The Fund, a separate series of the Trust, a Delaware statutory trust organized
in two separate series, 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 February 15, 2007. The Fund commenced trading on the American
Stock Exchange (which became the NYSE Alternext US LLC (the “NYSE Alternext”))
on February 20, 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, ABN AMRO Clearing
Chicago (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 establishes short positions in certain futures contracts (the “DX
Contracts”) with a view to tracking the changes, whether positive or negative,
in the level of the Deutsche Bank Short US Dollar Index (USDX®) Futures
Index–Excess Return (the “Short Index” or the “Index”)
over time. The performance of the Fund also is intended to reflect the excess,
if any, of its interest income from its holdings of United States Treasury Obligations
over the expenses of the Fund. The Index is calculated to reflect the changes
in market value over time, whether positive or negative, of short positions
in DX Contracts. DX Contracts are traded through the currency markets of ICE
Futures U.S. (formerly known as the New York Board of Trade®), under the
symbol “DX.” The changes in market value over time, whether positive
or negative, of the DX Contracts are related to the changes, whether positive
or negative, in the level of the U.S. Dollar Index® (the “USDX®”).
The Index provides a general indication of the international value of the U.S.
dollar relative to the six major world currencies (each an “Index Currency,”
and collectively, the “Index Currencies”), which comprise the USDX®—Euro,
Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.
The Shares are designed for investors who want a cost-effective and convenient
way to invest in a group of currency futures on U.S. and non-U.S. markets.
The USDX® mark is a registered service mark owned by ICE Futures U.S., Inc.
As of the date of this Report, the DX Contracts are not subject to speculative
position limits. There can be no assurance that the DX Contracts will not become
subject to speculative position limits. Should the Fund become subject to speculative
position limits with respect to its DX Contracts holdings, the Fund’s
ability to issue new Baskets or the Fund’s ability to reinvest income
in additional DX Contracts may be limited to the extent that these activities
would cause the Fund to exceed the potential future position limits. Limiting
the size of the Fund may affect the correlation between the price of the Shares,
as traded on the NYSE Arca, and the net asset value of the Fund. That is, the
inability to create additional Baskets could result in Shares trading at a premium
or discount to the net asset value of the Fund.
The Managing Owner pays the Index Sponsor (as defined below) a licensing fee
and an index services fee for performing its duties. These fees constitute a
portion of the routine operational, administrative and other ordinary expenses
which are paid 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. After
the Closing Date, 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 Index is designed to reflect the changes in market value over time, whether
positive or negative, from investing in the first to expire DX Contracts whose
changes in market value over time, whether positive or negative, in turn, are
tied to the USDX®. The first to expire DX Contracts are the futures contracts
that expire in March, June, September and December. DX Contracts are traded
exclusively through ICE Futures U.S., under the symbol “DX.”
The changes in market value over time, whether positive or negative, of DX Contracts
are related to the Index Currencies. (Although the Index tracks the changes
in market value over time, whether positive or negative, of short positions
in the first to expire DX Contracts, the closing level of the Index is in effect,
and in part, a reflection of the changes, whether positive or negative, in the
level of the U.S. dollar relative to a basket of the underlying Index Currencies.)
The Index Currencies are Euro, Japanese Yen, British Pound, Canadian Dollar,
Swedish Krona and Swiss Franc. The Index Currencies represent the currencies
of the major trading partners of the U.S.
The USDX® is composed of notional amounts of each Index Currency. The notional
amounts of the Index Currencies included in the USDX® reflect a geometric
weighted average of the change in the Index Currencies’ exchange rates
against the U.S. dollar relative to March 1973. March 1973 was chosen as the
base period of the USDX® because it represents a significant milestone in
foreign exchange history when the world’s major trading nations allowed
their currencies to float freely against each other.
The fair value of DX Contracts is based on foreign exchange futures prices for
the underlying Index Currencies. The fair value of DX Contracts is calculated
in the same way as a spot index. DX Contracts, similar to single currency futures
contracts, will trade at a forward premium or discount based on the interest
rate differential between the U.S. dollar and the Index Currencies.