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 the changes, whether positive or negative, in the level
of the DBIQ Optimum Yield Silver Index Excess Return™ (the “DBIQ-OY
SI 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 silver sector. The single commodity
comprising the Index is silver (the “Index Commodity”). The Shares
are designed for investors who want a cost-effective and convenient way to invest
in commodity futures on U.S. and non-U.S. markets.
The Commodity Futures Trading Commission (the “CFTC”) and/or commodity
exchanges, as applicable, impose position limits on market participants trading
in the commodity included in the Index. The Index is comprised of futures contracts
on the Index Commodity 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
the Index Commodity by investing in the Index Contract, the Fund may invest
in (i) a futures contract referencing the Index Commodity other than the Index
Contract or, in the alternative, invest in (ii) other futures contracts not
based on the 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 the 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 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.
The Index is composed of one underlying Index Commodity. The closing level
of the Index is calculated on each business day by the Index Sponsor based on
the closing price of the futures contracts for the underlying Index Commodity
and the notional amount of such Index Commodity.
The composition of the Index may be adjusted in the event that the Index Sponsor
is not able to calculate the closing price of the Index Commodity.
The Index includes provisions for the replacement of futures contracts as they
approach maturity. This replacement takes place over a period of time in order
to lessen the impact on the market for the futures contracts being replaced.
With respect to the Index Commodity, the Fund employs a rule-based approach
when it “rolls” from one futures contract to another. The Index
replaces the underlying futures contracts on an “optimum yield”
basis.
Rather than select a new futures contract based on a predetermined schedule
(e.g., monthly), the 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 the Index Commodity.
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 the Index Commodity’s
contribution to the Fund’s return while rolling in a backwardated market
will tend to cause a push on the 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 Silver is calculated in USD on both an excess return
(unfunded) and total return (funded) basis.
The futures contract price for the Index Commodity will be the exchange closing
price for the 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 the Index Commodity. “Exchange Business Day” means, in
respect of the Index Commodity, a day that is a trading day for the 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, the 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.
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