The Fund is a separate series of the Trust. The Trust is a Delaware statutory
trust organized in seven separate series and was formed on August 3, 2006. The
Predecessor Managing Owner seeded the Fund with a capital contribution of $1,000
in exchange for 40 General Shares of the Fund. The General Shares were sold
to the Managing Owner by the Predecessor Managing Owner pursuant to the terms
of the Agreement. The fiscal year end of the Fund is December 31st. The term
of the Fund is perpetual (unless terminated earlier in certain circumstances)
as provided for in the Fifth Amended and Restated Declaration of Trust and Trust
Agreement of the Trust (the “Trust Agreement”). The Fund has an
unlimited number of Shares authorized for issuance.
The Fund offers common units of beneficial interest (the “Shares”)
only to certain eligible financial institutions (the “Authorized Participants”)
in one or more blocks of 200,000 Shares, called a Basket. The proceeds from
the offering of Shares are invested in the Fund. The Fund commenced investment
operations on January 3, 2007. The Fund commenced trading on the American Stock
Exchange (which became the NYSE Alternext US LLC (the “NYSE Alternext”))
on January 5, 2007 and, as of November 25, 2008, is listed on the NYSE Arca,
Inc. (the “NYSE Arca”).
Each of Deutsche Bank Securities Inc., Merrill Lynch Professional Clearing Corp.,
Virtu Financial Capital Markets LLC, Citigroup Global Markets Inc., J.P. Morgan
Securities Inc., Credit Suisse Securities (USA) LLC, Virtu Financial BD LLC,
Knight Capital Americas LLC, Timber Hill LLC, Morgan Stanley & Co. LLC,
Jefferies & Company Inc., Nomura Securities International Inc., RBC Capital
Markets, LLC, UBS Securities LLC, Cantor Fitzgerald & Co., BNP Paribas Securities
Corp., Goldman, Sachs & Co., Goldman Sachs Execution & Clearing, L.P.
and Citadel Securities LLC has executed a Participant Agreement.
The Fund seeks to track changes, whether positive or negative, in the level
of the DBIQ Optimum Yield Energy Index Excess Return™ (the DBIQ-OY Energy
ER™”, or the “Index”), over time, plus the excess, if
any, of the Fund’s interest income from its holdings of United States
Treasury Obligations over the expenses of the Fund. The Index is intended to
reflect the change in market value of the energy sector. The commodities comprising
the Index are light sweet crude oil, Ultra Low Sulphur Diesel (also commonly
known as Heating Oil), brent crude oil, RBOB gasoline and natural gas (each
an “Index Commodity”, and collectively, the “Index Commodities”).
The Commodity Futures Trading Commission (the “CFTC”) and/or commodity
exchanges, as applicable, impose position limits on market participants trading
in certain commodities included in the Index. The Index is comprised of futures
contracts on each of the Index Commodities that expire in a specific month and
trade on a specific exchange (the “Index Contracts”).
If the Managing Owner determines in its commercially reasonable judgment that
it has become impracticable or inefficient for any reason for the Fund to gain
full or partial exposure to any Index Commodity by investing in a specific Index
Contract, the Fund may invest in (i) a futures contract referencing the particular
Index Commodity other than the Index Contract or, in the alternative, invest
in (ii) other futures contracts not based on the particular Index Commodity
((i) and (ii) collectively, the “Alternative Futures Contracts”)
if, in the commercially reasonable judgment of the Managing Owner, such Alternative
Futures Contracts tend to exhibit trading prices that correlate with such Index
Commodity. Please see http://www.invescopowershares.com with respect to the
most recently available weighted composition of the Fund and the composition
of the Index on the Base Date.
Rather than select a new futures contract based on a predetermined schedule
(e.g., monthly), each Index Commodity rolls to the futures contract which generates
the best possible “implied roll yield.” The futures contract with
a delivery month within the next thirteen months which generates the best possible
implied roll yield will be included in the Index. As a result, the Fund is able
to potentially maximize the roll benefits in backwardated markets and minimize
the losses from rolling in contangoed markets for each Index Commodity, respectively.
In general, as a futures contract approaches its expiration date, its price
will move towards the spot price in a contangoed market. Assuming the spot price
does not change, this would result in the futures contract price decreasing
and a negative implied roll yield. The opposite is true in a backwardated market.
Rolling in a contangoed market will tend to cause a drag on an Index Commodity’s
contribution to the Fund’s return, while rolling in a backwardated market
will tend to cause a push on an Index Commodity’s contribution to the
Fund’s return.
If the Managing Owner determines in its commercially reasonable judgment that
it has become impracticable or inefficient for any reason for the Fund to gain
full or partial exposure to any Index Commodity by investing in a specific Index
Contract, the Fund may invest in Alternative Futures Contracts if, in the commercially
reasonable judgment of the Managing Owner, such Alternative Futures Contracts
tend to exhibit trading prices that correlate with an Index Contract. Please
see http://www.invescopowershares.com with respect to the most recently available
weighted composition of the Fund and the Index on the Base Date.