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 long 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 Long US Dollar Index (USDX®) Futures Index–Excess
Return, the “Long 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 long 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.
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 DX Contracts, the Fund may:
invest in a different month DX Contract other than the specific DX Contract
that was originally required by the Index, or
invest in another futures contract substantially similar to the DX Contracts,
if available, or
invest in the futures contracts referencing the Index Currencies, or
invest in a forward agreement, swap, or other OTC derivative referencing the
Index Currencies,
if, in the commercially reasonable judgment of the Managing Owner, such above
instruments tend to exhibit trading prices that correlate with the DX Contract.
The Fund is an index tracking fund and does not utilize any trading system,
whether discretionary, systematic or otherwise. The Index is calculated to reflect
the changes in market value over time, whether positive or negative, of long
positions in DX Contracts.
The Index reflects the changes in market value over time, whether positive
or negative, of long positions in the first to expire DX Contracts. In turn,
the changes in market value over time, whether positive or negative, of DX Contracts
are related to the changes, positive and negative, in the level of the USDX®.
The USDX® provides a general indication of the international value of the
U.S. dollar and is composed of notional amounts of each of the Index Currencies.
The notional amounts of each Index Currency included in the USDX® are weighted
to reflect the currencies of the largest trading partners of the U.S. These
largest trading partners constitute the bulk of international trade with the
United States and have well-developed foreign exchange markets with rates freely
determined by market participants. In addition, many currencies not included
in the USDX® move in close correlation with those that are included. The
USDX® is computed 24 hours a day, seven days a week based on exchange rates
supplied to Reuters by some 500 banks worldwide.
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