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 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. Further, in the event
the Fund invests in Alternative Futures Contracts as described above, that trade
on a U.S. exchange, the CFTC and commodity exchanges may impose position limits
on market participants trading in the Index Commodities. 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 the Index Commodity by investing in the 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 composition of the Index on the Base
Date.
The DBIQ Optimum Yield Precious Metals Index is calculated in USD on both an
excess return (unfunded) and total return (funded) basis.
The futures contract price for each Index Commodity will be the exchange closing
price for such Index Commodity on each weekday when banks in New York, New York
are open (the “Index Business Days”). If a weekday is not an Exchange
Business Day (as defined in the following sentence) but is an Index Business
Day, the exchange closing price from the previous Index Business Day will be
used for each Index Commodity. “Exchange Business Day” means, in
respect of an Index Commodity, a day that is a trading day for such Index Commodity
on the relevant exchange (unless either an Index disruption event or force majeure
event has occurred).
On the first New York business day (the “Verification Date”) of
each month, each Index Commodity futures contract will be tested in order to
determine whether to continue including it in the Index. If the Index Commodity
futures contract requires delivery of the underlying commodity in the next month,
known as the Delivery Month, a new Index Commodity futures contract will be
selected for inclusion in the Index. For example, if the first New York business
day is May 1, 2016, and the Delivery Month of the Index Commodity futures contract
currently in such Index is June 2016, a new Index Commodity futures contract
with a later Delivery Month will be selected.
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, commodity trading advisor and swap firm of the Trust and the
Fund. The Managing Owner is registered as a commodity pool operator and commodity
trading advisor with the CFTC and is a member of the National Futures Association
(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 (the “CEAct”)
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.
The Managing Owner has served as the managing owner of the Trust and the Fund
since the Closing Date on February 23, 2015. The Predecessor Managing Owner
served as the managing owner of the Trust and the Fund prior to the Closing
Date.
The Managing Owner’s main business offices are located at 3500 Lacey Road,
Suite 700, Downers Grove, IL 60515, and its telephone number is (800) 983-0903.
The Fund pays the Managing Owner a management fee, monthly in arrears, in an
amount equal to 0.75% per annum of the daily net asset value of the Fund (the
“Management Fee”). The Management Fee is paid in consideration of
the Managing Owner’s commodity futures trading advisory services. For
the avoidance of doubt, from inception up to and excluding the Closing Date,
all Management Fees were payable to the Predecessor Managing Owner. Since the
Closing Date, the Managing Owner has served as managing owner of the Fund and
all Management Fee accruals since the Closing Date have been paid to the Managing
Owner.
Pursuant to the Trust Agreement, the Fund will indemnify the Managing Owner
against any losses, judgments, liabilities, expenses and amounts paid in settlement
of any claims sustained by it in connection with its activities on behalf of
the Fund incurred without gross negligence or willful misconduct.