORMANCE RELATED INFORMATION THAT IS COVERED HEREIN UP TO AND EXCLUDING THE CLOSING DATE CAN BE
ATTRIBUTED TO THE MANAGING OWNER.
THE PREDECESSOR MANAGING OWNER, AN INDIRECT WHOLLY OWNED SUBSIDIARY OF DEUTSCHE BANK AG, COMMENCED OPERATIONS IN
JANUARY 2006. AS THE PREDECESSOR MANAGING OWNER, THE PREDECESSOR MANAGING OWNER AND ITS TRADING PRINCIPALS MANAGED THE DAY-TO-DAY OPERATIONS FOR THE FUND FROM INCEPTION UP TO AND EXCLUDING THE CLOSING DATE. BECAUSE THERE ARE LIMITED TRADING RESULTS
TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS. IN RESPECT OF ANY PERIOD, FOR THE AVOIDANCE OF DOUBT, NONE OF THE
PERFORMANCE RELATED INFORMATION THAT IS COVERED HEREIN ON AND AFTER THE CLOSING DATE CAN BE ATTRIBUTED TO THE PREDECESSOR MANAGING OWNER.
THE FUNDS
PERFORMANCE INFORMATION FROM INCEPTION UP TO AND EXCLUDING THE CLOSING DATE IS A REFLECTION OF THE PERFORMANCE ASSOCIATED WITH THE PREDECESSOR MANAGING OWNER. THE MANAGING OWNER HAS SERVED AS MANAGING OWNER OF THE FUND SINCE THE CLOSING DATE, AND
THE FUNDS PERFORMANCE INFORMATION SINCE THE CLOSING DATE IS A REFLECTION OF THE PERFORMANCE ASSOCIATED WITH THE MANAGING OWNER. PAST PERFORMANCE OF THE FUND IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE.
See accompanying Notes and Legends.
-47-
COMPARISON OF THE DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST INDEX® TOTAL RETURN WITH U.S. DOLLAR INDEX®
(March 12, 1993 August 31, 2016)*
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS
AN INDICATION OF THE FUNDS FUTURE PERFORMANCE.
The indices do not reflect any fees or expenses and do not reflect actual trading.
WHILE THE FUNDS OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN
DECEMBER 2005, CERTAIN INFORMATION RELATING TO THE INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE HYPOTHETICAL. HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH
HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUNDS PAST PERFORMANCE OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP
DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE
LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD MARCH 1993 THROUGH NOVEMBER 2005, THE INDEX CLOSING LEVELS REFLECT THE
APPLICATION OF THE INDEX METHODOLOGY, AND SELECTION OF INDEX CURRENCIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF
FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER THE RISKS YOU FACE SET FORTH HEREIN, RELATED TO THE CURRENCIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUNDS
EFFORTS TO TRACK THE INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF THE INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND.
FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING
OWNER COMMENCED OPERATIONS IN JANUARY 2006. AS MANAGING OWNER, THE MANAGING OWNER AND ITS TRADING PRINCIPALS HAVE BEEN MANAGING THE DAY-TO-DAY OPERATIONS FOR THE FUND AND RELATED PRODUCTS AND MANAGING FUTURES TRADING ACCOUNTS. BECAUSE THERE ARE
LIMITED ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS. FOR THE AVOIDANCE OF DOUBT, NONE OF THE
PERFORMANCE RELATED INFORMATION THAT IS COVERED HEREIN UP TO AND EXCLUDING THE CLOSING DATE CAN BE ATTRIBUTED TO THE MANAGING OWNER.
THE PREDECESSOR
MANAGING OWNER, AN INDIRECT WHOLLY OWNED SUBSIDIARY OF DEUTSCHE BANK AG, COMMENCED OPERATIONS IN JANUARY 2006. AS THE PREDECESSOR MANAGING OWNER, THE PREDECESSOR MANAGING OWNER AND ITS TRADING PRINCIPALS MANAGED THE DAY-TO-DAY OPERATIONS FOR THE
FUND FROM INCEPTION UP TO AND
-48-
EXCLUDING THE CLOSING DATE. BECAUSE THERE ARE LIMITED TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE
RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS. IN RESPECT OF ANY PERIOD, FOR THE AVOIDANCE OF DOUBT, NONE OF THE PERFORMANCE RELATED INFORMATION THAT IS COVERED HEREIN ON AND AFTER THE CLOSING DATE CAN BE ATTRIBUTED TO THE PREDECESSOR MANAGING
OWNER.
THE FUNDS PERFORMANCE INFORMATION FROM INCEPTION UP TO AND EXCLUDING THE CLOSING DATE IS A REFLECTION OF THE PERFORMANCE ASSOCIATED WITH THE
PREDECESSOR MANAGING OWNER. THE MANAGING OWNER HAS SERVED AS MANAGING OWNER OF THE FUND SINCE THE CLOSING DATE, AND THE FUNDS PERFORMANCE INFORMATION SINCE THE CLOSING DATE IS A REFLECTION OF THE PERFORMANCE ASSOCIATED WITH THE MANAGING OWNER.
PAST PERFORMANCE OF THE FUND IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE.
See accompanying Notes and Legends.
-49-
RESULTS OF DEUTSCHE BANK G10 CURRENCY FUTURE HARVEST INDEX® TOTAL RETURN
(March 12, 1993 August 31, 2016)*
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS
AN INDICATION OF THE FUNDS FUTURE PERFORMANCE.
The indices do not reflect any fees or expenses and do not reflect actual trading.
WHILE THE FUNDS OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN
DECEMBER 2005, CERTAIN INFORMATION RELATING TO THE INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE HYPOTHETICAL. HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH
HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUNDS PAST PERFORMANCE OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP
DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE
LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD MARCH 1993 THROUGH NOVEMBER 2005, THE INDEX CLOSING LEVELS REFLECT THE
APPLICATION OF THE INDEX METHODOLOGY, AND SELECTION OF INDEX CURRENCIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF
FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER THE RISKS YOU FACE SET FORTH HEREIN, RELATED TO THE CURRENCIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUNDS
EFFORTS TO TRACK THE INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF THE INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND.
FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING
OWNER COMMENCED OPERATIONS IN JANUARY 2006. AS MANAGING OWNER, THE MANAGING OWNER AND ITS TRADING PRINCIPALS HAVE BEEN MANAGING THE DAY-TO-DAY OPERATIONS FOR THE FUND AND RELATED PRODUCTS AND MANAGING FUTURES TRADING ACCOUNTS. BECAUSE THERE ARE
LIMITED ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS. FOR THE AVOIDANCE OF DOUBT, NONE OF THE
PERFORMANCE RELATED INFORMATION THAT IS COVERED HEREIN UP TO AND EXCLUDING THE CLOSING DATE CAN BE ATTRIBUTED TO THE MANAGING OWNER.
-50-
THE PREDECESSOR MANAGING OWNER, AN INDIRECT WHOLLY OWNED SUBSIDIARY OF DEUTSCHE BANK AG, COMMENCED OPERATIONS IN
JANUARY 2006. AS THE PREDECESSOR MANAGING OWNER, THE PREDECESSOR MANAGING OWNER AND ITS TRADING PRINCIPALS MANAGED THE DAY-TO-DAY OPERATIONS FOR THE FUND FROM INCEPTION UP TO AND EXCLUDING THE CLOSING DATE. BECAUSE THERE ARE LIMITED TRADING RESULTS
TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS. IN RESPECT OF ANY PERIOD, FOR THE AVOIDANCE OF DOUBT, NONE OF THE
PERFORMANCE RELATED INFORMATION THAT IS COVERED HEREIN ON AND AFTER THE CLOSING DATE CAN BE ATTRIBUTED TO THE PREDECESSOR MANAGING OWNER.
THE FUNDS
PERFORMANCE INFORMATION FROM INCEPTION UP TO AND EXCLUDING THE CLOSING DATE IS A REFLECTION OF THE PERFORMANCE ASSOCIATED WITH THE PREDECESSOR MANAGING OWNER. THE MANAGING OWNER HAS SERVED AS MANAGING OWNER OF THE FUND SINCE THE CLOSING DATE, AND
THE FUNDS PERFORMANCE INFORMATION SINCE THE CLOSING DATE IS A REFLECTION OF THE PERFORMANCE ASSOCIATED WITH THE MANAGING OWNER. PAST PERFORMANCE OF THE FUND IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE.
See accompanying Notes and Legends.
-51-
NOTES AND LEGENDS:
1. High reflects the highest closing level of the Index during the applicable year.
2. Low reflects the lowest closing level of the Index during the applicable year.
3. Annual Index Changes reflect the change to the Index level on an annual basis as of December 31 of each applicable year.
4. Closing levels as of inception on March 12, 1993.
5.
Closing levels as of August 31, 2016.
6. INDEX-TR is Deutsche Bank G10 Currency Future Harvest Index® Total Return. The Index calculation is calculated on a total return basis and reflects the change in market value of both the underlying index currencies and the interest income from a
hypothetical basket of fixed income securities. INDEX-ER is Deutsche Bank G10 Currency Future Harvest Index® Excess Return, which is the unfunded version of the Deutsche
Bank G10 Currency Future Harvest Index® Total Return. The sponsor of the Index, or the Index Sponsor, is Deutsche Bank Securities Inc. Deutsche Bank G10 Currency Future Harvest Index® is a registered trademark of Deutsche Bank AG. All rights reserved. DXY is U.S. Dollar Index®. The U.S. Dollar Index® provides a general indication of the international value of the USD by averaging the exchange rates between the USD and the following six major world currencies: Euro, Japanese Yen, British
Pound, Canadian Dollar, Swedish Krona and Swiss Franc. U.S. Dollar Index® is a registered service mark of ICE Futures U.S.
7. If the Funds Treasury Income and Money Market Income were to exceed the Funds fees and expenses, the total return on an investment in the Fund
is expected to outperform the Index and the Managing Owner expects to periodically to make distributions of the amount of such excess. If the Funds Treasury Income and Money Market Income do not exceed the Funds fees and expenses, the
total return on an investment in the Fund is expected to underperform the Index. The market price of the Shares is expected to track the Index closely. The total return on an investment in the Fund over any period is the sum of the capital
appreciation or depreciation of the Shares over the period, plus the amount of Treasury Income and Money Market Income and any distributions during the period. For the avoidance of doubt, the Fund invests in futures contracts in an attempt to track
its Index. The Fund holds Treasury Securities and money market mutual funds for margin and/or cash management purposes only.
8. Annualized Changes
to Index Level reflects the change to the level of the applicable index on an annual basis as of December 31 of each applicable year.
9.
Average rolling 3-month daily volatility. The daily volatility reflects the relative rate at which the price of the applicable index moves up and down, which is found by calculating the annualized standard deviation of the daily change
in price. In turn, an average of this value is calculated on a 3-month rolling basis.
10. Sharpe Ratio compares the annualized rate of return
minus the annualized risk-free rate of return to the annualized variability often referred to as the standard deviation of the monthly rates of return. A Sharpe Ratio of 1:1 or higher indicates that, according to the
measures used in calculating the ratio, the rate of return achieved by a particular strategy has equaled or exceeded the risks assumed by such strategy. The risk-free rate of return that was used in these calculations was assumed to be 2.62%
* For the period from March 12, 1993 to August 31, 2016.
WHILE THE FUNDS OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN
DECEMBER 2005, CERTAIN INFORMATION RELATING TO THE INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE HYPOTHETICAL. HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH
HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUNDS PAST PERFORMANCE OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP
DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE
LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD MARCH 1993 THROUGH NOVEMBER 2005, THE INDEX CLOSING LEVELS REFLECT THE
APPLICATION OF THE INDEX METHODOLOGY, AND SELECTION OF INDEX CURRENCIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF
FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER THE RISKS YOU FACE SET FORTH HEREIN, RELATED TO THE CURRENCIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUNDS
EFFORTS TO TRACK THE INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF THE INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND.
FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
-52-
THE MANAGING OWNER COMMENCED OPERATIONS IN JANUARY 2006. AS MANAGING OWNER, THE MANAGING OWNER AND ITS TRADING
PRINCIPALS HAVE BEEN MANAGING THE DAY-TO-DAY OPERATIONS FOR THE FUND AND RELATED PRODUCTS AND MANAGING FUTURES TRADING ACCOUNTS. BECAUSE THERE ARE LIMITED ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE
INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS. FOR THE AVOIDANCE OF DOUBT, NONE OF THE PERFORMANCE RELATED INFORMATION THAT IS COVERED HEREIN UP TO AND EXCLUDING THE CLOSING DATE CAN BE
ATTRIBUTED TO THE MANAGING OWNER.
THE PREDECESSOR MANAGING OWNER, AN INDIRECT WHOLLY OWNED SUBSIDIARY OF DEUTSCHE BANK AG, COMMENCED OPERATIONS IN
JANUARY 2006. AS THE PREDECESSOR MANAGING OWNER, THE PREDECESSOR MANAGING OWNER AND ITS TRADING PRINCIPALS MANAGED THE DAY-TO-DAY OPERATIONS FOR THE FUND FROM INCEPTION UP TO AND EXCLUDING THE CLOSING DATE. BECAUSE THERE ARE LIMITED TRADING RESULTS
TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS. IN RESPECT OF ANY PERIOD, FOR THE AVOIDANCE OF DOUBT, NONE OF THE
PERFORMANCE RELATED INFORMATION THAT IS COVERED HEREIN ON AND AFTER THE CLOSING DATE CAN BE ATTRIBUTED TO THE PREDECESSOR MANAGING OWNER.
THE FUNDS
PERFORMANCE INFORMATION FROM INCEPTION UP TO AND EXCLUDING THE CLOSING DATE IS A REFLECTION OF THE PERFORMANCE ASSOCIATED WITH THE PREDECESSOR MANAGING OWNER. THE MANAGING OWNER HAS SERVED AS MANAGING OWNER OF THE FUND SINCE THE CLOSING DATE, AND
THE FUNDS PERFORMANCE INFORMATION SINCE THE CLOSING DATE IS A REFLECTION OF THE PERFORMANCE ASSOCIATED WITH THE MANAGING OWNER. PAST PERFORMANCE OF THE FUND IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE.
PowerShares DB G10 Currency Harvest Fund (the Fund) is not sponsored or endorsed by Deutsche Bank AG, Deutsche Bank Securities Inc. or any
subsidiary or affiliate of Deutsche Bank AG or Deutsche Bank Securities Inc. (collectively, Deutsche Bank). The Deutsche Bank G10 Currency Future Harvest Index® Excess
Return (the DB Index) is the exclusive property of Deutsche Bank Securities Inc. Neither Deutsche Bank nor any other party involved in, or related to, making or compiling the DB Index makes any representation or warranty, express or
implied, concerning the DB Index, the Fund or the advisability of investing in securities generally. Neither Deutsche Bank nor any other party involved in, or related to, making or compiling the DB Index has any obligation to take the needs of
Invesco PowerShares Capital Management LLC, the sponsor of the Fund, or its clients into consideration in determining, composing or calculating the DB Index. Neither Deutsche Bank nor any other party involved in, or related to, making or compiling
the DB Index is responsible for or has participated in the determination of the timing of, prices at, quantities or valuation of the Fund. Neither Deutsche Bank nor any other party involved in, or related to, making or compiling the DB Index has any
obligation or liability in connection with the administration or trading of the Fund.
NEITHER DEUTSCHE BANK NOR ANY OTHER PARTY INVOLVED IN, OR RELATED
TO, MAKING OR COMPILING THE DB INDEX, WARRANTS OR GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE DB INDEX OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. NEITHER DEUTSCHE BANK NOR
ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING THE DB INDEX, MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY INVESCO POWERSHARES CAPITAL MANAGEMENT LLC FROM THE USE OF THE DB INDEX OR ANY DATA INCLUDED
THEREIN. NEITHER DEUTSCHE BANK NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING THE DB INDEX, MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE DB INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DEUTSCHE BANK OR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING THE DB INDEX HAVE ANY LIABILITY FOR DIRECT,
INDIRECT, PUNITIVE, SPECIAL, CONSEQUENTIAL OR ANY OTHER DAMAGES OR LOSSES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. EXCEPT AS EXPRESSLY PROVIDED TO THE CONTRARY, THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS
OR ARRANGEMENTS BETWEEN DEUTSCHE BANK AND INVESCO POWERSHARES CAPITAL MANAGEMENT LLC.
No purchaser, seller or holder of the shares of this Fund, or any
other person or entity, should use or refer to any Deutsche Bank trade name, trademark or service mark to sponsor, endorse, market or promote this Fund without first contacting Deutsche Bank to determine whether Deutsche Banks permission is
required. Under no circumstances may any person or entity claim any affiliation with Deutsche Bank without the written permission of Deutsche Bank.
-53-
USE OF PROCEEDS
Proceeds of the offering of the Shares are used by the Fund to engage in the trading of exchange-traded futures on the Index Currencies with a
view to tracking the changes, positive or negative, in the levels of the Index over time, less the expenses of the operations of the Fund. The Fund holds a portfolio of futures contracts on the Eligible Index Currencies and United States Treasury
Securities for deposit with the Funds Commodity Broker as margin and United States Treasury Securities, cash and money market mutual funds (affiliated or otherwise) on deposit with the Custodian (for cash management purposes) and may be held
by the Funds Commodity Broker as margin, to the extent permissible under CFTC rules. Approximately 5.49% of the Funds NAV is posted as collateral with respect to its holdings of futures on the Eligible Index Currencies as of
September 30, 2016. Collateral requirements are initially set by the applicable futures exchange. The Commodity Broker applies an additional collateral requirement based on a number of factors, including, but not limited to, volatility,
concentration, percentage of open interest, and position size with respect to the futures contracts on the Eligible Index Currencies. For purposes of calculating the approximate percentage of the Funds NAV that was posted as collateral, the
Funds aggregate assets under management reflected the sum of the Funds holdings of Treasury Securities, cash and the value of the futures contracts on the Eligible Index Currencies that have been marked to market as of September 30,
2016.
The Fund trades exchange-traded futures on the currencies comprising the Deutsche Bank G10 Currency Future Harvest Index® Excess Return, or the Index, with a view to tracking the Index over time. The Index is designed to reflect the return from investing on a 2:1 leveraged basis in long currency futures
positions for certain currencies associated with relatively high yielding interest rates and in short currency futures positions for certain currencies associated with relatively low yielding interest rates.
The Index is designed to exploit the trend that currencies associated with relatively high interest rates, on average, tend to rise in value relative to currencies associated with relatively low
interest rates. The Index exploits this trend using both long and short futures positions, which is expected to provide more consistent and less volatile returns than could be obtained by taking long positions only or short positions only.
To the extent, if any, that the Fund trades in futures contracts on United States exchanges, the assets deposited by the Fund with its
Commodity Broker as margin must be segregated pursuant to the regulations of the CFTC. Such segregated funds may be invested only in a limited range of instruments principally U.S. government obligations.
To the extent, if any, that the Fund trades in futures on markets other than regulated United States futures exchanges, funds deposited to
margin positions held on such exchanges are invested in bank deposits or in instruments of a credit standing generally comparable to those authorized by the CFTC for investment of customer segregated funds, although applicable CFTC rules
prohibit funds employed in trading on foreign exchanges from being deposited in customer segregated fund accounts.
Although
the percentages set forth below may vary substantially over time, as of the date of this Prospectus, the Fund estimates:
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up to approximately 6% of the NAV of the Fund is placed in segregated accounts in the name of the Fund with the Commodity Broker (or another eligible financial institution, as applicable) in the form of cash, money
market mutual funds or United States Treasury Securities to margin positions of all commodities combined. Such funds are segregated pursuant to CFTC rules; |
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up to approximately 94% of the NAV of the Fund is maintained in segregated accounts in the name of the Fund in bank deposits, money market mutual funds or United States Treasury Securities and United States Government
Agencies issues for cash management purposes. |
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The Managing Owner, a registered commodity pool operator, commodity trading advisor, and swap
firm, is responsible for the cash management activities of the Fund, including investing in United States Treasury Securities, United States Government Agencies issues and money market mutual funds (affiliated or otherwise) for cash management
purposes.
In addition, assets of the Fund not required to margin positions may be used for cash management purposes and may be maintained
in United States bank accounts opened in the name of the Fund and may be held in United States Treasury Securities and money market mutual funds (affiliated or otherwise), (or other securities approved by the CFTC for investment of customer funds)
and such assets will be held by the Custodian.
The Fund receives 100% of its Treasury Income and Money Market Income.
CHARGES
See Summary Breakeven Amounts and Summary Breakeven Table for additional breakeven related
information.
Management Fee
The Fund pays the Managing Owner a Management Fee, monthly in arrears, in an amount equal to 0.75% per annum of the daily NAV of the Fund.
The Management Fee is paid in consideration of the Managing Owners currency futures trading advisory services.
The Fund may, for
cash management purposes, invest in money market mutual funds that are managed by affiliates of the Managing Owner. The indirect portion of the management fee that the Fund may incur through such investment is in addition to the Management Fee paid
to the Managing Owner. The Managing Owner has contractually agreed to waive the fees that it receives in an amount equal to the indirect management fees that the Fund incurs through its investments in affiliated money market mutual funds through
June 20, 2018.
Organization and Offering Expenses
Expenses incurred in connection with organizing the Fund and the initial offering of the
Shares were paid by DB Commodity Services LLC, referred to as either the Predecessor Managing Owner or DBCS. Expenses incurred in connection with the continuous offering of Shares from
commencement of the Funds trading operations up to and excluding February 23, 2015 were also paid by the Predecessor Managing Owner. Expenses incurred in connection with the continuous offering of Shares on and after February 23,
2015 are paid by the Managing Owner. The Managing Owner aggregates the organization and offering expenses related to the Fund and other commodity and currency pools within the PowerShares DB fund suite, and allocates the costs associated to each
Fund. The Managing Owner expects that, as of the date of this Prospectus, the expenses incurred in connection with the continuous offering of Shares of the PowerShares DB fund suite may be approximately 0.03% of the average of the Funds NAV
during the life of the currently effective registration statement, provided that this amount may vary substantially depending upon the costs associated with the registration of additional shares, the total assets of the Fund, and any other related
continuous offering costs.
Organization and offering expenses relating to the Fund means those expenses incurred in connection with its
formation, the qualification and registration of the Shares and in offering, distributing and processing the Shares under applicable federal law, and any other expenses actually incurred and, directly or indirectly, related to the organization of
the Fund or the continuous offering of the Shares, including, but not limited to, expenses such as:
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initial and ongoing registration fees, filing fees and taxes; |
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costs of preparing, printing (including typesetting), amending, supplementing, mailing and distributing the Registration Statement, the exhibits thereto and this Prospectus; |
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the costs of qualifying, printing, (including typesetting), amending, supplementing, mailing and distributing sales materials used in connection with the offering and issuance of the Shares; |
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travel, telegraph, telephone and other expenses in connection with the offering and issuance of the Shares; and
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accounting, auditing and legal fees (including disbursements related thereto) incurred in connection therewith. |
The Managing Owner will not allocate to the Fund the indirect expenses of the Managing Owner.
Prior to January 1, 2011, the Fund invested substantially all of its assets in the DB G10 Currency Harvest Master Fund, or the Master
Fund. Upon formation of the Fund and the Master Fund in April 2006, organizational and offering costs were to be paid by the Predecessor Managing Owner subject to reimbursement by the Master Fund. As of July 12, 2006, costs incurred by the Fund
amounted to $1,064,500, which were expensed in the accounts of the Master Fund and recorded as a liability to the Predecessor Managing Owner. On July 12, 2006, prior to the commencement of investment operations and consolidation of the Fund and
Master Fund, the Predecessor Managing Owner determined to assume all the organization and offering costs both already incurred and to be incurred by the Predecessor Managing Owner on behalf of the Fund and Master Fund. Accordingly, the obligation of
the Master Fund as of July 12, 2006 was written off.
Brokerage Commissions and Fees
The Fund pays to the Commodity Broker all brokerage commissions, including applicable exchange fees, NFA fees,
give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with its trading activities. On average, total charges paid to the Commodity Broker are expected to be
less than USD 6.00 per round-turn trade, although the Commodity Brokers brokerage commissions and trading fees are determined on a contract-by-contract, or round-turn basis. A round-turn trade is a completed transaction involving both a
purchase and a liquidating sale, or a sale followed by a covering purchase. The Managing Owner estimates the brokerage commissions and fees will be approximately 0.05% of the NAV of the Fund in any year, although the actual amount of brokerage
commissions and fees in any year or any part of any year may be greater.
Routine Operational, Administrative and Other Ordinary Expenses
The Managing Owner pays all routine operational, administrative and other ordinary expenses of the Fund generally, as determined by
the Managing Owner including, but not limited to, computer services, the fees and expenses of the Trustee, license and service fees paid to DBSI as Marketing Agent and Index Sponsor, legal and accounting fees and expenses, tax preparation expenses,
filing fees, and printing, mailing and duplication costs. For the avoidance of doubt, the Fund does not reimburse the Managing Owner for the routine operational, administrative and other ordinary expenses of the Fund. The Managing Owner aggregates
the routine operational, administrative and other ordinary expenses related to the Fund and other commodity and currency pools within the PowerShares DB fund suite, and allocates the costs associated to each Fund. The Managing Owner expects that all
of the routine operational, administrative and other ordinary expenses of the PowerShares DB fund suite will be approximately 0.36% per annum of the average of the Funds NAV.
Non-Recurring Fees and Expenses
The Fund pays all non-recurring and unusual fees and expenses (referred to as extraordinary fees and expenses in the Trust Declaration), if
any, of the Fund generally, as determined by the Managing Owner. Non-recurring and unusual fees and expenses are fees and expenses which are non-recurring and unusual in nature, such as legal claims and liabilities and litigation costs or
indemnification or other unanticipated expenses. Non-recurring and unusual fees and expenses will also include material expenses which are not currently anticipated obligations of the Fund or of managed futures funds in general. Routine operational,
administrative and other ordinary expenses will not be deemed non-recurring expenses.
Management Fee and
Expenses to be Paid First out of Treasury Income and Money Market Income
The Management Fee and the brokerage commissions and fees of
the Fund are paid first out of Treasury Income from the Funds holdings of United States Treasury Securities and Money Market Income from the Funds holdings of money market mutual funds (affiliated or otherwise) and income from the
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on deposit with the Commodity Broker as margin, the Custodian, or otherwise. If the sum of the Treasury Income and the Money Market Income is not sufficient to cover the fees and expenses of the
Fund during any period, the excess of such fees and expenses over such Treasury Income and Money Market Income will be paid out of income from futures trading, if any, or from sales of the Funds United States Treasury Securities and/or
holdings in money market mutual funds. For the avoidance of doubt, the Fund invests in futures contracts in an attempt to track its Index. The Fund holds Treasury Securities and money market mutual funds for margin and/or cash management purposes
only.
Selling Commission
Retail investors may purchase and sell Shares through traditional brokerage accounts. Investors are expected to be charged a customary
commission by their brokers in connection with purchases of Shares that will vary from investor to investor. Investors are encouraged to review the terms of their brokerage accounts for applicable charges. Also, the excess, if any, of the price at
which an Authorized Participant sells a Share over the price paid by such Authorized Participant in connection with the creation of such Share in a Basket will be deemed to be underwriting compensation by the Financial Industry Regulatory Authority,
or FINRA, Corporate Financing Department.
WHO MAY SUBSCRIBE
Baskets may be created or redeemed only by Authorized Participants. Each Authorized Participant must (1) be a registered broker-dealer or
other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions, (2) be a participant in DTC, and (3) have entered into an
agreement with the Fund and the Managing Owner (a Participant Agreement). The Participant Agreement sets forth the procedures for the creation and redemption of Baskets and for the delivery of cash required for such creations or redemptions. A list
of the current Authorized Participants can be obtained from the Administrator. See Creation and Redemption of Shares for more details.
CREATION AND REDEMPTION OF SHARES
The Fund creates and redeems Shares from time-to-time, but only in one or more Baskets. A Basket is a block of 200,000 Shares. Baskets may be
created or redeemed only by Authorized Participants. Except when aggregated in Baskets, the Shares are not redeemable securities. Authorized Participants pay a transaction fee of USD 500 in connection with each order to create or redeem a Basket.
Authorized Participants may sell the Shares included in the Baskets they purchase from the Fund to other investors.
Authorized
Participants are the only persons that may place orders to create and redeem Baskets. Authorized Participants must be (1) registered broker-dealers or other securities market participants, such as banks and other financial institutions, which
are not required to register as broker-dealers to engage in securities transactions, and (2) participants in DTC. To become an Authorized Participant, a person must enter into a Participant Agreement with the Fund and the Managing Owner. The
Participant Agreement sets forth the procedures for the creation and redemption of Baskets and for the payment of cash required for such creations and redemptions. The Managing Owner may delegate its duties and obligations under the Participant
Agreement to Invesco Distributors, the Administrator or the Transfer Agent without consent from any Shareholder or Authorized Participant. The Participant Agreement and the related procedures attached thereto may be amended by the Managing Owner
without the consent of any Shareholder or Authorized Participant. To compensate the Transfer Agent for services in processing the creation and redemption of Baskets, an Authorized Participant is required to pay a transaction fee of USD 500 per
order to create or redeem Baskets. Authorized Participants who purchase Baskets from the Fund receive no fees, commissions or other form of compensation or inducement of any kind from either the Managing Owner or the Fund, and no such person has any
obligation or responsibility to the Managing Owner or the Fund to effect any sale or resale of Shares.
Authorized Participants are
cautioned that some of their activities will result in their being deemed participants in a distribution in a manner which would render them statutory underwriters and subject them to the prospectus delivery and liability provisions of the
Securities Act of 1933, or the Securities Act, as described in Plan of Distribution.
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Each Authorized Participant must be registered as a broker-dealer under the Exchange Act and
regulated by FINRA, or exempt from being, or otherwise not be required to be, so regulated or registered, and qualified to act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires. Certain
Authorized Participants may be regulated under federal and state banking laws and regulations. Each Authorized Participant will have its own set of rules and procedures, internal controls and information barriers as it determines is appropriate in
light of its own regulatory regime.
Authorized Participants may act for their own accounts or as agents for broker-dealers, custodians
and other securities market participants that wish to create or redeem Baskets.
Persons interested in purchasing Baskets should contact
the Managing Owner or the Administrator to obtain the contact information for the Authorized Participants. Shareholders who are not Authorized Participants will only be able to redeem their Shares through an Authorized Participant.
Under the Participant Agreements, the Managing Owner has agreed to indemnify the Authorized Participants and certain parties related to the
Authorized Participants against certain liabilities as a result of:
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any breach by the Managing Owner, the Fund, or any of their respective agents or employees, of any provision of the Participant Agreement, including any representations, warranties and covenants by any of them or the
Fund therein or in the Officers Certificate (as defined in the Participant Agreement); |
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any failure on the part of the Managing Owner to perform any obligation of the Managing Owner set forth in the Participant Agreement; |
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any failure by the Managing Owner to comply with applicable laws and regulations in connection with the Participant Agreement, except that the Managing Owner will not be required to indemnify a Managing Owner
Indemnified Party (as defined in the Participant Agreement) to the extent that such failure was caused by the reasonable reliance on instructions given or representations made by one or more Managing Owner Indemnified Parties or the
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negligence or willful malfeasance of any Managing Owner Indemnified Party; |
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any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, of which this Prospectus is a part of, or arising out of or based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except those statements in the Registration Statement based on information furnished in writing by or on behalf of the Authorized
Participant expressly for use in the Registration Statement; |
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any untrue statement or alleged untrue statement of a material fact contained in a Prospectus or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except those statements in this Prospectus based on information furnished in writing by or on behalf of the Authorized
Participant expressly for use in such Prospectus. |
As provided in the Participant Agreements, in the absence of gross
negligence, bad faith or willful misconduct, neither the Managing Owner nor an Authorized Participant will be liable to each other or to any other person, including any party claiming by, through or on behalf of the Authorized Participant, for any
losses, liabilities, damages, costs or expenses arising out of any mistake or error in data or other information provided to any of them by each other or any other person or out of any interruption or delay in the electronic means of communications
used by them.
The following description of the procedures for the creation and redemption of Baskets is only a summary and an investor
should refer to the relevant provisions of the Funds Trust Declaration and the form of Participant Agreement for more detail. The Funds Trust Declaration and the form of Participant Agreement are filed as exhibits to the registration
statement of which this Prospectus is a part.
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Creation Procedures
On any business day, an Authorized Participant may place an order with the Transfer Agent to create one or more Baskets. For purposes of
processing both creation and redemption orders, a business day means any day other than a day when banks in New York City are required or permitted to be closed. Creation orders must be placed by 1:00 p.m., Eastern time. The day on which
the Transfer Agent receives a valid creation order is the creation order date. The day on which a creation order is settled is the creation order settlement date. As provided below, the creation order settlement date may occur up to 3 business days
after the creation order date. By placing a creation order, and prior to delivery of such Baskets, an Authorized Participants DTC account is charged the non-refundable transaction fee due for the creation order.
Unless otherwise agreed to by the Managing Owner and the Authorized Participant as provided in the next sentence, Baskets are issued on the
creation order settlement date as of 2:45 p.m., Eastern time, on the business day immediately following the creation order date at the applicable NAV per Share as of the closing time of the NYSE Arca or the last to close of the exchanges on which
its futures contracts are traded, whichever is later, on the creation order date, but only if the required payment has been timely received. Upon submission of a creation order, the Authorized Participant may request the Managing Owner to agree to a
creation order settlement date up to 3 business days after the creation order date. By placing a creation order, and prior to receipt of the Baskets, an Authorized Participants DTC account is charged the non-refundable transaction fee due for
the creation order.
Determination of Required Payment
The total payment required to create each Basket is the NAV of 200,000 Shares as of the closing time of the NYSE Arca or the last to close of
the exchanges on which the Funds futures contracts are traded, whichever is later, on the creation order date.
Because orders to
purchase Baskets must be placed by 1:00 p.m., Eastern time, but the total payment required to create a Basket will not be determined until 4:00 p.m., Eastern time, on the date the creation order is received, Authorized Participants will not know the
total amount of the payment required to create a Basket at the time they submit the
creation order for the Basket. The Funds NAV and the total amount of the payment required to create a Basket could rise or fall substantially between the time a creation order is submitted
and the time the amount of the purchase price in respect thereof is determined.
Rejection of Creation
Orders
The Managing Owner or the Transfer Agent may reject a creation order if:
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The Managing Owner or the Transfer Agent determines that the creation order is not in proper form; |
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The Managing Owner believes that the acceptance or receipt of the creation order would have adverse tax consequences to the Fund or its Shareholders; or |
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Circumstances outside the control of the Managing Owner or the Transfer Agent make it, for all practical purposes, not feasible to process creations of Baskets. |
The Managing Owner will not be liable for the rejection of any creation order.
Redemption Procedures
The procedures by which an Authorized Participant can redeem one or more Baskets mirror the procedures for the creation of Baskets. On any
business day, an Authorized Participant may place an order with the Transfer Agent to redeem one or more Baskets. Redemption orders must be placed by 1:00 p.m., Eastern time. The day on which the Managing Owner receives a valid redemption order
is the redemption order date. The day on which a redemption order is settled is the redemption order settlement date. As provided below, the redemption order settlement date may occur up to 3 business days after the redemption order date. The
redemption procedures allow Authorized Participants to redeem Baskets. Individual Shareholders may not redeem directly from the Fund. Instead, individual Shareholders may only redeem Shares in integral multiples of 200,000 and only through an
Authorized Participant.
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Unless otherwise agreed to by the Managing Owner and the Authorized Participant as provided in
the next sentence, by placing a redemption order, an Authorized Participant agrees to deliver the Baskets to be redeemed through DTCs book-entry system to the Fund not later than the redemption order settlement date as of 2:45 p.m., Eastern
time, on the business day immediately following the redemption order date. Upon submission of a redemption order, the Authorized Participant may request the Managing Owner to agree to a redemption order settlement date up to 3 business days after
the redemption order date. By placing a redemption order, and prior to receipt of the redemption proceeds, an Authorized Participants DTC account is charged the non-refundable transaction fee due for the redemption order.
Determination of Redemption Proceeds
The redemption proceeds from the Fund consist of the cash redemption amount. The cash redemption amount is equal to the NAV of the number of
Basket(s) requested in the Authorized Participants redemption order as of the closing time of the NYSE Arca or the last to close of the exchanges on which the Funds futures contracts are traded, whichever is later, on the redemption
order date. The Managing Owner will distribute the cash redemption amount at 2:45 p.m., Eastern time, on the redemption order settlement date through DTC to the account of the Authorized Participant as recorded on DTCs book entry system.
Delivery of Redemption Proceeds
The redemption proceeds due from the Fund are delivered to the Authorized Participant at 2:45 p.m., Eastern time, on the redemption order
settlement date if, by such time, the Funds DTC account has been credited with the Baskets to be redeemed. If the Funds DTC account has not been credited with all of the Baskets to be redeemed by such time, the redemption distribution is
delivered to the extent of whole Baskets received. Any remainder of the redemption distribution is delivered on the next business day to the extent of remaining whole Baskets received if the Transfer Agent receives the fee applicable to the
extension of the redemption distribution date which the Managing Owner may, from time-to-time, determine and the remaining Baskets to be redeemed are credited to the Funds DTC account by 2:45 p.m., Eastern time, on such next business day. Any
further outstanding amount of the redemption order will be cancelled. The Managing Owner is also authorized to deliver the
redemption distribution notwithstanding that the Baskets to be redeemed are not credited to the Funds DTC account by 2:45 p.m., Eastern time, on the redemption order settlement date if the
Authorized Participant has collateralized its obligation to deliver the Baskets through DTCs book entry system on such terms as the Managing Owner may determine from time-to-time.
Suspension, Postponement or Rejection of Redemption Orders
The Managing Owner may, in its discretion, suspend the right of redemption, or postpone the redemption order settlement date (1) for any
period during which an emergency exists as a result of which the redemption distribution is not reasonably practicable, or (2) for such other period as the Managing Owner determines to be necessary for the protection of the Shareholders. The
Managing Owner will not be liable to any person or in any way for any loss or damages that may result from any such suspension or postponement.
The Managing Owner or the Transfer Agent may reject a redemption order if the order is not in proper form as described in the Participant
Agreement. The Managing Owner or the Transfer Agent will reject a redemption order if the acceptance or receipt of the order, in the opinion of its counsel, might be unlawful.
Creation and Redemption Transaction Fee
To compensate the Transfer Agent for services in processing the creation and redemption of Baskets, an Authorized Participant is required to
pay a transaction fee of USD 500 per order to create or redeem Baskets. An order may include multiple Baskets. The transaction fee may be reduced, increased or otherwise changed by the Managing Owner. The Managing Owner will notify DTC of any
agreement to change the transaction fee and will not implement any increase in the fee for the redemption of Baskets until 30 days after the date of the notice.
Monthly account
statements conforming to CFTC and NFA requirements are posted on the Managing Owners website at http://www.invescopowershares.com. Additional reports may be posted on the Managing Owners website in the discretion of the Managing
Owner or as required by regulatory authorities.
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THE COMMODITY BROKER
A variety of executing brokers executes futures transactions on behalf of the Fund. Such executing brokers give-up all such transactions to
Morgan Stanley & Co. LLC, a Delaware limited liability company, which serves as the Funds clearing broker, or Commodity Broker. In its capacity as clearing broker, the Commodity Broker may execute or receive transactions executed by
others and clears all of the Funds futures transactions and performs certain administrative and custodial services for the Fund. Morgan Stanley & Co. LLC is also registered with the Commodity Futures Trading Commission as a futures
commission merchant and is a member of the National Futures Association in such capacity.
On June 1, 2011, Morgan Stanley &
Co. Incorporated converted from a Delaware corporation to a Delaware limited liability company. As a result of that conversion, Morgan Stanley & Co. Incorporated is now named Morgan Stanley & Co. LLC (MS&Co. or the
Company).
MS&Co. is a wholly-owned, indirect subsidiary of Morgan Stanley, a Delaware holding company. Morgan Stanley
files periodic reports with the Securities and Exchange Commission as required by the Exchange Act, which include current descriptions of material litigation and material proceedings and investigations, if any, by governmental and/or regulatory
agencies or self-regulatory organizations concerning Morgan Stanley and its subsidiaries, including MS&Co. As a consolidated subsidiary of Morgan Stanley, MS&Co. does not file its own periodic reports with the SEC that contain descriptions
of material litigation, proceedings and investigations. As a result, we refer you to the Legal Proceedings section of Morgan Stanleys SEC 10-K filings for 2015, 2014, 2013, 2012, and 2011.
In addition to the matters described in those filings, in the normal course of business, each of Morgan Stanley and MS&Co. has been named,
from time to time, as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with its activities as a global diversified financial services institution. Certain of the legal actions
include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Each
of Morgan Stanley and MS&Co. is also involved, from time to time, in investigations and proceedings by governmental and/or regulatory agencies or self-regulatory organizations, certain of
which may result in adverse judgments, fines or penalties. The number of these investigations and proceedings has increased in recent years with regard to many financial services institutions, including Morgan Stanley and MS&Co.
MS&Co. is a Delaware limited liability company with its main business office located at 1585 Broadway, New York, New York 10036. Among
other registrations and memberships, MS&Co. is registered as a futures commission merchant and is a member of the National Futures Association.
Regulatory and Governmental Matters.
The Company has received subpoenas and requests for information from certain federal and state regulatory and governmental entities, including
among others various members of the RMBS Working Group of the Financial Fraud Enforcement Task Force, such as the United States Department of Justice, Civil Division and several state Attorney Generals Offices, concerning the origination,
financing, purchase, securitization and servicing of subprime and non-subprime residential mortgages and related matters such as residential mortgage backed securities (RMBS), collateralized debt obligations (CDOs),
structured investment vehicles (SIVs) and credit default swaps backed by or referencing mortgage pass-through certificates. These matters, some of which are in advanced stages, include, but are not limited to, investigations related to
the Companys due diligence on the loans that it purchased for securitization, the Companys communications with ratings agencies, the Companys disclosures to investors, and the Companys handling of servicing and foreclosure
related issues.
On February 25, 2015, the Company reached an agreement in principle with the United States Department of Justice,
Civil Division and the United States Attorneys Office for the Northern District of California, Civil Division (collectively, the Civil Division) to pay $2.6 billion to resolve certain claims that the Civil Division indicated it
intended to bring against the Company. That settlement was finalized on February 10, 2016.
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On April 1, 2016, the California Attorney Generals Office filed an action against the
Company and certain affiliates in California state court styled California v. Morgan Stanley, et al., on behalf of California investors, including the California Public Employees Retirement System and the California Teachers
Retirement System. The complaint alleges that the Company made misrepresentations and omissions regarding residential mortgage-backed securities and notes issued by the Cheyne SIV, and asserts violations of the California False Claims Act and other
state laws and seeks treble damages, civil penalties, disgorgement, and injunctive relief.
In October 2014, the Illinois Attorney
Generals Office (ILAG) sent a letter to the Company alleging that the Company knowingly made misrepresentations related to RMBS purchased by certain pension funds affiliated with the State of Illinois and demanding that the Company
pay ILAG approximately $88 million. The Company and ILAG reached an agreement to resolve the matter on February 10, 2016.
On
January 13, 2015, the New York Attorney Generals Office (NYAG), which is also a member of the RMBS Working Group, indicated that it intends to file a lawsuit related to approximately 30 subprime securitizations sponsored by
the Company. NYAG indicated that the lawsuit would allege that the Company misrepresented or omitted material information related to the due diligence, underwriting and valuation of the loans in the securitizations and the properties securing them
and indicated that its lawsuit would be brought under the Martin Act. The Company and NYAG reached an agreement to resolve the matter on February 10, 2016.
On June 5, 2012, the Company consented to and became the subject of an Order Instituting Proceedings Pursuant to Sections 6(c) and 6(d)
of the Commodity Exchange Act, as amended, Making Findings and Imposing Remedial Sanctions by The Commodity Futures Trading Commission (CFTC) to resolve allegations related to the failure of a salesperson to comply with exchange rules that prohibit
off-exchange futures transactions unless there is an Exchange for Related Position (EFRP). Specifically, the CFTC found that from April 2008 through October 2009, the Company violated Section 4c(a) of the Commodity Exchange Act and Commission
Regulation 1.38 by executing, processing and reporting numerous off-exchange futures trades to the Chicago Mercantile Exchange (CME) and Chicago Board of Trade (CBOT) as EFRPs in violation of CME and CBOT rules because those trades lacked the
corresponding and related cash, OTC swap, OTC option, or other OTC
derivative position. In addition, the CFTC found that the Company violated CFTC Regulation 166.3 by failing to supervise the handling of the trades at issue and failing to have adequate policies
and procedures designed to detect and deter the violations of the Act and Regulations. Without admitting or denying the underlying allegations and without adjudication of any issue of law or fact, the Company accepted and consented to entry of
findings and the imposition of a cease and desist order, a fine of $5,000,000, and undertakings related to public statements, cooperation and payment of the fine. The Company entered into corresponding and related settlements with the CME and CBOT
in which the CME found that the Company violated CME Rules 432.Q and 538 and fined the Company $750,000 and CBOT found that the Company violated CBOT Rules 432.Q and 538 and fined the Company $1,000,000.
On July 23, 2014, the U.S. Securities and Exchange Commission (SEC) approved a settlement by MS&Co. and certain
affiliates to resolve an investigation related to certain subprime RMBS transactions sponsored and underwritten by those entities in 2007. Pursuant to the settlement, MS&Co. and certain affiliates were charged with violating Sections
17(a)(2) and 17(a)(3) of the Securities Act, agreed to pay disgorgement and penalties in an amount of $275 million and neither admitted nor denied the SECs findings.
On April 21, 2015, the Chicago Board Options Exchange, Incorporated (CBOE) and the CBOE Futures Exchange, LLC (CFE) filed statements of
charges against the Company in connection with trading by one of the Companys former traders of EEM options contracts that allegedly disrupted the final settlement price of the November 2012 VXEM futures. CBOE alleged that the Company
violated CBOE Rules 4.1, 4.2 and 4.7, Sections 9(a) and 10(b) of the Exchange Act, and Rule 10b-5 thereunder. CFE alleged that the Company violated CFE Rules 608, 609 and 620. Both matters are ongoing.
On June 18, 2015, the Company entered into a settlement with the SEC and paid a fine of $500,000 as part of the MCDC Initiative to
resolve allegations that the Company failed to form a reasonable basis through adequate due diligence for believing the truthfulness of the assertions by issuers and/or obligors regarding their compliance with previous continuing disclosure
undertakings pursuant to Rule 15c2-12 in connection with offerings in which the Company acted as senior or sole underwriter.
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On August 6, 2015, the Company consented to and became the subject of an order by the CFTC
to resolve allegations that the Company violated CFTC Regulation 22.9(a) by failing to hold sufficient US Dollars in cleared swap segregated accounts in the United States to meet all US Dollar obligations to cleared swaps customers. Specifically,
the CFTC found that while the Company at all times held sufficient funds in segregation to cover its obligations to its customers, on certain days during 2013 and 2014, it held currencies, such as euros, instead of US dollars, to meet its US dollar
obligations. In addition, the CFTC found that the Company violated Regulation 166.3 by failing to have in place adequate procedures to ensure that it complied with Regulation 22.9(a). Without admitting or denying the findings or
conclusions and without adjudication of any issue of law or fact, the Company accepted and consented to the entry of findings, the imposition of a cease and desist order, a civil monetary penalty of $300,000, and undertakings related to public
statements, cooperation, and payment of the monetary penalty.
Civil Litigation
On December 23, 2009, the Federal Home Loan Bank of Seattle filed a complaint against the Company and another defendant
in the Superior Court of the State of Washington, styled Federal Home Loan Bank of Seattle v. Morgan Stanley & Co. Inc., et al. The amended complaint, filed on September 28, 2010, alleges that defendants made untrue
statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sold to plaintiff by the
Company was approximately $233 million. The complaint raises claims under the Washington State Securities Act and seeks, among other things, to rescind the plaintiffs purchase of such certificates By orders dated June 23,
2011 and July 18, 2011, the court denied defendants omnibus motion to dismiss plaintiffs amended complaint and on August 15, 2011, the court denied the Companys individual motion to dismiss the amended
complaint. On March 7, 2013, the court granted defendants motion to strike plaintiffs demand for a jury trial. The defendants joint motions for partial summary judgment were denied on November 9, 2015. At March 25,
2016, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $45 million, and the certificates had not yet incurred actual losses. Based on currently available information, the Company
believes it could incur a loss in this action up to the difference between the $45 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the
time of a judgment against the Company, plus pre- and post-judgment interest, fees and costs. The Company may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior to a judgment.
On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against the Company and other defendants
in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Deutsche Bank Securities Inc. et al. An amended complaint, filed on June 10, 2010, alleges that defendants made untrue
statements and material omissions in connection with the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold to
plaintiff by the Company was approximately $276 million. The complaint raises claims under both the federal securities laws and California law and seeks, among other things, to rescind the plaintiffs purchase of such
certificates. On August 11, 2011, plaintiffs federal securities law claims were dismissed with prejudice. On February 9, 2012, defendants demurrers with respect to all other claims were overruled. On December 20,
2013, plaintiffs negligent misrepresentation claims were dismissed with prejudice. At March 25, 2016, the current unpaid balance of the mortgage pass-through certificates at issue in these cases was approximately $56 million, and the
certificates had incurred actual losses of approximately $1 million. Based on currently available information, the Company believes it could incur a loss for this action up to the difference between the $56 million unpaid balance of these
certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Company, or upon sale, plus pre- and post-judgment interest, fees and costs. The Company may be entitled to be indemnified for some of these
losses and to an offset for interest received by the plaintiff prior to a judgment.
On July 15, 2010, China
Development Industrial Bank (CDIB) filed a complaint against the Company, styled China Development Industrial Bank v. Morgan Stanley & Co. Incorporated et al., which is pending in the Supreme Court of the State of New
York, New York County (Supreme Court of NY). The complaint relates to a $275 million credit default swap referencing the super senior portion of the STACK 2006-1 CDO. The complaint asserts
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claims for common law fraud, fraudulent inducement and fraudulent concealment and alleges that the Company misrepresented the risks of the STACK 2006-1 CDO to CDIB, and that the Company knew that
the assets backing the CDO were of poor quality when it entered into the credit default swap with CDIB. The complaint seeks compensatory damages related to the approximately $228 million that CDIB alleges it has already lost under the credit default
swap, rescission of CDIBs obligation to pay an additional $12 million, punitive damages, equitable relief, fees and costs. On February 28, 2011, the court denied the Companys motion to dismiss the complaint. Based on
currently available information, the Company believes it could incur a loss of up to approximately $240 million plus pre- and post-judgment interest, fees and costs.
On October 15, 2010, the Federal Home Loan Bank of Chicago filed a complaint against the Company and other defendants
in the Circuit Court of the State of Illinois, styled Federal Home Loan Bank of Chicago v. Bank of America Funding Corporation et al. A corrected amended complaint was filed on April 8, 2011. The corrected
amended complaint alleges that defendants made untrue statements and material omissions in the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans and
asserts claims under Illinois law. The total amount of certificates allegedly sold to plaintiff by the Company at issue in the action was approximately $203 million. The complaint seeks, among other things, to rescind the
plaintiffs purchase of such certificates. The defendants filed a motion to dismiss the corrected amended complaint on May 27, 2011, which was denied on September 19, 2012. On December 13, 2013, the court entered an order
dismissing all claims related to one of the securitizations at issue. After that dismissal, the remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $78 million. At March 25,
2016, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $50 million, and the certificates had not yet incurred actual losses. Based on currently available information, the Company believes
it could incur a loss in this action up to the difference between the $50 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Company, plus pre- and post-judgment
interest, fees and costs. The Company may be entitled to be indemnified for some of these losses and to an offset
for interest received by the plaintiff prior to a judgment.
On
April 20, 2011, the Federal Home Loan Bank of Boston filed a complaint against the Company and other defendants in the Superior Court of the Commonwealth of Massachusetts styled Federal Home Loan Bank of Boston v. Ally Financial, Inc. F/K/A
GMAC LLC et al. An amended complaint was filed on June 29, 2012 and alleges that defendants made untrue statements and material omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts
containing residential mortgage loans. The total amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $385 million. The amended complaint raises claims under the Massachusetts Uniform
Securities Act, the Massachusetts Consumer Protection Act and common law and seeks, among other things, to rescind the plaintiffs purchase of such certificates. On May 26, 2011, defendants removed the case to the United States District
Court for the District of Massachusetts. The defendants motions to dismiss the amended complaint were granted in part and denied in part on September 30, 2013. On November 25, 2013, July 16, 2014, and May 19, 2015,
respectively, the plaintiff voluntarily dismissed its claims against the Company with respect to three of the securitizations at issue. After these voluntary dismissals, the remaining amount of certificates allegedly issued by the Company or sold to
plaintiff by the Company was approximately $332 million. At March 25, 2016, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $54 million, and the certificates had not yet incurred
actual losses. Based on currently available information, the Company believes it could incur a loss in this action up to the difference between the $54 million unpaid balance of these certificates (plus any losses incurred) and their fair market
value at the time of a judgment against the Company, or upon sale, plus pre- and post-judgment interest, fees and costs. The Company may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff
prior to a judgment.
On May 3, 2013, plaintiffs in Deutsche Zentral-Genossenschaftsbank AG et al. v. Morgan
Stanley et al. filed a complaint against the Company, certain affiliates, and other defendants in the Supreme Court of NY. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiffs of certain
mortgage pass-through certificates backed by securitization trusts containing
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residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff currently at issue in this action was approximately $644
million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, negligent misrepresentation, and rescission and seeks, among other things, compensatory and punitive
damages. On June 10, 2014, the court granted in part and denied in part the Companys motion to dismiss the complaint. The Company perfected its appeal from that decision on June 12, 2015. At March 25, 2016, the current unpaid
balance of the mortgage pass-through certificates at issue in this action was approximately $263 million, and the certificates had incurred actual losses of approximately $84 million. Based on currently available information, the Company believes it
could incur a loss in this action up to the difference between the $263 million unpaid balance of these certificates (plus any losses incurred) and their fair market value at the time of a judgment against the Company, or upon sale, plus pre- and
post-judgment interest, fees and costs. The Company may be entitled to be indemnified for some of these losses.
On May 17, 2013,
plaintiff in IKB International S.A. in Liquidation, et al. v. Morgan Stanley, et al. filed a complaint against the Company and certain affiliates in the Supreme Court of NY. The complaint alleges that defendants made material
misrepresentations and omissions in the sale to plaintiff of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or
sold by the Company to plaintiff was approximately $132 million. The complaint alleges causes of action against the Company for common law fraud, fraudulent concealment, aiding and abetting fraud, and negligent misrepresentation, and seeks,
among other things, compensatory and punitive damages. On October 29, 2014, the court granted in part and denied in part the Companys motion to dismiss. All claims regarding four certificates were dismissed. After these dismissals, the
remaining amount of certificates allegedly issued by the Company or sold to plaintiff by the Company was approximately $116 million. On August 26, 2015, the Company perfected its appeal from the courts October 29, 2014 decision. At
March 25, 2016, the current unpaid balance of the mortgage pass-through certificates at issue in this action was approximately $28 million, and the certificates had incurred actual losses of $58 million. Based on currently available
information, the
Company believes it could incur a loss in this action up to the difference between the $28 million unpaid balance of these certificates (plus any losses incurred) and their fair market value
at the time of a judgment against the Company, or upon sale, plus pre- and post-judgment interest, fees and costs. The Company may be entitled to be indemnified for some of these losses and to an offset for interest received by the plaintiff prior
to a judgment.
Settled Civil Litigation
On August 25, 2008, the Company and two ratings agencies were named as defendants in a purported class action related to securities
issued by a structured investment vehicle called Cheyne Finance PLC and Cheyne Finance LLC (together, the Cheyne SIV). The case was styled Abu Dhabi Commercial Bank, et al. v. Morgan Stanley & Co. Inc., et al. The
complaint alleged, among other things, that the ratings assigned to the securities issued by the Cheyne SIV were false and misleading, including because the ratings did not accurately reflect the risks associated with the subprime residential
mortgage backed securities held by the Cheyne SIV. The plaintiffs asserted allegations of aiding and abetting fraud and negligent misrepresentation relating to approximately $852 million of securities issued by the Cheyne SIV. On April 24,
2013, the parties reached an agreement to settle the case, and on April 26, 2013, the court dismissed the action with prejudice.
On March 15, 2010, the Federal Home Loan Bank of San Francisco filed a complaint against the Company and other defendants
in the Superior Court of the State of California styled Federal Home Loan Bank of San Francisco v. Credit Suisse Securities (USA) LLC, et al. An amended complaint filed on June 10, 2010 alleged that defendants made untrue
statements and material omissions in connection with the sale to plaintiff of a number of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of certificates allegedly sold
to plaintiff by the Company was approximately $704 million. The complaint raised claims under both the federal securities laws and California law and sought, among other things, to rescind the plaintiffs purchase of such
certificates. On January 26, 2015, as a result of a settlement with certain other defendants, the plaintiff requested and the court subsequently entered a dismissal with prejudice of certain of the plaintiffs claims, including all
remaining claims against the Company.
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On July 9, 2010 and February 11, 2011, Cambridge Place Investment Management
Inc. filed two separate complaints against the Company and/or its affiliates and other defendants in the Superior Court of the Commonwealth of Massachusetts, both styled Cambridge Place Investment Management Inc. v. Morgan
Stanley & Co., Inc., et al. The complaints asserted claims on behalf of certain clients of plaintiffs affiliates and allege that defendants made untrue statements and material omissions in the sale of a number
of mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued by the Company and/or its affiliates or sold to plaintiffs
affiliates clients by the Company and/or its affiliates in the two matters was approximately $263 million. On February 11, 2014, the parties entered into an agreement to settle the litigation. On February 20, 2014, the court
dismissed the action.
On October 25, 2010, the Company, certain affiliates and Pinnacle Performance Limited, a
special purpose vehicle (SPV), were named as defendants in a purported class action in the United States District Court for the Southern District of New York (SDNY), styled Ge Dandong, et al. v. Pinnacle Performance Ltd.,
et al.. On January 31, 2014, the plaintiffs in the action, which related to securities issued by the SPV in Singapore, filed a second amended complaint, which asserted common law claims of fraud, aiding and abetting fraud, fraudulent
inducement, aiding and abetting fraudulent inducement, and breach of the implied covenant of good faith and fair dealing. On July 17, 2014, the parties reached an agreement to settle the litigation, which received final court approval on
July 2, 2015.
On July 5, 2011, Allstate Insurance Company and certain of its affiliated entities filed a
complaint against the Company in the Supreme Court of NY, styled Allstate Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on September 9, 2011, and alleges that the defendants made untrue statements and
material omissions in the sale to the plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly issued and/or sold to the plaintiffs by
the Company was approximately $104 million. The complaint raised common law claims of fraud, fraudulent inducement, aiding and abetting fraud, and negligent misrepresentation and seeks, among other things, compensatory and/or recessionary damages
associated with the plaintiffs purchases of such certificates. On March 15, 2013,
the court denied in substantial part the defendants motion to dismiss the amended complaint, which order the Company appealed on April 11, 2013. On May 3, 2013, the Company
filed its answer to the amended complaint. On January 16, 2015, the parties reached an agreement to settle the litigation.
On July 18, 2011, the Western and Southern Life Insurance Company and certain affiliated companies filed a complaint against
the Company and other defendants in the Court of Common Pleas in Ohio, styled Western and Southern Life Insurance Company, et al. v. Morgan Stanley Mortgage Capital Inc., et al. An amended complaint was filed on April 2, 2012
and alleges that defendants made untrue statements and material omissions in the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The amount of the certificates
allegedly sold to plaintiffs by the Company was approximately $153 million. On June 8, 2015, the parties reached an agreement to settle the litigation.
On September 2, 2011, the Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac,
filed 17 complaints against numerous financial services companies, including the Company and certain affiliates. A complaint against the Company and certain affiliates and other defendants was filed in the Supreme Court of NY, styled Federal
Housing Finance Agency, as Conservator v. Morgan Stanley et al. The complaint alleges that defendants made untrue statements and material omissions in connection with the sale to Fannie Mae and Freddie Mac of residential mortgage
pass-through certificates with an original unpaid balance of approximately $11 billion. The complaint raised claims under federal and state securities laws and common law and seeks, among other things, rescission and compensatory and punitive
damages. On February 7, 2014, the parties entered into an agreement to settle the litigation. On February 20, 2014, the court dismissed the action.
On April 25, 2012, Metropolitan Life Insurance Company and certain affiliates filed a complaint against the Company and certain
affiliates in the Supreme Court of NY, styled Metropolitan Life Insurance Company, et al. v. Morgan Stanley, et al. An amended complaint was filed on June 29, 2012, and alleges that the defendants made untrue statements and material
omissions in the sale to the plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of
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certificates allegedly sponsored, underwritten, and/or sold by the Company was approximately $758 million. The amended complaint raised common law claims of fraud, fraudulent inducement, and
aiding and abetting fraud and seeks, among other things, rescission, compensatory, and/or rescissionary damages, as well as punitive damages, associated with the plaintiffs purchases of such certificates. On April 11, 2014, the parties
entered into a settlement agreement.
On April 25, 2012, The Prudential Insurance Company of America and certain affiliates
filed a complaint against the Company and certain affiliates in the Superior Court of the State of New Jersey, styled The Prudential Insurance Company of America, et al. v. Morgan Stanley, et al. On October 16, 2012, plaintiffs filed an
amended complaint. The amended complaint alleged that defendants made untrue statements and material omissions in connection with the sale to plaintiffs of certain mortgage pass-through certificates backed by securitization trusts containing
residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company was approximately $1.073 billion. The amended complaint raises claims under the New Jersey Uniform Securities Law, as well as
common law claims of negligent misrepresentation, fraud, fraudulent inducement, equitable fraud, aiding and abetting fraud, and violations of the New Jersey RICO statute, and includes a claim for treble damages. On January 8, 2016, the parties
reached an agreement to settle the litigation.
In re Morgan Stanley Mortgage Pass-Through Certificates Litigation, which
had been pending in the SDNY, was a putative class action involving allegations that, among other things, the registration statements and offering documents related to the offerings of certain mortgage pass-through certificates in 2006 and 2007
contained false and misleading information concerning the pools of residential loans that backed these securitizations. On December 18, 2014, the parties agreement to settle the litigation received final court approval, and on
December 19, 2014, the court entered an order dismissing the action.
On November 4, 2011, the Federal
Deposit Insurance Corporation (FDIC), as receiver for Franklin Bank S.S.B, filed two complaints against the Company in the District Court of the State of Texas. Each was styled Federal Deposit Insurance Corporation as Receiver for
Franklin Bank, S.S.B v. Morgan Stanley & Company LLC F/K/A Morgan
Stanley & Co. Inc. and alleged that the Company made untrue statements and material omissions in connection with the sale to plaintiff of mortgage pass-through certificates backed by
securitization trusts containing residential mortgage loans. The amount of certificates allegedly underwritten and sold to plaintiff by the Company in these cases was approximately $67 million and $35 million, respectively. On July 2, 2015, the
parties reached an agreement to settle the litigation.
On February 14, 2013, Bank Hapoalim B.M. filed a complaint
against the Company and certain affiliates in the Supreme Court of NY, styled Bank Hapoalim B.M. v. Morgan Stanley et al. The complaint alleges that defendants made material misrepresentations and omissions in the sale to plaintiff of
certain mortgage pass-through certificates backed by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiff was approximately $141
million. On July 28, 2015, the parties reached an agreement to settle the litigation, and on August 12, 2015, the plaintiff filed a stipulation of discontinuance with prejudice.
On September 23, 2013, the plaintiff in National Credit Union Administration Board v. Morgan Stanley & Co. Inc., et
al. filed a complaint against the Company and certain affiliates in the SDNY. The complaint alleged that defendants made untrue statements of material fact or omitted to state material facts in the sale to the plaintiff of certain mortgage
pass-through certificates issued by securitization trusts containing residential mortgage loans. The total amount of certificates allegedly sponsored, underwritten and/or sold by the Company to plaintiffs in the matter was approximately $417
million. The complaint alleged violations of federal and various state securities laws and sought, among other things, rescissionary and compensatory damages. On November 23, 2015, the parties reached an agreement to settle the matter.
On September 16, 2014, the Virginia Attorney Generals Office filed a civil lawsuit, styled Commonwealth of Virginia ex rel. Integra REC
LLC v. Barclays Capital Inc., et al., against the Company and several other defendants in the Circuit Court of the City of Richmond related to RMBS. The lawsuit alleged that the Company and the other defendants knowingly made misrepresentations
and omissions related to the loans backing RMBS purchased by the Virginia Retirement System. The complaint asserts claims under the Virginia Fraud Against Taxpayers
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Act, as well as common law claims of actual and constructive fraud, and seeks, among other things, treble damages and civil penalties. On January 6, 2016, the parties reached an agreement to
settle the litigation. An order dismissing the action with prejudice was entered on January 28, 2016.
Additional or
replacement Commodity Brokers may be appointed in respect of the Fund in the future.
CONFLICTS OF INTEREST
General
The Managing Owner has not established formal procedures to resolve all potential conflicts of interest. Consequently, investors may be
dependent on the good faith of the respective parties subject to such conflicts to resolve them equitably. Although the Managing Owner attempts to monitor these conflicts, it is extremely difficult, if not impossible, for the Managing Owner to
ensure that these conflicts do not, in fact, result in adverse consequences to the Fund.
Prospective investors should be aware
that the Managing Owner presently intends to assert that Shareholders have, by subscribing for Shares, consented to the following conflicts of interest in the event of any proceeding alleging that such conflicts violated any duty owed by the
Managing Owner to investors.
The Managing Owner
The Managing Owner has a conflict of interest in allocating its own limited resources among different clients and potential future business
ventures, to each of which it owes fiduciary duties. Additionally, certain of the professional staff of the Managing Owner may also service other affiliates of the Managing Owner and their respective clients. The Managing Owner may, from
time-to-time, have conflicting demands in respect of its obligations to the Fund and to other commodity pools and accounts. It is possible that current or future pools that the Managing Owner may become involved with may generate larger fees,
resulting in increased payments to employees. Although the Managing Owner and its professional staff cannot and will not devote all of its or their respective time or resources to the management of the business and affairs of the Fund,
the Managing Owner intends to devote, and to cause its professional staff to devote, sufficient time and resources to manage properly the business and affairs of the Fund consistent with its or
their respective fiduciary duties to the Fund and others.
The Managing Owner has a conflict of interest in the selection of affiliated
money market mutual funds in which the Fund may invest a portion of its cash for cash management purposes. The Managing Owner may choose to invest a portion of the Funds cash in an affiliated money market mutual fund despite the fact that
non-affiliated money market mutual funds may pay a higher dividend.
There is an absence of arms length negotiation with respect to
some of the terms of this offering, and there has been no independent due diligence conducted with respect to this offering.
Invesco Distributors
Because the Managing Owner and Invesco Distributors are affiliates, the Managing Owner has a disincentive to
replace Invesco Distributors. Furthermore, the Managing Owner did not conduct an arms length negotiation with respect to Invesco Distributors.
Invesco Advisers
Placing trades generally involves acting on portfolio manager instructions to buy or sell a specified amount of futures contracts, including
how to place the trades. The Managing Owner is part of the Invesco Global Trading Desk, which includes trading hubs operated by affiliates of the Managing Owner throughout the world. Invesco Advisers Inc. or Invesco Advisers, one such affiliate,
operates a trading desk in Atlanta with particular experience in placing trades in currency futures contracts. The Managing Owner may utilize the Invesco Advisers trading desk to place trades for the Fund. Invesco Advisers receives no compensation
for providing this service. Invesco Advisers acts as a commodity trading advisor of the Fund.
The Commodity
Broker
Shareholders should understand that the Commodity Broker receives a round-turn brokerage fee from the Fund for serving as the
Funds
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commodity broker. A round-turn trade is a completed transaction involving both a purchase and a liquidating sale, or a sale followed by a covering purchase.
The Commodity Broker may act from time-to-time as a commodity broker for other accounts with which it is affiliated or in which it or one of
its affiliates has a financial interest. The compensation received by the Commodity Broker from such accounts may be more or less than the compensation received for brokerage services provided to the Fund. Customers of the Commodity Broker who
maintain commodity trading accounts may pay commissions at negotiated rates which are greater or less than the rate paid by the Fund. In addition, various accounts traded through the Commodity Broker (and over which their personnel may have
discretionary trading authority) may take positions in the futures markets opposite to those of the Fund or may compete with the Fund for the same positions. The Commodity Broker may have a conflict of interest in its execution of trades for the
Fund and for other customers. The Managing Owner will, however, not retain any commodity broker for the Fund which the Managing Owner has reason to believe would knowingly or deliberately favor any other customer over the Fund with respect to the
execution of commodity trades.
The Commodity Broker will benefit from executing orders for other clients, whereas the Fund may be harmed
to the extent that the Commodity Broker has fewer resources to allocate to the Funds accounts due to the existence of such other clients.
Certain officers or employees of the Commodity Broker may be members of United States commodities exchanges and/or serve on the governing
bodies and standing committees of such exchanges, their clearing houses and/or various other industry organizations. In such capacities, these officers or employees may have a fiduciary duty to the exchanges, their clearing houses and/or such
various other industry organizations which could compel such employees to act in the best interests of these entities, perhaps to the detriment of the Fund.
The Index Sponsor and the Marketing Agent
Deutsche Bank Securities Inc., in its capacity as the Funds Index Sponsor and Marketing Agent, has a conflict of interest in allocating
its own limited resources among different clients and potential future business ventures. Additionally, certain of the
professional staff of Deutsche Bank Securities Inc. may also service other affiliates of Deutsche Bank Securities Inc. and their respective clients. Deutsche Bank Securities Inc., in its capacity
as the Funds Index Sponsor and Marketing Agent may, from time-to-time, have conflicting demands in respect of its obligations to the Fund and to other clients. It is possible that current or future pools that Deutsche Bank Securities Inc. may
become involved with in its capacity as the Funds Index Sponsor and Marketing Agent may generate larger fees, resulting in possibly increased payments to employees.
Proprietary Trading/Other Clients
The Managing Owner will not trade proprietary accounts.
Because the principals of the Managing Owner may trade for their own proprietary accounts (subject to certain internal Invesco Ltd. employee
trading policies and procedures) at the same time that they are managing the account of the Fund, prospective investors should be aware that the activities of the principals of the Managing Owner, subject to their fiduciary duties, may, from
time-to-time, result in taking positions in their personal trading accounts which are opposite to those held by the Fund, may trade ahead of the Fund, may compete with the Fund for positions in the marketplace and may give preferential treatment to
these proprietary accounts. Records of the Managing Owner principals personal trading accounts will not be available for inspection by Shareholders.
The Commodity Broker, its principals and its affiliates may trade in the commodity and foreign exchange markets for their proprietary accounts
and for the accounts of their clients, and in doing so may take positions opposite to those held by the Fund, may trade ahead of the Fund, may compete with the Fund for positions in the marketplace and may give preferential treatment to these
proprietary and non-proprietary accounts. Such trading may create conflicts of interest in respect of their obligations to the Fund. Records of proprietary trading and trading on behalf of other clients will not be available for inspection by
Shareholders.
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DESCRIPTION OF THE SHARES; CERTAIN
MATERIAL TERMS OF THE TRUST
DECLARATION
The
following summary describes in brief the Shares and certain aspects of the operation of the Fund and the respective responsibilities of the Trustee and the Managing Owner concerning the Fund and the material terms of the Trust Declaration.
Prospective investors should carefully review the Trust Declaration which is incorporated by reference into this Prospectus and consult with their own advisers concerning the implications to such prospective subscribers of investing in a Delaware
statutory trust. Capitalized terms used in this section and not otherwise defined shall have such meanings assigned to them under the Trust Declaration.
Description of the Shares
The Fund issues common units of beneficial interest, or Shares, which represent units of fractional undivided beneficial interest in and
ownership of the Fund. The Shares are listed on the NYSE Arca under the symbol DBV.
The Shares may be purchased from the Fund
or redeemed on a continuous basis, but only by Authorized Participants and only in blocks of 200,000 Shares, or Baskets. Individual Shares may not be purchased from the Fund or redeemed. Shareholders that are not Authorized Participants may not
purchase from the Fund or redeem Shares or Baskets.
Principal Office; Location of Records
The Fund is organized as a statutory trust under the Delaware Statutory Trust Act. The Fund is managed by the Managing Owner, whose office is
located at 3500 Lacey Road, Suite 700, Downers Grove, IL 60515, telephone: (800) 983-0903.
The books and records of the Fund are
maintained as follows: all marketing materials are maintained at the offices of Invesco Distributors, Inc., 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173, telephone number (800) 983-0903; Basket creation and redemption books and
records, certain financial books and records (including Fund accounting records, ledgers with respect to assets, liabilities, capital, income and expenses, the registrar, transfer journals and related details) and trading and related documents
received from futures commission merchants are maintained by The Bank of New York Mellon, 2 Hanson Place, Brooklyn, New York 11217, telephone number (718) 315-7500. All other books and records of the Fund (including minute books and other
general corporate records, trading records and related reports and other items received from the
Funds Commodity Brokers) are maintained at the Funds principal office, c/o Invesco PowerShares Capital Management LLC, 3500 Lacey Road, Suite 700, Downers Grove, IL 60515; telephone
number (800) 983-0903.
The books and records of the Fund are located at the foregoing addresses, and available for inspection and
copying (upon payment of reasonable reproduction costs) by Shareholders or their representatives for any purposes reasonably related to a Shareholders interest as a beneficial owner of such Shares during regular business hours as provided in
the Trust Declaration. The Managing Owner will maintain and preserve the books and records of the Fund for a period of not less than six years.
The Trustee
Wilmington Trust Company, a Delaware trust company, is the sole Trustee of the Fund. The Trustees principal offices are located at Rodney
Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001. The Trustee is unaffiliated with the Managing Owner. The Trustees duties and liabilities with respect to the offering of the Shares and the management of the Fund are
limited to its express obligations under the Trust Declaration.
The rights and duties of the Trustee, the Managing Owner and the
Shareholders are governed by the provisions of the Delaware Statutory Trust Act and by the Trust Declaration.
The Trustee serves
as the sole trustee of the Fund in the State of Delaware. The Trustee will accept service of legal process on the Fund in the State of Delaware and will make certain filings under the Delaware Statutory Trust Act. The Trustee does not owe any other
duties to the Fund, the Managing Owner or the Shareholders. The Trustee is permitted to resign upon at least sixty (60) days notice to the Fund, provided, that any such resignation will not be effective until a successor Trustee is
appointed by the Managing Owner. The Trust Declaration provides that the Trustee is compensated by the Fund and is indemnified by the Fund against any expenses it incurs relating to or arising out of the formation, operation or termination of the
Fund or the performance of its duties pursuant to the Trust Declaration, except to the extent that such expenses result from the gross negligence or willful misconduct of the Trustee. The Managing Owner has the discretion to replace the Trustee.
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Only the Managing Owner has signed the registration statement of which this Prospectus is a
part, and only the assets of the Fund and the Managing Owner are subject to issuer liability under the federal securities laws for the information contained in this Prospectus and under federal securities laws with respect to the issuance and sale
of the Shares. Under such laws, neither the Trustee, either in its capacity as Trustee or in its individual capacity, nor any director, officer or controlling person of the Trustee is, or has any liability as, the issuer or a director, officer or
controlling person of the issuer of the Shares. The Trustees liability in connection with the issuance and sale of the Shares is limited solely to the express obligations of the Trustee set forth in the Trust Declaration.
Under the Trust Declaration, the Trustee has delegated to the Managing Owner the exclusive management and control of all aspects of the
business of the Fund. The Trustee has no duty or liability to supervise or monitor the performance of the Managing Owner, nor does the Trustee have any liability for the acts or omissions of the Managing Owner. The Shareholders have no voice in the day-to-day management of the business and operations of the Fund, other than certain limited voting rights as set forth in the Trust Declaration. In the course of its
management of the business and affairs of the Fund, the Managing Owner may, in its sole and absolute discretion, appoint an affiliate or affiliates of the Managing Owner as additional managing owners (except where the Managing Owner has been
notified by the Shareholders that it is to be replaced as the managing owner) and retain such persons, including affiliates of the Managing Owner, as it deems necessary for the efficient operation of the Fund.
Because the Trustee has delegated substantially all of its authority over the operation of the Fund to the Managing Owner, the Trustee itself
is not registered in any capacity with the CFTC.
The section Performance of PowerShares DB G10 Currency Harvest Fund on page
35 includes the performance of the offered pool.
The Managing Owner
Background and Principals
Invesco PowerShares Capital Management LLC, a Delaware limited liability company, is the Managing Owner of the Fund. The Managing
Owner
serves as both commodity pool operator and commodity trading advisor of the Fund. The Managing Owner has been registered with the CFTC as a commodity pool operator since January 1, 2013,
commodity trading advisor since October 1, 2014, as a swap firm since September 8, 2015, and has been a member of the NFA since January 1, 2013. Its principal place of business is 3500 Lacey Road, Downers Grove, Illinois 60515,
telephone number (800) 983-0903. The Managing Owner is an affiliate of Invesco Ltd. The registration of the Managing Owner with the CFTC and its membership in the NFA must not be taken as an indication that either the CFTC or the NFA has
recommended or approved the Managing Owner or the Fund.
In its capacity as a commodity pool operator, the Managing Owner is an
organization which operates or solicits funds for commodity pools; that is, an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts. In its capacity as a commodity trading advisor,
the Managing Owner is an organization which, for compensation or profit, advises others as to the value of or the advisability of buying or selling futures contracts.
After consideration of the exchange-traded fund, or ETF, market generally and its goals specifically, DB Commodity Services LLC, referred to
as either DBCS or the Predecessor Managing Owner, made the determination that it would be in DBCS best interest to cease managing products in the U.S. commodities ETF space. After consideration of the ETF market generally and its goals
specifically, the Managing Owner made the determination that it wanted to expand its presence in the U.S. commodities ETF space by becoming the new managing owner of the Fund. The Managing Owner also intends to launch other commodities-based ETF
products in the U.S. in order to respond to developments in the market and investor preferences. The change of managing owner was effected by DBCS selling and transferring to the Managing Owner the general units of the Fund owned by DBCS, and by the
substitution of the Managing Owner for DBCS as managing owner of the Fund, which became effective as of February 23, 2015.
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Principals
The following principals serve in the below capacities on behalf of the Managing Owner:
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Name |
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Daniel Draper |
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Chief Executive Officer, Board of Managers |
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Peter Hubbard |
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Vice President and Director of Portfolio Management |
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David Warren |
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Chief Administrative Officer, Board of Managers |
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Roderick Ellis |
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Principal |
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Steven Hill |
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Principal Financial and Accounting Officer, Investment Pools |
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Christopher Joe |
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Chief Compliance Officer |
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John Zerr |
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Board of Managers |
Invesco North American Holdings Inc. is also a principal of the Managing Owner.
The Managing Owner is managed by a Board of Managers. The Board of Managers is composed of Messrs. Draper, Warren and Zerr.
The Managing Owner has designated Mr. Hubbard as the trading principal of the Fund.
Daniel Draper (47) has been Chief Executive Officer of the Managing Owner since March 24, 2016. In this role, he has
general oversight responsibilities for all of the Managing Owners business. Mr. Draper has been a Member of the Board of Managers of the Managing Owner since September 2013. In this role he is responsible for the management of the
Managing Owners exchange traded fund business with direct functional reporting responsibilities for the Managing Owners portfolio management, products, marketing and capital markets teams. In such capacity, Mr. Draper also is
responsible for managing the operations of the Invesco Funds. Previously, Mr. Draper was the Global Head of Exchange Traded Funds for Credit Suisse Asset Management, or Credit Suisse, based in London from March 2010 until June 2013, followed by
a three month non-compete period pursuant to his employment terms with Credit Suisse. Credit Suisse is an asset management business of Credit Suisse Group, a financial services company. From January 2007 to March 2010, he was the Global Head of
Exchange Traded Funds for Lyxor Asset Management in London, an investment management business unit of Societe Generale Corporate & Investment Banking. Mr. Draper was previously
registered as a Significant Influence Functions (SIF) person with the UKs Financial Conduct Authority. He withdrew this status on June 30, 2013 when he left Credit Suisse.
Mr. Draper received his MBA from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill and his BA from the College of William and Mary in Virginia. Mr. Draper is currently registered with FINRA and holds the
Series 7, 24 and 63 registrations. Mr. Draper was listed as a principal of the Managing Owner on December 16, 2013.
Peter Hubbard (35) joined the Managing Owner in May 2005 as a portfolio manager and has been Vice President, Director of
Portfolio Management since September 2012. In his role, Mr. Hubbard manages a team of 8 portfolio managers. His responsibilities include facilitating all portfolio management processes associated with more than 150 equity and fixed income
Invesco Funds listed in the United States, Canada and Europe. He is a graduate of Wheaton College with a B.A. degree in Business & Economics. Mr. Hubbard was listed as a principal and registered as an associated person of the Managing
Owner on November 15, 2012 and January 1, 2013, respectively. Mr. Hubbard was registered as a swap associated person of the Managing Owner effective as of September 8, 2015.
David Warren (59) is Chief Administrative Officer, Americas, for Invesco Ltd., a global investment management company
affiliated with the Managing Owner. He was appointed to this position in January 2007, and also holds the roles of Director, Executive Vice President and Chief Financial Officer of Invesco Canada Ltd., a Canadian investment management subsidiary of
Invesco Ltd., since January 2009. He has been a Member of the Board of Managers and Chief Administrative Officer of the Managing Owner since January 2010, as well. In these capacities, Mr. Warren is responsible for general management support,
in addition to executing on various strategic initiatives and overseeing the risk management framework for the business units operating within the Americas division of Invesco Ltd. He obtained a Bachelors Degree in Commerce from the University
of Toronto as both a CA and CPA, and is a member of the Chartered Professional Accountants of Canada. Mr. Warren was listed as a principal of the Managing Owner on November 21, 2012.
Roderick Ellis (49) has been a Chief Accounting Officer for Invesco Ltd. since April 2011. In this role, he is responsible
for all aspects of Corporate Accounting including group financial
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reporting, internal controls and group accounting policies. Mr. Ellis is also responsible for group insurance matters. Previously, Mr. Ellis was Global Director of Financial Planning
and Analysis, and Treasurer since May 2007. Mr. Ellis earned a B.A. (with honors) in Economics and Social History from the University of Sheffield, UK, in 1988. He is a member of the Institute of Chartered Accountants in England and Wales.
Mr. Ellis was listed as a principal of the Managing Owner on November 30, 2012.
Steven Hill (52) has been
Principal Financial and Accounting Officer, Investment Pools for the Managing Owner since December 2012, and was Head of Global ETF Operations from September 2011 to December 2012. As Principal Financial and Accounting Officer, Investment Pools, he
has financial and administrative oversight responsibilities for, and serves as Principal Financial Officer of, the Invesco Funds, including the Fund. As Head of Global ETF Operations he had management responsibilities with regard to the general
operations of the Managing Owner. From October 2010 to August 2011, he was Senior Managing Director and Chief Financial Officer of Destra Capital Management LLC and its subsidiaries, or Destra, an asset management firm, and was responsible for
managing financial and administrative activities as well as financial reporting for Destra and investment funds sponsored by Destra. Previously, he was Senior Managing Director of Claymore Securities, Inc., or Claymore, from December 2003 to October
2010, and was responsible for managing financial and administrative oversight for investment funds sponsored by Claymore. Claymore, now known as Guggenheim Funds Distributors, Inc., is a registered broker-dealer that distributes investment funds.
Mr. Hill earned a BS in Accounting from North Central College, Naperville, IL. Mr. Hill was listed as a principal of the Managing Owner on February 12, 2015.
Christopher Joe (47) has been Chief Compliance Officer of the Managing Owner since September 1, 2015. In his role as
Chief Compliance Officer he is responsible for all aspects of regulatory compliance for the Managing Owner. He has also acted as U.S. Compliance Director for Invesco, Ltd. since November, 2006. Formerly, he served as Chief Compliance Officer of
Invesco Investment Advisers, LLC, a registered investment adviser affiliated with the Managing Owner from June, 2010 to March, 2013. He also served as Deputy Chief Compliance Officer of Invesco Adviser, Inc., a registered investment adviser
affiliated with the Managing
Owner, from November, 2014 to September, 2015. Mr. Joe has also served as a principal of the Managing Owner since September 25, 2015.
John Zerr (54) has been a Member of the Board of Managers of the Managing Owner since September 2006. Mr. Zerr is also
Managing Director and General Counsel US Retail of Invesco Management Group, Inc., a registered investment adviser affiliated with the Managing Owner, since March 2006, where he is responsible for overseeing the US Retail Legal Department for
Invesco Ltd. and its affiliated companies. Mr. Zerr has also been a Senior Vice President and Secretary of IDI since March 2006 and June 2006, respectively. He also served as a Director of that entity until February 2010. Mr. Zerr has
served as Senior Vice President of Invesco Advisers, Inc., a registered investment adviser affiliated with the Managing Owner, since December 2009. Mr. Zerr serves as a Director, Vice President and Secretary of Invesco Investment Services,
Inc., a registered transfer agency since May 2007. Mr. Zerr has served as Director, Senior Vice President, General Counsel and Secretary of a number of other Invesco Ltd. wholly-owned subsidiaries which service or serviced portions of Invesco
Ltd.s US Retail business since May 2007 and since June 2010 with respect to certain Van Kampen entities engaged in the asset management business that were acquired by Invesco Ltd. from Morgan Stanley. In each of the foregoing positions
Mr. Zerr is responsible for overseeing legal operations. In such capacity, Mr. Zerr also is responsible for overseeing the legal activities of the Invesco Funds. Mr. Zerr earned a BA degree in economics from Ursinus College. He
graduated cum laude with a J.D. from Temple University School of Law. Mr. Zerr was listed as a principal of the Managing Owner on December 6, 2012.
Invesco North American Holdings Inc, which is a wholly owned, indirect subsidiary of Invesco Ltd., has been a principal of the
Managing Owner since October, 2006.
Fiduciary and Regulatory Duties of the Managing Owner
As managing owner of the Fund, the Managing Owner effectively is subject to the duties and restrictions imposed on
fiduciaries under both statutory and common law. The Trust Declaration is filed as an exhibit to the registration statement of which this Prospectus is a part. The general fiduciary duties which would otherwise be imposed on the
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Managing Owner (which would make the operation of the Fund as described herein impracticable due to the strict prohibition imposed by such duties on, for example, conflicts of interest on behalf
of a fiduciary in its dealings with its beneficiaries), are defined and limited in scope by the disclosure of the business terms of the Fund, as set forth herein and in the Trust Declaration (to which terms all Shareholders, by subscribing to the
Shares, are deemed to consent).
The Trust Declaration provides that the Covered Persons (which means the Managing Owner and its
affiliates) will have no liability to the Fund or to any Shareholder, or other Covered Person or other person, for any loss suffered by the Fund arising out of any action or inaction of the Covered Person if the Covered Person, in good faith,
determined that such course of conduct was in the best interests of the Fund and such course of conduct did not constitute gross negligence or willful misconduct by the Covered Person.
Each Covered Person will be indemnified by the Fund to the fullest extent permitted by law against any losses, judgments, liabilities,
expenses, and amounts paid in settlement of any claims sustained by it in connection with its activities for the Fund, except with respect to any matter as to which such Covered Person will have been finally adjudicated in any action, suit, or other
proceeding not to have acted in good faith in the reasonable belief that such Covered Persons action was in the best interest of the Fund and except that no Covered Person will be indemnified against any liability to the Fund or to the limited
owners by reason of willful misconduct or gross negligence of such Covered Person. Any such indemnification will only be recoverable from the Fund. The source of payments made in respect of indemnification under the Trust Declaration will be the
assets of the Fund.
Under Delaware law, a beneficial owner of a business trust (such as a Shareholder of the Fund) may, under certain
circumstances, institute legal action on behalf of himself and all other similarly situated beneficial owners (a class action) to recover damages from a managing owner of such business trust for violations of fiduciary duties, or on
behalf of a business trust (a derivative action) to recover damages from a third party where a managing owner has failed or refused to institute proceedings to recover such damages. In addition, beneficial owners may have the right,
subject to certain legal requirements, to bring class actions in federal court to enforce their rights under the federal securities laws and the rules and regulations
promulgated thereunder by the Securities and Exchange Commission (SEC). Beneficial owners who have suffered losses in connection with the purchase or sale of their beneficial
interests may be able to recover such losses from a managing owner where the losses result from a violation by the Managing Owner of the anti-fraud provisions of the federal securities laws.
Under certain circumstances, Shareholders also have the right to institute a reparations proceeding before the CFTC against the Managing Owner
(a registered commodity pool operator and commodity trading advisor), the Commodity Broker (registered futures commission merchant), as well as those of their respective employees who are required to be registered under the Commodity Exchange Act,
as amended, and the rules and regulations promulgated thereunder. Private rights of action are conferred by the Commodity Exchange Act, as amended. Investors in futures and in commodity pools may, therefore, invoke the protections provided
thereunder.
There are substantial and inherent conflicts of interest in the structure of the Fund which are, on their face, inconsistent
with the Managing Owners fiduciary duties. One of the purposes underlying the disclosures set forth in this Prospectus is to disclose to all prospective Shareholders these conflicts of interest so that the Managing Owner may have the
opportunity to obtain investors informed consent to such conflicts. Prospective investors who are not willing to consent to the various conflicts of interest described under Conflicts of Interest and elsewhere should not invest in
the Fund. The Managing Owner currently intends to raise such disclosures and consent as a defense in any proceeding brought seeking relief based on the existence of such conflicts of interest.
The foregoing summary describing in general terms the remedies available to Shareholders under federal law is based on statutes, rules and
decisions as of the date of this Prospectus. This is a rapidly developing and changing area of the law. Therefore, Shareholders who believe that they may have a legal cause of action against any of the foregoing parties should consult their own
counsel as to their evaluation of the status of the applicable law at such time.
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Ownership or Beneficial Interest in the Fund
As of the date of this Prospectus, the Managing Owner and the principals of the Managing Owner own less than 1% of the Shares.
Management; Voting by Shareholders; Negative Consent
The Shareholders take no part in the management or control, and have no voice in the operations or the business of the Fund. Shareholders, may,
however, remove and replace the Managing Owner as the managing owner of the Fund, and may amend the Trust Declaration, except in certain limited respects, by the affirmative vote of a majority of the outstanding Shares then owned by Shareholders (as
opposed to by the Managing Owner and its affiliates). The owners of a majority of the outstanding Shares then owned by Shareholders may also compel dissolution of the Fund. The owners of 10% of the outstanding Shares then owned by Shareholders have
the right to bring a matter before a vote of the Shareholders. The Managing Owner has no power under the Trust Declaration to restrict any of the Shareholders voting rights. Any Shares purchased by the Managing Owner or its affiliates, as well
as the Managing Owners general interests in the Fund are non-voting.
Any action required or permitted to be taken by Shareholders
by vote may be taken without a meeting by written consent setting forth the actions so taken. The written consents will be treated for all purposes as votes at a meeting. If the vote or consent of any Shareholder to any action of the Fund or any
Shareholder, as contemplated by the Trust Declaration, is solicited by the Managing Owner, the solicitation will be effected by notice to each Shareholder given in the manner provided by the Trust Declaration.
The Trust Declaration permits the approval of actions through the negative consent of Shareholders. As provided by Section 11.3 of the
Trust Declaration, the vote or consent of each Shareholder so solicited will be deemed conclusively to have been cast or granted as requested in the notice of solicitation, whether or not the notice of solicitation is actually received by that
Shareholder, unless the Shareholder expresses written objection to the vote or consent by notice given in the manner provided in the Trust Declaration and actually received by the Fund within twenty (20) days after the notice of solicitation is
effected. Because Section 11.3 of the Trust Declaration provides for negative consent (e.g., that Shareholders are deemed to have consented unless they timely object), your consent will be
deemed conclusively to have been granted with respect to any matter for which the Managing Owner may solicit your consent unless you express written objection in the manner required by the Trust Declaration and your written objection is actually
received by the Trust within twenty (20) days after the notice of solicitation is effected. This means that not responding to the vote or consent solicitation would have the same effect as responding with your affirmative written consent. For
example, in the context of a consent solicitation to change the managing owner or any other action, your lack of a response will have the same effect as if you had provided your affirmative written consent for the proposed action.
The Managing Owner and all persons dealing with the Fund will be entitled to act in reliance on any vote or consent which is deemed cast or
granted pursuant to the negative consent provision and will be fully indemnified by the Fund in so doing. Any action taken or omitted in reliance on this deemed vote or consent of one or more Shareholders will not be void or voidable by reason of
timely communication made by or on behalf of all or any of these Shareholders in any manner other than as expressly provided in the Trust Declaration.
The Managing Owner has the right unilaterally to amend the Trust Declaration provided that any such amendment is for the benefit of and not
adverse to the Shareholders or the Trustee and also in certain unusual circumstancesfor example, if doing so is necessary to comply with certain regulatory requirements.
Recognition of the Fund in Certain States
A number of states do not have business trust statutes such as that under which the Fund has been formed in the State of Delaware.
It is possible, although unlikely, that a court in such a state could hold that, due to the absence of any statutory provision to the contrary in such jurisdiction, the Shareholders, although entitled under Delaware law to the same limitation on
personal liability as stockholders in a private corporation for profit organized under the laws of the State of Delaware, are not so entitled in such state. To protect Shareholders against any loss of limited liability, the Trust Declaration
provides that no written obligation
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may be undertaken by the Fund unless such obligation is explicitly limited so as not to be enforceable against any Shareholder personally. Furthermore, the Fund itself indemnifies all its
Shareholders against any liability that such Shareholders might incur in addition to that of a beneficial owner.
Possible Repayment of Distributions Received by Shareholders; Indemnification by Shareholders
The Shares are limited liability
investments; investors may not lose more than the amount that they invest plus any profits recognized on their investment. However, Shareholders could be required, as a matter of bankruptcy law, to return to the estate of the Fund any distribution
they received at a time when the Fund was in fact insolvent or in violation of its Trust Declaration. In addition, although the Managing Owner is not aware of this provision ever having been invoked in the case of any public futures fund,
Shareholders agree in the Trust Declaration that they will indemnify the Fund for any harm suffered by it as a result of
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Shareholders actions unrelated to the business of the Fund, or |
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taxes separately imposed on the Fund by any state, local or foreign taxing authority. |
The
foregoing repayment of distributions and indemnity provisions (other than the provision for Shareholders indemnifying the Fund for taxes imposed upon it by a state, local or foreign taxing authority, which is included only as a formality due to the
fact that many states do not have business trust statutes so that the tax status of the Fund in such states might, theoretically, be challenged although the Managing Owner is unaware of any instance in which this has actually occurred) are
commonplace in statutory trusts and limited partnerships.
Shares Freely Transferable
The Shares trade on the NYSE Arca and provide institutional and retail investors with direct access to the Fund. The Fund trades with a view to
tracking the Index over time, less expenses. The Shares may be bought and sold on the NYSE Arca.
Book-Entry Form
Individual certificates will not be issued for the Shares. Instead, global certificates are deposited by the Trustee with DTC and registered in
the name of Cede & Co., as nominee for DTC. The global certificates evidence all of the Shares outstanding at any time. Under the Funds Trust Declaration, Shareholders are limited to (1) participants in DTC such as banks,
brokers, dealers and trust companies (DTC Participants), (2) those who maintain, either directly or indirectly, a custodial relationship with a DTC Participant (Indirect Participants), and (3) those banks, brokers, dealers, trust companies
and others who hold interests in the Shares through DTC Participants or Indirect Participants. The Shares are only transferable through the book-entry system of DTC. Shareholders who are not DTC Participants
may transfer their Shares through DTC by instructing the DTC Participant holding their Shares (or by instructing the Indirect Participant or other entity through which their Shares are held) to transfer the Shares. Transfers are made in accordance
with standard securities industry practice.
Reports to Shareholders
The Managing Owner will furnish you with an annual report of the Fund within 90 calendar days after the end of the Funds fiscal year as
required by the rules and regulations of the SEC as well as with those reports required by the CFTC and the NFA, including, but not limited to, an annual audited financial statement certified by independent registered public accountants and any
other reports required by any other governmental authority that has jurisdiction over the activities of the Fund. You also will be provided with appropriate information to permit you to file your U.S. federal and state income tax returns (on a
timely basis) with respect to your Shares. Monthly account statements conforming to CFTC and NFA requirements are posted on the Managing Owners website at http://www.invescopowershares.com. Additional reports may be posted on the
Managing Owners website in the discretion of the Managing Owner or as required by applicable regulatory authorities.
The Managing
Owner will notify Shareholders of any change in the fees paid by the Fund or of any material changes to the Fund by filing with the SEC a supplement to this Prospectus and a Form 8-K, which will be publicly available at http://www.sec.gov and
at the Managing Owners website at http://www.invescopowershares.com. Any such notification will include a description of Shareholders voting rights.
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NAV
NAV means the total assets of the Fund including, but not limited to, all cash and cash equivalents or other debt securities less total
liabilities of the Fund, each determined on the basis of generally accepted accounting principles in the United States, consistently applied under the accrual method of accounting. In particular, NAV includes any unrealized profit or loss on open
futures contracts, and any other credit or debit accruing to the Fund but unpaid or not received by the Fund. All open futures contracts traded on a United States exchange are calculated at their then current market value, which are based upon the
settlement price for that particular futures contract traded on the applicable United States exchange on the date with respect to which NAV is being determined; provided, that if a futures contract traded on a United States exchange could not be
liquidated on such day, due to the operation of daily limits or other rules of the exchange upon which that position is traded or otherwise, the Managing Owner may value such futures contract pursuant to policies the Managing Owner has adopted,
which are consistent with normal industry standards. The current market value of all open futures contracts traded on a non-United States exchange, to the extent applicable, will be based upon the settlement price for that particular futures
contract traded on the applicable non-United States exchange on the date with respect to which NAV is being determined; provided further, that if a futures contract traded on a non-United States exchange, to
the extent applicable, could not be liquidated on such day, due to the operation of daily limits (if applicable) or other rules of the exchange upon which that position is traded or otherwise, the Managing Owner may value such futures contract
pursuant to policies the Managing Owner has adopted, which are consistent with normal industry standards. The Managing Owner may in its discretion (and under circumstances, including, but not limited to, periods during which a settlement price of a
futures contract is not available due to exchange limit orders or force majeure type events such as systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance) value any asset of the Fund pursuant to such other principles as the Managing Owner deems fair and equitable so long as such principles are consistent with normal industry standards. Interest
earned on the Funds foreign
exchange futures brokerage account is accrued at least monthly. The amount of any distribution will be a liability of the Fund from the day when the distribution is declared until it is paid.
NAV per Share is the NAV of the Fund divided by the number of outstanding Shares.
Termination Events
The Fund will dissolve at any time upon the happening of any of the following events:
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The filing of a certificate of dissolution or revocation of the Managing Owners charter (and the expiration of 90 days after the date of notice to the Managing Owner of revocation without a reinstatement of its
charter) or upon the withdrawal, removal, adjudication or admission of bankruptcy or insolvency of the Managing Owner, or an event of withdrawal unless (i) at the time there is at least one remaining managing owner and that remaining managing
owner carries on the business of the Fund or (ii) within 90 days of such event of withdrawal all the remaining Shareholders agree in writing to continue the business of the Fund and to select, effective as of the date of such event, one or more
successor managing owners. If the Fund is terminated as the result of an event of withdrawal and a failure of all remaining Shareholders to continue the business of the Fund and to appoint a successor managing owner as provided above within 120 days
of such event of withdrawal, Shareholders holding Shares representing at least a majority (over 50%) of the NAV (not including Shares held by the Managing Owner and its affiliates) may elect to continue the business of the Fund by forming a new
statutory trust, or reconstituted trust, on the same terms and provisions as set forth in the Trust Declaration. Any such election must also provide for the election of a managing owner to the reconstituted trust. If such an election is made, all
Shareholders of the Fund shall be bound thereby and continue as Shareholders of the reconstituted trust. |
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The occurrence of any event which would make unlawful the continued existence of the Fund. |
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In the event of the suspension, revocation or termination of the Managing Owners registration as a commodity pool operator, or membership as a commodity pool operator with the NFA (if, in either case, such
registration is required at such time unless at the time there is at least one remaining managing owner whose registration or membership has not been suspended, revoked or terminated). |
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The Fund becomes insolvent or bankrupt. |
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The Shareholders holding Shares representing at least a majority (over 50%) of the NAV (which excludes the Shares of the Managing Owner) vote to dissolve the Fund, notice of which is sent to the Managing Owner not less
than ninety (90) Business Days prior to the effective date of termination. |
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The determination of the Managing Owner that the aggregate net assets of the Fund in relation to the operating expenses of the Fund make it unreasonable or imprudent to continue the business of the Fund, or, in the
exercise of its reasonable discretion, the determination by the Managing Owner to dissolve the Fund because the aggregate NAV of the Fund as of the close of business on any business day declines below USD 10 million. |
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The Fund is required to be registered as an investment company under the Investment Company Act of 1940. |
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DTC is unable or unwilling to continue to perform its functions, and a comparable replacement is unavailable.
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DISTRIBUTIONS
The Managing Owner has discretionary authority over all distributions made by the Fund. To the extent that the Funds actual and projected
Treasury Income and the Funds actual and projected Money Market Income exceeds the actual and projected fees and expenses of the Fund, the Managing Owner expects periodically to make distributions of the amount of such excess. The Managing
Owner currently does not expect to make distributions with respect to the Funds capital gains. Depending on the Funds performance for the taxable year and your own tax situation for such year, your income tax liability for the taxable
year for your allocable share of the Funds net ordinary income or loss and capital gain or loss may exceed any distributions you receive with respect to such year.
THE ADMINISTRATOR, CUSTODIAN AND
TRANSFER AGENT
The Bank
of New York Mellon is the administrator of the Fund and has entered into an Administration Agreement in connection therewith. The Bank of New York Mellon serves as custodian, or Custodian, of the Fund and has entered into a Global Custody Agreement,
or Custody Agreement, in connection therewith. The Bank of New York Mellon serves as the transfer agent, or Transfer Agent, of the Fund and has entered into a Transfer Agency and Service Agreement in connection therewith.
The Bank of New York Mellon, a banking corporation organized under the laws of the State of New York with trust powers, has an office at 2
Hanson Place, Brooklyn, New York 11217. The Bank of New York Mellon is subject to supervision by the New York State Banking Department and the Board of Governors of the Federal Reserve System. Information regarding the NAV of the Fund, creation and
redemption transaction fees and the names of the parties that have executed a Participant Agreement may be obtained from The Bank of New York Mellon by calling the following number: (718) 315-7500. A copy
of the Administration Agreement is available for inspection at The Bank of New York Mellons office identified above.
The
Administrator retains certain financial books and records, including: Basket creation and redemption books and records, Fund accounting
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records, ledgers with respect to assets, liabilities, capital, income and expenses, the registrar, transfer journals and related details and trading and related documents received from futures
commission merchants, c/o The Bank of New York Mellon, 2 Hanson Place, Brooklyn, New York 11217, telephone number (718) 315-7500.
A summary of the material terms of the Administration Agreement is disclosed in the Material Contracts section.
The Administrators monthly fees of up to 0.05% per annum are paid on behalf of the Fund by the Managing Owner out of the Management
Fee.
The Administrator and any of its affiliates may from time-to-time purchase or sell Shares for their own account, as agent for their
customers and for accounts over which they exercise investment discretion.
The Administrator and any successor administrator must be a
participant in DTC or such other securities depository as shall then be acting.
The Transfer Agent receives a transaction processing fee
in connection with orders from Authorized Participants to create or redeem Baskets in the amount of USD 500 per order. These transaction processing fees are paid directly by the Authorized Participants and not by the Fund.
The Fund retains the services of one or more additional service providers to assist with certain tax reporting requirements of the Fund and
its Shareholders.
INVESCO DISTRIBUTORS, INC.
Invesco Distributors, Inc., or Invesco Distributors, assists the Managing Owner with certain functions and duties relating to distribution and
marketing, which include the following: consultation with the marketing staff of the Managing Owner and its affiliates with respect to FINRA compliance in connection with marketing efforts; review and filing of marketing materials with FINRA; and
consultation with the Managing Owner and its affiliates in connection with marketing and sales strategies. Investors may contact Invesco Distributors toll-free in the U.S. at (800) 983-0903.
Invesco Distributors retains all marketing materials for the Fund, at the offices of Invesco
Distributors, Inc., 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173; telephone number (800) 983-0903.
The Managing Owner, out of the Management Fee, pays Invesco Distributors for performing its duties on behalf of the Fund and may pay Invesco
Distributors additional compensation in consideration of the performance by Invesco Distributors of additional services to the Fund. Such additional services may include, among other services, the development and implementation of a marketing plan
and the utilization of Invesco Distributors resources, which include an extensive broker database and a network of internal and external wholesalers. Invesco Distributors is affiliated with the Managing Owner.
INVESCO ADVISERS INC.
Background and Principals
Invesco Advisers Inc., a Delaware corporation, or Invesco Advisers, is the commodity trading advisor of the Trust and the Fund and is an
affiliate of the Managing Owner. The Managing Owner may utilize the Invesco Advisers trading desk to place trades for the Fund. Invesco Advisers receives no compensation for providing this service.
Invesco Advisers has been registered with the CFTC as a commodity pool operator since January 1, 2000, commodity trading advisor since
November 8, 1984 and a swap firm since January 8, 2013 and has been a member of the NFA since February 11, 1986. Its principal place of business is 1555 Peachtree Street NE, Atlanta, Georgia 30309, telephone number
(404) 439-3271. The registration of Invesco Advisers with the CFTC and its membership in the NFA must not be taken as an indication that either the CFTC or the NFA has recommended or approved Invesco Advisers, the Trust or each Fund.
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Principals
The following principals serve in the below capacities on behalf of Invesco Advisers:
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Mark Ahnrud |
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Portfolio Manager, Associated Person, Principal and Swap Associated Person |
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Kevin Carome |
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Principal |
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Eric Johnson |
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Associated Person, Principal, Branch Manager and Swap Associated Person |
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Karen Dunn Kelley |
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Principal |
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Robert Leveille |
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Chief Compliance Officer and Principal |
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Colin Meadows |
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Principal |
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Loren Starr |
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Principal |
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Philip Taylor |
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Principal |
Invesco North American Holdings Inc. is also a principal of Invesco Advisers.
Mark Ahnrud (54) joined Invesco Advisers in 2000 and serves as a Portfolio Manager. In this role, he works with the Invesco Global Asset
Allocation team, which invests in stock, bond and commodity markets worldwide. He earned a BS degree in finance and investments from Babson College and an AMBA with a concentration in finance and real estate investments from Fuqua School of Business
at Duke University. He is also a CFA charterholder. Mr. Ahnrud was registered as associated person and principal of Invesco Advisers on August 12, 2005 and September 20, 2005, respectively. He was registered as a swap associated
person of Invesco Advisers effective as of January 8, 2013.
Kevin Carome (60) is Senior Managing Director and has
served as General Counsel for Invesco Ltd., a global investment management company affiliated with Invesco Advisers. He was appointed to this position in January 2006, and also holds the role of Director of Invesco Advisers, a position he has held
since January 2009. In these capacities, Mr. Carome is responsible for overseeing the legal activities and legal departments of Invesco Ltd. and its affiliated companies. He obtained a BA in political science and a JD from Boston College.
Mr. Carome was listed as a principal of Invesco Advisers on May 6, 2011.
Eric Johnson (58) joined Invesco Ltd. in February
2010 and serves as Head of US Sales, Client Service and Consultant Relations for Invesco Ltd.s Worldwide Institutional business. In that capacity, he is responsible for institutional sales, consultant relations and client service for
Invescos traditional investment management capabilities. Mr. Johnson earned a BA degree with distinction from the University of Virginia. He was registered as associated person and principal of Invesco Advisers on March 24, 2010 and
March 22, 2011, respectively. He was registered as a branch manager and swap
associated person of Invesco Advisers effective as of January 25, 2012 and July 24, 2013, respectively.
Karen Dunn Kelley (56) is Senior Managing Director of Investments for Invesco Ltd. She was appointed to this position in May 2011, and also
leads Invescos Office of Investments. In these capacities, Ms. Dunn Kelley is responsible for Invescos fundamental equities business; the global asset allocation, quantitative strategies and global equities investment teams; equity
trading and investment administration. She graduated magna cum laude with a BS degree from Villanova University College of Commerce and Finance. Ms. Dunn Kelley was listed as a principal of Invesco Advisers on March 27, 2014.
Robert Leveille (46) has been Chief Compliance Officer of Invesco Advisers since February 2016. In this role he is responsible for all
aspects of regulatory compliance for Invesco Advisers. From March 2007 to February 2016, he served as Chief Compliance Officer of Putnam Investments, a global asset management firm, where he managed the firms compliance department and oversaw
the design, implementation and monitoring of the compliance program for mutual funds and other registered entities. Mr. Leveille earned a BA from Duke University and a JD from Harvard Law School. He was listed as a principal of Invesco Advisers
on April 8, 2016.
Colin Meadows (45) has served as Chief Administrative Officer of Invesco Ltd. since May 2006. In this role, he
is responsible for information technology, operations, human resources, transfer agency and corporate development. In April 2014, Mr. Meadows assumed Senior Managing Director responsibility for Invesco Real Estate, WL Ross and Co. and Invesco
Private Capital, each an asset manager affiliated with Invesco Advisers. Mr. Meadows earned a BA degree in economics and English literature from Andrews University and a JD from Harvard Law School. He was listed as a principal of Invesco
Advisers on December 15, 2014.
Loren Starr (55) has served as Senior Managing Director and Chief Financial Officer of Invesco
Ltd. since December, 2007. In this role, he is responsible for finance accounting investor relations and corporate properties. Mr. Meadows earned a BA degree in chemistry and a BS degree in industrial engineering, graduating summa cum laude
from Columbia University. He earned an MBA from Columbia and an MS degree in operations research from Carnegie Mellon University. Mr. Starr is also a
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certified treasury professional. He was listed as a principal of Invesco Advisers on May 9, 2011.
Philip Taylor (61) is Senior Managing Director and Head of Invesco Ltd.s North American business, a position he has held since April
2006. In this role, he has had general responsibility for Invescos global fixed income business. Mr. Taylor also has responsibility for Human Resources, as well as Strategy and Business Planning. He received a Bachelor of Commerce
(Honours) degree from Carleton University and an MBA from the Schulich School of Business at York University. He was listed as a principal of Invesco Advisers on July 13, 2011.
Invesco North American Holdings Inc, which is a wholly owned, indirect subsidiary of Invesco Ltd., has been a principal of Investment Advisers
since May 17, 1990.
INDEX SPONSOR
The Managing Owner, on behalf of the Fund, has appointed Deutsche Bank Securities Inc. to serve as the index sponsor, or the Index Sponsor.
The Index Sponsor calculates and publishes the daily index levels and the indicative intraday index levels. Additionally, the Index Sponsor also calculates the IIV per Share of the Fund throughout each business day. The Index Sponsor may subcontract
its services from time-to-time to one or more third parties.
The Managing Owner pays the Index Sponsor a licensing fee and an index
services fee out of the Management Fee for performing its duties. These fees constitute a portion of the routine operational, administrative and other ordinary expenses and are paid from out of the Management Fee and are not charged to or reimbursed
by the Fund.
Neither the Managing Owner nor any affiliate of the Managing Owner has any rights to influence the selection of the futures
contracts underlying the Index.
The Index Sponsor is not affiliated with the Fund, or the Managing Owner. The Managing Owner has entered
into a license agreement with the Index Sponsor to use the Index.
The Fund is not sponsored, endorsed, sold or promoted by the Index
Sponsor, and the Index Sponsor makes no representation regarding the advisability of investing in Shares.
There is no relationship between the Index Sponsor and the Managing Owner or the Fund other than
a services agreement and a license by the Index Sponsor to the Managing Owner of certain of the Index Sponsors trademarks and trade names, and the Index, for use by the Managing Owner or the Fund. Such trademarks, trade names and the Index
have been created and developed by the Index Sponsor without regard to, and independently of, the Managing Owner and the Fund, their businesses, and/or any prospective investor. The Fund and the Managing Owner have arranged with the Index Sponsor to
license the Index for possible inclusion in funds which the Managing Owner independently intends to develop and promote. The licensing of the Index to the Managing Owner or the Fund is not an offer to purchase or sell, or a solicitation to purchase,
Shares in the Fund. A determination that any portion of an investors portfolio should be devoted to the Fund or any other ETF product developed by the Managing Owner with reference to the Index is a determination made solely by the Managing
Owner serving the investor or the investor himself, not the Index Sponsor. The Index Sponsor is not responsible for, and has not participated in the determination of, the prices and amount of Shares or the timing of the issuance or sale of Shares or
in the determination of any financial calculations relating thereto. The Index Sponsor has no obligation or liability in connection with the administration of the Fund, or marketing of the Shares. The Index Sponsor does not guarantee the accuracy
and/or the completeness of the Index or any data included therein. The Index Sponsor shall have no liability for any errors, omissions, or interruptions therein. The Index Sponsor makes no warranty, express or implied, as to results to be obtained
by the Managing Owner, the Fund or owners of Shares, or any other person or entity, from the use of the Index or any data included therein. The Index Sponsor 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 Index or any data included therein, the Fund, or the Shares. Deutsche Bank Securities Inc., which also serves as the marketing agent, has entered into a services
agreement with the Managing Owner. The agreements between the Managing Owner and DBSI as Marketing Agent and Index Sponsor relate to the Managing Owners sponsorship not only of the Fund but of other commodity pools and exchange-traded funds.
These agreements are for an initial six year term which commenced on February 26, 2015, with additional one-year renewal terms unless terminated.
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Both the Managing Owner and DBSI have the right to terminate on notice subject to payment of a
termination fee, both with respect to a given fund and with respect to all funds subject to these agreements. Each party also has the right to terminate for cause, although the Managing Owners ability to exercise this right is restricted to a
narrow set of circumstances during the initial six-year term. Accordingly, there may be circumstances where the Managing Owner would otherwise believe cause exists to terminate DBSI but where it would have to rely on its right to terminate at will.
The termination fee payable by the Managing Owner would be based on anticipated fee payments under these agreements during the remainder of the initial six-year term, and therefore could be sufficiently high as to deter the Managing Owner from
exercise of these termination rights. These termination fees would also be triggered by certain other termination rights of DBSI, including in the event of a change of control of the Managing Owner or changes of law affecting the licenses or
services to be provided by DBSI. As a consequence of these termination fee rights, DBSI may elect to terminate these licenses and services under certain circumstances where, were these being provided under stand-alone arrangements in respect of the
Fund, it might not elect to terminate the business relationship. Termination of the agreements between DBSI and the Managing Owner could result in disruption to the affairs of the Fund, including the need to adopt new indices and engage a
replacement index sponsor.
Without limiting any of the foregoing, in no event shall the Index Sponsor have any liability for any special,
punitive, indirect, or consequential damages (including lost profits) resulting from the use of the Index or any data included therein, the Fund, or the Shares, even if notified of the possibility of such damages.
The Index Sponsor shall not be liable to the Managing Owner, the Fund, or the owners of any Shares for any loss or damage, direct or indirect,
arising from (i) any inaccuracy or incompleteness in, or delays, interruptions, errors or omissions in the delivery of the Index or any data related thereto, the Index Data, or (ii) any decision made or action taken by any customer or
third party in reliance upon the Index Data. The Index Sponsor does not make any warranties, express or implied, to the Managing Owner, the Fund or owners of Shares or anyone else regarding the Index Data, including without limitation, any
warranties with respect to the timeliness, sequence, accuracy, completeness, currentness, merchantability, quality, or fitness for a
particular purpose or any warranties as to the results to be obtained by the Managing Owner, the Fund or owners of Shares or anyone else in connection with the use of the Index Data. The Index
Sponsor shall not be liable to the Managing Owner, the Fund or owners of Shares or anyone else for loss of business revenues, lost profits or any indirect, consequential, special or similar damages whatsoever, whether in contract, tort or otherwise,
even if advised of the possibility of such damages.
The Managing Owner does not guarantee the accuracy and/or the completeness of the
Index or any Index Data included therein, and the Managing Owner shall have no liability for any errors, omissions, or interruptions therein. The Managing Owner makes no warranty, express or implied, as to results to be obtained by the Fund, owners
of the Shares or any other person or entity from the use of the Index or any Index Data included therein. The Managing Owner makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to each Underlying Index or any Index Data included therein. Without limiting any of the foregoing, in no event shall the Managing Owner 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 Index even if notified of the possibility of such damages.
THE MARKETING AGENT
Pursuant to the services agreement, the Managing Owner, on behalf of the Fund, has appointed Deutsche Bank Securities Inc., or the Marketing
Agent, to assist the Managing Owner by providing support to educate institutional investors about the Deutsche Bank indices and to complete governmental or institutional due diligence questionnaires or requests for proposals related to the Deutsche
Bank indices.
The Managing Owner pays the Marketing Agent a marketing services fee out of the Management Fee for performing its duties.
The Marketing Agent will not open or maintain customer accounts or handle orders for the Fund. The Marketing Agent has no responsibility
for the performance of the Fund or the decisions made or actions taken by the Managing Owner.
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800 Number for Investors
Investors may contact the Managing Owner toll free in the U.S. at (800) 983-0903.
THE SECURITIES DEPOSITORY; BOOK-ENTRY-ONLY SYSTEM; GLOBAL SECURITY
DTC acts as securities depository for the Shares. DTC is a limited-purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions
of section 17A of the Exchange Act. DTC was created to hold securities of DTC Participants and to facilitate the clearance and settlement of transactions in such securities among the DTC Participants through electronic book-entry changes. This
eliminates 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. 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. DTC has
agreed to administer its book-entry system in accordance with its rules and by-laws and the requirements of law.
Individual certificates
will not be issued for the Shares. Instead, global certificates are signed by the Managing Owner on behalf of the Fund, registered in the name of Cede & Co., as nominee for DTC, and deposited with the Trustee on behalf of DTC. The global
certificates evidence all of the Shares outstanding at any time. The representations, undertakings and agreements made on the part of the Fund in the global certificates are made and intended for the purpose of binding only the Fund and not the
Trustee or the Managing Owner individually.
Upon the settlement date of any creation, transfer or redemption of Shares, DTC credits or
debits, on its book-entry registration and transfer system, the amount of the Shares so created, transferred or redeemed to the accounts of the appropriate DTC Participants. The Managing Owner and the Authorized Participants designate the accounts
to be credited and charged in the case of creation or redemption of Shares.
Beneficial ownership of the Shares is limited to DTC Participants, Indirect Participants and
persons holding interests through DTC Participants and Indirect Participants. Owners of beneficial interests in the Shares is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC
Participants), the records of DTC Participants (with respect to Indirect Participants), and the records of Indirect Participants (with respect to Shareholders that are not DTC Participants or Indirect Participants). Shareholders are expected to
receive from or through the DTC Participant maintaining the account through which the Shareholder has purchased their Shares a written confirmation relating to such purchase.
Shareholders that are not DTC Participants may transfer the Shares through DTC by instructing the DTC Participant or Indirect Participant
through which the Shareholders hold their Shares to transfer the Shares. Shareholders that are DTC Participants may transfer the Shares by instructing DTC in accordance with the rules of DTC. Transfers are made in accordance with standard securities
industry practice.
DTC may decide to discontinue providing its service with respect to Baskets and/or the Shares by giving notice to the
Trustee and the Managing Owner. Under such circumstances, the Trustee and the Managing Owner will either find a replacement for DTC to perform its functions at a comparable cost or, if a replacement is unavailable, terminate the Fund.
The rights of the Shareholders generally must be exercised by DTC Participants acting on their behalf in accordance with the rules and
procedures of DTC. Because the Shares can only be held in book-entry form through DTC and DTC Participants, investors must rely on DTC, DTC Participants and any other financial intermediary through which they hold the Shares to receive the benefits
and exercise the rights described in this section. Investors should consult with their broker or financial institution to find out about procedures and requirements for securities held in book-entry form through DTC.
SHARE SPLITS
If the Managing Owner believes that the per Share price in the secondary market for Shares has fallen outside a desirable trading price range,
the Managing Owner may direct the Trustee to declare a
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split or reverse split in the number of Shares outstanding and to make a corresponding change in the number of Shares constituting a Basket.
MATERIAL CONTRACTS
Brokerage Agreement
The Commodity Broker and the Managing Owner (on behalf of the Fund) entered into a brokerage agreement with respect to the Fund, or, the
Brokerage Agreement. As a result the Commodity Broker:
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acts as the clearing broker; |
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acts as custodian of the Funds assets in connection with the clearing of transactions; and |
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performs such other services for the Fund as the Managing Owner may from time-to-time request. |
As clearing broker for the Fund, the Commodity Broker receives orders for trades from the Managing Owner.
Confirmations of all executed trades are given to the Fund by the Commodity Broker. The Brokerage Agreement incorporates the Commodity
Brokers standard customer agreements and related documents, which generally include provisions that:
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the assets of the Fund held in its account with the Commodity Broker and all contracts and rights to payment thereunder are held as security for the Funds obligations to the Commodity Broker; |
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the Commodity Broker shall have the right to limit the size of open positions (net or gross) of the Fund with respect to its account at any time only as necessary to comply with the applicable law or applicable position
limits and shall promptly notify the Fund of any rejected order; |
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the Fund must make all applicable original margin, variation margin, intra-day margin and premium payments to the Commodity Broker;
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the Commodity Broker may, among other things, close out positions, sell securities or other property held in the Funds account, purchase futures or cancel orders at any time upon the
default of the Fund under the Brokerage Agreement, without the consent of the Managing Owner on behalf of the Fund; and |
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absent a separate written agreement with the Fund with respect to give-up transactions, the Commodity Broker, in its sole discretion, may accept from other brokers contracts executed by such brokers and to be given up
to the Commodity Broker for clearance or carrying in any account. |
Administrative functions provided by the Commodity Broker
to the Fund include, but are not limited to, preparing and transmitting daily confirmations of transactions and monthly statements of account, calculating balances and margin requirements.
In respect of the transactions effected pursuant to the Brokerage Agreement, the Commodity Broker will charge the Fund a fee for the services
it has agreed to perform, including brokerage charges, give-up fees, commissions and services fees as may be agreed upon by the Fund and the Commodity Broker; exchange, clearing house, NFA or other regulatory fees; the amount necessary to hold
Commodity Broker harmless against all taxes and related liabilities of the Fund; any debit balance or deficiency in the Funds account; interest on any debit balances or deficiencies in the Funds account and on monies advanced to the
Fund; and any other agreed upon amounts owed by the Fund to the Commodity Broker in connection with the Funds account or transactions therein. .
The Brokerage Agreement is terminable by the Fund at any time by written notice to the Commodity Broker, or by the Commodity Broker without
penalty upon ten (10) days prior written notice.
The Brokerage Agreement provides that except to the extent of its gross
negligence, fraud or willful misconduct, the Commodity Broker shall not be liable for any loss, liability or expense incurred by the Fund in connection with or arising out of the Brokerage Agreement, transactions in or for the Fund or any actions
taken by the Commodity Broker at the request or direction of the Fund.
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Administration Agreement
Pursuant to the Administration Agreement between the Fund and the Administrator, the Administrator performs or supervises the performance of
services necessary for the operation and administration of the Fund (other than making investment decisions), including receiving and processing orders from Authorized Participants to create and redeem Baskets, NAV calculations, accounting and other
fund administrative services.
The Administration Agreement will continue in effect from the commencement of trading operations unless
terminated on at least 90 days prior written notice by either party to the other party. Notwithstanding the foregoing, the Administrator may terminate the Administration Agreement upon 30 days prior written notice if the Fund has
materially failed to perform its obligations under the Administration Agreement or upon the termination of the Global Custody Agreement.
The Administrator is both exculpated and indemnified under the Administration Agreement.
Except as otherwise provided in the Administration Agreement, the Administrator will not be liable for any costs, expenses, damages,
liabilities or claims (including attorneys and accountants fees) incurred by the Fund, except those costs, expenses, damages, liabilities or claims arising out of the Administrators own gross negligence or willful misconduct. In no
event will the Administrator be liable to the Fund or any third party for special, indirect or consequential damages, or lost profits or loss of business, arising under or in connection with the Administration Agreement, even if previously informed
of the possibility of such damages and regardless of the form of action. The Administrator will not be liable for any loss, damage or expense, including counsel fees and other costs and expenses of a defense against any claim or liability, resulting
from, arising out of, or in connection with its performance under the Administration Agreement, including its actions or omissions, the incompleteness or inaccuracy of any Proper Instructions (as defined therein), or for delays caused by
circumstances beyond the Administrators control, unless such loss, damage or expense arises out of the gross negligence or willful misconduct of the Administrator.
The Fund will indemnify and hold harmless the Administrator from and against any and all costs, expenses, damages, liabilities and claims
(including
claims asserted by the Fund), and reasonable attorneys and accountants fees relating thereto, which are sustained or incurred or which may be asserted against the Administrator by
reason of or as a result of any action taken or omitted to be taken by the Administrator in good faith under the Administration Agreement or in reliance upon (i) any law, act, regulation or interpretation of the same even though the same may
thereafter have been altered, changed, amended or repealed, (ii) the registration statement or Prospectus, (iii) any Proper Instructions, or (iv) any opinion of legal counsel for the Fund, or arising out of transactions or other
activities of the Fund which occurred prior to the commencement of the Administration Agreement; provided, that the Fund will not indemnify the Administrator for costs, expenses, damages, liabilities or claims for which the Administrator is liable
under the preceding paragraph. This indemnity will be a continuing obligation of the Fund, its successors and assigns, notwithstanding the termination of the Administration Agreement. Without limiting the generality of the foregoing, the Fund will
indemnify the Administrator against and save the Administrator harmless from any loss, damage or expense, including counsel fees and other costs and expenses of a defense against any claim or liability, arising from any one or more of the following:
(i) errors in records or instructions, explanations, information, specifications or documentation of any kind, as the case may be, supplied to the Administrator by any third party described above or by or on behalf of the Fund; (ii) action
or inaction taken or omitted to be taken by the Administrator pursuant to Proper Instructions of the Fund or otherwise without gross negligence or willful misconduct; (iii) any action taken or omitted to be taken by the Administrator in good
faith in accordance with the advice or opinion of counsel for the Fund or its own counsel; (iv) any improper use by the Fund or its agents, distributor or investment advisor of any valuations or computations supplied by the Administrator
pursuant to the Administration Agreement; (v) the method of valuation and the method of computing NAV; or (vi) any valuations or NAV provided by the Fund.
Actions taken or omitted in reliance on Proper Instructions, or upon any information, order, indenture, stock certificate, power of attorney,
assignment, affidavit or other instrument believed by the Administrator to be genuine or bearing the signature of a person or persons believed to be authorized to sign, countersign or execute the same, or upon the opinion of legal counsel for the
Fund or its own counsel, will be conclusively presumed to have been taken or omitted in good faith.
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Notwithstanding any other provision contained in the Administration Agreement, the Administrator
will have no duty or obligation with respect to, including, without limitation, any duty or obligation to determine, or advise or notify the Fund of: (a) the taxable nature of any distribution or amount received or deemed received by, or
payable to the Fund; (b) the taxable nature or effect on the Fund or its shareholders of any corporate actions, class actions, tax reclaims, tax refunds, or similar events; (c) the taxable nature or taxable amount of any distribution or
dividend paid, payable or deemed paid by the Fund to its shareholders; or (d) the effect under any federal, state, or foreign income tax laws of the Fund making or not making any distribution or dividend payment, or any election with respect
thereto.
Global Custody Agreement
The Bank of New York Mellon serves as the Funds custodian, or Custodian. Pursuant to the Global Custody Agreement between the Fund and
the Custodian, or Custody Agreement, the Custodian serves as custodian of all the Funds securities and cash at any time delivered to Custodian during the term of the Custody Agreement and has authorized the Custodian to hold its securities in
registered form in its name or the name of its nominees. The Custodian has established and will maintain one or more securities accounts and cash accounts pursuant to the Custody Agreement. The Custodian will maintain books and records segregating
the assets.
Either party may terminate the Custody Agreement by giving to the other party a notice in writing specifying the date of such
termination, which will be not less than ninety (90) days after the date of such notice. Upon termination thereof, the Fund will pay to the Custodian such compensation as may be due to the Custodian, and will likewise reimburse the Custodian
for other amounts payable or reimbursable to the Custodian thereunder. The Custodian will follow such reasonable oral or written instructions concerning the transfer of custody of records, securities and other items as the Fund gives; provided, that
(a) the Custodian will have no liability for shipping and insurance costs associated therewith, and (b) full payment will have been made to the Custodian of its compensation, costs, expenses and other amounts to which it is entitled
thereunder. If any securities or cash remain in any account, the Custodian may deliver to the Fund such securities and cash. Except as otherwise provided herein, all obligations of the parties to each other hereunder will cease upon termination of
the Custody Agreement.
The Custodian is both exculpated and indemnified under the Custody Agreement.
Except as otherwise expressly provided in the Custody Agreement, the Custodian will not be liable for any costs, expenses, damages,
liabilities or claims, including attorneys and accountants fees, or losses, incurred by or asserted against the Fund, except those losses arising out of the gross negligence or willful misconduct of the Custodian. The Custodian will have
no liability whatsoever for the action or inaction of any depository. Subject to the Custodians delegation of its duties to its affiliates, the Custodians responsibility with respect to any securities or cash held by a subcustodian is
limited to the failure on the part of the Custodian to exercise reasonable care in the selection or retention of such subcustodian in light of prevailing settlement and securities handling practices, procedures and controls in the relevant market.
With respect to any losses incurred by the Fund as a result of the acts or the failure to act by any subcustodian (other than an affiliate of the Custodian), the Custodian will take appropriate action to recover such losses from such subcustodian;
and the Custodians sole responsibility and liability to the Fund will be limited to amounts so received from such subcustodian (exclusive of costs and expenses incurred by the Custodian). In no event will the Custodian be liable to the Fund or
any third party for special, indirect or consequential damages, or lost profits or loss of business, arising in connection with the Custody Agreement.
The Fund will indemnify the Custodian and each subcustodian for the amount of any tax that the Custodian, any such subcustodian or any other
withholding agent is required under applicable laws (whether by assessment or otherwise) to pay on behalf of, or in respect of income earned by or payments or distributions made to or for the account of the Fund (including any payment of tax
required by reason of an earlier failure to withhold). The Custodian will, or will instruct the applicable subcustodian or other withholding agent to, withhold the amount of any tax which is required to be withheld under applicable law upon
collection of any dividend, interest or other distribution made with respect to any security and any proceeds or income from the sale, loan or other transfer of any security. In the event that the Custodian or any subcustodian is required under
applicable law to pay any tax on behalf of the Fund, the Custodian is hereby authorized to withdraw cash from any cash account in the amount required to pay such tax and to use such cash, or to remit such cash to the appropriate subcustodian, for
the timely payment of such tax in the manner required by applicable law.
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The Fund will indemnify the Custodian and hold the Custodian harmless from and against any and
all losses sustained or incurred by or asserted against the Custodian by reason of or as a result of any action or inaction, or arising out of the Custodians performance under the Custody Agreement, including reasonable fees and expenses of
counsel incurred by the Custodian in a successful defense of claims by the Fund; provided however, that the Fund will not indemnify the Custodian for those losses arising out of the Custodians gross negligence or willful misconduct. This
indemnity will be a continuing obligation of the Fund, its successors and assigns, notwithstanding the termination of the Custody Agreement.
Transfer Agency and Service Agreement
The Bank of New York Mellon serves as the Funds transfer agent, or Transfer Agent. Pursuant to the Transfer Agency and Service Agreement
between the Fund and the Transfer Agent, the Transfer Agent serves as the Funds transfer agent, dividend disbursing agent, and agent in connection with certain other activities as provided under the Transfer Agency and Service Agreement.
The term of the Transfer Agency and Service Agreement is one year from the effective date and will automatically renew for additional one year
terms unless either party provides written notice of termination at least ninety (90) days prior to the end of any one year term or, unless earlier terminated as provided below:
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Either party terminates prior to the expiration of the initial term in the event the other party breaches any material provision of the Transfer Agency and Service Agreement, including, without limitation in the case of
the Fund, its obligations to compensate the Transfer Agent, provided that the non-breaching party gives written notice of such breach to the breaching party and the breaching party does not cure such violation within 90 days of receipt of such
notice. |
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The Fund may terminate the Transfer Agency and Service Agreement prior
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to the expiration of the initial term upon ninety (90) days prior written notice in the event that the Managing Owner determines to liquidate the Fund and terminate its registration
with the Securities and Exchange Commission other than in connection with a merger or acquisition of the Fund. |
The
Transfer Agent will have no responsibility and will not be liable for any loss or damage unless such loss or damage is caused by its own gross negligence or willful misconduct or that of its employees, or its breach of any of its representations. In
no event will the Transfer Agent be liable for special, indirect or consequential damages regardless of the form of action and even if the same were foreseeable.
Pursuant to the Transfer Agency and Service Agreement, the Transfer Agent will not be responsible for, and the Fund will indemnify and hold
the Transfer Agent harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability, or Losses, arising out of or attributable to:
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All actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to the Transfer Agency and Service Agreement, provided that such actions are taken without gross negligence, or willful
misconduct. |
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The Funds gross negligence or willful misconduct. |
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The breach of any representation or warranty of the Fund thereunder. |
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The conclusive reliance on or use by the Transfer Agent or its agents or subcontractors of information, records, documents or services which (i) are received by the Transfer Agent or its agents or subcontractors,
and (ii) have been prepared, maintained or performed by the Fund or any other person or firm on behalf of the Fund including but not limited to any previous transfer agent or registrar. |
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The conclusive reliance on, or the carrying out by the Transfer Agent or its agents or subcontractors of any
instructions or requests of the Fund on behalf of the Fund. |
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The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state. |
Distribution Services Agreement
Invesco Distributors provides certain distribution services to the Fund. Pursuant to the Distribution Services Agreement, as amended from
time-to-time, between the Fund and Invesco Distributors, Invesco Distributors will assist the Managing Owner with certain functions and duties relating to distribution and marketing including reviewing and approving marketing materials.
The date of the Distribution Services Agreement is the effective date and such Agreement will continue automatically for successive annual
periods, provided that such continuance is specifically approved at least annually (i) by the Funds Managing Owner or (ii) otherwise as provided under the Distribution Services Agreement. The Distribution Services Agreement is
terminable without penalty on sixty days written notice by the Funds Managing Owner or by Invesco Distributors. The Distribution Services Agreement will automatically terminate in the event of its assignment.
Pursuant to the Distribution Services Agreement, the Fund will indemnify Invesco Distributors as follows:
The Fund indemnifies and holds harmless Invesco Distributors and each of its directors and officers and each person, if any, who controls
Invesco Distributors within the meaning of Section 15 of the Securities Act, against any loss, liability, claim, damage or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damage or
expense and reasonable counsel fees incurred in connection therewith) by reason of any person acquiring any Shares, based upon the ground that the registration statement,
Prospectus, statement of additional information, shareholder reports or other information filed or made public by the Fund (as from time-to-time amended) included an untrue statement of a
material fact or omitted to state a material fact required to be stated or necessary in order to make the statements not misleading under the Securities Act or any other statute or the common law. However, the Fund does not indemnify Invesco
Distributors or hold it harmless to the extent that the statement or omission was made in reliance upon, and in conformity with, information furnished to the Fund by or on behalf of Invesco Distributors. In no case:
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is the indemnity of the Fund in favor of Invesco Distributors or any person indemnified to be deemed to protect Invesco Distributors or any person against any liability to the Fund or its security holders to which
Invesco Distributors or such person would otherwise be subject by reason of willful misfeasance, bad faith or negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under the Distribution
Services Agreement; or |
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is the Fund to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against Invesco Distributors or any person indemnified unless Invesco Distributors or person, as the case
may be, will have notified the Fund in writing of the claim promptly after the summons or other first written notification giving information of the nature of the claims will have been served upon Invesco Distributors or any such person (or after
Invesco Distributors or such person will have received notice of service on any designated agent). |
However, failure to
notify the Fund of any claim will not relieve the Fund from any liability which it may have to any person against whom such action is brought otherwise than on account of its indemnity agreement described herein. The Fund will be entitled to
participate at its own expense in the defense, or, if it so elects, to assume the defense of any suit brought to enforce any claims, and if the Fund elects to assume the defense, the defense will be conducted by counsel chosen by the Fund. In the
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event the Fund elects to assume the defense of any suit and retain counsel, Invesco Distributors, officers or directors or controlling person(s), defendant(s) in the suit, will bear the fees and
expenses of any additional counsel retained by them. If the Fund does not elect to assume the defense of any suit, it will reimburse Invesco Distributors, officers or directors or controlling person(s) or defendant(s) in the suit for the reasonable
fees and expenses of any counsel retained by them. The Fund agrees to notify Invesco Distributors promptly of the commencement of any litigation or proceeding against it or any of its officers in connection with the issuance or sale of any of the
Shares.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal (and certain state and local) income tax considerations associated with the
purchase, ownership and disposition of Shares as of the date hereof by U.S. Shareholders (as defined below) and non-U.S. Shareholders (as defined below). Except where noted, this discussion deals only with Shares held as capital assets by
Shareholders who acquired Shares by purchase and does not address special situations, such as those of:
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dealers in securities, commodities or currencies; |
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financial institutions; |
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regulated investment companies, or RICs, other than the status of the Fund as a qualified publicly traded partnership, or a qualified PTP, within the meaning of the Code; |
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real estate investment trusts; |
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tax-exempt organizations; |
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persons holding Shares as a part of a hedging, integrated or conversion transaction or a straddle; |
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traders in securities or commodities that elect to use a mark-to-market method of accounting for their securities or commodities holdings; or
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persons liable for alternative minimum tax. |
Furthermore, the discussion below is based upon
the provisions of the Code, the Treasury Regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as of the date hereof, and such authorities may be repealed, revoked, modified or subject to differing
interpretations, possibly on a retroactive basis, so as to result in U.S. federal income tax consequences different from those described below.
A U.S. Shareholder means a beneficial owner of Shares that is for U.S. federal income tax purposes:
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an individual citizen or resident of the United States; |
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a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States or any state thereof or the District of Columbia; |
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
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a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of such trust or (2) has a valid
election in effect under applicable Treasury Regulations to be treated as a U.S. person. |
A non-U.S. Shareholder
means a beneficial owner of Shares that is not a U.S. Shareholder.
If a partnership or other entity or arrangement treated as a
partnership for U.S. federal income tax purposes holds Shares, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner in a partnership
holding Shares, we urge you to consult your own tax advisor.
No statutory, administrative or judicial authority directly addresses the
treatment of Shares or instruments similar to Shares for U.S. federal income tax purposes. As a result, we cannot assure you that
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the IRS, or the courts will agree with the tax consequences described herein. A different treatment from that described below could adversely affect the amount, timing and character of items
of income, gain, loss or deduction in respect of an investment in the Shares. If you are considering the purchase of Shares, we urge you to consult your own tax advisor concerning the particular U.S. federal income tax consequences to you of the
purchase, ownership and disposition of Shares, as well as any consequences to you arising under the laws of any other taxing jurisdiction.
Status of the Fund
Under current law and assuming full compliance with the terms of the Trust Declaration and applicable law (and other relevant documents), in
the opinion of Sidley Austin LLP, the Fund will be classified as a partnership for U.S. federal income tax purposes. Accordingly, subject to the discussion below regarding publicly traded partnerships, the Fund generally will not be a taxable entity
for U.S. federal income tax purposes and the Fund will not incur U.S. federal income tax liability.
Special
Rules for Publicly Traded Partnerships
A partnership generally is not a taxable entity and generally incurs no U.S. federal income tax
liability. Section 7704 of the Code provides that publicly traded partnerships will, as a general rule, be taxed as corporations. However, an exception exists with respect to publicly traded partnerships of which 90% or more of the gross income
during each taxable year consists of qualifying income within the meaning of Section 7704(d) of the Code, or the qualifying income exception. Qualifying income includes dividends, interest, capital gains from the sale or other
disposition of stocks and debt instruments and, in the case of a partnership (such as the Fund) a principal activity of which is the buying and selling of commodities or futures contracts with respect to commodities, income and gains derived from
commodities or futures contracts with respect to commodities. The types of currency futures contracts held by the Fund are regulated as commodities and are traded on a commodities exchange, and, although there is no specific authority directly
addressing the issue, such contracts should be treated as futures contracts with respect to commodities under Section 7704(d) of the Code. The Fund anticipates that at least 90% of its gross income for each taxable year
will constitute qualifying income within the meaning of Section 7704(d) of the Code.
There can be no assurance that the IRS will not assert that the Fund should be treated as a publicly traded partnership taxable as a
corporation. No ruling has been or will be sought from the IRS, and the IRS has made no determination as to the status of the Fund for U.S. federal income tax purposes or whether the Funds operations generate qualifying income
under Section 7704(d) of the Code. Whether the Fund will continue to meet the qualifying income exception is a matter that will be determined by the Funds operations and the facts existing at the time of future determinations. However,
the Funds Managing Owner will use its best efforts to cause the Fund to operate in such manner as is necessary for the Fund to continue to meet the qualifying income exception.
If the Fund were taxable as a corporation in any taxable year, either as a result of a failure to meet the qualifying income exception
described above or otherwise, the Funds items of income, gain, loss and deduction would be reflected only on the Funds tax return rather than being passed through to the Shareholders, and the Funds net income would be taxed to it
at the income tax rates applicable to domestic corporations. In addition, if the Fund were taxable as a corporation, any distribution made by the Fund to a Shareholder would be treated as taxable dividend income, to the extent of the Funds
current or accumulated earnings and profits, or, in the absence of current and accumulated earnings and profits, as a nontaxable return of capital to the extent of the Shareholders tax basis in its Shares, or as taxable capital gain, after the
Shareholders tax basis in its Shares is reduced to zero. Taxation of the Fund as a corporation could result in a material reduction in a Shareholders cash flow and after-tax return and thus could result in a substantial reduction of the
value of the Shares.
The discussion below is based on Sidley Austin llps opinion that the Fund will be classified as a partnership
for U.S. federal income tax purposes that is not subject to corporate income tax for U.S. federal income tax purposes.
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U.S. Shareholders
Treatment of Fund Income
A partnership generally does not incur U.S. federal income tax liability. Instead, each partner of a partnership is required to take into
account its share of items of income, gain, loss, deduction and other items of the partnership. Accordingly, each Shareholder will be required to include in income its allocable share of the Funds income, gain, loss, deduction and other items
for the Funds taxable year ending with or within its taxable year. In computing a partners U.S. federal income tax liability, the items must be included, regardless of whether cash distributions are made by the partnership. Thus,
Shareholders may be required to take into account taxable income without a corresponding current receipt of cash if the Fund generates taxable income but does not make cash distributions in an amount equal to the taxable income, or if the
Shareholder is not able to deduct, in whole or in part, the Shareholders allocable share of the Funds expenses or capital losses. The Funds taxable year will end on December 31 unless otherwise required by law. The Fund will
use the accrual method of accounting.
Shareholders will take into account their respective shares of ordinary income realized by the Fund
from accruals of interest on United States Treasury Securities, or T-Bills, held in the Funds portfolio. The Fund may hold T-Bills or other debt instruments with acquisition discount or original issue discount, in which
case Shareholders will be required to include accrued amounts in taxable income on a current basis even though receipt of those amounts may occur in a subsequent year. The Fund may also acquire debt instruments with market discount. Upon
disposition of such obligations, gain will generally be required to be treated as interest income to the extent of the market discount and Shareholders will be required to include as ordinary income their share of the market discount that accrued
during the period the obligations were held by the Fund. Shareholders will take into account their respective shares of any dividends received by the Fund from the Funds investments in the money market mutual funds.
It is expected that all or substantially all of the currency futures contracts on the Eligible Index Currencies held by the Fund will
constitute Section 1256 Contracts (as defined below). The Code generally applies a mark-to-market system of taxing unrealized gains and losses on and otherwise provides for special rules of taxation with respect to futures and other
contracts that are Section 1256 Contracts. Section 1256 Contracts held by the Fund at the end of a taxable year of the Fund will be treated for U.S. federal income tax purposes as if they were sold by the Fund at their fair market value on
the last business day of the taxable year. The net
gain or loss, if any, resulting from these deemed sales (known as marking-to-market), together with any gain or loss resulting from any actual sales of Section 1256 Contracts (or
other termination of the Funds obligations under such contracts), must be taken into account by the Fund in computing its taxable income for the year. If a Section 1256 Contract held by the Fund at the end of a taxable year is sold in the
following year, the amount of any gain or loss realized on the sale will be adjusted to reflect the gain or loss previously taken into account under the mark-to-market rules.
Capital gains and losses from Section 1256 Contracts generally are characterized as short-term capital gains or losses to the extent of
40% of the gains or losses and as long-term capital gains or losses to the extent of 60% of the gains or losses. Thus, Shareholders will generally take into account their pro rata share of the long-term capital gains and losses and short-term
capital gains and losses from Section 1256 Contracts held by the Fund and taken into account by the Fund in computing its taxable income. If a non-corporate taxpayer incurs a net capital loss for a year, the portion of the loss, if any, which
consists of a net loss on Section 1256 Contracts may, at the election of the taxpayer, be carried back three years. A loss carried back to a year by a non-corporate taxpayer may be deducted only to the extent (1) the loss does not exceed
the net gain on Section 1256 Contracts for the year and (2) the allowance of the carryback does not increase or produce a net operating loss for the year. Any gain or loss with respect to any currency futures contracts on the Eligible
Index Currencies held by the Fund that are not subject to the rules described above may be treated as either ordinary income or loss or capital gain or loss, depending upon elections available to the Fund.
Allocation of the Funds Profits and Losses
For U.S. federal income tax purposes, a Shareholders distributive share of the Funds income, gain, loss, deduction and other items
will be determined by the Trust Declaration, unless an allocation under such agreement does not have substantial economic effect, in which case the allocations will be determined in accordance with the partners interests in
the partnership. Subject to the discussion below under Monthly Allocation and Revaluation Conventions and Transferor/Transferee Allocations and Section 754 Election, the allocations pursuant to the Trust
Declaration should be considered to have substantial economic effect or deemed to be made in accordance with the partners interests in the Fund.
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If the allocations provided by the Trust Declaration were successfully challenged by the IRS,
the amount of income or loss allocated to Shareholders for U.S. federal income tax purposes under the Trust Declaration could be increased or reduced or the character of the income or loss could be modified or both.
As described in more detail below, the U.S. federal income tax rules that apply to partnerships are complex and their application is not
always clear. Additionally, the rules generally were not written for, and in some respects are difficult to apply to, publicly traded partnerships. The Fund will apply certain assumptions and conventions intended to comply with the intent of the
rules and to report income, gain, loss, deduction and credit to Shareholders in a manner that reflects the economic gains and losses, but these assumptions and conventions may not comply with all aspects of the applicable Treasury Regulations. It is
possible therefore that the IRS will successfully assert that assumptions made and/or conventions used do not satisfy the technical requirements of the Code or the Treasury Regulations and will require that tax items be adjusted or reallocated in a
manner that could adversely impact Shareholders.
Monthly Allocation and Revaluation Conventions and Transferor/Transferee
Allocations
In general, the Funds taxable income and losses will be determined monthly and will be apportioned among the
Shareholders in proportion to the number of Shares owned by each of them as of the close of the last trading day of the preceding month. By investing in Shares, a U.S. Shareholder agrees that, in the absence of an administrative determination or
judicial ruling to the contrary, it will report income and loss under the monthly allocation and revaluation conventions described below.
Under the monthly allocation convention, whomever is treated for U.S. federal income tax purposes as holding Shares as of the close of the
last trading day of the preceding month will be treated as continuing to hold the Shares until immediately before the close of the last trading day of the following month. With respect to any Shares that were not treated as outstanding as of the
close of the last trading day of the preceding month, the first person that is treated as holding such Shares (other
than an underwriter or other person holding in a similar capacity) for U.S. federal income tax purposes will be treated as holding such Shares for this purpose as of the close of the last trading
day of the preceding month. As a result, a Shareholder who has disposed of Shares prior to the close of the last trading day of a month may be allocated items of income, gain, loss and deduction realized after the date of transfer.
Section 706 of the Code generally requires that items of partnership income and deductions be allocated between transferors and
transferees of partnership interests on a daily basis. It is possible that transfers of Shares could be considered to occur for U.S. federal income tax purposes when the transfer is completed without regard to the Funds monthly convention for
allocating income and deductions. If this were to occur, the Funds allocation method might be considered a monthly convention that does not literally comply with that requirement. If the IRS treats transfers of Shares as occurring throughout
each month and a monthly convention is not allowed by the Treasury Regulations (or only applies to transfers of less than all of a Shareholders Shares) or if the IRS otherwise does not accept the Funds convention, the IRS may contend
that taxable income or losses of the Fund must be reallocated among the Shareholders. If such a contention was sustained, the Shareholders respective tax liabilities would be adjusted to the possible detriment of certain Shareholders. The
Managing Owner is authorized to revise the Funds methods of allocation between transferors and transferees (as well as among Shareholders whose interests otherwise vary during a taxable period).
In addition, for any month in which a creation or redemption of Shares takes place, the Fund generally will credit or debit, respectively, the
book capital accounts of the existing Shareholders with any unrealized gain or loss in the Funds assets. This will result in the allocation of the Funds items of income, gain, loss, deduction and credit to existing
Shareholders to account for the difference between the tax basis and fair market value of property owned by the Fund at the time new Shares are issued or old Shares are redeemed (reverse Section 704(c) allocations). The intended
effect of these allocations is to allocate any built-in gain or loss in the Funds assets at the time of a creation or redemption of Shares to the investors that economically have earned such gain or loss.
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As with the other allocations described above, the Fund generally will use a monthly convention
for purposes of the reverse Section 704(c) allocations. More specifically, the Fund generally will credit or debit, respectively, the book capital accounts of existing Shareholders with any unrealized gain or loss in the Funds
assets based on a calculation utilizing the average price of the Shares during the month in which the creation or redemption transaction takes place, rather than the fair market value of its assets at the time of such creation or redemption (the
revaluation convention). As a result, it is possible that, for U.S. federal income tax purposes, (i) a purchaser of newly issued Shares will be allocated some or all of the unrealized gain in the Funds assets at the time it
acquires the Shares or (ii) an existing Shareholder will not be allocated its entire share in the unrealized loss in the Funds assets at the time of such acquisition. Furthermore, the applicable Treasury Regulations generally require that
the book capital accounts be adjusted based on the fair market value of partnership property on the date of adjustment and do not explicitly allow the adoption of a monthly revaluation convention.
The Code and applicable Treasury Regulations generally require that items of partnership income and deductions be allocated between
transferors and transferees of partnership interests on a daily basis, and that adjustments to book capital accounts be made based on the fair market value of partnership property on the date of adjustment. The Code and Treasury
Regulations do not contemplate monthly allocation or revaluation conventions. If the IRS does not accept the Funds monthly allocation or revaluation convention, the IRS may contend that taxable income or losses of the Fund must be reallocated
among the Shareholders of the Fund. If such a contention were sustained, the Shareholders respective tax liabilities would be adjusted to the possible detriment of certain Shareholders. The Managing Owner is authorized to revise the
Funds allocation and revaluation methods in order to comply with applicable law or to allocate items of partnership income and deductions in a manner that reflects more accurately the Shareholders interests in the Fund.
Section 754 Election
The Fund has made the election permitted by Section 754 of the Code. Such an election, once made, is irrevocable without the consent of
the IRS. The making of the Section 754 election by the Fund will generally have the effect of requiring a purchaser of Shares to adjust its proportionate share of the basis in the Funds assets, or the inside basis, pursuant to
Section 743(b) of the Code to fair market value (as
reflected in the purchase price for the purchasers Shares), as if it had acquired a direct interest in the Funds assets. The Section 743(b) adjustment is attributed solely to a
purchaser of Shares and is not added to the bases of the Funds assets associated with all of the other Shareholders. Depending on the relationship between a Shareholders purchase price for Shares and its unadjusted share of the
Funds inside basis at the time of the purchase, the Section 754 election may be either advantageous or disadvantageous to the Shareholder as compared to the amount of gain or loss a Shareholder would be allocated absent the
Section 754 election.
The calculations under Section 754 of the Code are complex, and there is little legal authority
concerning the mechanics of the calculations, particularly in the context of publicly traded partnerships. To help reduce the complexity of those calculations and the resulting administrative costs, the Fund will apply certain conventions in
determining and allocating the Section 743 basis adjustments. It is possible that the IRS will successfully assert that some or all of such conventions utilized by the Fund do not satisfy the technical requirements of the Code or the Treasury
Regulations and, thus, will require different basis adjustments to be made. If the IRS were to sustain such a position, a Shareholder may have adverse tax consequences.
In order to make the basis adjustments permitted by Section 754, the Fund will be required to obtain information regarding each
Shareholders secondary market transactions in Shares as well as creations and redemptions of Shares. The Fund will seek the requested information from the record Shareholders, and, by purchasing Shares, each beneficial owner of Shares will be
deemed to have consented to the provision of the information by the record owner of the beneficial owners Shares. Notwithstanding the foregoing, however, there can be no guarantee that the Fund will be able to obtain such information from
record owners or other sources, or that the basis adjustments that the Fund makes based on the information it is able to obtain will be effective in eliminating disparity between a Shareholders outside basis in its Shares and its interest in
the inside basis in the Funds assets.
Constructive Termination
The Fund will experience a constructive termination for tax purposes if there is a sale or exchange of 50 percent or more of the total Shares
in the Fund within a 12-month period. A constructive
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termination results in the closing of the Funds taxable year for all Shareholders in the Fund. In the case of a Shareholder reporting on a taxable year other than the taxable year used by
the Fund (which is a fiscal year ending December 31), the early closing of the Funds taxable year may result in more than 12 months of its taxable income or loss being includable in the Shareholders taxable income for the year of
termination. The Fund would be required to make new tax elections after a termination, including a new election under Section 754. A termination could also result in penalties if the Fund were unable to determine that the termination had
occurred.
Treatment of Distributions
Distributions of cash by a partnership are generally not taxable to the distributee to the extent the amount of cash does not exceed the
distributees tax basis in its partnership interest. Thus, any cash distributions made by the Fund will be taxable to a Shareholder only to the extent the distributions exceed the Shareholders tax basis in the Shares it is treated as
owning (see Tax Basis in Fund Shares below). Any cash distributions in excess of a Shareholders tax basis generally will be considered to be gain from the sale or exchange of the Shares (see Disposition of
Shares below).
Creation and Redemption of Share Baskets
Shareholders, other than Authorized Participants (or holders for which an Authorized Participant is acting), generally will not recognize gain
or loss as a result of an Authorized Participants creation or redemption of a Basket. If the Fund disposes of assets in connection with the redemption of a Basket, however, the disposition may give rise to gain or loss that will be allocated
in part to Shareholders. An Authorized Participants creation or redemption of a Basket also may affect the Shareholders share of the Funds tax basis in its assets, which could affect the amount of gain or loss allocated to the
Shareholder on the sale or disposition of portfolio assets by the Fund.
Disposition of Shares
If a U.S. Shareholder transfers Shares and such transfer is a sale or other taxable disposition, the U.S. Shareholder will generally be
required to recognize gain or loss measured by the difference between the amount realized on the sale and the U.S. Shareholders adjusted tax basis in the Shares sold. The amount realized will include an amount equal to
the U.S. Shareholders share of the Funds liabilities, as well as any proceeds from the sale. The gain or loss recognized will generally be taxable as capital gain or loss. Capital
gain of non-corporate U.S. Shareholders is eligible to be taxed at reduced rates where the Shares sold are considered held for more than one year. Capital gain of corporate U.S. Shareholders is taxed at the same rate as ordinary income. Any capital
loss recognized by a U.S. Shareholder on a sale of Shares will generally be deductible only against capital gains, except that a non-corporate U.S. Shareholder may also offset up to $3,000 per year of ordinary income with capital losses.
Tax Basis in Fund Shares
A U.S. Shareholders initial tax basis in its Shares will equal the sum of (a) the amount of cash paid by the U.S. Shareholder for
its Shares and (b) the U.S. Shareholders share of the Funds liabilities. A U.S. Shareholders tax basis in its Shares will be increased by (a) the U.S. Shareholders share of the Funds taxable income, including
capital gain, (b) the U.S. Shareholders share of the Funds income, if any, that is exempt from tax and (c) any increase in the U.S. Shareholders share of the Funds liabilities. A U.S. Shareholders tax basis in
Shares will be decreased (but not below zero) by (a) the amount of any cash distributed (or deemed distributed) to the U.S. Shareholder, (b) the U.S. Shareholders share of the Funds losses and deductions, (c) the U.S.
Shareholders share of the Funds expenditures that are neither deductible nor properly chargeable to its capital account and (d) any decrease in the U.S. Shareholders share of the Funds liabilities.
Limitations on Interest Deductions
The deductibility of a non-corporate U.S. Shareholders investment interest expense is generally limited to the amount of the
Shareholders net investment income. Investment interest expense will generally include interest expense incurred by the Fund, if any, and investment interest expense incurred by the U.S. Shareholder on any margin account borrowing
or other loan incurred to purchase or carry Shares. Net investment income includes gross income from property held for investment and amounts treated as portfolio income, such as dividends and interest, less deductible expenses, other than interest,
directly connected with the production of investment income. For this purpose, any long-term capital gain or qualifying dividend income that is taxable at long-term capital gains rates is excluded from net investment income unless the U.S.
Shareholder elects to pay tax on such capital gain or dividend income at ordinary income rates.
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Organization, Syndication and Other Expenses
In general, expenses incurred that are considered miscellaneous itemized deductions may be deducted by a U.S. Shareholder that is
an individual, estate or trust only to the extent that they exceed 2% of the adjusted gross income of the U.S. Shareholder. The Code imposes additional limitations on the amount of certain itemized deductions allowable to individuals, by reducing
the otherwise allowable portion of such deductions by an amount equal to the lesser of:
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3% of the individuals adjusted gross income in excess of certain threshold amounts; or |
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80% of the amount of certain itemized deductions otherwise allowable for the taxable year. |
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addition, these expenses are also not deductible in determining the alternative minimum tax liability of a U.S. Shareholder. The Fund will report its expenses on a pro rata basis to the Shareholders, and each U.S. Shareholder will determine
separately to what extent they are deductible on the U.S. Shareholders tax return. A U.S. Shareholders inability to deduct all or a portion of the expenses could result in an amount of taxable income to the U.S. Shareholder with respect
to the Fund that exceeds the amount of cash actually distributed to such U.S. Shareholder for the year. It is anticipated that management fees the Fund will pay will constitute miscellaneous itemized deductions.
Under Section 709(b) of the Code, amounts paid or incurred to organize a partnership may, at the election of the partnership, be treated
as deferred expenses, which are allowed as a deduction ratably over a period of 180 months. The Fund has made a Section 709(b) election. A non-corporate U.S. Shareholders allocable share of the organizational expenses will constitute
miscellaneous itemized deductions. Expenditures in connection with the issuance and marketing of Shares (so called syndication fees) are not eligible for the 180-month amortization provision and are not deductible.
Passive Activity Income and Loss
Individuals are subject to certain passive activity loss rules under Section 469 of the Code. Under these rules, losses from a
passive activity generally may not be used to offset income derived from any source other than passive activities. Losses that cannot be currently used under this rule may generally be carried forward. Upon an individuals disposition of an
interest in the passive activity, the individuals unused passive losses may generally be used to offset other (i.e., non-passive) income. Under current Treasury Regulations, income or loss from the Funds investments generally will not
constitute income or losses from a passive activity. Therefore, income or loss realized by Shareholders will not be available to offset a U.S. Shareholders passive losses or passive income from other sources.
Reporting by the Fund to its Shareholders
The Fund will file a partnership tax return. Accordingly, tax information will be provided to Shareholders on Schedule K-1 for each calendar
year as soon as practicable after the end of such taxable year but in no event later than March 15. Each Schedule K-1 provided to a Shareholder will set forth the Shareholders share of the Funds tax items (i.e., interest income from
T-Bills, short-term and long-term capital gain or loss with respect to the futures contracts, Money Market Income and investment expenses for the year) in a manner sufficient for a U.S. Shareholder to complete its tax return with respect to its
investment in the Shares.
Each Shareholder, by its acquisition of Shares, will be deemed to agree to allow brokers and nominees to
provide to the Fund its name and address and the other information and forms as may be reasonably requested by the Fund for purposes of complying with their tax reporting and withholding obligations (and to waive any confidentiality rights with
respect to the information and forms for this purpose) and to provide information or forms upon request.
Given the lack of authority
addressing structures similar to that of the Fund, it is not certain that the IRS will agree with the manner in which tax reporting by the Fund will be undertaken. Therefore, Shareholders should be aware that future IRS interpretations or revisions
to Treasury Regulations could alter the manner in which tax reporting by the Fund and any nominee will be undertaken.
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Audits and Adjustments to Tax Liability
Any challenge by the IRS to the tax treatment by a partnership of any item must be conducted at the partnership, rather than at the partner,
level. A partnership ordinarily designates a tax matters partner (as defined under Section 6231 of the Code with respect to taxable years of partnerships beginning before January 1, 2018) as the person to receive notices and to
act on its behalf in the conduct of such a challenge or audit by the IRS.
Pursuant to the governing documents, the Managing Owner has
been appointed the tax matters partner of the Fund for all purposes of the Code. The tax matters partner, which is required by the Trust Declaration to notify all U.S. Shareholders of any U.S. federal income tax audit of the Fund, has
the authority under the Trust Declaration to conduct any IRS audits of the Funds tax returns or other tax related administrative or judicial proceedings and to settle or further contest any issues in such proceedings. The decision in any
proceeding initiated by the tax matters partner will be binding on all U.S. Shareholders. As the tax matters partner, the Managing Owner has the right on behalf of all Shareholders to extend the statute of limitations relating to the
Shareholders U.S. federal income tax liabilities with respect to Fund items.
A U.S. federal income tax audit of the Funds
partnership tax return may result in an audit of the returns of the U.S. Shareholders, which, in turn, could result in adjustments of items of a Shareholder that are unrelated to the Fund as well as to the Funds related items. In particular,
there can be no assurance that the IRS, upon an audit of a partnership tax return of the Fund or of an income tax return of a U.S. Shareholder, might not take a position that differs from the treatment thereof by the Fund. A U.S. Shareholder would
be liable for interest on any deficiencies that resulted from any adjustments. Prospective U.S. Shareholders should also recognize that they might be forced to incur substantial legal and accounting costs in resisting any challenge by the IRS to
items in their individual returns, even if the challenge by the IRS should prove unsuccessful.
The Bipartisan Budget Act of 2015
implements a new regime for the U.S. federal income tax audit of partnerships that generally applies for taxable years of partnerships beginning after December 31, 2017. The Managing Owner will be appointed the partnership
representative of the Fund.
Non-U.S. Shareholders
The Fund will conduct its activities in such a manner that a non-U.S. Shareholder who is not otherwise carrying on a trade or business in the
United States will not be considered to be engaged in a trade or business in the United States as a result of an investment in the Shares. A non-U.S. Shareholders share of the interest income realized by the Fund on its holdings of T-Bills
will be exempt from U.S. withholding tax provided the non-U.S. Shareholder certifies on IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable form) that the Shareholder is not a U.S. person, provides name and address information and otherwise
satisfies applicable documentation requirements. In addition, with respect to certain distributions made to non-U.S. Shareholders, no withholding is required and the distributions by the Fund that relate to dividends paid to the Fund by money market
mutual funds that are RICs generally will not be subject to federal income tax if (i) the distributions are properly reported by us as interest-related dividends or short-term capital gain dividends, (ii) the
distributions are derived from sources specified in the Code for such dividends and (iii) certain other requirements are satisfied. No assurance can be given that any of our distributions would be designated as eligible for this exemption.
Non-U.S. Shareholders will not be subject to U.S. federal income tax on gains realized on the sale of Shares or on the non-U.S.
Shareholders share of the Funds gains. However, in the case of an individual non-U.S. Shareholder, the non-U.S. Shareholder will be subject to U.S. federal income tax on gains on the sale of Shares or the non-U.S. Shareholders
distributive share of gains if the non-U.S. Shareholder is present in the United States for 183 days or more during a taxable year and certain other conditions are met.
Non-U.S. Shareholders that are individuals will be subject to U.S. federal estate tax on the value of U.S. situs property owned at the time of
their death (unless a statutory exemption or tax treaty exemption applies). It is unclear whether partnership interests (such as the Shares) will be considered U.S. situs property. Accordingly, non-U.S. Shareholders may be subject to U.S. federal
estate tax on all or part of the value of the Shares owned at the time of their death.
Non-U.S. Shareholders are advised to consult their
own tax advisors with respect to the particular tax consequences to them of an investment in the Shares.
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Regulated Investment Companies
The Fund does not believe that it will be classified as a qualified PIP. Accordingly, a RIC that invests in Shares will be treated as owning a
proportionate share of the Funds assets and will take into account its allocable share of the Funds items of income, gain, loss, and deduction when testing the various compliance requirements specifically applicable to RICs. Under
current interpretation of the RIC qualification rules, a RICs allocable share of income from the Funds currency futures transactions and interest income from its investment in debt obligations are treated as qualifying income. Because
the Fund is not a qualified PTP, a RICs investment in the Shares will not be counted against the 25 percent limit on a RICs permitted investment in securities issued by qualified PTPs, and a RIC need not limit its investment in Shares
provided it otherwise can satisfy the RIC qualification requirements. The U.S. Treasury has specific statutory authority (granted in 1987) to promulgate Treasury Regulations excluding from the definition of qualifying income foreign currency gains
which are not directly related to a RICs principal business of investing in stock or securities (or options and futures with respect to stock or securities), although to date no such Treasury Regulations have been issued or proposed. For this
reason, there are some RICs which do not invest in foreign currencies except as a way to hedge risk for investments which may be denominated in or affected by certain foreign currency fluctuations. At least one RIC has obtained a private ruling from
the IRS that gains on its derivative investments used to obtain exposure to foreign currencies would constitute qualifying income under current law. RIC investors that have not sought their own rulings on the issue face a risk that future Treasury
Regulations will recharacterize foreign currency gains received by them as nonqualifying income and be retroactive in application. A prospective RIC investor is encouraged to consult a tax advisor regarding the treatment of its investment in Shares
under the current tax rules.
Tax-Exempt Organizations
An organization that is otherwise exempt from U.S. federal income tax is nonetheless subject to taxation with respect to its unrelated
business taxable income, or UBTI. Except as noted below with respect to certain categories of exempt income, UBTI generally includes income or gain derived (either directly or through a partnership) from a trade or business, the conduct of
which is substantially unrelated to the exercise or performance of the organizations exempt purpose or function.
UBTI generally does not include passive investment income, such as dividends, interest and
capital gains, whether realized by the organization directly or indirectly through a partnership (such as the Fund) in which it is a partner. This type of income is exempt, subject to the discussion of unrelated debt-financed income
below, even if it is realized from securities trading activity that constitutes a trade or business.
UBTI includes not only trade or
business income or gain as described above, but also unrelated debt-financed income. This latter type of income generally consists of (1) income derived by an exempt organization (directly or through a partnership) from income
producing property with respect to which there is acquisition indebtedness at any time during the taxable year and (2) gains derived by an exempt organization (directly or through a partnership) from the disposition of property with
respect to which there is acquisition indebtedness at any time during the twelve-month period ending with the date of the disposition.
All of the income realized by the Fund is expected to be short-term or long-term capital gain income, interest income or other passive
investment income of the type specifically exempt from UBTI as discussed above. The Fund will not borrow funds for the purpose of acquiring or holding any investments or otherwise incur acquisition indebtedness with respect to such
investments. Therefore, a tax-exempt entity purchasing Shares will not incur any UBTI by reason of its investment in the Shares or upon sale of such Shares provided that such tax-exempt entity does not borrow funds for the purpose of investing in
the Shares.
Certain State and Local Taxation Matters
Prospective Shareholders should consider, in addition to the U.S. federal income tax consequences described, potential state and local tax
considerations in investing in the Shares. These considerations arise under various taxing schemes, which include taxes imposed on entities treated as partnerships for U.S. federal income tax purposes, withholding on the distributive share of a
nonresident partner, franchise and capital taxes, gross income taxes, net income taxes, value added taxes, and gross receipts taxes.
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State and local tax laws often differ from U.S. federal income tax laws with respect to the
treatment of specific items of income, gain, loss, deduction and credit for state net income tax purposes. For Shareholders that are taxed as entities for state or local tax income tax purposes, the taxable nexus, income, and apportionment factors
of the Fund may flow through to the Shareholder and such flow-through may disproportionately impact the taxability of the Shareholder in one or more jurisdictions relative to that Shareholders distributive share from the Fund. For Shareholders
that are individuals, the taxable nexus and apportioned income of the Fund will generally flow through to the Shareholder and the Shareholders distributive share of the taxable income or loss of the Fund generally will be required to be
included in determining its reportable income for state and local income tax purposes in the jurisdiction in which the Shareholder is a resident.
The Fund may have a taxable nexus with one or more jurisdictions that will subject a Shareholder to tax (and require a Shareholder to file a
state and local tax return with the jurisdiction in respect to the Shareholders share of the income derived from that business). A prospective Shareholder should consult its tax advisor with respect to the availability of a credit for such tax
in the jurisdiction(s) in which the Shareholder is resident.
The Fund is likely not subject to the New York City unincorporated business
tax because such tax is not imposed on an entity that is primarily engaged in the purchase and sale of financial instruments and securities for its own account. It is noted that the determination of whether the Fund will be subject to
such tax is made on an annual basis and, accordingly, may change from one year to the next.
Nonresident individual Shareholders will be
subject to New York State personal income tax with respect to their share of the New York source income or gain realized directly by the Fund, if any, and New York State may require withholding from the distributive shares of the Shareholders with
respect to such income. Whenever reporting is required, the Fund, in its sole discretion, may, as a convenience to Shareholders make composite state filings and payments in New York and offer each eligible Shareholder the opportunity to join in such
returns to the extent permitted by New York law. A nonresident individual U.S. Shareholder will not be subject to New York City income tax on nonresidents with respect to his or her investment in the Fund.
New York State and New York City residents will be subject to New York State and New York City
personal income tax on their income recognized in respect of Shares. Because the Fund may conduct its business, in part, in New York City, corporate U.S. Shareholders generally will be subject to the New York franchise tax and the New York City
general corporation tax by reason of their investment in the Fund, unless certain exemptions apply. However, pursuant to applicable regulations, non-New York corporate U.S. Shareholders not otherwise subject to New York State franchise tax or
New York City general corporation tax should not be subject to these taxes solely by reason of investing in shares based on qualification of the Fund as a portfolio investment partnership under applicable rules. No ruling from the New
York State Department of Taxation and Finance or the New York City Department of Finance has been, or will be, requested regarding such matters.
Pursuant to the investment partnership provisions of the Illinois Income Tax Act, if (i) 90% or more of the gross income generated by a
partnership consists of interest, dividends and gains from the sale or exchange of qualifying investment securities for purposes of the 1.5% Illinois personal property tax replacement income tax (the Replacement Tax),
(ii) no less than 90% of an entitys cost of its total assets consist of qualifying investment securities, deposits at banks or other financial institutions and office space and equipment reasonably necessary to carry on its activities as
an investment partnership, and (iii) the entity is not a dealer in qualifying investment securities, then the entity will meet the requirements of the investment partnership provisions of the Illinois Income Tax Act and should not be subject to
the Replacement Tax.
For the purposes of claiming the Replacement Tax exemption, qualifying investment securities include common and
preferred stock; bonds, debentures, and other debt securities; foreign and domestic currency deposits; mortgage or asset-backed securities; repurchase agreements and loan participations; forward currency exchange contracts and forward and futures
contracts on foreign currencies; stock and bond index securities and futures contracts and other similar financial securities and futures contracts on those securities; options for the purchase or sale of the foregoing securities, currencies, or
contracts; regulated futures contracts; commodities or futures, forwards, or options with respect to such commodities; derivatives; and a partnership interest in another partnership that is an investment partnership. If the tests for the Replacement
Tax exemption are not met, and the Fund incurs a Replacement Tax liability, such liability will be computed on and charged and allocated to the Shareholders who do not themselves pay the Replacement Tax.
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Whether or not the Fund qualifies as an investment partnership for Replacement Tax purposes is a
question of fact that could change from year to year, and there can be no assurance that the Fund will in fact qualify in any particular year as an investment partnership that is exempt from the Replacement Tax.
Backup Withholding
The Fund is required in certain circumstances to backup withhold on certain payments paid to non-corporate Shareholders that do not furnish the
Fund with their correct taxpayer identification number (in the case of individuals, their social security number) and certain certifications, or who are otherwise subject to backup withholding. Backup withholding is not an additional tax. Any
amounts withheld from payments made to a Shareholder may be refunded or credited against the Shareholders U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS in a timely manner.
Shareholders should be aware that certain aspects of the U.S. federal, state and local income tax treatment regarding the purchase, ownership
and disposition of Shares are not clear under existing law. Thus, Shareholders are urged to consult their own tax advisors to determine the tax consequences of ownership of the Shares in their particular circumstances, including the application of
U.S. federal, state, local and foreign tax laws.
FATCA
The Foreign Account Tax Compliance Act (FATCA) (i) requires certain foreign entities that are foreign financial institutions
(as defined in Section 1471(d)(4) of the Code) to enter into an agreement with the IRS to disclose to the IRS the name, address and tax identification number of certain U.S. persons who own an interest in the foreign entity and requires
certain other foreign entities to provide certain other information; and (ii) imposes a 30% withholding tax on certain payments of U.S. source income and proceeds from the sale of property that produces U.S. source interest or
dividends if the foreign entity fails to enter into the agreement or satisfy its obligations under the legislation. Non-U.S. Shareholders are encouraged to consult with their own tax advisors regarding the possible implications of FATCA on an
investment in the Fund.
Tax on Net Investment Income
A 3.8% tax will be imposed on some or all of the net investment income of certain individuals with modified adjusted gross income of over
$200,000 ($250,000 in the case of joint filers) and the undistributed net investment income of certain estates and trusts. For these purposes, it is expected that all or a substantial portion of a Shareholders share of Fund income will be net
investment income. In addition, certain Fund expenses may not be deducted in calculating a Shareholders net investment income.
Tax Agent
The
beneficial owners who are of a type, as identified by the nominee through whom their Shares are held, that do not ordinarily have U.S. federal tax return filing requirements (collectively, Certain K-1 Unitholders) have designated the
Managing Owner as their tax agent (the Tax Agent) in dealing with the Trust. In light of such designation and pursuant to Treasury Regulation section 1.6031(b)-1T(c), as amended from time to time, the Trust will provide to the Tax Agent
Certain K-1 Unitholders statements (as such term is defined under Treasury Regulation section 1.6031(b)-1T(a)(3)), as amended from time to time).
PROSPECTIVE
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS BEFORE DECIDING WHETHER TO INVEST IN THE SHARES.
PURCHASES BY EMPLOYEE
BENEFIT PLANS
Although
there can be no assurance that an investment in the Fund, or any other managed futures product, will achieve the investment objectives of an employee benefit plan in making such investment, futures investments have certain features which may be of
interest to such a plan. For example, the futures markets are one of the few investment fields in which employee benefit plans can participate in leveraged strategies without being required to pay tax on unrelated business taxable
income. See
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Material U.S. Federal Income Tax Considerations Tax-Exempt Organizations at page 90. In addition, because they are not taxpaying entities, employee benefit plans are
not subject to paying annual tax on profits (if any) of the Fund.
General
The following section sets forth certain consequences under the Employee Retirement Income Security Act of 1974, as amended
(ERISA), and the Code, which a fiduciary of an employee benefit plan as defined in, and subject to the fiduciary responsibility provisions of, ERISA or of a plan as defined in and subject to Section 4975 of
the Code who has investment discretion should consider before deciding to invest the plans assets in the Fund (such employee benefit plans and plans being referred to herein as Plans, and such fiduciaries
with investment discretion being referred to herein as Plan Fiduciaries). The following summary is not intended to be complete, but only to address certain questions under ERISA and the Code which are likely to be raised by the Plan
Fiduciarys own counsel.
In general, the terms employee benefit plan as defined in ERISA and plan as defined
in Section 4975 of the Code together refer to any plan or account of various types which provide retirement benefits or welfare benefits to an individual or to an employers employees and their beneficiaries. Such plans and accounts
include, but are not limited to, corporate pension and profit-sharing plans, simplified employee pension plans, Keogh plans for self-employed individuals (including partners), individual retirement
accounts described in Section 408 of the Code and medical benefit plans.
Each Plan Fiduciary must give appropriate consideration to
the facts and circumstances that are relevant to an investment in the Fund, including the role that such an investment in the Fund would play in the Plans overall investment portfolio. Each Plan Fiduciary, before deciding to invest in the
Fund, must be satisfied that such investment in the Fund is a prudent investment for the Plan, that the investments of the Plan, including the investment in the Fund, are diversified so as to minimize the risk of large losses and that an investment
in the Fund complies with the documents of the Plan and related trust.
EACH PLAN FIDUCIARY CONSIDERING ACQUIRING SHARES MUST CONSULT
WITH ITS OWN LEGAL AND TAX ADVISORS
BEFORE DOING SO. AN INVESTMENT IN THE FUND IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. THE FUND IS NOT
INTENDED AS A COMPLETE INVESTMENT PROGRAM.
Plan Assets
ERISA and a regulation issued thereunder (the Plan Asset Rules) contain rules for determining when an investment by a Plan
in an entity will result in the underlying assets of such entity being assets of the Plan for purposes of ERISA and Section 4975 of the Code (i.e., plan assets). Those rules provide that assets of an entity will not be plan
assets of a Plan which purchases an interest therein if certain exceptions apply, including (i) an exception applicable if the equity interest purchased is a publicly-offered security (the Publicly-Offered Security
Exception) and (ii) an exception applicable if the investment by all benefit plan investors is not significant or certain other exceptions apply (the Insignificant Participation Exception).
The Publicly-Offered Security Exception applies if the equity interest is a security that is (1) freely transferable,
(2) part of a class of securities that is widely held and (3) either (a) part of a class of securities registered under Section 12(b) or 12(g) of the Exchange Act, or (b) sold to the Plan as part of a public
offering pursuant to an effective registration statement under the Securities Act and the class of which such security is a part is registered under the Exchange Act within 120 days (or such later time as may be allowed by the SEC) after the end of
the fiscal year of the issuer in which the offering of such security occurred. The Plan Asset Rules state that the determination of whether a security is freely transferable is to be made based on all relevant facts and circumstances.
Under the Plan Asset Rules, a class of securities is widely held only if it is of a class of securities owned by 100 or more investors independent of the issuer and of each other.
The Shares should be considered to be publicly-offered securities. First, the Shares are being sold only as part of a public offering pursuant
to an effective registration statement under the Securities Act, and the Shares were timely registered under the Exchange Act. Second, it appears that the Shares are freely transferable because the Shares may be freely bought and sold on the NYSE
Arca. Third, the Shares have been owned by at least 100 investors independent of the Fund and of each other from the date the Shares were first sold. Therefore, the underlying assets of the Fund should not be considered to constitute assets of any
Plan which purchases Shares.
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Ineligible Purchasers
In general, Shares may not be purchased with the assets of a Plan if the Managing Owner, the Commodity Broker, the Administrator, Invesco
Distributors, the Marketing Agent, the Trustee, the Index Sponsor, or any of their respective affiliates or any of their respective employees either: (a) has investment discretion with respect to the investment of such plan assets; (b) has
authority or responsibility to give or regularly gives investment advice with respect to such plan assets, for a fee, and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect
to such plan assets and that such advice will be based on the particular investment needs of the Plan; or (c) is an employer maintaining or contributing to such Plan. A party that is described in clause (a) or (b) of the preceding
sentence is a fiduciary under ERISA and the Code with respect to the Plan, and any such purchase might result in a prohibited transaction under ERISA and the Code.
Except as otherwise set forth, the foregoing statements regarding the consequences under ERISA and the Code of an investment in the Fund are
based on the provisions of the Code and ERISA as currently in effect, and the existing administrative and judicial interpretations thereunder. No assurance can be given that administrative, judicial or legislative changes will not occur that will
not make the foregoing statements incorrect or incomplete.
THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH HIS OR HER
ATTORNEY AND FINANCIAL ADVISERS AS TO THE PROPRIETY OF AN INVESTMENT IN THE FUND IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR PLAN AND CURRENT TAX LAW.
PLAN OF DISTRIBUTION
Authorized Participants
Unless otherwise agreed to by the Managing Owner and the Authorized Participant as provided in the next sentence, the Fund issues Shares in
Baskets to Authorized Participants continuously on the
creation order settlement date as of 2:45 p.m., Eastern time, on the business day immediately following the date
on which a valid order to create a Basket is accepted by the Fund, at the NAV of 200,000 Shares as of the closing time of the NYSE Arca or the last to close of the exchanges on which the Funds futures contracts are traded, whichever is later,
on the date that a valid order to create a Basket is accepted by the Fund. Upon submission of a creation order, the Authorized Participant may request the Managing Owner to agree to a creation order settlement date up to 3 business days after the
creation order date.
Authorized Participants may offer to the public, from time-to-time, Shares from any Baskets they create. Shares
offered to the public by Authorized Participants will be offered at a per Share offering price that will vary depending on, among other factors, the trading price of the Shares on the NYSE Arca, the NAV per Share and the supply of and demand for the
Shares at the time of the offer. Shares initially comprising the same Basket but offered by Authorized Participants to the public at different times may have different offering prices. The excess, if any, of the price at which an Authorized
Participant sells a Share over the price paid by such Authorized Participant in connection with the creation of such Share in a Basket will be deemed to be underwriting compensation by the FINRA Corporate Financing Department. Authorized
Participants will not receive from the Fund, the Managing Owner or any of their affiliates, any fee or other compensation in connection with their sale of Shares to the public, although investors are expected to be charged a customary commission by
their brokers in connection with purchases of Shares that will vary from investor to investor. Investors are encouraged to review the terms of their brokerage accounts for applicable charges.
As of the date of this Prospectus, each of BNP Paribas Securities Corp., Cantor Fitzgerald & Co., Citadel Securities, LLC, Citigroup
Global Markets Inc., Credit Suisse Securities USA LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co. and Goldman Sachs Execution & Clearing, L.P., Jefferies LLC, J.P. Morgan Securities Inc., Knight Capital Americas, LLC,
Merrill Lynch Professional Clearing Corp., Morgan Stanley & Co. LLC, Nomura Securities International Inc., RBC Capital Markets, LLC, Timber Hill LLC, UBS Securities LLC, Virtu Financial Capital Markets, LLC and , Virtu Financial BD LLC. has
executed a Participant Agreement and are the only Authorized Participants.
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Likelihood of Becoming a Statutory Underwriter
The Fund issues Shares in Baskets to Authorized Participants from time-to-time in exchange for cash. Because new Shares can be created and
issued on an ongoing basis at any point during the life of the Fund, a distribution, as such term is used in the Securities Act, will be occurring. An Authorized Participant, other broker-dealer firm or its client will be deemed a
statutory underwriter, and thus will be subject to the prospectus-delivery and liability provisions of the Securities Act, if it purchases a Basket from the Fund, breaks the Basket down into the constituent
Shares and sells the Shares to its 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 the Shares. A determination of whether one is an
underwriter 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 would lead to categorization as an underwriter. Authorized Participants, other broker-dealers and other persons are cautioned that some of their
activities will result in their being deemed participants in a distribution in a manner which would render them statutory underwriters and subject them to the prospectus-delivery and liability provisions of
the Securities Act.
Dealers who are neither Authorized Participants nor underwriters but are participating in a distribution
(as contrasted to ordinary secondary trading transactions), and thus dealing with Shares that are part of an unsold allotment within the meaning of section 4(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by section 4(3) of the Securities Act.
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Summary of Items of Value Paid Pursuant to FINRA Rule 2310
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Nature of Payment |
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Recipient |
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Payor |
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Amount of Payment |
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Services Provided |
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Selling Commission |
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Authorized Participants |
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Shareholders |
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No greater than 0.99% of the gross offering proceeds. |
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Brokering purchases and sales of the Shares and
creating and redeeming Baskets. |
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Distribution Services Fee |
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Invesco Distributors |
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Managing Owner |
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Capped at $25,000 per annum, not to exceed 0.25% of the gross offering proceeds. |
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Assisting the Managing Owner with certain
functions and duties relating to distribution and marketing, including reviewing and approving marketing materials, consulting with FINRA and ensuring compliance with FINRA marketing rules and maintaining certain books and records pertaining to the
Fund. |
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Marketing Services Fee |
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Marketing Agent |
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Managing Owner |
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A range from 0.05% - 0.345% per annum of the Total Average Net Assets (as defined herein) during each year calculated in U.S. dollars; not to exceed 8.75% of the gross offering
proceeds. |
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Assisting the Managing Owner by providing support
to educate institutional investors about the Deutsche Bank indices and to complete governmental or institutional due diligence questionnaires or requests for proposals related to the Deutsche Bank indices.
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For additional details see below.
General
Retail investors may purchase and sell Shares through traditional brokerage accounts. Investors who purchase Shares through a commission/fee-based brokerage account may pay commissions/fees charged by the brokerage account. Investors are encouraged to review the terms of their brokerage accounts for applicable charges.
Investors intending to create or redeem Baskets through Authorized Participants in transactions not involving a broker-dealer registered in
such investors state of domicile or residence should consult their legal advisor regarding applicable broker-dealer or securities regulatory requirements under the state securities laws prior to such creation or redemption.
The Managing Owner has agreed to indemnify certain parties against certain liabilities, including liabilities under the Securities Act, and
to contribute to payments that such parties may be required to make in respect of those liabilities. The Trustee has
agreed to reimburse such parties, solely from and to the extent of the Funds assets, for indemnification
and contribution amounts due from the Managing Owner in respect of such liabilities to the extent the Managing Owner has not paid such amounts when due.
The offering of Baskets is being made in compliance with FINRA Rule 2310. Accordingly, the Authorized Participants will not make any sales
to any account over which they have discretionary authority without the prior written approval of a purchaser of Shares. The maximum amount of items of value to be paid to FINRA Members in connection with the offering of the Shares by the Fund will
not exceed 10%.
The Authorized Participants will not charge a commission of greater than 0.99% of the gross offering proceeds of the
offering (or in an aggregate amount equal to $19,800,000 of the aggregate $2,000,000,000 registered on the initial Registration Statement on Form S-1, SEC Registration Number 333-132484).
-103-
Pursuant to the Distribution Services Agreement, Invesco Distributors will be paid by the
Managing Owner out of the Management Fee of the Fund in an amount capped up to $25,000 per annum.
The Marketing Agent will be paid a
marketing services fee by the Managing Owner. For each year ending on or prior to the sixth anniversary of the date of the Services Agreement, the marketing services fee will equal to the sum of: (i) 0.00345 times the lesser of Total Average
Net Assets and $6,000,000,000, plus (ii) If such Total Average Net Assets were greater than $6,000,000,000, 0.002625 times the lesser of (A) the excess of such Total Average Net Assets over $6,000,000,000 and (B) $3,000,000,000, plus
(iii) If such Total Average Net Assets were greater than $9,000,000,000, 0.000975 times the lesser of (A) the excess of such Total Average Net Assets over $9,000,000,000 and (B) $3,000,000,000, plus (iv) If such Total Average Net
Assets were greater than $12,000,000,000, 0.00015 times the excess of such Total Average Net Assets over $12,000,000,000. For each year ending on or after to the sixth anniversary of the date of the Services Agreement, the marketing services fee
will equal to 0.0005 times Total Average Net Assets. Total Average Net Assets means the sum of the Average Net Assets of all Funds for such period. Average Net Assets means in respect of any Fund, the
average of the total NAV of such Fund (determined as described in its prospectus) as of the close of trading on each day of the applicable determination year during which the market on which such Fund is or was listed for trading was open for
trading. For the avoidance of doubt, if a Fund was opened or terminated, or the applicable marketing services from the Marketing Agent were initiated or terminated, in the course of a determination year, the Average Net Assets will continue to be
calculated with respect to all trading days in such determination year but with a value of zero for days on which the Fund did not exist or the Marketing Agents marketing services had been terminated or not yet initiated. For purposes of this
paragraph only, Funds means, collectively, PowerShares DB Agriculture Fund, PowerShares DB Base Metals Fund, PowerShares DB Commodity Index Tracking Fund, PowerShares DB Energy Fund, PowerShares DB G10 Currency Harvest Fund, PowerShares
DB Gold Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Silver Fund, PowerShares DB US Dollar Index Bearish Fund, PowerShares DB US Dollar Index Bullish Fund, and New Invesco ETFs. New Invesco ETF
means, in part, any fund that both (i) is formed and sponsored or advised on or after the date of the
Services Agreement by the Managing Owner or an affiliate and (ii) meets all of the following criteria:
(1) is a any vehicle that both (a) is listed, traded or sold in North America, Central America or South America and (b) either (i) has an investment strategy substantially similar to that of a Fund or (ii) satisfies (or
would, if sponsored by the Managing Owner, satisfy) all of the criteria set forth in clauses (ii)(1) and (b) herein; (2) is marketed as having a principal investment objective of providing exposure to certain designated commodities or
derivatives thereof, whether long, short, or otherwise; and (3) (A) invests, is permitted to invest in, or which has as a principal investment strategy the investment of, more than 51% of its net assets in certain designated commodities,
or (B) establishes or maintains, is permitted to establish or maintain, or which has as a principal investment strategy to establish or maintain, exposure to derivatives of certain designated commodities with a gross aggregate notional value
greater than 51% of its NAV.
The payments to Invesco Distributors and the Marketing Agent will not, in the aggregate, exceed 0.25% and
8.75%, respectively, of the gross offering proceeds of the offering (or in an aggregate amount equal to $5,000,000 and $175,000,000, respectively, of the aggregate $2,000,000,000 registered on the initial Registration Statement on Form S-1, SEC
Registration Number 333-132484). Invesco Distributors and the Marketing Agent will monitor compensation received in connection with the Fund to determine if the payments described hereunder must be limited, when combined with selling commissions
charged and any price spreads realized by other FINRA members, in order to comply with the 10% limitation on total underwriters compensation pursuant to FINRA Rule 2310.
The Marketing Agents compensation also is subject to the limitations under NASD Rule 2830, which governs the underwriting compensation
which may be paid in respect of investment companies.
The Shares trade on the NYSE Arca under the symbol DBV.
LEGAL MATTERS
Sidley Austin llp has advised the Managing Owner in connection with the Shares being offered hereby. Sidley Austin llp also advises
the Managing Owner with respect to its responsibilities as managing owner of, and with respect to matters relating to, the Fund. Sidley Austin llp has prepared
-104-
the sections Material U.S. Federal Income Tax Considerations and Purchases By Employee Benefit Plans with respect to ERISA. Sidley Austin llp has not represented, nor
will it represent, the Fund or the Shareholders in matters relating to the Fund and no other counsel has been engaged to act on their behalf. Certain opinions of counsel have been filed with the SEC as exhibits to the Registration Statement of which
this Prospectus is a part.
Richards, Layton & Finger, P.A., special Delaware counsel to the Fund, has advised the Fund in
connection with the legality of the Shares being offered hereby.
EXPERTS
The financial statements of PowerShares DB G10 Currency Harvest Fund and managements assessment of the effectiveness of internal control
over financial reporting (which is included in Managements Report on Internal Control over Financial Reporting) incorporated in this Prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2015 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
This Prospectus constitutes part of the Registration Statement filed by the Fund with the SEC in Washington, D.C. Additionally, as further
discussed under Incorporation by Reference of Certain Documents, we have incorporated by reference certain information. This Prospectus does not contain all of the information set forth in such Registration Statement, certain portions of
which have been omitted pursuant to the rules and regulations of the SEC, including, without limitation, certain exhibits thereto (for example, the forms of the Participant Agreement and the Customer Agreement). The descriptions contained herein of
agreements included as exhibits to the Registration Statement are necessarily summaries; the exhibits themselves may be inspected without charge at the public reference facilities maintained by the SEC in Washington, D.C., and copies of all or part
thereof may be obtained from the Commission upon payment of the prescribed fees. The SEC maintains a website that contains reports, proxy and information
statements and other information regarding registrants that file electronically with the SEC. The address of
such site is http://www.sec.gov.
RECENT FINANCIAL INFORMATION
AND ANNUAL REPORTS
The
Managing Owner will furnish you with an annual report of the Fund within 90 calendar days after the end of the Funds fiscal year as required by the rules and regulations of the CFTC, including, but not limited to, an annual audited financial
statement certified by independent registered public accountants and any other reports required by any other governmental authority that has jurisdiction over the activities of the Fund. You also will be provided with appropriate information to
permit you to file your U.S. federal and state income tax returns (on a timely basis) with respect to your Shares. Monthly account statements conforming to CFTC and NFA requirements are posted on the Managing Owners website at
http://www.invescopowershares.com. Additional reports may be posted on the Managing Owners website in the discretion of the Managing Owner or as required by regulatory authorities.
INCORPORATION BY
REFERENCE OF CERTAIN
DOCUMENTS
The Securities
and Exchange Commission, or the SEC, allows us to incorporate by reference into this Prospectus the information that we file with it, meaning we can disclose important information to you by referring you to those documents already on
file with the SEC.
This filing incorporates by reference the following documents, which we have previously filed with the SEC, in
response to certain disclosures:
|
|
|
The Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed February 29, 2016; |
|
|
|
The Quarterly Reports on Form 10-Q for the quarterly periods ended on March 31, 2016 and June 30, 2016, filed May 10, 2016 and August 9, 2016, respectively; |
|
|
|
The Current Reports on Form 8-K, filed February 22, 2016, April 22, 2016, June 20, 2016 and October 25, 2016; and
|
-105-
|
|
|
All other reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act since December 31, 2015, except for information furnished under Form 8-K, which is not deemed filed and not incorporated herein by
reference. |
Any statement contained in a document that is incorporated by reference will be modified or superseded for all
purposes to the extent that a statement contained in this Prospectus modifies or is contrary to that previous statement. Any statement so modified or superseded will not be deemed a part of this Prospectus except as so modified or superseded.
We will provide to you a copy of the filings that have been incorporated by reference in this Prospectus upon your request, at no
cost. Any request may be made by writing or calling us at the following address or telephone number:
Invesco PowerShares Capital
Management LLC
3500 Lacey Road, Suite 700
Downers Grove, IL 60515
Telephone: (800) 983-0903
These documents may also be accessed through our website at http://www.invescopowershares.com or as described herein under
Additional Information. The information and other content contained on or linked from our website are not incorporated by reference in this Prospectus and should not be considered a part of this Prospectus.
We file annual, quarterly, current reports and other information with the SEC. You may read and copy these materials at the SECs Public
Reference Room at 100 F Street, N.E., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site at http://www.sec.gov that
contains reports, proxy and information statements and other information regarding the Fund.
[Remainder of page left blank intentionally.]
-106-
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
POWERSHARES DB G10 CURRENCY HARVEST FUND
Shares of Beneficial Interest
The Shares
are speculative securities which involve the risk of loss.
Past performance is not necessarily indicative of future results.
See The Risks You Face beginning at page 21 in Part One.
THIS PROSPECTUS IS IN TWO PARTS:
A DISCLOSURE DOCUMENT AND A STATEMENT OF ADDITIONAL INFORMATION.
THESE PARTS ARE BOUND TOGETHER, AND BOTH CONTAIN
IMPORTANT INFORMATION. YOU MUST READ THE
STATEMENT OF ADDITIONAL INFORMATION
IN CONJUNCTION WITH THE
DISCLOSURE DOCUMENT.
, 2016
Invesco
PowerShares Capital Management LLC
Managing Owner
-107-
PART TWO
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
-108-
GENERAL INFORMATION RELATING TO
INVESCO POWERSHARES CAPITAL
MANAGEMENT LLC
Invesco
PowerShares is Leading the Intelligent ETF Revolution® through its family of more than 140 domestic and international ETFs, with franchise assets of approximately $98 billion as of
December 31, 2015. PowerShares ETFs trade on US stock exchanges, as well as exchanges throughout Canada and Europe.
Invesco
PowerShares is anchored on a vision of delivering investment performance through the ETF structure. With this vision, Invesco PowerShares focuses on offering value-added and innovative ETFs; starting with the inception of the first two Dynamic ETFs
in May 2003. Integration with Invesco Ltd. since 2006 continues to give Invesco PowerShares a global presence.
Invesco PowerShares is a
part of Invesco Ltd., a leading independent global investment management company that provides comprehensive investment solutions and is listed on the New York Stock Exchange under the symbol IVZ.
THE FUTURES MARKETS
Futures Contracts
Futures contracts are standardized contracts made on United States or foreign exchanges that call for the future delivery of specified
quantities of various agricultural and tropical commodities, industrial commodities, currencies, financial instruments or metals at a specified time and place. The contractual obligations, depending upon whether one is a buyer or a seller, may be
satisfied either by taking or making, as the case may be, physical delivery of an approved grade of commodity or by making an offsetting sale or purchase of an equivalent but opposite futures contract on the same, or mutually off-setting, exchange
prior to the designated date of delivery. As an example of an offsetting transaction where the physical commodity is not delivered, the contractual obligation arising from the sale of one contract of December 2016 wheat on a commodity exchange may
be fulfilled at any time before delivery of the commodity is required by the purchase of one contract of December 2016 wheat on the same exchange. The difference between the price at which the futures contract is sold or purchased and the price paid
for the offsetting purchase or sale, after allowance for brokerage commissions, constitutes the profit or loss to the
trader. Certain futures contracts, such as those for stock or other financial or economic indices approved by
the CFTC or Eurodollar contracts, settle in cash (irrespective of whether any attempt is made to offset such contracts) rather than delivery of any physical commodity.
Hedgers and Speculators
The two broad classes of persons who trade futures interest contracts are hedgers and speculators. Commercial
interests, including farmers, that market or process commodities, and financial institutions that market or deal in commodities, including interest rate sensitive instruments, foreign currencies and stocks, and which are exposed to currency,
interest rate and stock market risks, may use the futures markets for hedging. Hedging is a protective procedure designed to minimize losses that may occur because of price fluctuations occurring, for example, between the time a processor makes a
contract to buy or sell a raw or processed commodity at a certain price and the time he must perform the contract. The futures markets enable the hedger to shift the risk of price fluctuations to the speculator. The speculator risks his capital with
the hope of making profits from price fluctuations in futures interests contracts. Speculators rarely take delivery of commodities, but rather close out their positions by entering into offsetting purchases or sales of futures interests contracts.
Since the speculator may take either a long or short position in the futures markets, it is possible for him to make profits or incur losses regardless of whether prices go up or down.
Futures Exchanges
Futures exchanges provide centralized market facilities for trading futures contracts and options (but not forward contracts). Members of, and
trades executed on, a particular exchange are subject to the rules of that exchange. Among the principal exchanges in the United States are the Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange, and ICE
Futures U.S.
Each futures exchange in the United States has an associated clearing house. Once trades between members of an
exchange have been confirmed, the clearing house becomes substituted for each buyer and each seller of contracts traded on the exchange and, in effect, becomes the other party to each traders open position in the market. Thereafter, each party
to a trade looks only to the clearing house for performance. The clearing house generally
-109-
establishes some sort of security or guarantee fund to which all clearing members of the exchange must contribute; this fund acts as an emergency buffer that enables the clearing house, at least
to a large degree, to meet its obligations with regard to the other side of an insolvent clearing members contracts. Furthermore, clearing houses require margin deposits and continuously mark positions to market to provide some
assurance that their members will be able to fulfill their contractual obligations. Thus, a central function of the clearing houses is to ensure the integrity of trades, and members effecting futures transactions on an organized exchange need not
worry about the solvency of the party on the opposite side of the trade; their only remaining concerns are the respective solvencies of their commodity broker and the clearing house. The clearing house guarantee of performance on open
positions does not run to customers. If a member firm goes bankrupt, customers could lose money.
Foreign futures exchanges differ in
certain respects from their U.S. counterparts. In contrast to U.S. exchanges, certain foreign exchanges are principals markets, where trades remain the liability of the traders involved, and the exchange clearing house does not
become substituted for any party.
Daily Limits
Most U.S. futures exchanges (but generally not foreign exchanges or banks or dealers in the case of forward contracts) limit the amount of
fluctuation in futures interests contract prices during a single trading day by regulation. These regulations specify what are referred to as daily price fluctuation limits or more commonly daily limits. The daily limits
establish the maximum amount that the price of a futures interests contract may vary either up or down from the previous days settlement price. Once the daily limit has been reached in a particular futures interest, no trades may be made at a
price beyond the limit. See The Risks You Face (37) The NAV Calculation of the Fund May Be Overstated or Understated Due to the Valuation Method Employed When a Settlement Price is not Available on the Date of NAV
Calculation.
Although the Eligible Index Currencies that the Fund will invest in from time-to-time are not currently subject to
daily limits, the terms and conditions of these contracts may change in the future.
Regulations
Futures exchanges in the United States are subject to regulation under the Commodity Exchange Act, or CEAct, by the CFTC, the governmental
agency having responsibility for regulation of futures exchanges and trading on those exchanges. (Investors should be aware that no governmental U.S. agency regulates the OTC foreign exchange markets.)
The CEAct and the CFTC also regulate the activities of commodity trading advisors and commodity pool operators and the
CFTC has adopted regulations with respect to certain of such persons activities. Pursuant to its authority, the CFTC requires a commodity pool operator (such as the Managing Owner) to keep accurate, current and orderly records with respect to
each pool it operates. The CFTC may suspend the registration of a commodity pool operator if the CFTC finds that the operator has violated the CEAct or regulations thereunder and in certain other circumstances. Suspension, restriction or termination
of the Managing Owners registration as a commodity pool operator would prevent it, until such time (if any) as such registration were to be reinstated, from managing, and might result in the termination of, the Fund. The CEAct gives the CFTC
similar authority with respect to the activities of commodity trading advisors, such as the Managing Owner. If the registration of a Managing Owner as a commodity trading advisor were to be terminated, restricted or suspended, the Managing Owner
would be unable, until such time (if any) as such registration were to be reinstated, to render trading advice to the Fund. The Fund itself is not registered with the CFTC in any capacity.
The CEAct requires all futures commission merchants, such as the Commodity Broker, to meet and maintain specified fitness and
financial requirements, segregate customer funds from proprietary funds and account separately for all customers funds and positions, and to maintain specified book and records open to inspection by the staff of the CFTC.
The CEAct also gives the states certain powers to enforce its provisions and the regulations of the CFTC.
Shareholders are afforded certain rights for reparations under the CEAct. Shareholders may also be able to maintain a private right of action
for certain violations of the CEAct. The CFTC has adopted rules implementing the reparation provisions of the CEAct which provide that any person may file a complaint for a reparations award with the CFTC
-110-
for violation of the CEAct against a floor broker, futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, and their respective associated persons.
Pursuant to authority in the CEAct, the NFA has been formed and registered with the CFTC as a registered futures association.
At the present time, the NFA is the only non-exchange self-regulatory organization for commodities professionals. NFA members are subject to NFA standards relating to fair trade practices, financial condition, and consumer protection. As the
self-regulatory body of the commodities industry, the NFA promulgates rules governing the conduct of commodity professionals and disciplines those professionals who do not comply with such standards. The CFTC has delegated to the NFA responsibility
for the registration of commodity trading advisors, commodity pool operators, futures commission merchants, introducing brokers and their respective associated persons and floor brokers. The Commodity Broker and the Managing Owner are members of the
NFA (the Fund itself is not required to become members of the NFA).
The CFTC has no authority to regulate trading on foreign commodity
exchanges and markets.
Margin
Initial or original margin is the minimum amount of funds that must be deposited by a futures trader with his commodity
broker in order to initiate futures trading or to maintain an open position in futures contracts. Maintenance margin is the amount (generally less than initial margin) to which a traders account may decline before he must deliver
additional margin. A margin deposit is like a cash performance bond. It helps assure the futures traders performance of the futures interests which contracts he purchases or sells. Futures interests are customarily bought and sold on margins
that represent a very small percentage (ranging upward from less than 2%) of the purchase price of the underlying commodity being traded. Because of such low margins, price fluctuations occurring in the futures markets may create profits and losses
that are greater, in relation to the amount invested, than are customary in other forms of investments. The minimum amount of margin required in connection with a particular futures interests contract is set from time-to-time by the exchange on
which such contract is traded, and may be modified from time-to-time by the exchange during the term of the contract.
Brokerage firms carrying accounts for traders in futures interests contracts may not accept
lower, and generally require higher, amounts of margin as a matter of policy in order to afford further protection for themselves.
Margin
requirements are computed each day by a commodity broker. When the market value of a particular open futures interests contract position changes to a point where the margin on deposit does not satisfy maintenance margin requirements, a margin call
is made by the commodity broker. If the margin call is not met within a reasonable time, the broker may close out the Funds position. With respect to the Managing Owners trading, only the Managing Owner, and not the Fund or its
Shareholders personally, will be subject to margin calls.
[Remainder of page left blank intentionally.
-111-
PART II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution.
The following expenses reflect the estimated amounts required to prepare and file this Registration Statement (other than selling commissions).
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|
|
|
|
|
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Approximate |
|
|
|
Amount |
|
Securities and Exchange Commission Registration Fee* |
|
$ |
76,122 |
|
Financial Industry Regulatory Authority Filing Fee* |
|
|
0 |
|
Printing Expenses |
|
|
50,000 |
|
Fees of Independent Registered Public Accounting Firm |
|
|
10,750 |
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Fees of Counsel |
|
|
20,000 |
|
|
|
|
|
|
Total |
|
$ |
156,872 |
|
* |
Paid in connection with the filing of Form S-3 (File No. 333-192126). |
Item 14. Indemnification
of Directors and Officers.
Section 4.7 of the Fifth Amended and Restated Declaration of Trust and Trust Agreement of the Fund, as
amended from time-to-time, filed as an exhibit to this Registration Statement and, as amended from time-to-time, or the Trust Agreement, provides for the indemnification of Covered Persons (as such term is defined in the Trust Agreement). Each
Covered Person shall be indemnified by the Fund to the fullest extent permitted by law against any losses, judgments, liabilities, expenses, and amounts paid in settlement of any claims sustained by it in connection with its activities for the Fund,
except with respect to any matter as to which such Covered Person shall have been finally adjudicated in any action, suit, or other proceeding not to have acted in good faith in the reasonable belief that such Covered Persons action was in the
best interest of the Fund and except that no Covered Person shall be indemnified against any liability to the Fund or to the Limited Owners by reason of willful misconduct or gross negligence of such Covered Person. Any such indemnification will
only be recoverable from the Trust Estate (as such term is defined in the Trust Agreement). All rights to indemnification permitted therein and payment of associated expenses shall not be affected by the dissolution or other cessation to exist of
the Managing Owner, or the withdrawal, adjudication of bankruptcy or insolvency of the Managing Owner, or the filing of a voluntary or involuntary petition in bankruptcy under Title 11 of the Code by or against the Managing Owner. The source of
payments made in respect of indemnification under the Trust Agreement shall be the assets of the Fund.
II-1
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits
(a) Exhibits. The following documents (unless otherwise indicated) are filed herewith and made a part of this Registration Statement:
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Exhibit Number |
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Description of Document |
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3.1 |
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Form of Fifth Amended and Restated Declaration of Trust and Trust Agreement of the Registrant1 |
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3.1.1 |
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Amendment No. 1 to the Fifth Amended and Restated Declaration of Trust and Trust Agreement of the Registrant2 |
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5.1 |
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Form of Opinion of Richards, Layton & Finger as to legality |
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8.1 |
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Opinion of Sidley Austin LLP as to income tax matters |
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10.1 |
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Form of Commodity Futures Customer Agreement3 |
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10.2 |
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Form of Administration Agreement1 |
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10.3 |
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Form of Global Custody Agreement1 |
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10.4 |
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Form of Transfer Agency and Service Agreement1 |
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10.5 |
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Distribution Services Agreement2 |
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10.6 |
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Form of Marketing Agreement1 |
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10.7 |
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Form of Participation Agreement1 |
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23.1 |
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Consent of Sidley Austin LLP |
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23.2 |
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Consent of Richards, Layton & Finger is included as part of Exhibit 5.1 |
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23.3 |
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Consent of Sidley Austin LLP as tax counsel is included as part of Exhibit 8.1 |
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23.5 |
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Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm |
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24.1 |
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Power of Attorney (included on the signature page to this registration statement) |
1 |
Previously filed as an exhibit to Post-Effective Amendment No. 1 to Form S-3 on December 8, 2014, and incorporated herein by reference. |
2 |
Previously filed as an exhibit to Form 8-K on June 20, 2016, and incorporated herein by reference. |
3 |
To be filed on form 8-K |
(b) |
The following financial statements are included in the Prospectus: |
The financial statements of
the Fund are incorporated by reference as described under Incorporation by Reference of Certain Documents
II-2
Item 17. Undertakings.
|
(a) |
The undersigned registrant hereby undertakes: |
|
(1) |
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; |
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(i) |
To include any prospectus required by section 10(a)(3) of the Securities Act of 1933, as amended; |
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(ii) |
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; |
|
(iii) |
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
|
Provided, however, That:
(A) Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-8, and
the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement; and
(B) Paragraphs (a)(1)(i), (a)(1)(ii) and
(a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b)
that is part of the registration statement.
|
(2) |
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the bona fide offering thereof. |
|
(3) |
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
II-3
|
(4) |
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser: |
|
(i) |
If the registrant is relying on Rule 430B: |
(A) Each prospectus filed by
the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration
statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be
part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such
effective date; or
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(ii) |
If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in
a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document
immediately prior to such date of first use. |
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(5) |
That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: |
(a) The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will
be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
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(i) |
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
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(ii) |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
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(iii) |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
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(iv) |
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
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(b) |
The undersigned registrant hereby undertakes that: |
(1) For purposes of
determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains
a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to officers, directors
or controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in
the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by an officer, director, or controlling person
of the registrant in the successful defense of any such action, suit or proceeding) is asserted by such officer, director or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Managing Owner of the Registrant has duly caused this Registration Statement
on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Downers Grove, State of Illinois, on the 25th day of October, 2016.
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PowerShares DB G10 Currency Harvest Fund |
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By: |
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Invesco PowerShares Capital Management LLC, |
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its Managing Owner |
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By: |
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/s/ Daniel Draper |
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Name: Daniel Draper |
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Title: Chief Executive Officer |
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints each of Anna Paglia, Melissa Nguyen and Adam Henkel as his true and lawful
attorneys-in-fact with full power to sign on behalf of such person, in the capacities indicated below, a registration statement on Form S-1 (or other appropriate form) for filing with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and any other documents in support thereof or supplemental or amendatory thereto, and any and all other amendments (including post-effective amendments) to such registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and all further amendments, including post-effective amendments, thereto)), and each hereby ratifies and confirms the signature of such person as it may be signed by said attorneys-in-fact, and each of them
individually, on any and all amendments to this registration statement or any such subsequent related registration statement.
Pursuant to
the requirements of the Securities Act of 1933, this Registration Statement on Form S-1 has been signed by the following persons on behalf of the Managing Owner of the Registrant in the capacities and on the date indicated.
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/s/ Daniel Draper
Name: Daniel Draper |
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Chief Executive Officer and Manager
(principal executive officer) |
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October 25, 2016 |
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/s/ Steven Hill
Name: Steven Hill |
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Principal Financial and Accounting
Officer, Investment Pools
(principal financial officer and principal
accounting officer) |
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October 25, 2016 |
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/s/ David Warren
Name: David Warren |
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Manager |
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October 25, 2016 |
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/s/ John Zerr
Name: John Zerr |
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Manager |
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October 25, 2016 |