As Filed with the Securities and Exchange Commission on June 25, 2008January 7, 2014
Registration No. 333-150501 333-[ ]
333-150501-01
333-150501-02
333-150501-03
333-150501-04
333-150501-05
333-150501-06
333-150501-07
333-150501-08
333-150501-09
333-150501-10
333-150501-11
333-150501-12
333-150501-13
333-150501-14
333-150501-15Registration No. 333-[ ]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
(Registrant)
POWERSHARES DB ENERGY FUND; POWERSHARES DB OIL FUND;
POWERSHARES DB PRECIOUS METALS FUND; POWERSHARES DB GOLD FUND;
POWERSHARES DB SILVER FUND; POWERSHARES DB BASE METALS FUND;
POWERSHARES DB AGRICULTURE FUND
DB MULTI-SECTOR COMMODITY MASTER TRUST(Co-Registrant)
DB ENERGY MASTER FUND; DB OIL MASTER FUND; DB PRECIOUS METALS MASTER FUND;
DB GOLD MASTER FUND; DB SILVER MASTER FUND; DB BASE METALS MASTER FUND;
DB AGRICULTURE MASTER FUND
(Rule 140 Co-Registrants)
(Exact name of the registrant as specified in its charter)
| | | | |
| Delaware | | 6799 | | 87-0778053 (Trust)
87-0778057 (Master Trust)
|
| (State of Organization) | | (Primary Standard Industrial Classification Code Number) | | (I.R.S. Employer
Identification Number) |
| | |
c/o DB Commodity Services LLC 60 Wall Street New York, New York 10005 (212) 250-5883 | | | | Kevin RichMartin Kremenstein
c/o DB Commodity Services LLC 60 Wall Street New York, New York 10005 (212) 250-5883250-8779 |
(Address, including zip code, and telephone number including area code, of registrant’s principal executive offices) | | | | (Name, address, including zip code,
and telephone number, including area code, of agent for service) |
Copies to:
Michael J. Schmidtberger, Esq.
James C. Munsell, Esq.
Sidley AustinLLP
787 Seventh Avenue
New York, New York 10019
Approximate date of commencement of proposed sale to the public:
As promptly as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this formForm are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
If this formForm is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this formForm is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If this formForm is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b212b-2 of the Exchange Act.
| | | | | | |
| Large accelerated filer ¨ | | Accelerated filer ¨ | | Non-accelerated filer x¨ | | Smaller reporting company ¨x |
| | | | (Do not check if a smaller
reporting company) | | |
CALCULATION OF REGISTRATION FEE
| | | | | | | | | | | |
| Title of Securities to be Registered | | Amount to be Registered | | Proposed Maximum
Aggregate
Offering Price Per Share | | Proposed Maximum
Aggregate Offering Price | | Amount of
Registration Fee |
PowerShares DB Agriculture Fund Common Units of Beneficial Interest | | 125,000,000 | | $ | 37.501 | | $ | 4,687,500,0001 | | $ | 184,218.15 |
| | | | | | |
|
| Title of Securities being included in this registration statement | | Earlier Registration
Statement Number | | Unsold Number of
Shares from Earlier
Registration
Statement | | Filing fee paid for
Unsold Shares |
PowerShares DB Silver Fund Common Units of Beneficial Interest | | 333-184947-11 | | 39,000,000 | | $72,293.36 |
|
|
This Registration Statement contains a combined prospectus underPursuant to the provisions of Rule 429 promulgated415(a)(6) under the Securities Act of 1933, which relatesas amended, the issuer is including on this new registration statement both the unsold securities and the filing fees paid in connection with such unsold securities that was covered by the earlier registration statement as provided in the following table. The filing fees in the below table will continue to File Nos. 333-148613, 333-142163 and 333-135422. Accordingly, upon effectiveness, this Registration Statement shall act as a Post-Effective Amendment No. 1be applied to File No. 333-148613, a Post-Effective Amendment No. 2 to File No. 333-142163 and Post-Effective Amendment No. 3 to File No. 333-135422.such unsold securities.
1 | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(d) under the Securities Act, based upon a net asset value per Share of $37.50 as of April 21, 2008. A Registration fee of $184,218.15 in respect thereof was paid on April 29, 2008. |
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
EXPLANATORY NOTE
PowerShares DB Multi-Sector Commodity Trust, or the Trust, is organized in seven separate series as a Delaware statutory trust, each such series a Fund. DB Commodity Services LLC, the Managing Owner of the Trust and the Funds, had previously offered the common units of beneficial interest, or Shares, of all seven Funds pursuant to a single Registration Statement and a shared Prospectus. Upon effectiveness of the Registration Statement on Form S-3 (333-184947), the Managing Owner offered the Shares of the following six Funds through a shared Prospectus: PowerShares DB Energy Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund, PowerShares DB Silver Fund and PowerShares DB Base Metals Fund. The Shares of PowerShares DB Agriculture Fund were offered by the Managing Owner pursuant to a separate Registration Statement (333-185865) and a standalone Prospectus. Upon effectiveness of the Registration Statement on Form S-3 being filed simultaneously, the Managing Owner will then offer the Shares of the following five Funds through a shared Prospectus: PowerShares DB Energy Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund and PowerShares DB Base Metals Fund. The Shares of PowerShares DB Silver Fund will be offered by the Managing Owner pursuant to this separate Registration Statement and a standalone Prospectus. The Shares of PowerShares DB Agriculture Fund will continue to be offered by the Managing Owner pursuant to a separate Registration Statement and a standalone Prospectus.
The information in this Prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any statejurisdiction where the offer or sale is not permitted.
Subject to completion, dated June 25, 2008January 7, 2014.
POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
| | |
PowerShares DB Energy Fund
| | $322,723,344 and 14,212,621 Common Units of Beneficial Interest |
PowerShares DB Oil Fund
| | $378,992,022 and 14,513,789 Common Units of Beneficial Interest |
PowerShares DB Precious Metals Fund
| | $363,143,464 and 15,743,074 Common Units of Beneficial Interest |
PowerShares DB Gold Fund
| | $404,989,090 and 15,408,321 Common Units of Beneficial Interest |
PowerShares DB Silver Fund | | $423,261,880 and 17,568,518 Common Units of Beneficial Interest39,000,000 |
PowerShares DB Base Metals Fund
| | $309,321,892 and 21,949,079 Common Units of Beneficial Interest |
PowerShares DB Agriculture Fund
| | 14,572,875 Common Units of Beneficial Interest |
PowerShares DB Multi-Sector Commodity Trust, or the Trust, is organized in seven separate series as a Delaware statutory trust. Eachtrust, one of which is offered pursuant to this Prospectus. PowerShares DB Silver Fund, or the Fund, is a series of the Trust, called aTrust. The Fund issues common units of beneficial interest, or Shares, which represent units of fractional undivided beneficial interest in and ownership of such Fund only. Shares in each Fund are being separately offered.
the Fund.
Authorized Participants may sell the Shares they purchase from athe Fund in blocks of 200,000 Shares, called Baskets, to other investors at prices that are expected to reflect, among other factors, the trading price of suchthe Fund’s Shares on the AmexNYSE Arca, Inc., or the NYSE Arca, and the supply of and demand for Shares of suchthe Fund at the time of sale and are expected to fall between net asset value and the trading price of the Shares of suchthe Fund on the AmexNYSE Arca at the time of sale.
The Shares of each Fund trade on the AmexNYSE Arca under the following symbols: PowerShares DB Energy Fund – DBE; PowerShares DB Oil Fund – DBO; PowerShares DB Precious Metals Fund – DBP; PowerShares DB Gold Fund – DGL; PowerShares DB Silver Fund – DBS; PowerShares DB Base Metals Fund – DBB; and PowerShares DB Agriculture Fund – DBA.symbol “DBS.”
Each Fund invests the proceeds of its offering of Shares in a corresponding series of DB Multi-Sector Commodity Master Trust, or the Master Trust. The Master Trust is organized in seven separate series as a Delaware statutory trust. Each series of the Master Trust, called a Master Fund, corresponds to a particular Fund.
DB Commodity Services LLC serves as the Managing Owner, commodity pool operator and commodity trading advisor of each Fund and each Master Fund. Each Master Fund trades exchange-traded futures contracts on silver, which is the commodities comprising a particular commodities index,single commodity that comprises the DBIQ Optimum
Yield Silver Index Excess Return™, or the Index, with a view to tracking the indexIndex over time. EachThe Fund also earns interest income from United States Treasury and other high credit quality short-term fixed income securities.
Silver is the single underlying commodity underlying the Index, or Index Commodity. The Index intends to reflect the silver sector.
•The common units of beneficial interest of five other series of the Trust, PowerShares DB Energy Fund, is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Energy Excess Return™ (DBLCI-OY Energy ER™), which is intended to reflect the energy sector.
•PowerShares DB Oil Fund, is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Crude Oil Excess Return™ (DBLCI-OY CL ER™), which is intended to reflect the changes in market value of crude oil.
•PowerShares DB Precious Metals Fund, is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Precious Metals Excess Return™ (DBLCI-OY Precious Metals ER™), which is intended to reflect the precious metals sector.
•PowerShares DB Gold Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Gold Excess Return™ (DBLCI-OY GC ER™), which is intended to reflect the changes in market value of gold.
•PowerShares DB Silver Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Silver Excess Return™ (DBLCI-OY SI ER™), which is intended to reflect the changes in market value of silver.
• and PowerShares DB Base Metals Fund, is designed are offered pursuant to tracka separate and common prospectus. The common units of beneficial interest of the Deutsche Bank Liquid Commodity Index–Optimum Yield Industrial Metals Excess Return™ (DBLCI-OY Industrial Metals ER™), which is intended to reflectseventh series of the base metals sector.
•Trust, PowerShares DB Agriculture Fund, is designed are offered pursuant to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Agriculture Excess Return™ (DBLCI-OY Agriculture ER™), which is intended to reflect the agricultural sector.
We refer to each of the indexes as an Index and we refer to them collectively as the Indexes.
a separate prospectus.
Except when aggregated in Baskets, the Shares are not redeemable securities.
DB Commodity Services LLC serves as the Managing Owner, commodity pool operator and commodity trading advisor of the Fund.
INVESTING IN THE SHARES INVOLVES SIGNIFICANT RISKS.
PLEASE REFER TO “THE“THE RISKS YOU FACE”FACE” BEGINNING ON PAGE 23.18.
Futures trading is volatile and even a small movement in market prices could cause large losses.
The success of each Masterthe Fund’s trading program depends upon the skill of the Managing Owner and its trading principals.
You could lose all or substantially all of your investment.
Each of the IndexesThe Index is concentrated in a small number of commodities and some are highly concentrated in a single commodity. Concentration may result in greater volatility.
Investors in each Fund pay fees in connection with their investment in the Shares, including asset-based fees of either 0.50% per annum with respect to PowerShares DB Oil Fund, PowerShares DB Gold Fund and PowerShares DB Silver Fund or 0.75% per annum with respect to PowerShares DB Energy Fund, PowerShares DB Precious Metals Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculture Fund.annum. Additional charges include brokerage fees of approximately 0.03% with respect to PowerShares DB Energy Fund and PowerShares DB Base Metals Fund, 0.04% with respect to PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund and PowerShares DB Silver Fund or 0.16% with respect to PowerShares DB Agriculture Fund per annum in the aggregate.
Authorized Participants may offer to the public, from time-to-time, Shares from any Baskets they create. Shares offered to the public by Authorized Participants will be offered at a per-Share offering price that will vary depending on, among other factors, the trading price of the Shares of each Fund on the Amex,NYSE Arca, the net asset value per Share and the supply of and demand for the Shares at the time of the offer. Shares initially comprising the same Basket but offered by Authorized Participants to the public at different times may have different offering prices. Authorized Participants will not receive from anythe Fund, the Managing Owner or any of their affiliates, any fee or other compensation in connection with their sale of Shares to the public.
An Authorized Participant may receive commissions or fees from investors who purchase Shares through their commission or fee-based brokerage accounts.
In addition, the Managing Owner pays a distribution services fee to ALPS Distributors, Inc. and pays a marketing fee to Invesco Distributors, Inc. without reimbursement from the Trust or the Fund. For more information regarding these items of compensation paid to FINRA members, please see the “Plan of Distribution” section on page 93.
These securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has the Securities and Exchange Commission or any state securities commission passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. None of the Funds nor any of the Master FundsThe Fund is not a mutual fund or any other type of investment company within the meaning of the Investment Company Act of 1940, as amended, and none of themthe Fund is not subject to regulation thereunder.
THE COMMODITY FUTURES TRADING COMMISSION HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THESE POOLSTHIS POOL NOR HAS THE COMMISSION PASSED UPONON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.
The Shares are neither interests in nor obligations of any of the Managing Owner, the Trustee or any of their respective affiliates. The Shares are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.
( , 2008)[ ], [ ], 2014
COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT
YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT FUTURESCOMMODITY INTEREST TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL.
FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, AND ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED TO THESE POOLSTHIS POOL AT PAGE 10955 AND A STATEMENT OF THE PERCENTAGE RETURNS NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, AT PAGE 15.13.
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN ANY OF THESETHIS COMMODITY POOLS.POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN ANY OF THESETHIS COMMODITY POOLS,POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING A DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, AT PAGES 2318 THROUGH 30.28.
YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED.
THE BOOKS AND RECORDS OF EACH FUND AND EACH MASTER FUND ARE MAINTAINED AS FOLLOWS: ALL MARKETING MATERIALS ARE MAINTAINED AT THE OFFICES OF ALPS DISTRIBUTORS, INC., 1290 BROADWAY, SUITE 1100, DENVER, COLORADO 80203; TELEPHONE NUMBER (303) 623-2577; BASKET CREATION AND REDEMPTION BOOKS AND RECORDS, ACCOUNTING AND CERTAIN OTHER FINANCIAL BOOKS AND RECORDS (INCLUDING FUND AND MASTER FUND ACCOUNTING RECORDS, LEDGERS WITH RESPECT TO ASSETS, LIABILITIES, CAPITAL, INCOME AND EXPENSES, THE REGISTRAR, TRANSFER JOURNALS AND RELATED DETAILS) AND TRADING AND RELATED DOCUMENTS RECEIVED FROM FUTURES COMMISSION MERCHANTS ARE MAINTAINED BY THE BANK OF NEW YORK, 2 HANSON PLACE, 12TH FLOOR, BROOKLYN, NEW YORK 11217, TELEPHONE NUMBER (718) 315-4850. ALL OTHER BOOKS AND RECORDS OF EACH FUND AND EACH MASTER FUND (INCLUDING MINUTE BOOKS AND OTHER GENERAL CORPORATE RECORDS, TRADING RECORDS AND RELATED REPORTS AND OTHER ITEMS RECEIVED FROM EACH MASTER FUND’S COMMODITY BROKERS) ARE MAINTAINED AT THE FUNDS’ PRINCIPAL OFFICE, C/O DB COMMODITY SERVICES LLC, 60 WALL STREET, NEW YORK, NEW YORK 10005; TELEPHONE NUMBER (212) 250-5883. SHAREHOLDERS WILL HAVE THE RIGHT, DURING NORMAL BUSINESS HOURS, TO HAVE ACCESS TO AND COPY (UPON PAYMENT OF REASONABLE REPRODUCTION COSTS) SUCH BOOKS AND RECORDS IN PERSON OR BY THEIR AUTHORIZED ATTORNEY OR AGENT. MONTHLY ACCOUNT STATEMENTS FOR EACH FUND CONFORMING TO COMMODITY FUTURES TRADING COMMISSION (THE “CFTC”) AND THE NATIONAL FUTURES ASSOCIATION (THE “NFA”) REQUIREMENTS ARE POSTED ON THE MANAGING OWNER’S WEBSITE AT WWW.DBFUNDS.DB.COM. ADDITIONAL REPORTS ARE POSTED ON THE FUNDS’ WEBSITE IN THE DISCRETION OF THE MANAGING OWNER OR AS
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REQUIRED BY REGULATORY AUTHORITIES. THERE WILL SIMILARLY BE DISTRIBUTED TO SHAREHOLDERS OF EACH FUND, NOT MORE THAN 90 DAYS AFTER THE CLOSE OF EACH FUND’S FISCAL YEAR, CERTIFIED AUDITED FINANCIAL STATEMENTS AND (IN NO EVENT LATER THAN MARCH 15 OF THE IMMEDIATELY FOLLOWING YEAR) THE TAX INFORMATION RELATING TO SHARES OF EACH FUND NECESSARY FOR THE PREPARATION OF SHAREHOLDERS’ ANNUAL FEDERAL INCOME TAX RETURNS.
THIS PROSPECTUS DOES NOT INCLUDE ALL OF THE INFORMATION OR EXHIBITS IN THE REGISTRATION STATEMENT OF THE TRUST AND THE MASTER TRUST. YOU CAN READ AND COPY THE ENTIRE REGISTRATION STATEMENT AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE SEC IN WASHINGTON, D.C.
THE FUNDS AND THE MASTER FUNDS FILEFUND FILES QUARTERLY AND ANNUAL REPORTS WITH THE SEC. YOU CAN READ AND COPY THESE REPORTS AT THE SEC PUBLIC REFERENCE FACILITIES INROOM AT 100 F STREET, N.E., WASHINGTON, D.C. PLEASE CALL20549. THE PUBLIC MAY OBTAIN INFORMATION ON THE OPERATION OF THE PUBLIC REFERENCE ROOM BY CALLING THE SEC AT 1-800-SEC-0330 FOR FURTHER INFORMATION.1-800-SEC-0330.
THE FILINGS OF THE TRUST AND THE MASTER TRUST ARE POSTED AT THE SEC WEBSITE ATHTTP://WWW.SEC.GOV.WWW.SEC.GOV.
REGULATORY NOTICES
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST, ANY FUND, THE MASTER TRUST, ANY MASTER FUND, THE MANAGING OWNER, THE AUTHORIZED PARTICIPANTS OR ANY OTHER PERSON.
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THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO SELL OR A SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY OFFER, SOLICITATION, OR SALE OF THE SHARES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION, OR SALE IS NOT AUTHORIZED OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER, SOLICITATION, OR SALE.
THE BOOKS AND RECORDS OF THE FUND ARE MAINTAINED AS FOLLOWS: ALL MARKETING MATERIALS ARE MAINTAINED AT THE OFFICES OF ALPS DISTRIBUTORS, INC., 1290 BROADWAY, SUITE 1100, DENVER, COLORADO 80203; TELEPHONE NUMBER(303) 623-2577; BASKET CREATION AND REDEMPTION BOOKS AND RECORDS, ACCOUNTING AND CERTAIN OTHER FINANCIAL BOOKS AND RECORDS (INCLUDING FUND ACCOUNTING RECORDS, LEDGERS WITH RESPECT TO ASSETS, LIABILITIES, CAPITAL, INCOME AND EXPENSES, THE REGISTRAR, TRANSFER JOURNALS AND RELATED DETAILS) AND TRADING AND RELATED DOCUMENTS RECEIVED FROM FUTURES COMMISSION MERCHANTS ARE MAINTAINED BY THE BANK OF NEW YORK MELLON, 2 HANSON PLACE, BROOKLYN, NEW YORK 11217, TELEPHONE NUMBER (718) 315-7500. ALL OTHER BOOKS AND RECORDS OF THE FUND (INCLUDING MINUTE BOOKS AND OTHER GENERAL CORPORATE RECORDS, TRADING RECORDS AND RELATED REPORTS AND OTHER ITEMS RECEIVED FROM THE FUND’S COMMODITY BROKERS) ARE MAINTAINED AT THE FUND’S PRINCIPAL OFFICE, C/O DB COMMODITY SERVICES LLC, 60 WALL STREET, NEW YORK, NEW YORK 10005; TELEPHONE NUMBER (212) 250-5883. SHAREHOLDERS WILL HAVE THE RIGHT, DURING NORMAL BUSINESS HOURS, TO HAVE ACCESS TO AND COPY (UPON PAYMENT OF REASONABLE REPRODUCTION COSTS) SUCH BOOKS AND RECORDS IN PERSON OR BY THEIR AUTHORIZED ATTORNEY OR AGENT. MONTHLY ACCOUNT STATEMENTS FOR THE FUND CONFORMING TO COMMODITY FUTURES TRADING COMMISSION (THE “CFTC”) AND THE NATIONAL FUTURES ASSOCIATION (THE “NFA”) REQUIREMENTS ARE POSTED ON THE MANAGING OWNER’S WEBSITE ATHTTP://WWW.DBXUS.COM. ADDITIONAL REPORTS ARE POSTED ON THE MANAGING OWNER’S WEBSITE IN THE DISCRETION OF THE MANAGING OWNER OR AS REQUIRED BY REGULATORY AUTHORITIES. THERE WILL SIMILARLY BE DISTRIBUTED TO SHAREHOLDERS OF THE FUND, NOT MORE THAN 90 DAYS AFTER THE CLOSE OF THE FUND’S FISCAL YEAR, CERTIFIED AUDITED FINANCIAL STATEMENTS AND (IN NO EVENT LATER THAN MARCH 15 OF THE IMMEDIATELY FOLLOWING YEAR) THE TAX INFORMATION RELATING TO SHARES OF THE FUND NECESSARY FOR THE PREPARATION OF SHAREHOLDERS’ ANNUAL FEDERAL INCOME TAX RETURNS.
THE DIVISION OF INVESTMENT MANAGEMENT OF THE SECURITIES AND EXCHANGE COMMISSION REQUIRES THAT THE FOLLOWING STATEMENT BE PROMINENTLY SET FORTH HEREIN: “NEITHER POWERSHARES DB MULTI-SECTOR COMMODITY TRUST NOR DB MULTI-SECTOR COMMODITY MASTER TRUST NOR ANY SERIES THEREOF IS A MUTUAL FUND OR ANY OTHER TYPE OF INVESTMENT COMPANY WITHIN THE MEANING OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND IS NOT SUBJECT TO REGULATION THEREUNDER.”
AUTHORIZED PARTICIPANTS MAY BE REQUIRED TO DELIVER A PROSPECTUS WHEN TRANSACTING IN SHARES. SEE “PLAN OF DISTRIBUTION.”
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PART ONE
DISCLOSURE DOCUMENT
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PART TWO
STATEMENT OF ADDITIONAL
INFORMATION
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SUMMARY
This summary of all material information providedcontained or incorporated by reference in this Prospectus is intended for quick reference only.only and does not contain all of the information that may be important to you. For ease of reference, any references throughout this Prospectus to various actions taken by each of the Funds or each of the Master FundsFund are actually actions that the Trust or the Master Trust has taken on behalf of such respective Funds or Master Funds.the Fund. The remainder of this Prospectus contains more detailed information. You should read the entire Prospectus, including all exhibits to the Prospectus, the information incorporated by reference in this prospectus, including the financial statements and the notes to those financial statements in the Annual Report on Form 10-K and the Quarterly Report on Form 10-Q with respect to each Fund,Prospectus before deciding to invest in Shares of anythe Fund. Please see the section “Incorporation by Reference of Certain Documents” on page 98 for information on how you can obtain the information that is incorporated by reference in this Prospectus. This Prospectus is intended to be used beginningdated [ ] [ ], 2008.2014.
The Trust and the Funds; The Master Trust and the Master FundsFund
PowerShares DB Multi-Sector Commodity Trust, or the Trust, was formed as a Delaware statutory trust, in seven separate series, or Funds,funds, on August 3, 2006. EachPowerShares DB Silver Fund, or the Fund, is a series of the Trust. The Fund issues common units of beneficial interest, or Shares, which represent units of fractional undivided beneficial interest in and ownership of suchthe Fund. The term of the Trust and eachthe Fund is perpetual (unless terminated earlier in certain circumstances). The principal offices of the Trust and eachthe Fund are located at c/o DB Commodity Services LLC, 60 Wall Street, New York, New York 10005, and the telephone number of each of them is (212) 250-5883.
DB Multi-Sector Commodity Master Trust, or the Master Trust, was formed as a Delaware statutory trust, in seven separate series, or Master Funds, on August 3, 2006. Each Master Fund issues common units of beneficial interest, or Master Fund Units, which represent units of fractional undivided beneficial interest in and ownership of such Master Fund. The term of the Master Trust and each Master Fund is perpetual (unless terminated earlier in certain circumstances). The principal offices of the Master Trust and each Master Fund are located at c/o DB Commodity Services LLC, 60 Wall Street, New York, New York 10005, and the telephone number of each of them is (212) 250-5883.
Each of the Trust and Master Trust was organized in seven separate series as a Delaware statutory trust rather than as seven separate statutory trusts in order to achieve certain administrative efficiencies. The interests of investors are not adversely affected by the choice of form of organization. As of the date of this Prospectus, the Trust consists of the following seven series – PowerShares DB Energy Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund, PowerShares DB Silver Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculture Fund. This Prospectus is for the Fund only and not for the first
6 funds listed in the prior sentence, or the Sectors Funds. The Sectors Funds, which are series of the Trust, are not being offered by this Prospectus. Information regarding both the Fund and the Sectors Funds (and any other additional series of the Trust, as applicable) is available atwww.dbxus.com.
Shares Listed on the AmexNYSE Arca
The Shares of eachthe Fund are listed on the AmexNYSE Arca under the following symbols:
PowerShares DB Energy Fund – DBE;
PowerShares DB Oil Fund – DBO;
PowerShares DB Precious Metals Fund – DBP;
PowerShares DB Gold Fund – DGL;
PowerShares DB Silver Fund – DBS;
PowerShares DB Base Metals Fund – DBB; and
PowerShares DB Agriculture Fund – DBA.
symbol “DBS.”
Secondary market purchases and sales of Shares will be subject to ordinary brokerage commissions and charges.
Purchases and Sales in the Secondary Market on the AmexNYSE Arca
The Shares of each Fund trade on the AmexNYSE Arca like any other equity security.
Baskets of Shares in each Fund may be created or redeemed only by Authorized Participants. It is expected that Baskets in a Fund will be created when there is sufficient demand for Shares in such Fund that the market price per Share is at a premium to the net asset value per Share. Authorized Participants are expected to sell such Shares, which are listed on the Amex,NYSE Arca, to the public at prices that are expected to reflect, among other factors, the trading price of the Shares of such Fund on the AmexNYSE Arca and the supply of and demand for Shares at the time of sale and are expected to fall between net asset value and the trading price of the Shares on the AmexNYSE Arca at the time of sale. Similarly, it is expected that Baskets in a Fund will be redeemed when the market price per Share of such Fund is at a discount to the net asset value per Share. Retail investors seeking to purchase or sell Shares on any day are expected to effect
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such transactions in the secondary market, on the Amex,NYSE Arca, at the market price per Share, rather than in connection with the creation or redemption of Baskets.
The market price of the Shares of a Fund may not be identical to the net asset value per Share, but these valuations are expected to be very close. Investors are able to use the indicative intra-day value per Share to determine if they want to purchase in the secondary market via the Amex.NYSE Arca. The intra-day
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indicative value per Share of each Fund is based on the prior day’s final net asset value, adjusted four times per minute throughout the trading day to reflect the continuous price changes of the Master Fund’s futures positions to provide a continuously updated estimated net asset value per Share.
Retail investors may purchase and sell Shares through traditional brokerage accounts. Purchases or sales of Shares may be subject to customary brokerage commissions. Investors are encouraged to review the terms of their brokerage accounts for applicable charges.
Pricing Information Available on the AmexNYSE Arca and Other Sources
The following table lists additional NYSE Arca symbols and their meanings with respect to the Fund and the Index:
| | |
DBS | | Market price per Share on NYSE Arca |
DBS.IV | | Indicative intra-day value per Share |
DBS.NV | | End of day net asset value of the Fund |
DBSLIX | | Intra-day Index closing level |
DBCMYESI | | End of day Index closing level as of close of NYSE Arca |
The current trading price per Share of each Fund (quotedintra-day data in U.S. dollars)the above table is published continuously under its ticker symbol as trades occuronce every fifteen seconds throughout each trading day onday.
The Index Sponsor publishes the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.com, or any successor thereto.
The most recent end-of-day closing level of each Index is published under its own symbol as of the close of business for the Amex each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.com, or any successor thereto. The most recent end-of-day net asset value of each Fund is published under its own symbol as of the close of business on Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.com, or any successor thereto. In addition, the most recent end-of-day net asset value of each Fund is published the following morning on the consolidated tape.
End of Day Index Closing Level Symbols; End-of-Day Net Asset Value Symbols
PowerShares DB Energy Fund. The end-of-day closing level of the DBLCI-OY Energy ER is published under the symbol DBENIX. The end-of-day net asset value of PowerShares DB Energy Fund is published under the symbol DBE.NV.
PowerShares DB Oil Fund. The end-of-day closing level of the DBLCI-OY CL ER is published under the symbol DBOLIX. The end-of-day net asset value of PowerShares DB Oil Fund is published under the symbol DBO.NV.
PowerShares DB Precious Metals Fund. The end-of-day closing level of the DBLCI-OY Precious Metals ER is published under the symbol DBPMIX. The end-of-day net asset value of PowerShares DB Precious Metals Fund is published under the symbol DBP.NV.
PowerShares DB Gold Fund. The end-of-day closing level of the DBLCI-OY GC ER is published under the symbol DGLDIX. The end-of-day net asset value of PowerShares DB Gold Fund is published under the symbol DGL.NV.
PowerShares DB Silver Fund. The end-of-day closing level of the DBLCI-OY SI ER is published under the symbol DBSLIX. The end-of-day net asset value of PowerShares DB Silver Fund is published under the symbol DBS.NV.
PowerShares DB Base Metals Fund. The end-of-day closing level of the DBLCI-OY Industrial Metals ER is published under the symbol DBBMIX. The end-of-day net asset value of PowerShares DB Base Metals Fund is published under the symbol DBB.NV.
PowerShares DB Agriculture Fund. The end-of-day closing level of the DBLCI-OY Agriculture ER is published under the symbol DBAGIX. The end-of-day net asset value of PowerShares DB Agriculture Fund is published under the symbol DBA.NV.
Index daily. The Managing Owner publishes the net asset value of eachthe Fund and the net asset value per Share of each Fund daily. Additionally, the Index Sponsor publishes the intra-day Index level, of each Index, and the Managing Owner will publishpublishes the indicative value per Share of eachthe Fund (quoted in U.S. dollars) once every fifteen seconds throughout each trading day.
All of the foregoing information is published as follows:
The intra-day level of the Index (symbol: DBSLIX) and the intra-day indicative value per
Share (symbol: DBS.IV) (each quoted in U.S. dollars) are published once every fifteen seconds throughout each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.comwww.dbxus.com, or any successor thereto.
The current trading price per Share (symbol: DBS) (quoted in U.S. dollars) is published continuously as trades occur throughout each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbxus.com, or any successor thereto.
The most recent end-of-day Index closing level (symbol: DBCMYESI) is published as of the close of business for the NYSE Arca each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbxus.com, or any successor thereto.
The most recent end-of-day net asset value of the Fund (symbol: DBS.NV) is published as of the close of business on Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbxus.com, or any successor thereto. In addition, the most recent end-of-day net asset value of the Fund (symbol: DBS.NV) is published the following morning on the consolidated tape.
All of the foregoing information is published underwith respect to the following symbols:
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Intra-Day Index, Level Symbols and Intra-Day Indicative Values Per Share Symbols
PowerShares DB Energy Fund. The intra-day index level ofincluding the DBLCI-OY Energy ER is published under the symbol DBENIX. The intra-day indicative value per Share of PowerShares DB Energy Fund is published under the symbol DBE.IV.
PowerShares DB Oil Fund. The intra-day index level of the DBLCI-OY CL ER is published under the symbol DBOLIX. The intra-day indicative value per Share of PowerShares DB Oil Fund is published under the symbol DBO.IV.
PowerShares DB Precious Metals Fund. The intra-day index level of the DBLCI-OY Precious Metals ER is published under the symbol DBPMIX. The intra-day indicative value per Share of PowerShares DB Precious Metals Fund is published under the symbol DBP.IV.
PowerShares DB Gold Fund. The intra-day index level of the DBLCI-OY GC ER is published under the symbol DGLDIX. The intra-day indicative value per Share of PowerShares DB Gold Fund is published under the symbol DGL.IV.
PowerShares DB Silver Fund. The intra-day index level of the DBLCI-OY SI ER is published under the symbol DBSLIX. The intra-day indicative value per Share of PowerShares DB Silver Fund is published under the symbol DBS.IV.
PowerShares DB Base Metals Fund. The intra-day index level of the DBLCI-OY Industrial Metals ER is published under the symbol DBBMIX. The intra-day indicative value per Share of PowerShares DB Base Metals Fund is published under the symbol DBB.IV.
PowerShares DB Agriculture Fund. The intra-day index level of the DBLCI-OY Agriculture ER is published under the symbol DBAGIX. The intra-day indicative value per Share of PowerShares DB Agriculture Fund is published under the symbol DBA.IV.
Each Index’s history, is also availablepublished athttps://index.db.com.
The Index Sponsor obtains information for inclusion in, or for use in the calculation of, the IndexesIndex from sources the Index Sponsor considers reliable. None of the Index Sponsor, the Managing Owner, the Funds,the Master FundsFund or any of their respective affiliates accepts responsibility for or guarantees the accuracy and/or completeness of any of the IndexesIndex or any data included in any of the Indexes.
Index.
CUSIP NumbersNumber
The CUSIP number of PowerShares DB Energythe Fund is 73936B101.
The CUSIP number of PowerShares DB Oil Fund is 73936B507.
The CUSIP number of PowerShares DB Precious Metals Fund is 73936B200.
The CUSIP number of PowerShares DB Gold Fund is 73936B606.
The CUSIP number of PowerShares DB Silver Fund is 73936B309.
The CUSIP number of PowerShares DB Base Metals Fund is 73936B705.
The CUSIP number of PowerShares DB Agriculture Fund is 73936B408.
The Master-Feeder Structure
Each Fund invests substantially all of its assets in a separate Master Fund in a master-feeder structure. Each Fund holds no investment assets other than Master Fund Units of its corresponding Master Fund. Each Master Fund is wholly-owned by its corresponding Fund and the Managing Owner. Each Share issued by a Fund correlates with a Master Fund Unit issued by such Fund’s corresponding Master Fund and held by such Fund.
Risk Factors
An investment in the Shares of any Fund is speculative and involves a high degree of risk. The summary risk
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factors set forth below are intended merely to highlight certain risks that are common to allof the Funds. EachFund. The Fund has particularadditional risks that are set forth elsewhere in this Prospectus.
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The Funds and the Master Funds have a limited operating history. Therefore, a potential investor has only a limited performance history to serve as a factor for evaluating an investment in any Fund.
Past performance is not necessarily indicative of future results; all or substantially all of an investment in anythe Fund could be lost.
The trading of each Masterthe Fund takes place in very volatile markets.
Each Fund and its corresponding MasterThe Fund is subject to the fees and expenses set forth below (prior toin the aggregate amount of any commissions charged by the investor’s broker in connection with an investor’s purchase of Shares)approximately 0.79% per annum as described herein and will be successful only if significant losses are avoided.
| | | | | | | | | |
| Fund | | Fees and
Expenses | | | Yield on 3- month U.S.
Treasury
bills | | | Expected
Annual Net
Income | |
DBE | | (0.78 | )% | | 2.07 | % | | 1.29 | % |
DBO | | (0.54 | )% | | 2.07 | % | | 1.53 | % |
DBP | | (0.79 | )% | | 2.07 | % | | 1.28 | % |
DGL | | (0.54 | )% | | 2.07 | % | | 1.53 | % |
DBS | | (0.54 | )% | | 2.07 | % | | 1.53 | % |
DBB | | (0.78 | )% | | 2.07 | % | | 1.29 | % |
DBA | | (0.91 | )% | | 2.07 | % | | 1.16 | % |
Each Fund and its corresponding Master Fund is subject to the approximate fees and expenses in the aggregate amounts per annum set forth in the above table and elsewhere in this Prospectus. Each Fund and its corresponding Master Fund will be successful only if their annual returns from futures trading, plus theirits annual interest income from theirits holdings of United States Treasury securities and other high credit quality short-term fixed income securities, exceed thesesuch fees and expenses. Because it is expected that interest income will exceed the fees and costs incurred by eachexpenses of approximately 0.79% per annum. The Fund and Master Fund at the end of the first twelve months of an investment, the percentage of profit required for each Fund to breakeven at the end of the first twelve months of an investment, by definition, is expected to be 0.00%. Each Master Fund (and, in turn, each Fund) is expected to earn interest income equal to 2.07%0.04% per annum, based upon the yield of 3-month U.S. Treasury bills as of June 16, 2008.October 31, 2013, or $0.01 per annum per Share at $25.00 as the net asset value per Share. Therefore, based upon the differencebetweendifference between the current yield of 3-month U.S. Treasury bills and the annual fees and expenses, eachthe Fund is expectedwill be required to have net income equal to or greater than the approximate amountearn approximately 0.75% per annum, set forthor $0.19 per annum per Share at $25.00 as the net asset value per Share, in order for an investor to break-even on an investment during the above table, assuming that each Fund does not experience gains or losses from its futures trading.first twelve months of an investment. Actual interest income could be higher or lower than the current yield of3-month U.S. Treasury bill.bills.
As of the date of this Prospectus, the CFTC and commodity exchange rules imposeimposes speculative position limits on market participants trading in two commodities included in the DBLCI-OY Agriculture ER, corn and wheat. The DB Agriculture MasterIndex Commodity, Silver, or the Affected Index Commodity. Because the Fund has not obtained relief from the CFTC with respectis subject to these position limits. If position limits, are applied to the DB Agriculture Master Fund, the PowerShares DB Agriculture Fund’sits ability to issue new Baskets or the DB Agriculture Master Fund’sits ability to reinvest income in additional corn and wheat futures contracts corresponding to the Affected Index Commodity may be limited to the extent that these activities
| | would cause the Fund to exceed its applicable position limits. Limiting the size of the Fund may affect the correlation between the price of its Shares, as traded on the NYSE Arca, and its net asset value. 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 DB Agriculture MasterManaging Owner determines in its commercially reasonable judgment that it has become impracticable or inefficient for any reason for the Fund to exceed applicable position limits. Limitinggain full or partial exposure to the sizeIndex Commodity by investing in the specific futures contract that comprises the Index, the Fund may invest in a futures contract referencing the Index Commodity other than the specific contract that comprises the Index or, in the alternative, invest in other futures contracts not based on the Index Commodity if, in the commercially reasonable judgment of the PowerShares DB Agriculture Fund may affectManaging Owner, such futures contracts tend to exhibit trading prices that correlate with a futures contract that comprises the correlation between the price of the Shares, as traded on the Amex, and the net asset value of the PowerShares DB Agriculture Fund. That is, the inability to create additional Baskets could result in Shares trading at a premium or discount to net asset value of the PowerShares DB Agriculture Fund.Index.
There can be no assurance that anythe Fund will achieve profits or avoid losses, significant or otherwise.
Performance of athe Fund may not track itsthe Index during particular periods or over the long term. Such tracking error may cause athe Fund to outperform or underperform itsthe Index.
Certain potential conflicts of interest exist between the Managing Owner and its affiliates and the Shareholders. For example, because the Managing Owner and the Commodity Broker are both indirect wholly-owned subsidiaries of Deutsche Bank AG, the Managing Owner has a disincentive to replace the Commodity Broker. The Commodity Broker may have a conflict of interest between its execution of trades for the Master FundsFund and for its other customers. More specifically, the Commodity Broker will benefit from executing orders for other clients, whereas the Master FundsFund may be harmed to the extent that the Commodity Broker has fewer
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| | | the extent that the Commodity Broker has fewer resources to allocate to the Master Funds’Fund’s accounts due to the existence of such other clients. Allocation of resources among the Master FundsCommodity Broker’s clients adds to the potential conflict. Proprietary trading by the affiliates of the Managing Owner and the Commodity Broker may create conflicts of interest from time-to-time because such proprietary trades may take a position that is opposite of that of a Masterthe Fund or may compete with a Masterthe Fund for certain positions within the marketplace. See “Conflicts of Interest” for a more complete disclosure of various conflicts. Although the Managing Owner has established procedures designed to resolve certain of these conflicts equitably, the Managing Owner has not established formal procedures to resolve all potential conflicts of interest. Consequently, investors may be dependent on the good faith of the respective parties subject to such conflicts to resolve them equitably. Although the Managing Owner attempts to monitor these conflicts, it is extremely difficult, if not impossible, for the Managing Owner to ensure that these conflicts will not, in fact, result in adverse consequences to the Funds.Fund. |
The Trustee
Wilmington Trust Company, or the Trustee, a Delaware banking corporation,trust company, is the sole trustee of the Trust and the Master Trust. The Trustee delegated to the Managing Owner all of the power and authority to manage the business and affairs of the Trust and each Fund and the Master Trust and each Master Fund and has only nominal duties and liabilities to the Trust the Funds, the Master Trust and the Master Funds.
Fund.
Investment Objective
Each Fund and its corresponding MasterThe Fund seeks to track changes, whether positive or negative, in the level of its correspondingthe DBIQ Optimum Yield Silver Index Excess Return™, or the Index, over time, plus the excess, if any, of its corresponding Masterthe Fund’s interest income from its holdings of United States Treasury and other high credit quality short-term fixed income securities over the expenses of each Fund and its corresponding Master Fund.expenses. The Shares of each Fund 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.
Advantages of investing in the Shares include:
| • | | Ease and Flexibility of Investment. The Shares trade on the AmexNYSE Arca and provide institutional and retail investors with indirect access to commodity futures markets. The Shares may be bought and sold on the AmexNYSE Arca like other exchange-listed securities. Retail investors may purchase and sell Shares through traditional brokerage accounts. |
| • | | Margin. Shares are eligible for margin accounts. |
| • | | Diversification. The Shares may help to diversify a portfolio because historically the Indexes haveIndex has tended to exhibit low to negative correlation with both equities and conventional bonds and positive correlation to inflation. |
| • | | Optimum Yield™. The Shares seek to followtrack the Index, which employs the Optimum Yield™ version of their respective Index,rolling methodology, which seeks to minimize the effects of negative roll yield that may be experienced by conventional commodities indexes. |
| • | | Transparency. The Shares provide a more direct investment in commodities than mutual funds that invest in commodity-linked notes, which have implicit imbedded costs and credit risk. |
Investing in the Shares does not insulate Shareholders from certain risks, including price volatility.
Each Fund pursues its investment objective by investing substantially all of its assets in its corresponding Master Fund. Each Master Fund pursues its investment objective by investing in a portfolio of exchange-traded futures on the commodities comprising the corresponding Index.
The Trust is comprised of each of the following Funds, each of which, in turn, intends to reflect the below sectors:
PowerShares DB Energy Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Energy Excess Return™ (DBLCI-OY Energy ER™), which is intended to reflect the energy sector. The Index Commodities consist of Light, Sweet Crude Oil (WTI), Heating Oil, Brent Crude Oil, RBOB Gasoline and Natural Gas.
PowerShares DB Oil Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Crude Oil Excess Return™
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| (DBLCI-OY CL ER™), which is intended to reflect the changes in market value of crude oil. The single Index Commodity consists of Light, Sweet Crude Oil (WTI).
|
PowerShares DB Precious Metals Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Precious Metals Excess Return™ (DBLCI-OY Precious Metals ER™), which is intended to reflect the precious metals sector. The Index Commodities consist of Gold and Silver.
PowerShares DB Gold Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Gold Excess Return™ (DBLCI-OY GC ER™), which is intended to reflect the changes in market value of gold. The single Index Commodity consists of Gold.
PowerShares DB Silver Fund is designed to track the Deutsche Bank Liquid Commodity Index–DBIQ Optimum Yield Silver Index Excess Return™ (DBLCI-OY(DBIQ-OY SI ER™), which is intended to reflect the changes in market value of silver. The single Index Commodity consists of Silver.
PowerShares DB Base Metals Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Industrial Metals Excess Return™ (DBLCI-OY Industrial Metals ER™), which is intended to reflect the base metals sector. The Index Commodities consist of Aluminum, Zinc and Copper—Grade A.
PowerShares DB Agriculture Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Agriculture Excess Return™ (DBLCI-OY Agriculture ER™), which is intended to reflect the agricultural sector. The Index Commodities consist of Corn, Wheat, Soybeans and Sugar.
If the Managing Owner determines in its commercially reasonable judgment that it has become impracticable or inefficient for any reason for any Masterthe Fund to gain full or partial exposure to anythe Index Commodity by investing in a specific futures contract that comprises the applicable Index, such Masterthe Fund may invest in a futures contract referencing the particular Index Commodity
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other than the specific contract that comprises the applicable Index or, in the alternative, invest in other futures contracts not based on the particular Index Commodity if, in the commercially reasonable judgment of the Managing Owner, suchfuturessuch futures contracts tend to exhibit trading prices that correlate with athe futures contract that comprises the applicable Index.
The Index Sponsor calculates eachthe Index on both an excess return basis and a total return basis. The excess return basis calculation reflects the change in market value over time, whether positive or negative, of the applicable underlying commodity futures only. The total return basis calculation reflects the sum of the change in market value over time, whether positive or negative, of the applicable underlying commodity futures plus the return on 3-month U.S. Treasury bills. Each Fund and its corresponding MasterThe Fund seeks to track changes, whether positive or negative, in the level of its corresponding Index over time, plus the excess, if any, of its corresponding Master Fund’s interest income from its holdings of United States Treasury and other high credit quality short-term fixed income securities over the expenses of each Fund’s and its corresponding Master Fund’s expenses.
EachThe Fund will make distributions at the discretion of the Managing Owner. To the extent that a Masterthe Fund’s actual and projected interest income from its holdings of United States Treasury securities and other high credit quality short-term fixed income securities exceeds the actual and projected fees and expenses of such Master Fund and its correspondingthe Fund, the Managing Owner expects periodically to make distributions of the amount of such excess. The FundsFund currently dodoes not expect to make distributions with respect to capital gains. Depending on the applicable Fund’s performance for the taxable year and your own tax situation for such year, your income tax liability for the taxable year for your allocable share of suchthe Fund’s net ordinary income or loss and capital gain or loss may exceed any distributions you receive with respect to such year.
The Master Fund’s portfolio also will include United States Treasury securities and other high credit quality short-term fixed income securities for deposit with the Master Fund’s Commodity Broker as margin.
General
The Deutsche Bank Liquid Commodity Index–Each of the DBIQ Optimum Yield Index Excess Return™, or DBLCI-OYER™DBIQ-OYER™, and the DBIQ Index Excess Return™, or DBIQ ER™ (“DBIQ-OYER™” and “DBIQ ER™,” collectively, “DBIQ™” or
“DBIQ ER™”), is intended to reflect the changes in market value, positive or negative, in certain sectors of commodities, or an Index. Eachindex. The Index is (i) calculated on an excess return, or
6
unfunded basis and (ii)basis. The Index is rolled in a manner which is aimed at potentially maximizing the roll benefits in backwardated markets and minimizing the losses from rolling in contangoed markets. Eachmarkets, or Optimum YieldTM. The Index is comprised of one or more underlying commodities,commodity (silver), or Index Commodities. The composition of Index Commodities with respect to each Index varies according to each specific sector that such Index intends to reflect. Each Index Commodity is assigned a weight, or Index Base Weight, which is intended to reflect the proportion of such Index Commodity relative to each Index.Commodity.
DBLCI-OY CL ER™, DBLCI-OY GC ER™ and DBLCI-OY SI ER™ are Indexes with a single Index Commodity, or Single Commodity Sector Indexes.
EachThe Index has been calculated back to a base date, or Base Date. On the Base Date of December 2, 1988, the closing level of eachthe Index, or Closing Level, was 100.
The sponsor of eachthe Index is Deutsche Bank AG London, or Index Sponsor.
Composition of the Index
Each Index, except each Single Commodity SectorThe Index is composed of the notional amounts of eachamount of the underlying Index Commodities. Each Single Commodity Sector Index is composed of one underlying Index Commodity. The notional amount of each Index Commodity included in each multi-sector Index is intended to reflect the changes in market value of each such Index Commodity within the specific Index. The Closing Level of eachthe Index is calculated on each business day by the Index Sponsor based on the closing price of the futures contracts for each of the underlying Index CommoditiesCommodity and the notional amounts of such Index Commodities.
Each Index, excluding each Single Commodity Sector Index, is rebalanced annually in November to ensure that each of the Index Commodities is weighted in the same proportion that such Index Commodities were weighted on the Base Date.
Commodity.
The composition of eachthe Index may be adjusted in the event that the Index Sponsor is not able to calculate the closing prices of the Index Commodities.Commodity.
EachThe 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 eachthe Index Commodity,the Master Fund employs a rule-based approach when it ‘rolls’ from one futures contract to another. Rather than select a new futures contract based on a predetermined schedule (e.g., monthly), eachthe 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 eachthe Index. As a result, eachthe Index Commodity is able to potentially maximize the roll benefits in backwardated markets and minimize the losses from rolling in contangoed markets.
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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 anthe Index Commodity’s contribution to the Fund’s return while rolling in a backwardated market will tend to cause a push on anthe Index Commodity’s contribution to the Fund’s return.
The futures contract price for eachthe Index Commodity will be the exchange closing price for suchthe Index Commodity on each weekday when banks in New York, New York are open, or 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 eachthe Index Commodity. “Exchange Business Day” means, in respect of anthe Index Commodity, a day that is a trading day for suchthe Index Commodity on the relevant exchange (unless either an Index disruption event or force majeure event has occurred).
Contract Selection
On the first New York business day, or Verification Date, of each month, each Index Commodity futures contract will be tested in order to determine whether to continue including it in the applicable 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 suchthe Index. For example, if the first New York business day is May 1, 2009,2014, and the Delivery Month of the Index Commodity futures contract currently in suchthe Index is June 2009,2014, a new Index Commodity futures contract with a later Delivery Month will be selected.
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For each underlying Index Commodity of an Index, theThe new Index Commodity futures contract selected will be the Index Commodity futures contract with the best possible “implied roll yield” based on the closing price for each eligible Index Commodity futures contract. Eligible Index Commodity futures contracts are any Index Commodity futures contracts having a Delivery Month (i) no sooner than the month after the
Delivery Month of the Index Commodity futures contract currently in suchthe Index, and (ii) no later than the 13th month after the Verification Date. For example, if the first New York business day is May 1, 20092014 and the Delivery Month of an Index Commodity futures contract currently in anthe Index is therefore June 2009,2014, the Delivery Month of an eligible new Index Commodity futures contract must be between July 20092014 and July 2010.June 2015. The implied roll yield is then calculated and the futures contract on the Index Commodity with the best possible implied roll yield is then selected. If two futures contracts have the same implied roll yield, the futures contract with the minimum number of months prior to the Delivery Month is selected.
After the futures contract selection, the monthly roll for eachthe futures contract underlying the Index Commodity that is subject to a roll in that particular month unwinds the old futures contract and enters a position in the new futures contract. This takes place between the 2nd and 6th Index Business Day of the month.
On each day during the roll period, new notional holdings are calculated. The calculations for the old futures contracts underlying the Index CommoditiesCommodity that are leaving anthe Index and the new futures contracts underlying the Index CommoditiesCommodity are then calculated.
On all days that are not monthly index roll days, the notional holdings of eachthe Index Commodity future remainsfutures remain constant.
Each Index is re-weighted on an annual basis on the 6th Index Business Day of each November.
The calculation of each Index is expressed as the weighted average return of the Index Commodities.
DBLCI™ and Deutsche Bank Liquid Commodity Index™ are trade marks of the Index Sponsor and are the subject of Community Trade Mark Nos. 3055043 and 3054996. Trade Mark applications in the United States are pending with respect to both the Trust and aspects of each Index. Any use of these marks must be with the consent of or under license from the Index Sponsor. The Fund Master Fund and the ManagingOwnerManaging Owner have been licensed to use DBLCI™ and Deutsche Bank Liquid Commodity Index™DBIQ™. The Index Sponsor does not approve, endorse or recommend the Fund the Master Fund or the Managing Owner.
There can be no assurance that any Fund or Masterthe Fund will achieve its investment objective or avoid substantial losses. The Master Funds have limited performance history. The value of the Shares of each Fund is expected to fluctuate generally in relation to changes in the value of its corresponding Master Fund Units.
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Shares of Each Fund Should Track Closely the Value of its Index
The Shares of each Fund are intended to provide investment results that generally correspond to changes, positive or negative, in the levels of the Fund’s corresponding Index, over time.
The value of the Shares of each Fund is expected to fluctuate in relation to changes in the value of its corresponding Master Fund’s portfolio. The market price of the Shares of a Fund may not be identical to the net asset value per Share, but these two valuations are expected to be very close.
Each MasterThe Fund holds a portfolio of long futures contracts on the Index CommoditiesCommodity which comprise its corresponding Index, each of which are traded on various commodity futures markets in the United States and abroad. Each MasterIndex. The Fund also holds cash and United States Treasury securities and other high credit quality short-term fixed income securities for deposit with its Commodity Broker as margin. Each MasterThe Fund’s portfolio is traded with a view to tracking the changes in its corresponding Index over time, whether the Index is rising, falling or flat over any particular period. None of the Master FundsThe Fund is not “managed” by traditional methods, which typically involve effecting changes in the composition of a portfolio on the basis of judgments relating to economic, financial and market considerations with a view to obtaining positive results under all market conditions.
results.
The Managing Owner
DB Commodity Services LLC, a Delaware limited liability company, serves as Managing Owner of the Trust and each Fund and the Master Trust and each Master Fund. The Managing Owner was formed on May 23, 2005. The Managing Owner is an affiliate of
8
Deutsche Bank AG. The Managing Owner was formed to be the managing owner of investment vehicles such as the Trust and the Fund and has been managing such investment vehicles since January 2006. The Managing Owner serves as the commodity pool operator and commodity trading advisor of the Trust and each Fund and the Master Trust and each Master Fund. The Managing Owner and its trading principals have limited experience in operating commodity pools and in managing futures trading accounts. The Managing Owner is registered as a commodity pool operator and commodity trading advisor with the Commodity Futures Trading Commission, or the CFTC, and is a member of the National Futures Association, or the NFA. As a registered commodity pool operator and commodity trading advisor, with respect to both the Trust and each Fund and the Master Trust and each Master Fund, the Managing Owner must comply with various regulatory requirements under the Commodity Exchange Act 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 is also subject to periodic inspections and audits by the CFTC and NFA.
The Shares are not deposits or other obligations of the Managing Owner, the Trustee or any of their respective subsidiaries or affiliates or any other bank, are not guaranteed by the Managing Owner, the Trustee or any of their respective subsidiaries or affiliates or any other bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. An investment in the Shares of anythe Fund is speculative and involves a high degree of risk.
The principal office of the Managing Owner is located at 60 Wall Street, New York, New York 10005. The telephone number of the Managing Owner is (212) 250-5883.
Each MasterThe Fund pays the Managing Owner a Management Fee, monthly in arrears, in an amount equal to either:
0.50% per annum of the daily net asset value of such Master Fund with respect to PowerShares DB Oil Fund, PowerShares DB Gold Fund and PowerShares DB Silver Fund, or
0.75% per annum of the daily net asset value of such Master Fund with respect to PowerShares DB Energy Fund, PowerShares DB Precious Metals Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculturethe Fund.
No separate fee is paid by any Fund. The Management Fee is paid in consideration of the Managing Owner’s commodity futures trading advisory services.
The Commodity Broker
A variety of executing brokers execute futures transactions on behalf of the Master Funds.Fund. Such executing brokers give-up all such transactions to Deutsche Bank Securities Inc., a Delaware corporation, which serves as clearing broker, or Commodity Broker of each of the Master Funds.Fund. The Commodity Broker is an affiliate of the Managing Owner. In its capacity as clearing broker, the Commodity Broker executes and clears each Masterthe Fund’s futures transactions and performs certain administrative services for each Masterthe Fund. Deutsche Bank Securities Inc. is registered with the CFTC as a futures commission merchant and is a member of the NFA in such capacity.
Each MasterThe Fund pays to the Commodity Broker all brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses
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charged in connection with trading activities for each Masterthe Fund. On average, total charges paid to the Commodity Broker are expected to be less than $10.00 per round-turn trade, although the Commodity Broker’s brokerage commissions and trading fees are determined on a contract-by-contract basis. The Managing Owner does not expect brokerage commissions and fees to exceed:
0.03% of the net asset value of each Master Fund with respect to PowerShares DB Energy Fund and PowerShares DB Base Metals Fund,
exceed 0.04% of the net asset value of each Masterthe Fund with respect to PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund and PowerShares DB Silver Fund, and
0.16% of the net asset value of the Master Fund with respect to PowerShares DB Agriculture Fund
in any year, although the actual amount of brokerage commissions and fees in any year or any part of any year may be greater.
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A round-turn trade is a completed transaction involving both a purchase and a liquidating sale, or a sale followed by a covering purchase.
The Administrator, Custodian and Transfer Agent
The Trust and Master Trust, on behalf of eachthe Fund, and each Master Fund, respectively, has appointed The Bank of New York Mellon as the administrator, or the Administrator, of each Fund and each Masterthe Fund and has entered into an Administration Agreement in connection therewith. The Bank of New York Mellon serves as custodian, or Custodian, of eachthe Fund and has entered into a Global Custody Agreement, or Custody Agreement, in connection therewith. The Bank of New York Mellon serves as the transfer agent, or Transfer Agent, of eachthe Fund and has entered into a Transfer Agency and Service Agreement in connection therewith.
The Bank of New York Mellon, a banking corporation organized under the laws of the State of New York with trust powers, has an office at 2 Hanson Place, 12th Floor, Brooklyn, N.Y. 11217. The Bank of New York Mellon is subject to supervision by the New York State Banking Department and the Board of Governors of the Federal Reserve System. Information regarding the net asset value of eachthe Fund, creation and redemption transaction fees and the names of the parties that have executed a Participant Agreement may be obtained from The Bank of New York Mellon by calling the following number: (718) 315-4412.315-7500. A copy of the Administration Agreement is available for inspection at The Bank of New York’s trustYork Mellon’s office identified above.
Pursuant to the Administration Agreement, the Administrator performs or supervises the performance of services necessary for the operation
and administration of each Fund and each Masterthe Fund (other than making investment decisions), including receiving and processing orders from Authorized Participants to create and redeem Baskets, net asset value calculations, accounting and other fund administrative services. The Administrator retains, separately for each Fund and each Masterthe Fund, certain financial books and records, including: Basket creation and redemption books and records, Fund and Master Fund accounting records, ledgers with respect to assets, liabilities, capital, income and expenses, the registrar, transfer journals and related details and trading and related documents received from futures commission merchants, c/o The Bank of New York Mellon, 2 HansonPlace, 12th Floor,Hanson Place, Brooklyn, New York 11217, telephone number (718) 315-4850.
315-7500.
The Administration Agreement will continue in effect from the commencement of trading operations unless terminated on at least 90 days’ prior written notice by either party to the other party. Notwithstanding the foregoing, the Administrator may terminate the Administration Agreement upon 30 days’ prior written notice if any Fund and/or any Masterthe Fund has materially failed to perform its obligations under the Administration Agreement.
The Administration Agreement provides for the exculpation and indemnification of the Administrator from and against any costs, expenses, damages, liabilities or claims (other than those resulting from the Administrator’s own bad faith, negligence or willful misconduct) which may be imposed on, incurred by or asserted against the Administrator in performing its obligations or duties under the Administration Agreement. Key terms of the Administration Agreement are summarized under the heading “Material Contracts.”
The Administrator’s monthly fees are paid on behalf of each Fund and each Masterthe Fund by the Managing Owner out of the applicable Management Fee.
The Administrator and any of its affiliates may from time-to-time purchase or sell Shares for their own account, as agent for their customers and for accounts over which they exercise investment discretion.
The Administrator alsoTransfer Agent receives a transaction processing fee in connection with orders from Authorized Participants to create or redeem Baskets
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in the amount of $500 per order. These transaction processing fees are paid indirectlydirectly by the Authorized Participants and not by any Fund or any Masterthe Fund.
EachThe Fund is expected to retain the services of one or more additional service providers to assist with certain tax reporting requirements of eachthe Fund and the Shareholders of each Fund.
its Shareholders.
ALPS Distributors, Inc.
The Trust, on behalf of eachthe Fund, has appointed ALPS Distributors, Inc., or ALPS Distributors, to assist the Managing Owner and the Administrator with certain functions and duties relating to distribution and
10
marketing, including reviewing and approving marketing materials. ALPS Distributors retains all marketing materials separately for each Fund and each Masterthe Fund, at c/o ALPS Distributors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203; telephone number (303) 623-2577. Investors may contact ALPS Distributors toll-free in the U.S. at (877) 369-4617. The Managing Owner, on behalf of eachthe Fund, has entered into a Distribution Services Agreement with ALPS Distributors. ALPS Distributors is affiliated with ALPS Fund Services, Inc., a Denver-based outsourcing solution for administration, compliance, fund accounting, legal, marketing, tax administration, transfer agency and shareholder services for open-end, closed-end, hedge and exchange-traded funds. ALPS Fund Services, Inc. and its affiliates provide fund administration services to funds with over 350,000 shareholder accounts and approximately $17 billionassets in client mutual fund assets under administration.excess of $48 billion. ALPS Distributors providesand its affiliates provide distribution services to approximately $232 billion in client assets.
funds with assets of more than $438 billion.
The Managing Owner, out of the relevant Management Fee, pays ALPS Distributors for performing its duties on behalf of each Fund and its corresponding Masterthe Fund and may pay ALPS Distributors additional compensation in consideration of the performance by ALPS Distributors of additional marketing, distribution and ongoing support services to such Fund or its corresponding Masterthe Fund. Such additional services may include, among other services, the development and implementation of a marketing plan and the utilization of ALPS Distributors’ resources, which include an extensive broker database and a network of internal and external wholesalers.
ALPS Distributors, Inc. is the distributor ofprovides distribution services to PowerShares DB Energy Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund, PowerShares DB Silver Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculture Fund. Certain marketing services may be provided for eachthe Fund by Invesco Aim Distributors, Inc. or Invesco PowerShares Capital Management, LLC. This assistance includes the licensing of the PowerShares® registered service mark to the Managing Owner for use with eachthe Fund. PowerShares® is a registered service mark of Invesco PowerShares Capital Management LLC. Invesco PowerShares Capital Management LLC is not a sponsor or promoter of any of the FundsFund and has no responsibility for the performance of any of the FundsFund or the decisions made or actions taken by the Managing Owner.
“800” Number for Investors
Investors may contact Invesco PowerShares Capital Management LLC toll free in the U.S. at (800) 983-0903.
Invesco Aim Distributors, Inc.
Through a marketing agreement between the Managing Owner and Invesco Aim Distributors, Inc. (formerly known as A I MInvesco Aim Distributors, Inc.), or Invesco Aim Distributors, an affiliate of Invesco PowerShares Capital Management LLC (formerly known as PowerShares Capital Management LLC), or Invesco PowerShares, the Managing Owner, on behalf of each Fund and each Masterthe Fund, has appointed Invesco Aim Distributors as a marketing agent. Invesco Aim Distributors assists the Managing Owner and the Administrator with certain functions and duties such as providing various educational and marketing activities regarding eachthe Fund, primarily in the secondary trading market, which activities include, but are not limited to, communicating eachthe Fund’s name, characteristics, uses, benefits, and risks, consistent with the prospectus.this Prospectus. Invesco Aim Distributors will not open or maintain customer accounts or handle orders for eachthe Fund. Invesco Aim Distributors is aan indirect and wholly-owned subsidiary of Invesco Ltd. Invesco Ltd. is a leading independent global investment manager operating under the AIM, Atlantic Trust, Invesco, Perpetual, PowerShares, TrimarkInvesco Canada and WL Ross brands.
The Managing Owner, out of the relevant Management Fee, pays Invesco Aim Distributors for performing its duties on behalf of each Fund and its corresponding Masterthe Fund.
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Limitation of Liabilities
Although the Managing Owner has unlimited liability for any obligations of eachthe Fund that exceed thatthe Fund’s net assets, your investment in athe Fund is part of the assets of thatthe Fund, and it will therefore be subject to the risks of thatthe Fund’s trading only. You cannot lose more than your investment in anythe Fund, and you will not be subject to the losses or liabilities of any Fundother series of the Trust in which you have not invested. We have received an opinion of counsel that eachthe Fund is entitled to the benefits of the limitation on inter-series liability provided under the Delaware Statutory Trust Act. Each Share, when purchased in accordance with the Fourth Amended and Restated Declaration of Trust and Trust Agreement of the Trust, or the Trust Declaration, shall, except as otherwise provided by law, be fully-paid and non-assessable.
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The debts, liabilities, obligations, claims and expenses of a particularthe Fund will be enforceable against the assets of thatthe Fund only, and not against the assets of the Trust generally or the assets of any other Fund orseries of any Master Fund,the Trust, and, unless otherwise provided in the Trust Declaration, of Trust, none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Trust or Master Trust generally or any other series thereof will be enforceable against the assets of such Fund or Masterthe Fund, as the case may be.
Creation and Redemption of Shares
The Funds createFund creates and redeemredeems Shares from time-to-time, but only in one or more Baskets. A Basket is a block of 200,000 Shares. Baskets may be created or redeemed only by Authorized Participants. Except when aggregated in Baskets, the Shares are not redeemable securities. Authorized Participants pay a transaction fee of $500 in connection with each order to create or redeem a Basket. Authorized Participants may sell the Shares included in the Baskets they purchase from the FundsFund to other investors.
The Master Funds create and redeem Master Fund Units from time-to-time, but only in one or more Master Unit Baskets. A Master Unit Basket is a block of 200,000 Master Fund Units. Master Unit Baskets in a particular Master Fund may be created or redeemed only by its corresponding Fund. Each Master Fund is wholly-owned by its corresponding Fund and the Managing Owner. Each Share issued by its corresponding Fund correlates with a Master Fund Unit issued by its corresponding Master Fund and held by such Fund.
See “Creation and Redemption of Shares” for more details.
The Offering
Unless otherwise agreed to by the Managing Owner and the Authorized Participant as provided in
Eachthe next sentence, the Fund issues Shares in Baskets to Authorized Participants continuously on the creation order settlement date as of noon, New York2:45 p.m., Eastern time, on the business day immediately following the date on which a valid order to create a Basket is accepted by the Fund, at the net asset value of 200,000 Shares of the Fund as of the closing time of the AmexNYSE Arca or the last to close of the exchangesexchange(s) on which the corresponding Master Fund’s futures contracts are traded, whichever is later, on the date that a valid order to create a Basket is accepted by the Fund.
Each Master Fund issues Master Fund Units in Master Unit Baskets to its corresponding Fund continuously as Upon submission of noon, New York time, ona creation order, the business day immediately following the date on which a valid order to create a Master Unit Basket is accepted by the Master Fund, at the net asset value of 200,000 Master Fund Units as of the closing time of the Amex or the last to close of the exchanges on which the corresponding Master Fund’s futures contracts are traded, whichever is later, on the date that a valid order to create a Master Unit Basket is accepted by the Master Fund. Each Master Fund is wholly-owned by its corresponding Fund andAuthorized Participant may request the Managing Owner. Each Share issued byOwner to agree to a Fund correlates with a Master Fund Unit issued by its corresponding Master Fund and held bycreation order settlement date up to 3 business days after the Fund.
creation order date.
Authorized Participants
Baskets may be created or redeemed only by Authorized Participants. Each Authorized Participant must (1) be a registered broker-dealer or other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions, (2) be a participant in DTC, and (3) have entered into an agreement with eachthe Fund and the Managing Owner, (aor a Participant Agreement).Agreement. The Participant Agreement sets forth the procedures for the creation and redemption of Baskets of Shares and for the delivery of cash required for such creations or redemptions. A list of the current Authorized Participants can be obtained from the Administrator. A similar agreement between each Fund and its corresponding Master Fund sets forth the procedures for the creation and redemption of Master Unit Baskets by the Funds. See “Creation and Redemption of Shares” for more details.
Net Asset Value
Net asset value in respect of any Master Fund, means the total assets of the Master Fund including, but not limited to, all cash and cash equivalents or other debt securities less total liabilities of such Masterthe Fund, each determined on the basis of generally accepted accounting principles in the United States, consistently applied under the accrual method of accounting.
Net asset value per Master Fund Unit, in respect of any Master Fund,Share is the net asset value of the Master Fund divided by the number of its outstanding Master Fund Units. Because there is a one-to-one correlation
12
between Shares of a Fund and Master Fund Units of its corresponding Master Fund and each Master Fund has assumed all liabilities of its corresponding Fund, the net asset value per Share of any Fund and the net asset value per Master Fund Unit of its corresponding Master Fund is equal.
Shares.
See “Description of the Shares and the Master Fund Units;Shares; The Funds;Fund; Certain Material Terms of the Trust Declarations – NetDeclaration-Net Asset Value” for more details.
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Clearance and Settlement
The Shares of each Fund are evidenced by global certificates that the Fund issues to DTC. The Shares of each Fund are available only in book-entry form. Shareholders may hold Shares of any Fund through DTC, if they are participants in DTC, or indirectly through entities that are participants in DTC. The Master Fund Units of each Master Fund are uncertificated and held by its corresponding Fund in book-entry form.
Segregated Accounts/Interest Income
The proceeds of the offering of each Fund are deposited in cash in a segregated account in theits name of its corresponding Master Fund at the Commodity Broker (or another eligible financial institution, as applicable) in accordance with CFTC investor protection and segregation requirements. Each MasterThe Fund is credited with 100% of the interest earned on its average net assets on deposit with the Commodity Broker or such other financial institution each week. In an attempt to increase interest income earned, the Managing Owner expects to invest non-margin assets of each Masterthe Fund in United States government securities (which include any security issued or guaranteed as to principal or interest by the United States), or any certificate of deposit for any of the foregoing, including United States Treasury bonds, United States Treasury bills and issues of agencies of the United States government, and certain cash items such as money market funds, certificates of deposit (under nine months) and time deposits or other instruments permitted by applicable rules and regulations. Currently, the rate of interest expected to be earned by each Masterthe Fund is estimated to be 2.07%0.04% per annum, based upon the yield on 3-month U.S. Treasury bills as of June 16, 2008.October 31, 2013. This interest income is used by each Masterthe Fund to pay its own expenses and the expenses of its corresponding Fund.expenses. See “Fees and Expenses” for more details.
[Remainder of page left blank intentionally.]
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Fees and Expenses
| | |
| Management Fee | | Each Master Fund with respect to PowerShares DB Oil Fund, PowerShares DB Gold Fund and PowerShares DB Silver Fund pays the Managing Owner a Management Fee, monthly in arrears, in an amount equal to 0.50% per annum of the daily net asset value of such Master Fund. Each Master Fund with respect to PowerShares DB Energy Fund, PowerShares DB Precious Metals Fund, PowerShares DB Base Metals Fund and PowerShares DB AgricultureThe Fund pays the Managing Owner a Management Fee, monthly in arrears, in an amount equal to 0.75% per annum of theits daily net asset value of such Master Fund. No separate management fee is paid by any corresponding Fund.value. The Management Fee is paid in consideration of the Managing Owner’s commodity futures trading advisory services. |
| Organization and Offering Expenses | | Expenses incurred in connection with organizing each Fund and its corresponding Masterthe Fund and the initial offering of its Shares were paid by the Managing Owner. Expenses incurred in connection with the continuous offering of Shares of each Fund after the commencement of its corresponding Master Fund’s trading operations are also paid by the Managing Owner. |
| Brokerage Commissions and Fees | | Each MasterThe Fund pays to the Commodity Broker all brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with its trading activities. On average, total charges paid to the Commodity Broker are expected to be less than $10.00 per round-turn trade, although the Commodity Broker’s brokerage commissions and trading fees are determined on a contract-by-contract basis. The Managing Owner does not expect brokerage commissions and fees to exceed (i) 0.03% of the net asset value of each Master Fund with respect to PowerShares DB Energy Fund and PowerShares DB Base Metals Fund, (ii) 0.04% of the net asset value of each Master Fund with respect to PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund and PowerShares DB Silver Fund, or (iii) 0.16% of the net asset value of the Master Fund with respect to PowerShares DB Agriculture Fund in any year, although the actual amount of brokerage commissions and fees in any year or any part of any year may be greater. |
| Routine Operational, Administrative and Other Ordinary Expenses | | The Managing Owner pays all of the routine operational, administrative and other ordinary expenses of each Fund and its corresponding Masterthe Fund, including, but not limited to, computer services, the fees and expenses of the Trustee, legal and accounting fees and expenses, tax preparation expenses, filing fees, and printing, mailing and duplication costs. |
| Non-Recurring Fees and Expenses | | Each MasterThe Fund pays all non-recurring and unusual fees and expenses (referred to as extraordinary fees and expenses in the Trust Agreement)Declaration), if any, of itself, and its corresponding Fund.as determined by the Managing Owner. Non-recurring and unusual fees and expenses are fees and expenses which are non-recurring and unusual in nature, such as legal claims and liabilities, litigation costs or indemnification or other unanticipated expenses. Such non-recurring and unusual fees and expenses, by their nature, are unpredictable in terms of timing and amount. |
Management Fee and Expenses to be Paid First out of Interest Income | | The Management Fee and the brokerage commissions and fees of each Master Fund and its correspondingthe Fund are paid first out of interest income from such Masterthe Fund’s holdings of U.S. Treasury bills and other high credit quality short-term fixed income securities on deposit with the Commodity Broker as margin or otherwise. Such interest income has historically been sufficient to cover the fees and expenses of each Master Fund and its corresponding Fund and is expected to continue to do so. To the extentFund. If, however, the interest income is not sufficient to cover the fees and expenses of a Master Fund and its correspondingthe Fund during any period, the excess of such fees and expenses over such interest income will be paid out of income from futures trading, if any, or from sales of the Master Fund’s fixed income securities. |
| Selling Commission | | Retail investors may purchase and sell Shares through traditional brokerage accounts. Investors are expected to be charged a customary commission by their brokers in connection with purchases of Shares that will vary from investor to investor. Investors are encouraged to review the terms of their brokerage accounts for applicable charges. |
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Breakeven Amounts
The following table estimates theestimated amount of (i) all fees and expenses which are anticipated to be incurred by a new investor in Shares of each Fund during the first twelve months of investment is the following percentage0.79% per annum of the net asset value of eachthe Fund, (ii) the current yield earned by each Master Fund on the 3-month U.S. Treasury bills and (iii) the expected annual net income, plus the amount of any commissions charged by the investor’s broker in connection with an investor’s purchase of Shares:Shares.
| | | | | | | | | |
| Fund | | Fees and
Expenses | | | Yield on 3- month U.S.
Treasury bills | | | Expected
Annual Net
Income | |
DBE | | (0.78 | )% | | 2.07 | % | | 1.29 | % |
DBO | | (0.54 | )% | | 2.07 | % | | 1.53 | % |
DBP | | (0.79 | )% | | 2.07 | % | | 1.28 | % |
DGL | | (0.54 | )% | | 2.07 | % | | 1.53 | % |
DBS | | (0.54 | )% | | 2.07 | % | | 1.53 | % |
DBB | | (0.78 | )% | | 2.07 | % | | 1.29 | % |
DBA | | (0.91 | )% | | 2.07 | % | | 1.16 | % |
Each Fund and its corresponding Master Fund is subject to the approximate fees and expenses in the aggregate amounts per annum set forth in the above table and elsewhere in this Prospectus. Each Fund and its corresponding MasterThe Fund will be successful only if theirits annual returns from futures trading, plus theirits annual interest income from theirits holdings of United States Treasury securities and other high credit quality short-term fixed income securities, exceed these fees and expenses of approximately 0.79% per annum. Because it is expected that interest income will exceed the fees and costs incurred by eachThe Fund and Master Fund at the end of the first twelve months of an investment, the percentage of profit required for each Fund to breakeven at the end of the first twelve months of an investment, by definition, is expected to be 0.00%. Each Master Fund (and, in turn, each Fund) is expected to earn interest income equal to 1.25%0.04% per annum, based upon the yield of 3-month U.S. Treasury bills as of April 17, 2008.October 31, 2013, or $0.01 per annum per Share at $25.00 as the net asset value per Share. Therefore, based upon the difference between the current yield of 3-month U.S. Treasury bills and the annual fees and expenses, eachthe Fund is expectedwill be required to have net income equal to or greater than the approximate amountearn approximately 0.75% per annum, set forthor $0.19 per annum per Share at $25.00 as the net asset value per Share, in order for an investor to break-even on an investment during the above table, assuming that each Fund does not experience gainsor losses from its futures trading.first twelve months of an investment. Actual interest income could be higher or lower than the current yield of3-month U.S. Treasury bill.
bills.
Distributions
EachThe Fund will make distributions at the discretion of the Managing Owner. To the extent that a Masterthe Fund’s actual and projected interest income from its holdings of United States Treasury securities and other high credit quality short-term fixed income securities exceeds the actual and projected fees and expenses of such Master Fund and its correspondingthe Fund, the Managing Owner expects periodically to make distributions of the amount of such excess. The FundsFund currently dodoes not expect to make distributions with respect to capital gains. Depending on the applicable Fund’s performance for the taxable year and your own tax situation for such year, your income tax liability for the taxable year for your allocable share of suchthe Fund’s net ordinary income or loss and capital gain or loss may exceed any distributions you receive with respect to such year.
Fiscal Year
The fiscal year of each Fund and each Masterthe Fund ends on December 31 of each year.
Financial Information
The Funds and the Master Funds have only recently been organized and have limited financial histories.
U.S. Federal Income Tax Considerations
Subject to the discussion below in “Material U.S. Federal Income Tax Considerations,” each of the Funds and each of the Master FundsFund will be classified as a partnership for U.S. federal income tax purposes. Accordingly, neither anythe Fund nor its corresponding Master Fund will not incur U.S. federal income tax liability; rather, each beneficial owner of a Fund’s Shares will be required to take into account its allocable share of suchthe Fund’s income, gain, loss, deduction and other items (which includes the Fund’s allocable share of its corresponding Master Fund’s income, gain, loss, deduction and other items) for the Fund’s taxable year ending with or within the owner’s taxable year.
Regulated investment companies (“RICs”) that invest in Shares of a Fund will be treated as owning a proportionate share of the corresponding Master Fund’s
15
Units and will take into account their allocable share of such Master Fund’s income, gain and loss when testing compliance with the asset, income and other statutory requirements specifically applicable to them. A Fund will be treated as a qualified publicly traded partnership (“qualified PTP”) within the meaning of the Internal Revenue Code of 1986, as amended, or the Code, for purposes of satisfying the qualification requirements specifically applicable to RICs for any taxable year in which its corresponding Master Fund realizes sufficient gross income from its commodity futures transactions. Prospective RIC investors should consult a tax adviser regarding the treatment of an investment in a Fund (and its corresponding Master Fund) to them under current tax rules. See “Material U.S. Federal Income Tax Considerations—Regulated Investment Companies” below.
Additionally, please refer to the “Material U.S. Federal Income Tax Considerations” section below for information on the potential U.S. federal income tax consequences of the purchase, ownership and disposition of Shares of a Fund.
Shares.
“Breakeven Table”Table
The “Breakeven Table”Breakeven Table on the following page 14 indicates the approximate percentage and dollar returns required for the value of an initial $25.00 investment in a Share of each Fund to equal the amount originally invested twelve months after issuance.
The “BreakevenBreakeven Table” as presented, is an approximation only. The capitalization of eachthe Fund does not directly affect the level of its charges as a percentage of its net asset value, other than brokerage commissions.
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16
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“Breakeven Table”Table
| | | | Dollar Amount and Percentage of Expenses Per Fund | | | Dollar Amount and Percentage of Expenses for
the Fund | |
| Expense1 | | DBE10 | | | DBO11 | | | DBP12 | | | DGL11 | | | DBS11 | | | DBB10 | | | DBA13 | | | DBS9 | |
| | $ | | | % | | | $ | | | % | | | $ | | | % | | | $ | | | % | | | $ | | | % | | | $ | | | % | | | $ | | | % | | | $ | | | % | |
Management Fee2 | | $ | 0.19 | | | 0.75 | % | | $ | 0.13 | | | 0.50 | % | | $ | 0.19 | | | 0.75 | % | | $ | 0.13 | | | 0.50 | % | | $ | 0.13 | | | 0.50 | % | | $ | 0.19 | | | 0.75 | % | | $ | 0.19 | | | 0.75 | % | | $ 0.19 | | | 0.75 | % |
Organization and Offering Expense Reimbursement3 | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ 0.00 | | | 0.00 | % |
Brokerage Commissions and Fees4 | | $ | 0.01 | | | 0.03 | % | | $ | 0.01 | | | 0.04 | % | | $ | 0.01 | | | 0.04 | % | | $ | 0.01 | | | 0.04 | % | | $ | 0.01 | | | 0.04 | % | | $ | 0.01 | | | 0.03 | % | | $ | 0.04 | | | 0.16 | % | | $ 0.01 | | | 0.04 | % |
Routine Operational, Administrative and Other Ordinary Expenses5,6 | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ | 0.00 | | | 0.00 | % | | $ 0.00 | | | 0.00 | % |
Interest Income7 | | $ | (0.52 | ) | | (2.07 | )% | | $ | (0.52 | ) | | (2.07 | )% | | $ | (0.52 | ) | | (2.07 | )% | | $ | (0.52 | ) | | (2.07 | )% | | $ | (0.52 | ) | | (2.07 | )% | | $ | (0.52 | ) | | (2.07 | )% | | $ | (0.52 | ) | | (2.07 | )% | | $(0.01) | | | (0.04 | )% |
12-Month Breakeven8,9 | | $ | (0.32 | ) | | 0.00 | % | | $ | (0.38 | ) | | 0.00 | % | | $ | (0.32 | ) | | 0.00 | % | | $ | (0.38 | ) | | 0.00 | % | | $ | (0.38 | ) | | 0.00 | % | | $ | (0.32 | ) | | 0.00 | % | | $ | (0.29 | ) | | 0.00 | % | |
12-Month Breakeven8 | | | $ 0.19 | | | 0.75 | % |
| 1. | The breakeven analysis assumes that the Shares have a constant month-end Fund net asset value and is based on $25.00 as the net asset value per Share. See “Charges” on page 10955 for an explanation of the expenses included in the “Breakeven Table.” |
| 2. | From the Management Fee, the Managing Owner will be responsible for paying the fees and expenses of the Administrator, ALPS Distributors and Invesco Aim Distributors. |
| 3. | The Managing Owner is responsible for paying the organization and offering expenses and the continuous offering costs of each Fund and each Masterthe Fund. |
| 4. | The actual amount of brokerage commissions and trading fees to be incurred will vary based upon the trading frequency of each Masterthe Fund and the specific futures contracts traded. |
| 5. | The Managing Owner is responsible for paying all routine operational, administrative and other ordinary expenses of each Fund and each Masterthe Fund. |
| 6. | In connection with orders to create and redeem Baskets, Authorized Participants will pay a transaction fee in the amount of $500 per order. Because these transaction fees arede minimis in amount, are charged on a transaction-by-transaction basis (and not on a Basket-by-Basket basis), and are borne by the Authorized Participants, they have not been included in the Breakeven Table. |
| 7. | Interest income currently is estimated to be earned at a rate of 2.07%0.04%, based upon the yield on 3-month U.S. Treasury bills as of June 16, 2008.October 31, 2013. Actual interest income could be higher or lower than the current yield of 3-month U.S. Treasury bills. |
| 8. | Because it is expected that interest income will exceed the fees and costs incurred by each Fund and Master Fund at the end of the first twelve months of an investment, the percentage of profit required for each Fund to breakeven at the end of the first twelve months of an investment, by definition, is expected to be 0.00%. |
9. | You may pay customary brokerage commissions in connection with purchases of the Shares. Because such brokerage commission rates will vary from investor to investor, such brokerage commissions have not been included in the Breakeven Table. Investors are encouraged to review the terms of their brokerage accounts for applicable charges. |
10.9. | Each of DBE and DBB are subject to (i) a Management Fee of 0.75% per annum and (ii) estimated brokerage commissions and fees of 0.03% per annum. DBE and DBB are each subject to fees and expenses in the aggregate amount of approximately 0.78% per annum. DBE and DBB will be successful only if each of their annual returns from the underlying futures contracts, including annual income from 3-month U.S. Treasury bills, exceeds approximately 0.78% per annum. The Master Funds of DBE and DBB (and, in turn, DBE and DBB) are expected to earn 2.07% per annum, based upon the yield of 3-month U.S. Treasury bills as of June 16, 2008. Therefore, based upon the difference between the current yield of 3-month U.S. Treasury bills and the annual fees and expenses, each of DBE and DBB would be expected to earn approximately 1.29% per annum, assuming that both DBE and DBB have not experienced either gains or losses resulting from investing in the underlying futures contracts. Actual interest income could be higher or lower than the current yield of 3-month U.S. Treasury bills. |
11. | Each of DBO, DGL and DBS are subject to (i) a Management Fee of 0.50% per annum and (ii) estimated brokerage commissions and fees of 0.04% per annum. DBO, DGL and DBS are each subject to fees and expenses in the aggregate amount of approximately 0.54% per annum. DBO, DGL and DBS will be successful only if each of their annual returns from the underlying futures contracts, including annual income from 3-month U.S. Treasury bills, exceeds approximately 0.54% per annum. The Master Funds of DBO, DGL and DBS (and, in turn, DBO, DGL and DBS) are expected to earn 2.07% per annum, based upon the yield of 3-month U.S. Treasury bills as of June 16, 2008. Therefore, based upon the difference between the current yield of 3-month U.S. Treasury bills and the annual fees and expenses, each of DBO, DGL and DBS would be expected to earn approximately 1.53% per annum, assuming that each of DBO, DGL and DBS has not experienced either gains or losses resulting from investing in the underlying futures contracts. Actual interest income could be higher or lower than the current yield of 3-month U.S. Treasury bills. |
12. | DBP is subject to (i) a Management Fee of 0.75% per annum and (ii) estimated brokerage commissions and fees of 0.04% per annum. DBPDBS is subject to fees and expenses in the aggregate amount of approximately 0.79% per annum. DBPDBS will be successful only if its annual returns from the underlying futures contracts, including annual income from 3-month U.S. Treasury bills, exceeds approximately 0.79% per annum. The Master Fund of DBP (and, in turn, DBP)DBS is expected to earn 2.07%0.04% per annum, based upon the yield of 3-month U.S. Treasury bills as of June 16, 2008.October 31, 2013. Therefore, based upon the difference between the current yield of 3-month U.S. Treasury bills and the annual fees and expenses, DBPDBS would be expectedrequired to earn approximately 1.28%0.75% per annum, assuming that DBP has not experienced either gains or losses resulting from investing in order for an investor to break-even on an investment during the underlying futures contracts.first twelve months of an investment. Actual interest income could be higher or lower than the current yield of 3-month U.S. Treasury bills. |
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13. | DBA is subject to (i) a Management Fee of 0.75% per annum and (ii) estimated brokerage commissions and fees of 0.16% per annum. DBA is subject to fees and expenses in the aggregate amount of approximately 0.91% per annum. DBA will be successful only if its annual returns from the underlying futures contracts, including annual income from 3-month U.S. Treasury bills, exceeds approximately 0.91% per annum. The Master Fund of DBA (and, in turn, DBA) is expected to earn 2.07% per annum, based upon the yield of 3-month U.S. Treasury bills as of June 16, 2008. Therefore, based upon the difference between the current yield of 3-month U.S. Treasury bills and the annual fees and expenses, DBA would be expected to earn approximately 1.16% per annum, assuming that DBA has not experienced either gains or losses resulting from investing in the underlying futures contracts. Actual interest income could be higher or lower than the current yield of 3-month U.S. Treasury bills. |
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Incorporation by Reference of Certain Documents
The Securities and Exchange Commission, or the SEC, allows us to “incorporate by reference” into this Prospectus the information that we file with it, meaning we can disclose important information to you by referring you to those documents already on file with the SEC.
The information we incorporate by reference is an important part of this prospectus, and later information that we file with the SEC will automatically update and supersede some of this information. We incorporate by reference the documents listed below, and any future filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the effectiveness of the registration statement.
This filingProspectus incorporates by reference the following documents, which we have previously filed with the SEC, in response to certain disclosures pursuant to Item 11 of Form S-1:disclosures:
The Annual ReportsReport on Form 10-K for the fiscal year ended December 31, 2007, as2012 filed on March 26, 2008 with respect1, 2013; Amendment No. 1 to each of the following:
PowerShares DB Energy Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Energy Master Fund, a series of DB Multi-Sector Commodity Master Trust;Annual Report for the year ended December 31, 2012 on Form 10-K/A filed on March 29, 2013;
PowerShares DB Oil Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Oil Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Precious Metals Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Precious Metals Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Gold Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Gold Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Silver Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Silver Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Base Metals Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Base Metals Master Fund, a series of DB Multi-Sector Commodity Master Trust; and
PowerShares DB Agriculture Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Agriculture Master Fund, a series of DB Multi-Sector Commodity Master Trust.
The Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2008, as filed on May 9, 2008 with respect to PowerShares DB Agriculture Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Agriculture Master Fund, a series of DB Multi-Sector Commodity Master Trust;
The Quarterly Reports on Form 10-Q for the fiscal quarterquarters ended March 31, 2008, as2013, June 30, 2013 and September 30, 3013 filed on May 14, 2008 with respect to each of the following:
PowerShares DB Energy Fund, a series of PowerShares DB Multi-Sector Commodity Trust3, 2013, August 8, 2013, and DB Energy Master Fund, a series of DB Multi-Sector Commodity Master Trust;November 5, 2013, respectively;
PowerShares DB Oil Fund, a series of PowerShares DB Multi-Sector Commodity TrustThe Current Reports on Form 8-K filed March 21, 2013, May 24, 2013, May 30, 2013, October 4, 2013 and DB Oil Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Precious Metals Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Precious Metals Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Gold Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Gold Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Silver Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Silver Master Fund, a series of DB Multi-Sector Commodity Master Trust;December 4, 2013; and
PowerShares DB Base Metals Fund, a seriesAll other reports filed pursuant to Section 13(a) or 15(d) of PowerShares DB Multi-Sector Commodity Trust and DB Base Metals Master Fund, a series of DB Multi-Sector Commodity Master Trust.
The Current Report onthe Exchange Act since December 31, 2012, except for information furnished under Form 8-K, which is not deemed filed on February 20, 2008 with respect to PowerShares DB Multi-Sector Commodity Trust and DB Multi-Sector Commodity Master Trust.not incorporated herein by reference.
The Current Report on Form 8-K filed on February 28, 2008 with respect to PowerShares DB Agriculture Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Agriculture Master Fund, a series of DB Multi-Sector Commodity Master Trust.
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The Current Report on Form 8-K filed on April 11, 2008 with respect to PowerShares DB Multi-Sector Commodity Trust and DB Multi-Sector Commodity Master Trust.
The Current Report on Form 8-K filed on June 23, 2008 with respect to PowerShares DB Multi-Sector Commodity Trust and DB Multi-Sector Commodity Master Trust.
Any statement contained in a document that is incorporated by reference will be modified or superseded for all purposes to the extent that a statement contained in this prospectus (or in any other document that is subsequently filed with the SEC and incorporated by reference)Prospectus modifies or is contrary to that previous statement. Any statement so modified or superseded will not be deemed a part of this prospectusProspectus except as so modified or superseded.
We will provide to you a copy of the filings that have been incorporated by reference in this prospectusProspectus upon your request, at no cost. Any request may be made by writing or calling us at the following address or telephone number:
Invesco PowerShares Capital Management LLC
301 West Roosevelt Road
Wheaton, IL 60187
Telephone: (800) 983-0903
These documents may also be accessed through our website atwww.dbfunds.db.comhttp://www.dbxus.com or as described herein under “Additional Information.” The information and other content contained on or linked from our website isare not incorporated by reference in this prospectusProspectus and should not be considered a part of this prospectus.Prospectus.
We file annual, quarterly, current reports and other information with the SEC. You may read and copy these materials at the SEC’s Public Reference Room at 100 F Street, NW,N.E., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site athttp://www.sec.gov that contains reports, proxy and information statements and other information regarding the company.Fund.
Reports to Shareholders
The Managing Owner will furnish you with an annual report of eachthe Fund in which you are invested within 90 calendar days after the end of suchthe Fund’s fiscal year as required by the rules and regulations of the SEC as well as with those reports required by the CFTC, and the NFA, including, but not limited to, an annual audited financial statement certified by independent registered public accountants and any other reports required by any other governmental authority that has jurisdiction over the activities of the Funds and the Master Funds.Fund. You also will be provided with appropriate information to permit you to file your U.S. federal and state income tax returns (on a timely basis) with respect to your Shares. Monthly account statements conforming to CFTC and NFA requirements are posted on the Managing Owner’s website atwww.dbfunds.db.comhttp://www.dbxus.com. Additional reports may be posted on the Fund’sManaging Owner’s website in the discretion of the Managing Owner or as required by regulatory authorities.
Cautionary Note RegardingForward-Looking Statements
This Prospectus includes forward-looking statements that reflect the Managing Owner’s current expectations about the future results, performance,
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prospects and opportunities of the Funds and the Master Funds.Fund. The Managing Owner has tried to identify these forward-looking statements by using words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “should,” “estimate” or the negative of those terms or similar expressions. These forward-looking statements are based on information currently available to the Managing Owner and are subject to a number of risks, uncertainties and other factors, both known, such as those described in “Risk Factors” in this Summary, in “The Risks You Face” and elsewhere in this Prospectus, and unknown, that could cause the actual results, performance, prospects or opportunities of the Funds and the Master FundsFund to differ materially from those expressed in, or implied by, these forward-looking statements.
You should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, the Managing Owner undertakes no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Prospectus, as a result of new information, future events
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or changed circumstances or for any other reason after the date of this Prospectus.
THE SHARES ARE SPECULATIVE AND
INVOLVE A HIGH DEGREE OF RISK.
Patent Applications Pending
Patent applications directed to the creation and operation of the Trust and aspects of eachthe Index are pending at the United States Patent and Trademark Office.
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ORGANIZATION CHART
POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
POWERSHARES DB SILVER FUND
| 1 | PowerShares DB Energy Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculture Fund, which are the remaining series of the Trust, are not offered by this Prospectus. |
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THE RISKS YOU FACE
You could lose money investing in Shares of any Fund.the Shares. You should consider carefully the risks described below before making an investment decision. You should also refer to the other information included in this Prospectus.
(1) The Value of the Shares of each Fund Relates Directly to the Value of the Futures Contracts and Other Assets Held by its Corresponding Master Fund and Fluctuations in the Price of These Assets Could Materially Adversely Affect an Investment in the Funds’ Shares.
| (1) | The Value of the Shares Relates Directly to the Value of the Futures Contracts and Other Assets Held by the Fund and Fluctuations in the Price of These Assets Could Materially Adversely Affect an Investment in the Fund’s Shares. |
The Shares of each Fund are designed to reflect as closely as possible the changes, positive or negative, in the level of its correspondingthe Index, over time, through its corresponding Master Fund’s portfolio of exchange traded futures contracts on itsthe Index Commodities.Commodity. The value of the Shares of each Fund relates directly to the value of theits portfolio, of its corresponding Master Fund, less the liabilities (including estimated accrued but unpaid expenses) of the Fund and its corresponding Master Fund. The price of the various Index CommoditiesCommodity may fluctuate widely. Several factors may affect the prices of the Index Commodities,Commodity, including, but not limited to:
Global supply and demand of the Index CommoditiesCommodity which may be influenced by such factors as forward selling by the various commodities producers, purchases made by the commodities’ producers to unwind their hedge positions and production and cost levels in the major markets of the Index Commodities;Commodity;
Domestic and foreign interest rates and investors’ expectations concerning interest rates;
Domestic and foreign inflation rates and investors’ expectations concerning inflation rates;
Investment and trading activities of mutual funds, hedge funds and commodity funds; and
Global or regional political, economic or financial events and situations.
| (2) | Net Asset Value May Not Always Correspond to Market Price and, as a Result, Baskets May be Created or Redeemed at a Value that Differs from the Market Price of the Shares. |
(2) Net Asset Value May Not Always Correspond to Market Price and, as a Result, Baskets may be Created or Redeemed at a Value that Differs from the Market Price of the Shares.
The net asset value per share of the Shares of a FundShare will change as fluctuations occur in the market value of the portfolio of its corresponding Master Fund. portfolio.
Investors should be aware that the public trading price of a Basket of Shares of a Fund may be different from the net asset value of a Basket of Shares of the Fund (i.e.(i.e., 200,000 Shares may trade at a premium over, or a discount to, net asset value of a Basket of Shares)Basket) and similarly the public trading price per Share of a Fund may be different from theits net asset value per Share of the Fund.Share. Consequently, an Authorized Participant may be able to create or redeem a Basket of Shares of a Fund at a discount or a premium to the public trading price per Share of the Fund.Share. This price difference may be due, in large part, to the fact that supply and demand forces at work in the secondary trading market for Shares of a Fund isare closely related, but not identical to the same forces influencing the prices of the Index Commodities comprisingCommodity that comprises the Fund’s corresponding Index, trading individually or in the aggregate at any point in time. Investors also should note that the size of eachthe Fund in terms of total assets held may change substantially over time and from time-to-time as Baskets are created and redeemed.
Authorized Participants or their clients or customers may have an opportunity to realize a riskless profit if they can purchase a creation Basket at a discount to the public trading price of the Shares of a Fund or can redeem a redemption Basket at a premium over the public trading price of the Shares of the Fund.Shares. The Managing Owner expects that the exploitation of such arbitrage opportunities by Authorized Participants and their clients and customers will tend to cause the public trading price to track net asset value per Share of the Funds closely over time.
The value of a Share of a Fund may be influenced by non-concurrent trading hours between the AmexNYSE Arca and the various futures exchangesexchange on which the Index Commodities correspondingCommodity is traded. While the Shares trade on the NYSE Arca from 9:30 a.m. to such Fund are traded.4:00 p.m. Eastern Standard Time, the trading hours for the futures exchange on which the Index Commodity trades may not necessarily coincide during all of this time. For example, while the Shares trade on the NYSE Arca until 4:00 p.m. Eastern Standard Time, liquidity in the silver market will be reduced after the close of the COMEX at 1:25 p.m. Eastern Standard Time. As a result, during periods when the AmexNYSE Arca is open and the futures exchangesexchange on which the Index Commodities areCommodity is traded is closed, trading spreads and the resulting premium or discount on the Shares may widen and, therefore, increase the difference between the price of the Shares and the net asset value of the Shares.
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(3) Regulatory and Exchange Position Limits and Other Rules May Restrict the Creation of Baskets of One or More of the Funds and the Operation of its Corresponding Master Fund.
| (3) | Regulatory and Exchange Position Limits and Other Rules May Restrict the Creation of Baskets and the Operation of the Fund. |
CFTC and commodity exchange rules impose speculative position limits on market participants, including certain of the Master Funds,Fund, trading in certain agricultural commodities.silver. These position limits prohibit any person from holding a position of more than a specific number of such futures contracts. The purposes of speculative position limits are to diminish, eliminate or prevent sudden or unreasonable fluctuations or unwarranted changes in the prices of futures contracts.
The CFTC and commodity exchange rules impose speculative position limits on market participants trading in the Index Commodity included in the Index (Silver, or the Affected Index Commodity). Currently, speculative position limits (i) for corn, oats, wheat, soybean, soybean oil and cotton are determined by the CFTC and (ii) for all other commodities are determined by the futures exchanges. Pursuant to the statutory mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, which was signed into law on July 21, 2010, the CFTC adopted final regulations on October 18, 2011, or the Regulations, which, in pertinent part, impose new federal position limits on futures and options on a subset of energy, metal, and agricultural commodities, or the Referenced Contracts, and economically equivalent swaps. The Regulations were to go into effect 60 days after the term “swap” is further defined pursuant to Section 721 of the Dodd-Frank Act. However, on September 28, 2012, a federal court issued an order vacating the Regulations. In vacating and remanding the new position limits rules, the court nevertheless upheld the CFTC’s revisions to the legacy position limits that amended previously-enacted position limits rules as Part 150 of the CFTC regulations and are already in place pursuant to CFTC rules. On November 5, 2013, the CFTC re-proposed for public comment new position limits and an aggregation rule both of which are currently pending and have not yet been adopted.
Generally, speculative position limits in the physical delivery markets are set at a stricter level during the spot month, the month when the futures
contract matures and becomes deliverable, versus the limits set for all other months. If the Managing Owner determines that the Fund’s trading may be approaching any of these speculative position limits, the Fund may reduce its trading in that commodity or trade in other commodities or instruments that the Index Sponsor determines comply with the rules and goals of the Index. Below is a chart that sets forth certain relevant information, including current speculative position limits for the Affected Index Commodity that any person may hold, separately or in combination, net long or net short, for the purchase or sale of any commodity futures contract or, on a futures-equivalent basis, options thereon. Speculative position limit levels remain subject to change by the CFTC or the relevant exchanges.
Exchanges may also establish accountability levels applicable to futures contracts. An exchange may order a person who holds or controls aggregate positions in excess of specified position accountability levels not to further increase the positions, to comply with any prospective limit which exceeds the size of the position owned or controlled, or to reduce any open position which exceeds position accountability levels if the exchange determines that such action is necessary to maintain an orderly market. Under current regulations, subject to any relevant exemptions, traders, such as the Fund, may not exceed speculative position limits, either individually or in the aggregate with other persons with whom they are under common control or ownership. Under the vacated Regulations, the CFTC would have required certain persons to aggregate exchange listed futures and economically equivalent swap positions owned or controlled by such persons.
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It is possible that in-19-
| | | | |
Affected Index
Commodity | | Exchange
(Symbol)1 | | Exchange Position
Limits2 |
Silver | | COMEX (SI) | | 1,500 – Spot Month 6,000 – Single Month 6,000 – All Months Combined |
| 1 | “COMEX” means the Commodity Exchange Inc., New York, or its successor. |
| 2 | Subject to any additional limitations as may be required by an exchange. |
Because the future, the CFTCFund may propose new rules with respectbe subject to position limits, and, consequently, the Fund’s ability to issue new Baskets, or the Fund’s ability to reinvest income in additional futures contracts corresponding to the Affected Index Commodity may be limited to the extent these activities would cause the Fund to exceed its applicable 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 Shares. That is, the inability to create additional Baskets could result in Shares trading at a premium or discount to net asset value of the Shares.
Under the vacated Regulations, the CFTC, among other things, established speculative position limits on exchange listed futures and options on physical commodities (including certain energy, metals and agricultural commoditiesproducts) and economically equivalent over-the-counter derivatives. Under the vacated Regulations, the CFTC also established aggregate position limits for traders engaged in indexed-based trading, such ascertain other contracts based on the trading engaged in by the Master Funds.same underlying commodity, including certain contracts traded on non-U.S. exchanges. Depending on the outcome of any future CFTC or futures exchange rulemaking, as applicable, the rules concerning position limits may be amended in a manner that is either detrimental or favorable to the Funds.Fund. For example, if the amended rules are detrimental to the DB Agriculture Master Fund, the PowerShares DB Agriculture Fund’sits ability to issue new Baskets, or the DB Agriculture Master Fund’s ability to reinvest income in additional corn and wheat futures contracts corresponding to the Affected Index Commodity, may be limited to the extent these activities would cause the Master Fund to exceed the applicable position limits. Limiting the size of the PowerShares DB Agriculture Fund may affect the correlation between
the price of the Shares, of the PowerShares DB Agriculture Fund, as traded on the Amex,NYSE Arca, and the net asset value of the PowerShares DB Agriculture Fund.Shares. That is, the inability to create additional Baskets could result in Shares in the PowerShares DB Agriculture Fund trading at a premium or discount to net asset value of the PowerShares DB Agriculture Fund.Shares.
| (4) | The Fund’s Performance May Not Always Replicate Exactly the Changes in the Level of the Index. |
The PowerShares DB AgricultureIt is possible that the Fund’s performance may not fully replicate the changes in the level of the Index includes four commodities, corn, wheat, soybeans and sugar, that are subjectdue to disruptions in the markets for the Index Commodity, the imposition of speculative position limits imposed by(as discussed in “The Risks YouFace - (3) Regulatory and Exchange Position Limits and Other Rules May Restrict the CFTCCreation of Baskets and the rulesOperation of the exchanges on whichFund”), or due to other extraordinary circumstances. As the futures contracts for these commodities trade. The Chicago Board of Trade limits are currently for corn futures: 22,000 contracts net all months combined, 13,500 contracts net a single month (other than the spot month), and 600 contracts for a spot month; for wheat futures: 6,500 contracts net all months combined, 5,000 contracts net a single month (other than a spot month), and 220 to 600 contracts for a spot month based on the month and certified stocks; for soybean futures: 5,500 contracts net all monthscombined, 3,500 contracts net a single month (other than a spot month), and 600 contracts for a spot month. The ICE Futures U.S. limits for sugar #11 futures are currently: 15,000 contracts net all months combined, 10,000 contracts net a single month (other than the spot month), and 5,000 contracts for a spot month.
Because the DB Agriculture Master Fund is approachingapproaches or has reachedreaches position limits with respect to certain futures contracts comprising the PowerShares DB Agriculture Fund’s Index Contract, the DB Agriculture Master Fund has commencedmay commence investing in other futures contracts based on commodities that comprise the PowerShares DB Agriculture Fund’s Index Commodity and in futures contracts based on commodities other than commodities that comprise the PowerShares DB Agriculture Fund’s Index Commodity that, in the commercially reasonable judgment of the Managing Owner, tend to exhibit trading prices that correlate with a futures contract that comprises the PowerShares DB Agriculture Fund’s Index.
(4) A Fund’s Performance May Not Always Replicate Exactly the Changes in the Level of its Corresponding Index.
It is possible that a Fund’s performance may not fully replicate the changes in the level of the Index to which it corresponds due to disruptions in the markets for the relevant Index Commodities, the imposition of speculative position limits (as discussed in “The Risks You Face— (3) Regulatory and Exchange Position Limits and Other Rules May Restrict the Creation of Baskets of One or More of the Funds and the Operation of its Corresponding Master Fund”, or due to other extraordinary circumstances.Contract. In addition, the Funds areFund is not able to replicate exactly the changes in the levellevels of their respective Indexesthe Index because the total return generated by their corresponding Master Fundsthe Fund is reduced by expenses and transaction costs, including those incurred in connection with the Master Funds’Fund’s trading activities, and increased by interest income from the Master Funds’Fund’s holdings of short-term high credit quality fixed income securities. Tracking the applicable Index requires trading of the relevant Master Fund’s portfolio with a view to tracking the Index over time and is dependent upon the skills of the Managing Owner and its trading principals, among other factors.
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(5) None of the Master Funds Is Actively Managed and each Tracks its Index During Periods in which the Index Is Flat or Declining as well as when the Index Is Rising.
| (5) | The Fund Is Not Actively Managed and Tracks its Index During Periods in Which the Index Is Flat or Declining as Well as When the Index Is Rising. |
None of the Master FundsThe Fund is not actively managed by traditional methods. Therefore, if positions in any one or more of itsthe Index CommoditiesCommodity are declining in value, a Masterthe Fund will not close out such positions, except in connection with a change in the composition or weighting of the Index. The Managing Owner will seek to cause the net asset value of each Masterthe Fund to track its Index during periods in which the Index is flat or declining as well as when the Index is rising.
(6) Amex-20-
| (6) | The NYSE Arca May Halt Trading in the Shares of the Fund Which Would Adversely Impact Your Ability to Sell Shares. |
The Shares are listed on the NYSE Arca under the market symbol “DBS.” Trading in the Shares of a Fund Which Would Adversely Impact Your Ability to Sell Shares.
Trading in Shares of a Fund may be halted due to market conditions or, in light of AmexNYSE Arca rules and procedures, for reasons that, in the view of the Amex,NYSE Arca, make trading in the Shares of a Fund inadvisable. In addition, trading is subject to trading halts caused by extraordinary market volatility pursuant to “circuit breaker” rules that require trading to be halted for a specified period based on a specified market decline. There can be no assurance that the requirements necessary to maintain the listing of the Shares of a Fund will continue to be met or will remain unchanged. Any Fund and its corresponding MasterThe Fund will be terminated if its Shares are delisted.
(7) The Lack of Active Trading Markets for the Shares of a Fund May Result in Losses on Your Investment in such Fund at the Time of Disposition of Your Shares.
| (7) | The Lack of an Active Trading Market for the Shares May Result in Losses on Your Investment in the Fund at the Time of Disposition of Your Shares. |
Although the Shares of each Fund are listed and traded on the Amex,NYSE Arca, there can be no guarantee that an active trading market for the Shares of a Fund will develop or be maintained. If you need to sell your Shares at a time when no active market for them exists, the price you receive for your Shares, assuming that you are able to sell them, likely will be lower than that you would receive if an active market did exist.
(8) The Shares of each Fund Are New Securities Products and Their Value Could Decrease if Unanticipated Operational or Trading Problems Arise.
| (8) | The Shares Could Decrease in Value if Unanticipated Operational or Trading Problems Arise. |
The mechanisms and procedures governing the creation, redemption and offering of the Shares have been developed specifically for thesethis securities products.product. Consequently, there may be unanticipated problems or issues with respect to the mechanics of the operations of the Funds and the Master FundsFund and the trading of the Shares that could have a material adverse effect on an investment in the Shares. In addition, although the Master Funds areFund is not actively “managed” by traditional methods, to the extent that unanticipated operational or trading problems or issues arise, the Managing Owner’s past experience and qualifications may not be suitable for solving these problems or issues.
(9) As the Managing Owner and its Principals have Only a Limited History of Operating Investment Vehicles like the Funds or the Master Funds, their Experience may be Inadequate or Unsuitable to Manage the Funds or the Master Funds.
| (9) | As the Managing Owner and its Principals have Been Operating Investment Vehicles like the Fund Since January 2006, their Experience May be Relatively Inadequate or Unsuitable to Manage the Fund. |
The Managing Owner was formed to be the managing owner of investment vehicles such as the Funds and the Master FundsFund and has only a limited history of past performance.been managing such investment vehicles since January 2006. The past performances of the Managing Owner’s management inof other positionscommodity pools are no indication of its or their ability to manage investment vehicles such as the Funds or the Master Funds.Fund. If the experience of the Managing Owner and its principals is not relatively adequate or suitable to manage investment vehicles such as the Funds and the Master Funds,Fund, the operations of the Funds and the Master FundsFund may be adversely affected.
| (10) | You May Not Rely on Past Performance or Index Results in Deciding Whether to Buy Shares. |
(10) You May Not Rely on Past Performance or Index Results in Deciding Whether to Buy Shares.
Each Fund and its corresponding Master Fund has a limited performance history upon which to evaluate your investment in each Fund and its corresponding Master Fund. Although past performance is not necessarily indicative of future results, if each Fund and its corresponding Master Fund had a longer performance history, suchthe Fund’s performance history might (or might not) provide you with more information on which to evaluate an investment in each Fund and its corresponding Masterthe Fund. Likewise, eachthe Index has a limited history which might (or might not) be indicative of the future Index
25
results, or of the future performance of each applicable Fund or its corresponding Masterthe Fund. Therefore, you will have to make your decision to invest in eachthe Fund without relying on the basis of limited information.Fund’s past performance history or the Index’s closing level history.
| (11) | Fewer Representative Commodities May Result In Greater Index Volatility. |
(11) Fewer Representative Commodities May Result In GreaterThe Index Volatility.
Each of the Indexes is concentrated in terms of the number of commodities represented, and some are highly concentrated in a single commodity. Each of PowerShares DB Energy Fund, PowerShares DB Precious Metals Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculture Fund are concentrated in 5 or fewer commodities and each of PowerShares DB Oil Fund, PowerShares DB Gold Fund and PowerShares DB Silverrepresented. The Fund is concentrated in a single commodity. You should be aware that other commodities indexes are more diversified in terms of both the number and variety of commodities included. Concentration in fewer commodities may result in a greater degree of volatility in anthe Index and the net asset value of the Fund and Master Fund which tracktracks the Index under specific market conditions and over time.
(12) Price Volatility May Possibly Cause the Total Loss of Your Investment.
| (12) | Price Volatility May Possibly Cause the Total Loss of Your Investment. |
Futures contracts have a high degree of price variability and are subject to occasional rapid and
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substantial changes. Consequently, you could lose all or substantially all of your investment in anythe Fund.
The following table* reflects various measures of volatility** of the Index as calculated on an excess return basis:
| | | | |
| Volatility Type | | Volatility | |
Daily volatility over full history | | | 26.90 | % |
Average rolling 3-month daily volatility | | | 25.09 | % |
Monthly return volatility | | | 28.22 | % |
Average annual volatility | | | 24.67 | % |
The following table reflects the daily volatility on an annual basis of the Index:
| | |
| Year*** | | Daily Volatility |
1988 | | 10.73% |
1989 | | 18.53% |
1990 | | 19.41% |
1991 | | 23.40% |
1992 | | 15.67% |
1993 | | 28.37% |
1994 | | 23.28% |
1995 | | 26.37% |
1996 | | 17.62% |
1997 | | 24.68% |
1998 | | 29.22% |
1999 | | 21.74% |
2000 | | 14.41% |
2001 | | 17.22% |
2002 | | 17.43% |
2003 | | 20.32% |
2004 | | 35.48% |
2005 | | 21.32% |
2006 | | 41.21% |
2007 | | 21.28% |
2008 | | 43.01% |
2009 | | 31.13% |
2010 | | 26.40% |
2011 | | 39.26% |
2012 | | 25.27% |
2013 | | 28.69% |
| * | As of October 31, 2013. Past Index levels are not necessarily indicative of future changes, positive or negative, in the Index levels. |
| ** | Volatility, for these purposes, means the following: |
Daily Volatility: The relative rate at which the price of the Index moves up and down, found by calculating the annualized standard deviation of the daily change in price.
(13) Unusually Long Peak-to-Valley Drawdown Periods With Respect ToMonthly Return Volatility: The relative rate at which the price of the Index of Each Fund May Be Reflected in Equally Long Peak-to-Valley Drawdown Periods with Respect tomoves up and down, found by calculating the Performanceannualized standard deviation of the Sharesmonthly change in price.
Average Annual Volatility: The average of Each Fund.yearly volatilities for a given sample period. The yearly volatility is the relative rate at which the price of the Index moves up and down, found by calculating the annualized standard deviation of the daily change in price for each business day in the given year.
| *** | As of December 31, except 1988 which is as of December 2 and 2013 which is as of October 31. |
Past Index results are not necessarily indicative of future changes, positive or negative, in the Index levels.
| (13) | Unusually Long Peak-to-Valley Drawdown Periods With Respect To the Index May Be Reflected in Equally Long Peak-to-Valley Drawdown Periods with Respect to the Performance of the Shares. |
Although past Index levels are not necessarily indicative of future Index levels, the peak-to-valley drawdown periods that eachthe Index has experienced has been unusually long and has lasted for multi-year drawdown periods. Please see the chart on page 45 for information regarding worst peak-to-valley drawdown periods with respect to each Index.
Because it is expected that eachthe Fund’s performance will track the performancechange of itsthe underlying Index, athe Fund would suffer a continuous drawdown during the period that anthe Index sufferssuchsuffers such a drawdown period, and in turn, the value of your Shares will also suffer.
| (14) | Fees and Commissions are Charged Regardless of Profitability and May Result in Depletion of Assets. |
(14) Fees and Commissions are Charged Regardless of Profitability and May Result in Depletion of Assets.
EachThe Fund indirectly is directly subject to the fees and expenses described herein which are payable
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irrespective of profitability. See “Breakeven Table” on page 17. Consequently, dependingSuch fees and expenses include asset-based fees of 0.75% per annum. Additional charges include brokerage fees of approximately 0.04% per annum in the aggregate and selling commissions. The Fund is expected to earn interest income at an annual rate of 0.04% per annum, based upon the yield on 3-month U.S. Treasury bills as of October 31, 2013. Because the Fund’s current interest income does not exceed its fees and expenses (other than selling commissions), the Fund will need to have a positive performance that exceeds the difference between the Fund’s interest income and its fees and expenses (other than selling commissions) in order to break even. If the aggregate of each Fundthe Fund’s performance and interest income do not exceed the interest rate environment,Fund’s fees and expenses described herein, then the expenses of each corresponding Masterthe Fund could, over time, result in losses to your investment in the Fund.therein. You may never achieve profits, significant or otherwise by investing in a Fund.otherwise.
(15) You Cannot Be Assured of the Managing Owner’s Continued Services, Which Discontinuance May Be Detrimental to the Funds.
| (15) | You Cannot Be Assured of the Managing Owner’s Continued Services, Which Discontinuance May Be Detrimental to the Fund. |
You cannot be assured that the Managing Owner will be willing or able to continue to service the Funds and the Master FundsFund for any length of time. If the Managing Owner discontinues its activities on behalf of the Funds andFund, the Master Funds, the Funds and the Master FundsFund may be adversely affected.
(16) Possible Illiquid Markets May Exacerbate Losses.
| (16) | Possible Illiquid Markets May Exacerbate Losses. |
Futures positions cannot always be liquidated at the desired price. It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market. A market disruption, such as when foreign governments may take or be subject to political actions which disrupt the markets in their currency or major exports, can also make it difficult to liquidate a position.
There can be no assurance that market illiquidity will not cause losses for the Funds.Fund. The large size of the positions which a Masterthe Fund may acquire on behalf of its corresponding Fund increases the risk of illiquidity by both making its positions more difficult to liquidate and increasing the losses incurred while trying to do so.
| (17) | You May Be Adversely Affected by Redemption Orders that Are Subject To Postponement, Suspension or Rejection Under Certain Circumstances. |
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(17) You May Be Adversely Affected by Redemption Orders that Are Subject To Postponement, Suspension or Rejection Under Certain Circumstances.
EachThe Fund may, in its discretion, suspend the right of redemption or postpone the redemption settlement date, (1) for any period during which an emergency exists as a result of which the redemption distribution is not reasonably practicable, or (2) for such other period as the Managing Owner determines to be necessary for the protection of the Shareholders of a Fund.Shareholders. In addition, athe Fund will reject a redemption order if the order is not in proper form as described in the participant agreement among the Authorized Participant, Agreementthe Managing Owner and the Managing Owner in its capacity as managing owner of the Fund or if the fulfillment of the order, in the opinion of its counsel, might be unlawful. Any such postponement, suspension or rejection could adversely affect a redeeming Authorized Participant. For example, the resulting delay may adversely affect the value of the Authorized Participant’s redemption proceeds if the net asset value of the applicable Fund declines during the period of delay. The Funds disclaimFund disclaims any liability for any loss or damage that may result from any such suspension or postponement.
(18) Because the Futures Contracts Have No Intrinsic Value, the Positive Performance of Your Investment Is Wholly Dependent Upon an Equal and Offsetting Loss.
| (18) | Because the Futures Contracts Have No Intrinsic Value, the Positive Performance of Your Investment Is Wholly Dependent Upon an Equal and Offsetting Loss. |
Futures trading is a risk transfer economic activity. For every gain there is an equal and offsetting loss rather than an opportunity to participate over time in general economic growth. Unlike most alternative investments, an investment in Shares of a Fund does not involve acquiring any asset with intrinsic value. Overall stock and bond prices could rise significantly and the economy as a whole prosper while Shares of a Fund trade unprofitably.
(19) Failure of Commodity Futures Markets to Exhibit Low to Negative Correlation to General Financial Markets Will Reduce Benefits of Diversification and May Exacerbate Losses to Your Portfolio.
| (19) | Failure of Commodity Futures Markets to Exhibit Low to Negative Correlation to General Financial Markets Will Reduce Benefits of Diversification and May Exacerbate Losses to Your Portfolio. |
Historically, commodity futures’ returns have tended to exhibit low to negative correlation with the returns of other assets such as stocks and bonds.
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Although commodity futures trading can provide a diversification benefit to investor portfolios because of its low to negative correlation with other financial assets, the fact that the Index is not 100% negatively correlated with financial assets such as stocks andbondsand bonds means that each respectivethe Fund cannot be expected to be automatically profitable during unfavorable periods for the stock or bond market, or vice-versa. If the Shares perform in a manner that correlates with the general financial markets or do not perform successfully, you will obtain no diversification benefits by investing in the Shares and the Shares may produce no gains to offset your losses from other investments.
| (20) | Shareholders Will Not Have the Protections Associated With Ownership of Shares in an Investment Company Registered Under the Investment Company Act of 1940. |
(20) Shareholders Will Not Have the Protections Associated With Ownership of Shares in an Investment Company Registered Under the Investment Company Act of 1940.
None of the Funds or the Master FundsThe Fund is not registered as an investment company under the Investment Company Act of 1940, and none of them is not required to register under such Act. Consequently, Shareholders willdo not have the regulatory protections provided to investors in registered and regulated investment companies.
| (21) | Trading on Commodity Exchanges Outside the United States is Not Subject to U.S. Regulation. |
(21) Various ActualIf speculative position limits with respect to an Index Contract underlying the Index Commodity have been reached, a portion of the Fund’s trades may take place on markets or exchanges outside the United States. Trading on commodity exchanges outside the United States is not regulated by any United States governmental agency and Potential Conflictsmay involve certain risks not applicable to trading on United States exchanges, including different or diminished investor protections. In trading contracts denominated in currencies other than U.S. dollars, Shares are subject to the risk of Interest May Be Detrimentaladverse exchange-rate movements between the dollar and the functional currencies of such contracts. Investors could incur substantial losses from trading on foreign exchanges which such investors would not have otherwise been subject had the Fund’s trading been limited to Shareholders.U.S. markets.
| (22) | Various Actual and Potential Conflicts of Interest May Be Detrimental to Shareholders. |
The Funds and the Master Funds areFund is subject to actual and potential conflicts of interest involving the Managing Owner,
various commodity futures brokers and Authorized Participants. The Managing Owner and its principals, all of whom are engaged in other investment activities, are not required to devote substantially all of their time to the business of the Funds and the Master Funds,Fund, which also presents the potential for numerous conflicts of interest with the Funds and the Master Funds.Fund. As a result of these and other relationships, parties involved with the Funds and the Master FundsFund have a financial incentive to act in a manner other than in the best interests of the Funds, the Master FundsFund and the Shareholders. The Managing Owner has not established any formal procedure to resolve conflicts of interest. Consequently, investors are dependent on the good faith of the respective parties subject to such conflicts to resolve them equitably. Although the Managing Owner attempts to monitor these conflicts, it is extremely difficult, if not impossible, for the Managing Owner to ensure that these conflicts do not, in fact, result in adverse consequences to the Shareholders.
The Funds and the Master FundsFund may be subject to certain conflicts with respect to the Commodity Broker, including, but not limited to, conflicts that result from receiving greater amounts of
27
compensation from other clients, or purchasing opposite or competing positions on behalf of third party accounts traded through the Commodity Broker.
(22) Shareholders of Each Fund Will Be Subject to Taxation on Their Share of the Fund’s Taxable Income (Including the Fund’s Share of the Corresponding Master Fund’s Taxable Income), Whether or Not They Receive Cash Distributions.
| (23) | Shareholders Will Be Subject to Taxation on Their Allocable Share of the Fund’s Taxable Income, Whether or Not They Receive Cash Distributions. |
Shareholders of each Fund will be subject to U.S. federal income taxation and, in some cases, state, local, or foreign income taxation on their allocable share of the Fund’s taxable income, (including the corresponding Master Fund’s taxable income allocable to their Fund), whether or not they receive cash distributions from the Fund. Shareholders of a Fund may not receive cash distributions equal to their share of the Fund’s taxable income (including the corresponding Master Fund’s taxable income) or even the tax liability that results from such income.
(23) Items of Income, Gain, Deduction, Loss and Credit with respect to Shares of a Fund could be Reallocated if the IRS does not Accept the Assumptions or Conventions Used by a Fund or its Corresponding Master Fund in Allocating Such Items.
| (24) | Items of Income, Gain, Loss and Deduction With Respect to Shares could be Reallocated if the IRS does not Accept the Assumptions or Conventions Used by the Fund in Allocating Such Items. |
U.S. federal income tax rules applicable to partnerships are complex and often difficult to apply to publicly traded partnerships. Each Fund and each MasterThe Fund will apply
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certain assumptions and conventions in an attempt to comply with the applicable rules and to report items of income, gain, deduction, loss and creditdeduction to Shareholders of the FundFund’s Shareholders in a manner that reflects the Shareholders’ beneficial interest in such tax items, but these assumptions and conventions may not be considered to be in compliance with all aspects of the applicable tax requirements. It is possible that the IRS will successfully assert that the conventions and assumptions used by a Fund or a Masterthe Fund do not satisfy the technical requirements of the Code and/or Treasury Regulations and could require that items of income, gain, deduction, loss or creditand deduction be adjusted or reallocated in a manner that adversely affects one or more Shareholders.
(24) The Current Treatment of Long-Term Capital Gains Under Current U.S. Federal Income Tax Law May Be Adversely Affected, Changed or Repealed in the Future.
| (25) | The Current Treatment of Long-Term Capital Gains Under Current U.S. Federal Income Tax Law May Be Adversely Affected, Changed or Repealed in the Future. |
Under current law, long-term capital gains are taxed to non-corporate investors at a maximumreduced U.S. federal income tax rate of 15%.rates. This tax treatment may be adversely affected, changed or repealed by future changes in, or the expiration of, tax laws at any time and is currently scheduled to expire for tax years beginning after December 31, 2010.
time.
PROSPECTIVE INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISERS AND COUNSEL WITH RESPECT TO THE POSSIBLE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE SHARES OF ANY FUND;SHARES; SUCH TAX CONSEQUENCES MAY DIFFER INWITH RESPECT OFTO DIFFERENT INVESTORS.
(25) Failure of Futures Commission Merchants or Commodity Brokers to Segregate Assets May Increase Losses; Despite Segregation of Assets, the Master Fund Remains at Risk of Significant Losses Because the Master Fund May Only Receive a Pro-Rata Share of the Assets, or No Assets at All.
| (26) | Failure of Futures Commission Merchants or Commodity Brokers to Segregate Assets May Increase Losses; Despite Segregation of Assets, the Fund Remains at Risk of Significant Losses Because the Fund May Only Receive a Pro-Rata Share of the Assets, or No Assets at All. |
The Commodity Exchange Act requires a clearing broker to segregate all funds received from customers from such broker’s proprietary assets. If the Commodity Broker fails to do so, the assets of the Master FundsFund might not be fully protected in the event of the Commodity Broker’s bankruptcy. Furthermore, in the event of the Commodity Broker’s bankruptcy, any Masterthe Fund Units could be limited to recovering either a pro rata
share of all available funds segregated on behalf of the Commodity Broker’s combined customer accounts or the Master Fund Units may not recover any assets at all, even though certain property specifically traceable to a particular Masterthe Fund was held by the Commodity Broker. The Commodity Broker may, from time-to-time, have been the subject of certain regulatory and private causes of action. Such material actions, if any, are described under “The Commodity Broker.”
In the event of a bankruptcy or insolvency of any exchange or a clearing house, a Masterthe Fund could experience a loss of the funds deposited through its Commodity Broker as margin with the
28
exchange or clearing house, a loss of any unrealized profits on its open positions on the exchange, and the loss of unrealized profits on its closed positions on the exchange.
| (27) | The Effect Of Market Disruptions and Government Intervention Are Unpredictable And May Have An Adverse Effect On The Value Of Your Shares. |
(26) Regulatory Changes or Actions May Alter the Nature of an InvestmentThe global financial markets have in the Funds.
Considerable regulatory attentionpast few years gone through pervasive and fundamental disruptions that have led to extensive and unprecedented governmental intervention. Such intervention has in certain cases been focusedimplemented on non-traditional investment pools which are publicly distributed in the United States.There is a possibility of future regulatory changes altering, perhaps to a material extent, the nature of an investment in a Fund or the“emergency” basis, suddenly and substantially eliminating market participants’ ability of a Fund to continue to implement itscertain strategies or manage the risk of their outstanding positions. In addition - as one would expect given the complexities of the financial markets and the limited time frame within which governments have felt compelled to take action - these interventions have typically been unclear in scope and application, resulting in confusion and uncertainty which in itself has been materially detrimental to the efficient functioning of the markets as well as previously successful investment strategy.
strategies.
The futures markets are subject to comprehensive statutes, regulations, and margin requirements. In addition, the CFTC and the exchanges are authorized to take extraordinary actionsFund may incur major losses in the event of disrupted markets and other extraordinary events in which historical pricing relationships become materially distorted. The risk of loss from pricing distortions is compounded by the fact that in disrupted markets many positions become illiquid, making it difficult or impossible to close out positions against which the markets are moving. The financing available to market participants from their banks, dealers and other counterparties is typically
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reduced in disrupted markets. Such a reduction may result in substantial losses to the affected market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limitsparticipants. Market disruptions may from time to time cause dramatic losses, and the suspension of trading. such events can result in otherwise historically low-risk strategies performing with unprecedented volatility and risk.
| (28) | Regulatory Changes or Actions, Including the Implementation of the Dodd-Frank Act, May Alter the Operations and Profitability of the Fund. |
The regulation of futurescommodity interest transactions in the United States is a rapidly changing area of law and is subject to ongoing modification by governmentgovernmental and judicial action. Considerable regulatory attention has been focused on non-traditional investment pools that are publicly distributed in the United States. The effectDodd-Frank Act seeks to regulate markets, market participants and financial instruments that previously have been unregulated and substantially alters the regulation of any futuremany other markets, market participants and financial instruments. Because many provisions of the Dodd-Frank Act require rulemaking by the applicable regulators before becoming fully effective and the Dodd-Frank Act mandates multiple agency reports and studies (which could result in additional legislative or regulatory change on a Fundaction), it is impossibledifficult to predict butthe impact of the Dodd-Frank Act on the Fund, the Managing Owner, and the markets in which the Fund may invest, the Net Asset Value of the Fund or the market price of the Shares. The Dodd-Frank Act could be substantialresult in the Fund’s investment strategy becoming non-viable or non-economic to implement. Therefore, the Dodd-Frank Act and adverse.regulations adopted pursuant to the Dodd-Frank Act could have a material adverse impact on the profit potential of the Fund and in turn the value of your Shares.
(27) Lack of Independent Advisers Representing Investors.
| (29) | Lack of Independent Advisers Representing Investors. |
The Managing Owner has consulted with counsel, accountants and other advisers regarding the formation and operation of the Funds and the Master Funds.Fund. No counsel has been appointed to represent you in connection with the offering of the Shares. Accordingly, you should consult your own legal, tax and financial advisers regarding the desirability of an investment in the Shares.
(28) Possibility of Termination of the Funds or Master Funds May Adversely Affect Your Portfolio.
| (30) | Possibility of Termination of the Fund May Adversely Affect Your Portfolio. |
The Managing Owner may withdraw from the Trust upon 120 days’ notice, which would cause the Funds and the Master FundsFund to terminate unless a substitute managing owner werewas obtained. Owners of 50% of the Shares of any Fund have the power to terminate the Fund. If it is so exercised, investors who may wish to continue to invest in a Fund’scorrespondingvehicle that tracks the Fund’s Index through a fund vehicle will have to find another vehicle, and may not be able to find another vehicle that offers the same features as the Fund. See “Description of the Shares and the Master Fund Units;Shares; The Funds;Fund; Certain Material Terms of the Trust Declarations –Declaration - Termination Events” for a summary of termination events. Such detrimental developments could cause you to liquidate your investments and upset the overall maturity and timing of your investment portfolio. If the registrations with the CFTC or memberships in the NFA of the Managing Owner or the Commodity Broker were revoked or suspended, such entity would no longer be able to provide services to the Funds and the Master Funds.Fund.
(29) Shareholders Do Not Have the Rights Enjoyed by Investors in Certain Other Vehicles.
| (31) | Shareholders Do Not Have the Rights Enjoyed by Investors in Certain Other Vehicles. |
As interests in separate series of a Delaware statutory trust, the Shares have none of the statutory rights normally associated with the ownership of shares of a corporation (including, for example, the right to bring “oppression” or “derivative” actions). In addition, the Shares have limited voting and distribution rights (for example, Shareholders do not have the right to elect directors and the Funds areFund is not required to pay regular distributions, although the FundsFund may pay distributions in the discretion of the Managing Owner).
| (32) | An Investment in the Shares May Be Adversely Affected by Competition From Other Methods of Investing in Commodities. |
(30) Competing Claims Over OwnershipThe Fund constitutes a relatively new type of Intellectual Property Rights Relatedinvestment vehicle. The Fund competes with other financial vehicles, including other commodity pools, hedge funds, traditional debt and equity securities issued by companies in the commodities industry, other securities backed by or linked to such commodities, and direct investments in the Funds Could Adversely Affect the Fundsunderlying commodities or commodity futures contracts. Market and an Investment in Shares.financial conditions, and other
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conditions beyond the Managing Owner’s control, may make it more attractive to invest in other financial vehicles or to invest in such commodities directly, which could limit the market for the Shares and reduce the liquidity of the Shares.
| (33) | Competing Claims Over Ownership of Intellectual Property Rights Related to the Fund Could Adversely Affect the Fund and an Investment in Shares. |
While the Managing Owner believes that all intellectual property rights needed to operate the Funds and the Master FundsFund are either owned by or licensed to the Managing Owner or have been obtained, third parties may allege or assert ownership of intellectual property rights which may be related to the design, structure and operations of a Fund and its corresponding Masterthe Fund. To the extent any claims of such ownership are brought or any proceedings are instituted to assert such claims, the negotiation, litigation or settlement of such claims, or the ultimate disposition of such claims in a court of law if a suit is brought, may adversely affect athe Fund and its corresponding Master Funds and an investment in the Shares, for example, resulting in expenses or damages or the termination of the Funds and the Master Funds.Fund.
29
(31) The Value of the Shares Will be Adversely Affected if the Funds or the Master Funds are Required to Indemnify the Trustee or the Managing Owner.
| (34) | The Value of the Shares Will be Adversely Affected if the Fund is Required to Indemnify the Trustee or the Managing Owner. |
Under the Trust Declarations,Declaration, the Trustee and the Managing Owner have the right to be indemnified for any liability or expense either incurs without negligence or misconduct. That means the Managing Owner may require the assets of one or more of the Master FundsFund to be sold in order to cover losses or liability suffered by it or by the Trustee. Any sale of that kind would reduce the net asset value of the Master Fund and, consequently, the value of the Shares of its corresponding Fund.Shares.
(32) The Net Asset Value Calculation of the Master Funds May Be Overstated or Understated Due to the Valuation Method Employed When a Settlement Price is not Available on the Date of Net Asset Value Calculation.
| (35) | The Net Asset Value Calculation of the Fund May Be Overstated or Understated Due to the Valuation Method Employed When a Settlement Price is not Available on the Date of Net Asset Value Calculation. |
Calculating the net asset value of each Masterthe Fund (and, in turn, its corresponding Fund) includes, in part, any unrealized profits or losses on open commodity futures contracts. Under normal circumstances, the net asset value of each Masterthe Fund reflects the settlement price of open commodity futures
contracts on the date when the net asset value is being calculated. However, if a commodity futures contract traded on an exchange (both U.S. and, to the extent it becomes applicable, non-U.S. exchanges) could not be liquidated on such day (due to the operation of daily limits or other rules of the exchange upon which that position is traded or otherwise), the settlement price onManaging Owner may value such futures contract pursuant to policies the most recent day onManaging Owner has adopted, which the position could have been liquidated will be the basis for determining the market value of such position for such day.are consistent with normal industry standards. In such a situation, there is a risk that the calculation of the net asset value of the applicable Master Fund on such day will not accurately reflect the realizable market value of such commodity futures contract. For example, daily limits are generally triggered in the event of a significant change in market price of a commodity futures contract. Therefore, as a result of the daily limit, the current settlement price is unavailable. Because the settlement price onManaging Owner may value such futures contract pursuant to policies the most recent day onManaging Owner has adopted, which the position could have been liquidated would be used in lieu of the actual settlement price on the date of determination,are consistent with normal industry standards, there is a risk that the resulting calculation of the net asset value of the applicable Master Fund (and, in turn, itscorresponding Fund) could be under or overstated, perhaps to a significant degree.
(33) Although the Shares of Each Fund are Limited Liability Investments, Certain Circumstances such as Bankruptcy of a Fund or Indemnification of Such Fund by the Shareholder will Increase a Shareholder’s Liability.
| (36) | Although the Shares are Limited Liability Investments, Certain Circumstances such as Bankruptcy of the Fund or Indemnification of the Fund by the Shareholders will Increase the Shareholders’ Liability. |
The Shares of each Fund are limited liability investments; investors may not lose more than the amount that they invest plus any profits recognized on their investment. However, Shareholders could be required, as a matter of bankruptcy law, to return to the estate of suchthe Fund any distribution they received at a time when the Fund was in fact insolvent or in violation of its Trust Declaration. In addition, although the Managing Owner is not aware of this provision ever having been invoked in the case of any public futures fund, Shareholders agree in the Trust Declaration that they will indemnify the Fund for any harm suffered by it as a result of
Shareholders’ actions unrelated to the business of the Fund, or
taxes imposed on the Shares by the states or municipalities in which such investors reside.
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| (37) | An Insolvency Resulting From Another Series in the Trust or the Trust Itself May Have a Material Adverse Effect On the Fund. |
The Fund is a series or a part of a Delaware statutory trust. Pursuant to Delaware law, the organization of the Trust provides that the assets and liabilities of the Fund are separate from the assets and liabilities of all other series of the Trust, as well as the larger Trust itself. Though such organization may, under state law, protect the assets of the Fund in an insolvency action brought by the creditors of another series of the Trust, this may be insufficient to protect the assets of the Fund from such creditors in an insolvency action in Federal court, or in a court in a foreign jurisdiction. Accordingly, an insolvency resulting from one or more other series in the Trust or the Trust itself may have a material adverse effect on the Fund. The material risks associated with the other series of the Trust have not been included in this disclosure document.
INVESTMENT OBJECTIVES OF THE FUNDSOBJECTIVE
Each Fund and its corresponding MasterThe Fund seeks to track changes, whether positive or negative, in the level of its correspondingthe DBIQ Optimum Yield Silver Index Excess Return™, or the Index, over time, plus the excess, if any, of its corresponding Masterthe Fund’s interest income from its holdings of United States Treasury and other high credit quality short-term fixed income securities over the expenses of each Fund and its corresponding Master Fund.expenses. The Shares of each Fund are designed for investors who want a cost-effective and convenient way to invest in a commodity futures on U.S. and non-U.S. markets.
Advantages of investing in the Shares include:
| • | | Ease and Flexibility of Investment. The Shares trade on the AmexNYSE Arca and provide institutional and retail investors with indirect access to commodity futures markets. The Shares may be bought and sold on the AmexNYSE Arca like other exchange-listed securities. Retail investors may purchase and sell Shares through traditional brokerage accounts. |
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| • | | Margin. Shares are eligible for margin accounts. |
| • | | Diversification. The Shares may help to diversify a portfolio because historically the Indexes have |
| | Index has tended to exhibit low to negative correlation with both equities and conventional bonds and positive correlation to inflation. |
| • | | Optimum Yield™. The Shares seek to followtrack the Index, which employs the Optimum Yield™ version of their respective Index,rolling methodology, which seeks to minimize the effects of negative roll yield that may be experienced by conventional commodities indexes. |
| • | | Transparency. The Shares provide a more direct investment in commodities than mutual funds that invest in commodity-linked notes, which have implicit imbedded costs and credit risk. |
Investing in the Shares does not insulate Shareholders from certain risks, including price volatility.
Each Fund pursues its investment objective by investing substantially all of its assets in its corresponding Master Fund. Each Master Fund pursues its investment objective by investing in a portfolio of exchange-traded futures on the commodities comprising the corresponding Index.
The Trust is comprised of each of the following Funds, each of which, in turn, intends to reflect the below sectors:
PowerShares DB Energy Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Energy Excess Return™ (DBLCI-OY Energy ER™), which is intended to reflect the energy sector.
PowerShares DB Oil Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Crude Oil Excess Return™ (DBLCI-OY CL ER™), which is intended to reflect the changes in market value of the crude oil sector.
PowerShares DB Precious Metals Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Precious Metals Excess Return™ (DBLCI-OY Precious Metals ER™), which is intended to reflect the precious metals sector.
PowerShares DB Gold Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Gold Excess Return™ (DBLCI-OYGC ER™), which is intended to reflect the changes in market value of the gold sector.
PowerShares DB Silver Fund is designed to track the Deutsche Bank Liquid Commodity Index–DBIQ Optimum Yield Silver Index Excess Return™ (DBLCI-OY(DBIQ-OY SI ER™), which is intended to reflect the changes in market value of the silver sector.
PowerShares DB Base Metals Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Industrial Metals Excess Return™ (DBLCI-OY Industrial Metals ER™), which is intended to reflect the base metals sector.
PowerShares DB Agriculture Fund is designed to track the Deutsche Bank Liquid Commodity Index–Optimum Yield Agriculture Excess Return™ (DBLCI-OY Agriculture ER™), which is intended to reflect the agricultural sector.
If the Managing Owner determines in its commercially reasonable judgment that it has become impracticable or inefficient for any reason for any Masterthe Fund to gain full or partial exposure to anythe Index Commodity by investing in a specific futures contract that comprises the applicable Index, such Masterthe Fund may invest in a futures contract referencing the particular Index Commodity other than the specific contract that comprises the applicable Index or, in the alternative, invest in other futures contracts not based on the particular Index Commodity if, in the commercially reasonable judgment of the Managing Owner, such futures contracts tend to exhibit trading prices that correlate with a futures contract that comprises the applicable Index.
EachThe Fund will make distributions at the discretion of the Managing Owner. To the extent that a Masterthe Fund’s actual and projected interest income from its holdings of United States Treasury securities and other high credit quality short-term fixed income securities exceeds the actual and projected fees and expenses of such Master Fund and its correspondingthe Fund, the Managing Owner expects periodically to make distributions of the amount of such excess. The FundsFund currently dodoes not expect to make distributions with respect to capital gains. Depending on the applicable Fund’s performance for the taxable
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year and your own tax situation for such year, your income tax liability for the taxable year for your allocable share of suchthe Fund’s net ordinary income or loss and capital gain or loss may exceed any distributions you receive with respect to such year.
31
The sponsor of eachthe Index, or the Index Sponsor, is Deutsche Bank AG London. DBLCI™ and Deutsche Bank Liquid Commodity Index™ are trade marks of Deutsche Bank AG and are the subject of Community Trade Mark Nos. 3055043 and 3054996. Trade Mark applications in the United States are pending with respect to both the Trust and aspects of eachthe Index. Deutsche Bank AG is an affiliate of the Fund the Master Fund and the Managing Owner.
Under the Trust Declarations of each Fund and corresponding Master Fund,Declaration, Wilmington Trust Company, the Trustee of each Fund and each corresponding Masterthe Fund, has delegated to the Managing Owner the exclusive management and control of all aspects of the business of each Fund and its corresponding Masterthe Fund. The Trustee will have no duty or liability to supervise or monitor the performance of the Managing Owner, nor will the Trustee have any liability for the acts or omissions of the Managing Owner.
The Shares of each Fund are intended to provide investment results that generally correspond to the changes, positive or negative, in the levels of the Fund’s corresponding Index over time.
The value of the Shares of each Fund is expected to fluctuate in relation to changes in the value of its corresponding Master Fund’s portfolio. The market price of the Shares of a Fund may not be identical to the net asset value per Share, but these two valuations are expected to be very close. See “The Risks You Face – (2) Net Asset Value May Not Always Correspond to Market Price and, as a Result, Baskets may be Created or Redeemed at a Value that Differs from the Market Price of the Shares.”
The Index Sponsor publishes the closing level of the Index daily. The Managing Owner publishes the net asset value of the Fund and the net asset value per Share daily. Additionally, the Index Sponsor publishes the intra-day Index level, and the Managing Owner publishes the indicative value per Share of the Fund (quoted in U.S. dollars) once every fifteen seconds throughout each trading day.
All of the foregoing information is published as follows:
The intra-day level of the Index (symbol: DBSLIX) and the intra-day indicative value per
Share (symbol: DBS.IV) (each quoted in U.S. dollars) are published once every fifteen seconds throughout each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbxus.com, or any successor thereto.
The current trading price per Share of each Fund(symbol: DBS) (quoted in U.S. dollars) is published continuously under its ticker symbol as trades occur throughout each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.comwww.dbxus.com, or any successor thereto.
The most recent end-of-day Index closing level of each Index(symbol: DBCMYESI) is published under its own symbol as of the close of business for the AmexNYSE Arca each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.comwww.dbxus.com, or any successor thereto.
The most recent end-of-day net asset value of eachthe Fund (symbol: DBS.NV) is published under its own symbol as of the close of business on Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.comwww.dbxus.com, or any successor thereto. In addition, the most recent end-of-day net asset value of eachthe Fund (symbol: DBS.NV) is published the following morning on the consolidated tape.
End of Day Index Closing Level Symbols; End-of-Day Net Asset Value Symbols
PowerShares DB Energy Fund. The end-of-day closing level of the DBLCI-OY Energy ER is published under the symbol DBENIX. The end-of-day net asset value of PowerShares DB Energy Fund is published under the symbol DBE.NV.
PowerShares DB Oil Fund. The end-of-day closing level of the DBLCI-OY CL ER is published under the symbol DBOLIX. The end-of-day net asset value of PowerShares DB Oil Fund is published under the symbol DBO.NV.
PowerShares DB Precious Metals Fund. The end-of-day closing level of the DBLCI-OY Precious Metals ER is published under the symbol DBPMIX. The end-of-day net asset value of PowerShares DB Precious Metals Fund is published under the symbol DBP.NV.
PowerShares DB Gold Fund. The end-of-day closing level of the DBLCI-OY GC ER is published under the symbol DGLDIX. The end-of-day net asset value of PowerShares DB Gold Fund is published under the symbol DGL.NV.
PowerShares DB Silver Fund. The end-of-day closing level of the DBLCI-OY SI ER is published under the symbol DBSLIX. The end-of-day net asset value of PowerShares DB Silver Fund is published under the symbol DBS.NV.
PowerShares DB Base Metals Fund. The end-of-day closing level of the DBLCI-OY Industrial Metals ER is published under the symbol DBBMIX. The end-of-day net asset value of PowerShares DB Base Metals Fund is published under the symbol DBB.NV.
PowerShares DB Agriculture Fund. The end-of-day closing level of the DBLCI-OY Agriculture ER is published under the symbol DBAGIX. The end-of-day net asset value of PowerShares DB Agriculture Fund is published under the symbol DBA.NV.
The Managing Owner publishes the net asset value of each Fund and the net asset value per Share of each Fund daily. Additionally, the Index Sponsor
32
publishes the intra-day level of each Index, and the Managing Owner publishes the indicative value per Share of each Fund (quoted in U.S. dollars) once every fifteen seconds throughout each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website at http://www.dbfunds.db.com, or any successor thereto. All of the foregoing information is published underwith respect to the following symbols:
Intra-Day Index, Level Symbols and Intra-Day Indicative Values Per Share Symbols
PowerShares DB Energy Fund. The intra-day index level ofincluding the DBLCI-OY Energy ER is published under the symbol DBENIX. The intra-day indicative value per Share of PowerShares DB Energy Fund is published under the symbol DBE.IV.
PowerShares DB Oil Fund. The intra-day index level of the DBLCI-OY CL ER is published under the symbol DBOLIX. The intra-day indicative value per Share of PowerShares DB Oil Fund is published under the symbol DBO.IV.
PowerShares DB Precious Metals Fund. The intra-day index level of the DBLCI-OY Precious Metals ER is published under the symbol DBPMIX. The intra-day indicative value per Share of PowerShares DB Precious Metals Fund is published under the symbol DBP.IV.
PowerShares DB Gold Fund. The intra-day index level of the DBLCI-OY GC ER is published under the symbol DGLDIX. The intra-day indicative value per Share of PowerShares DB Gold Fund is published under the symbol DGL.IV.
PowerShares DB Silver Fund. The intra-day index level of the DBLCI-OY SI ER is published under the symbol DBSLIX. The intra-day indicative value per Share of PowerShares DB Silver Fund is published under the symbol DBS.IV.
PowerShares DB Base Metals Fund. The intra-day index level of the DBLCI-OY Industrial Metals ER is published under the symbol DBBMIX. The intra-day indicative value per Share of PowerShares DB Base Metals Fund is published under the symbol DBB.IV.
PowerShares DB Agriculture Fund. The intra-day index level of the DBLCI-OY Agriculture ER is published under the symbol DBAGIX. The intra-day indicative value per Share of PowerSharesDB Agriculture Fund is published under the symbol DBA.IV.
Each Index’s history, is also availablepublished athttps://index.db.com.
The Index Sponsor obtains information for inclusion in, or for use in the calculation of, the IndexesIndex from sources the Index Sponsor considers reliable. None of the Index Sponsor, the Managing Owner, the Funds, the Master FundsFund or any of their respective affiliates accepts responsibility for or guarantees the accuracy and/or completeness of any of the IndexesIndex or any data included in any of the Indexes.
Index.
The intra-day indicative value per Share of each Fund is based on the prior day’s final net asset value, adjusted four times per minute throughout the trading day to reflect the continuous price changes of the Master Fund’s futures positions. The final net asset value of eachthe Fund and the final net asset value per Share of each Fund is calculated as of the closing time of the AmexNYSE Arca or the last to close of the exchangesexchange(s) on which the corresponding Master Fund’s futures contracts are traded, whichever is later, and posted in
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the same manner. Although a time gap may exist between the close of the AmexNYSE Arca and the close of the exchangesexchange(s) on which the Master Fund’s futures contracts are traded, there is no effect on the net asset value calculations as a result.
There can be no assurance that each Fund or its correspondingMasterthe Fund will achieve its investment objective or avoid substantial losses. Each Master Fund does not have any performance history. The value of the Shares is expected to fluctuate generally in relation to changes in the value of the corresponding Master Fund Units.
Role of Managing Owner
The Managing Owner serves as the commodity pool operator and commodity trading advisor of each Fund and each Masterthe Fund.
Specifically, with respect to each Fund and each Master Fund, the Managing Owner:
selects the Trustee, administrator,Commodity Broker, Administrator, Custodian and Transfer Agent, distributor, marketing agent and auditor;
negotiates various agreements and fees; and
33
performs such other services as the Managing Owner believes that the Fund and its corresponding Master Fund may from time-to-time require.
Specifically, with respect to each Master Fund, the Managing Owner:
selects the Commodity Broker;require; and
monitors the performance results of the Master Fund’s portfolio and reallocates assets within such portfolio with a view to causing the performance of the Master Fund’s portfolio to track its corresponding Index over time.
The Managing Owner is registered as a commodity pool operator and commodity trading advisor with the Commodity Futures Trading CommissionCFTC and is a member of the National Futures Association.
NFA.
The principal office of the Managing Owner is located at 60 Wall Street, New York, New York 10005. The telephone number of the Managing Owner is (212) 250-5883.
Market Diversification
As global markets and investing become more complex, the inclusion of futures may continue to increase in traditional portfolios of stocks and bonds managed by advisors seeking improved balance and diversification. The globalization of the world’s economy has the potential to offer significant investment opportunities, as major political and economic events continue to have an influence, in some cases a dramatic influence, on the world’s markets, creating risk but also providing the potential for profitable trading opportunities. By allocating a portion of the risk segment of their portfolios to one or more of the Funds, each of which invests through its corresponding Master Fund and investing in futures comprising its corresponding Index, investors have the potential, if their Fund investments are successful, to reduce the volatility of their portfolios over time and the dependence of such portfolios on any single nation’s economy.
THE MASTER-FEEDER STRUCTURE
Each Fund invests substantially all of its assets in a separate Master Fund in a master-feeder structure. Each Fund holds no investment assets otherthan Master Fund Units in its corresponding Master Fund. Each Master Fund is wholly-owned by its corresponding Fund and the Managing Owner. Each Share issued by a Fund correlates with a Master Fund Unit issued by its corresponding Master Fund and held by the Fund.
[Remainder of page left blank intentionally.]
34
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PERFORMANCE OF POWERSHARES DB ENERGYSILVER FUND ((TICKER: DBE)DBS), A SERIES OF
POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
Name of Pool: PowerShares DB Energy Fund
Type of Pool: Public, Exchange-Listed Commodity Pool
Inception of Trading: January 2007
Aggregate Gross Capital Subscriptions as of April 30, 2008: $136,489,792
Net Asset Value as of April 30, 2008: $120,251,920
Net Asset Value per Share as of April 30, 2008: $42.95
Worst Monthly Drawdown: (4.07)% August 2007
Worst Peak-to-Valley Drawdown: (4.07)% July – August 2007
| | | | | | | | | | | | |
Monthly Rate of Return | | | | 2008(%) | | | | | | 2007(%) | | |
January | | | | (1.17) | | | | | | 0.08 | | |
February | | | | 10.62 | | | | | | 5.80 | | |
March | | | | 1.35 | | | | | | 5.33 | | |
April | | | | 10.21 | | | | | | 0.86 | | |
May | | | | | | | | | | (0.92) | | |
June | | | | | | | | | | 3.41 | | |
July | | | | | | | | | | 2.26 | | |
August | | | | | | | | | | (4.07) | | |
September | | | | | | | | | | 7.78 | | |
October | | | | | | | | | | 12.90 | | |
November | | | | | | | | | | (2.56) | | |
December | | | | | | | | | | 4.95* | | |
Compound Rate of Return | | | | 22.12% (4 months) | | | | | | 40.68% | | |
* | The December 2007 return of 4.95% includes the $0.90 per Share distribution made to Shareholders of record as of December 19, 2007. Prior to the December 28, 2007 distribution, the pool’s return for December 2007 was 7.64%. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
PERFORMANCE OF POWERSHARES DB OIL FUND(TICKER: DBO), A SERIES OF POWERSHARES
DB MULTI-SECTOR COMMODITY TRUST
Name of Pool:PowerShares DB Oil Fund
Type of Pool:Public, Exchange-Listed Commodity Pool
Inception of Trading:January 2007
Aggregate Gross Capital Subscriptions as of April 30, 2008: $81,941,766
Net Asset Value as of April 30, 2008: $41,992,898
Net Asset Value per Share as of April 30, 2008: $41.99
Worst Monthly Drawdown:(4.20)% August 2007
Worst Peak-to-Valley Drawdown:(4.63)% March – May 2007
| | | | | | | | | | | | |
Monthly Rate of Return | | | | 2008(%) | | | | | | 2007(%) | | |
January | | | | (3.00) | | | | | | (2.08) | | |
February | | | | 10.99 | | | | | | 6.13 | | |
March | | | | 0.30 | | | | | | 4.77 | | |
April | | | | 12.33 | | | | | | (2.20) | | |
May | | | | | | | | | | (2.48) | | |
June | | | | | | | | | | 4.58 | | |
July | | | | | | | | | | 2.65 | | |
August | | | | | | | | | | (4.20) | | |
September | | | | | | | | | | 9.59 | | |
October | | | | | | | | | | 15.62 | | |
November | | | | | | | | | | (2.39) | | |
December | | | | | | | | | | 4.85* | | |
Compound Rate of Return | | | | 21.29% (4 months) | | | | | | 38.48% | | |
* | The December 2007 return of 4.85% includes the $1.28 per Share distribution made to Shareholders of record as of December 19, 2007. Prior to the December 28, 2007 distribution, the pool’s return for December 2007 was 7.93%. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
See accompanying Footnotes to Performance Information on page 38.
35
PERFORMANCE OF POWERSHARES DB PRECIOUS METALS FUND(TICKER: DBP), A SERIES OF
POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
Name of Pool:PowerShares DB Precious Metals Fund
Type of Pool:Public, Exchange-Listed Commodity Pool
Inception of Trading:January 2007
Aggregate Gross Capital Subscriptions as of April 30, 2008: $129,955,414
Net Asset Value as of April 30, 2008: $109,163,451
Net Asset Value per Share as of April 30, 2008: $32.11
Worst Monthly Drawdown:(7.24)% March 2008
Worst Peak-to-Valley Drawdown:(12.22)% February – April 2008
| | | | |
Monthly Rate of Return | | 2008(%) | | 2007(%) |
January | | 10.18 | | 4.04 |
February | | 7.34 | | 2.77 |
March | | (7.24) | | (1.87) |
April | | (5.36) | | 2.10 |
May | | | | (2.43) |
June | | | | (3.14) |
July | | | | 2.96 |
August | | | | (0.77) |
September | | | | 16.86 |
October | | | | (5.36) |
November | | | | 3.95 |
December | | | | 4.04* |
Compound Rate of Return | | 3.82%
(4 months) | | 23.72% |
* | The December 2007 return of 4.04% includes the $0.60 per Share distribution made to Shareholders of record as of December 19, 2007. Prior to the December 28, 2007 distribution, the pool’s return for December 2007 was 5.58%. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
PERFORMANCE OF POWERSHARES DB GOLD FUND(TICKER: DGL), A SERIES OF
POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
Name of Pool:PowerShares DB Gold Fund
Type of Pool:Public, Exchange-Listed Commodity Pool
Inception of Trading:January 2007
Aggregate Gross Capital Subscriptions as of April 30, 2008: $88,298,604
Net Asset Value as of April 30, 2008: $77,399,092
Net Asset Value per Share as of April 30, 2008: $32.25
Worst Monthly Drawdown:(5.92)% April 2008
Worst Peak-to-Valley Drawdown:(11.35)% February – April 2008
| | | | |
Monthly Rate of Return | | 2008(%) | | 2007(%) |
January | | 9.67 | | 3.44 |
February | | 5.14 | | 2.44 |
March | | (5.77) | | (1.02) |
April | | (5.92) | | 2.86 |
May | | | | (2.93) |
June | | | | (1.99) |
July | | | | 2.61 |
August | | | | 0.68 |
September | | | | 9.81 |
October | | | | 6.01 |
November | | | | (1.26) |
December | | | | 3.54* |
Compound Rate of Return | | 2.22%
(4 months) | | 26.20% |
* | The December 2007 return of 3.54% includes the $0.81 per Share distribution made to Shareholders of record as of December 19, 2007. Prior to the December 28, 2007 distribution, the pool’s return for December 2007 was 5.84%. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
See accompanying Footnotes to Performance Information on page 38.
36
PERFORMANCE OF POWERSHARES DB SILVER FUND(TICKER: DBS), A SERIES OF
POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
Name of Pool:PowerShares DB Silver Fund
Type of Pool:Public, Exchange-Listed Commodity Pool
Inception of Trading:January 2007
Aggregate Gross Capital Subscriptions as of April 30, 2008October 31, 2013:: $76,737,120$520,816,331
Net Asset Value as of April 30, 2008:October 31, 2013:$67,231,81821,937,552
Net Asset Value per Share as of April 30, 2008October 31, 2013:: $30.56$36.74
Worst Monthly Drawdown:(12.95)(28.30)% March 2008September 2011
Worst Peak-to-Valley Drawdown:(16.48)(61.64)% February - April 20082011 – June 2013
| | | | |
Monthly Rate of Return | | 2008(%) | | 2007(%) |
January | | 12.83 | | 6.48 |
February | | 16.53 | | 4.13 |
March | | (12.95) | | (4.91) |
April | | (4.05) | | 0.49 |
May | | | | (0.26) |
June | | | | (7.80) |
July | | | | 4.60 |
August | | | | (6.71) |
September | | | | 13.76 |
October | | | | 3.92 |
November | | | | (2.92) |
December | | | | 2.02* |
Compound Rate of Return | | 9.81%
(4 months) | | 11.32% |
| | | | | | | | | | | | |
Monthly Rate of Return | | 2013(%) | | 2012(%) | | 2011(%) | | 2010(%) | | 2009(%) | | 2008(%) |
January | | 3.81 | | 19.37 | | (9.59) | | (4.06) | | 11.40 | | 12.83 |
February | | (9.70) | | 4.11 | | 19.91 | | 1.91 | | 4.16 | | 16.53 |
March | | (0.33) | | (6.33) | | 12.35 | | 6.15 | | (0.89) | | (12.95) |
April | | (15.25) | | (4.74) | | 28.28 | | 6.20 | | (5.23) | | (4.05) |
May | | (8.34) | | (10.74) | | (21.29) | | (1.11) | | 26.80 | | 1.67 |
June | | (13.21) | | (0.73) | | (9.25) | | 1.38 | | (13.00) | | 3.41 |
July | | 0.76 | | 1.05 | | 15.23 | | (3.92) | | 2.46 | | 1.68 |
August | | 20.29 | | 12.54 | | 4.06 | | 7.65 | | 6.73 | | (23.42) |
September | | (8.02) | | 10.10 | | (28.30) | | 12.36 | | 11.63 | | (10.23) |
October | | 0.69 | | (6.72) | | 14.33 | | 12.61 | | (2.45) | | (20.75) |
November | | | | 2.85 | | (4.61) | | 14.77 | | 13.71 | | 4.72 |
December | | | | (9.32) | | (15.07) | | 9.63 | | (9.03) | | 8.74* |
Compound Rate of Return | | (29.28)%
(10 months) | | 7.03% | | (11.13)% | | 81.95% | | 48.10% | | (27.16)% |
| * | The December 20072008 return of 2.02%8.74% includes the $0.87$0.22 per Share distribution made to Shareholders of record as of December 19, 2007.17, 2008. Prior to the December 28, 200730, 2008 distribution, the pool’s return for December 20072008 was 5.24%9.92%. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
PERFORMANCE OF POWERSHARES DB BASE METALS FUND(TICKER: DBB), A SERIES OF POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
Name of Pool:PowerShares DB Base Metals Fund
Type of Pool:Public, Exchange-Listed Commodity Pool
Inception of Trading:January 2007
Aggregate Gross Capital Subscriptions as of April 30, 2008: $185,673,254
Net Asset Value as of April 30, 2008: $110,586,933
Net Asset Value per Share as of April 30, 2008: $25.13
Worst Monthly Drawdown:(8.98)% December 2007*
Worst Peak-to-Valley Drawdown:(21.01)% July - December 2007**
| | | | |
Monthly Rate of Return | | 2008(%) | | 2007(%) |
January | | 8.82 | | (5.84) |
February | | 12.16 | | 3.70 |
March | | (5.59) | | 1.88 |
April | | (0.87) | | 10.74 |
May | | | | (2.40) |
June | | | | (1.19) |
July | | | | 4.86 |
August | | | | (7.61) |
September | | | | 2.37 |
October | | | | (2.43) |
November | | | | (5.95) |
December | | | | (8.98)* |
Compound Rate of Return | | 14.23%
(4 months) | | (12.00)% |
* | The December 2007 return of (8.98)% includes the $0.96 per Share distribution made to Shareholders of record as of December 19, 2007. Prior to the December 28, 2007 distribution, the pool’s return for December 2007 was (5.01)%. |
** | The Worst Peak-to-Valley Drawdown from July — December 2007 includes the effect of the distribution made to Shareholders of record as of December 19, 2007. Please see Footnote *. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
See accompanying Footnotes to Performance Information on page 38.
37
PERFORMANCE OF POWERSHARES DB AGRICULTURE FUND(TICKER: DBA), A SERIES OF POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
Name of Pool:PowerShares DB Agriculture Fund
Type of Pool:Public, Exchange-Listed Commodity Pool
Inception of Trading:January 2007
Aggregate Gross Capital Subscriptions as of April 30, 2008: $3,110,150,432
Net Asset Value as of April 30, 2008: $2,604,808,617
Net Asset Value per Share as of April 30, 2008: $36.58
Worst Monthly Drawdown:(12.43)% March 2008
Worst Peak-to-Valley Drawdown:(12.43)% February – March 2008
| | | | | | | | | | | | |
Monthly Rate of Return | | | | 2008(%) | | | | | | 2007(%) | | |
January | | | | 12.47 | | | | | | 3.44 | | |
February | | | | 12.90 | | | | | | 3.91 | | |
March | | | | (12.43) | | | | | | (5.81) | | |
April | | | | 0.27 | | | | | | (1.94) | | |
May | | | | | | | | | | 5.84 | | |
June | | | | | | | | | | (0.04) | | |
July | | | | | | | | | | (0.50) | | |
August | | | | | | | | | | 2.07 | | |
September | | | | | | | | | | 10.20 | | |
October | | | | | | | | | | (0.17) | | |
November | | | | | | | | | | 4.94 | | |
December | | | | | | | | | | 6.56* | | |
Compound Rate of Return | | | | 11.49% (4 months) | | | | | | 31.24% | | |
* | The December 2007 return of 6.56% includes the $0.45 per Share distribution made to Shareholders of record as of December 19, 2007. Prior to the December 28, 2007 distribution, the pool’s return for December 2007 was 7.89%. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
See accompanying Footnotes to Performance Information.
Footnotes to Performance Information
1. “Aggregate Gross Capital Subscriptions” is the aggregate of all amounts ever contributed to the relevant pool, including investors who subsequently redeemed their investments.
2. “Net Asset Value” is the net asset value of eachthe pool as of April 30, 2008.
October 31, 2013.
3. “Net Asset Value per Share” is the Net Asset Value of the relevant pool divided by the total number of Shares outstanding with respect to suchthe pool as of April 30, 2008.
October 31, 2013.
4. “Worst Monthly Drawdown” is the largest single month loss sustained since inception of trading. “Drawdown” as used in this section of the Prospectus means losses experienced by the relevant pool over the specified period and is calculated on a rate of return basis, i.e., dividing net performance by beginning equity. “Drawdown” is measured on the basis of monthly returns only, and does not reflect intra-month figures. “Month” is the month of the Worst Monthly Drawdown.
5. “Worst Peak-to-Valley Drawdown” is the largest percentage decline in the Net Asset Value per Share over the history of the relevant pool. This need not be a continuous decline, but can be a series of positive and negative returns where the negative returns are larger than the positive returns. “Worst Peak-to-Valley Drawdown” represents the greatest percentage decline from any month-end Net Asset Value per Share that occurs without such month-end Net Asset Value per Share being equaled or exceeded as of a subsequent month-end. For example, if the Net Asset Value per Share of a particularthe pool declined by $1 in each of January and February, increased by $1 in March and declined again by $2 in April, a “peak-to-valley drawdown” analysis conducted as of the end of April would consider that “drawdown” to be still continuing and to be $3 in amount, whereas if the Net Asset Value per Share had increased by $2 in March, the January-February drawdown would have ended as of the end of February at the $2 level.
6. “Compound Rate of Return” of the relevant is calculated by multiplying on a compound basis each of the monthly rates of return set forth in the chart above and not by adding or averaging such monthly rates of return. For periods of less than one year, the results are year-to-date.
38
DESCRIPTION OF THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD EXCESS RETURN™ SECTOR INDEXES
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7. The below table reflects both the name of the original Index that the Fund tracked up to and including December 31, 2010, or Original Index, and the name of the Index that the Fund tracked after December 31, 2010, or Renamed Index:
| | | | | | | | | | | | |
| Fund | | Index | |
| Original | | Renamed | | Dates | |
| | | | | Inception | | | Rename | |
PowerShares DB Silver Fund | | Deutsche Bank Liquid Commodity Index-Optimum Yield Silver Excess Return™ | | DBIQ Optimum Yield Silver Index Excess Return™ | | | 6/06 | | | | 10/10 | |
The Fund’s Original Index is identical to the Renamed Index, except with respect to the following non-substantive changes: (i) name of Index and (ii) ticker symbol. The above Inception Date remains identical. The Rename Date of October 2010 reflects the date on which each Original Index changed its name as reflected in the Renamed Index column above and such change and became effective in January 3, 2011. Except as provided in the immediately preceding sentence, all prior underlying formulae, data (e.g., closing levels, measure of volatility, all other numerical statistics and measures) and all other characteristics (e.g., Base Date, Index Sponsor, Inception Date, rolling, etc.) with respect to each Original Index is identical to its corresponding Renamed Index.
DBLCI™ and Deutsche Bank Liquid Commodity Index™ are trade marks of the Index Sponsor and are the subject of Community Trade Mark Nos. 3055043 and 3054996. Trade Mark applications in the United States are pending with respect to both the Trust and aspects of eachthe Index. The Fund and the Managing Owner have been licensed to use DBLCI™, Deutsche Bank Liquid Commodity Index™ and DBIQ™.
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DESCRIPTION OF THE DBIQ OPTIMUM YIELD SILVER INDEX EXCESS RETURN™
Trade Mark applications in the United States are pending with respect to the Trust and aspects of the Index. Any use of these marks must be with the consent of or under license from the Index Sponsor. The Fund Master Fund and the Managing Owner have been licensed to use DBLCI™ and, Deutsche Bank Liquid Commodity Index™ and DBIQ™. The Index Sponsor does not approve, endorse or recommend the Fund the Master Fund or the Managing Owner.
General
The Deutsche Bank Liquid Commodity Index–Each of the DBIQ Optimum Yield Index Excess Return™, or DBLCI-OYER™DBIQ-OYER™, and the DBIQ Index Excess Return™, or DBIQ ER™ (“DBIQ-OYER™” and “DBIQ ER™,” collectively, “DBIQ™” or “DBIQ ER™”), is intended to reflect the changes in market value, over time, positive or negative, in certain sectors of commodities, or an Index. Eachindex. The Index is (i) calculated on an excess return, or unfunded basis and (ii)basis. The Index is rolled in a manner which is aimed at potentially maximizing the roll benefits in backwardated markets and minimizing the losses from rolling in contangoed markets. Eachmarkets, or Optimum YieldTM. The Index is comprised of one or more underlying commodities,commodity (silver), or Index Commodities. The composition of Index Commodities with respect to each Index varies according to each specific sector that such Index intends to reflect. Each Index Commodity is assigned a weight, or Index Base Weight, which is intended to reflect the proportion of such Index Commodity relative to each Index.
Indexes and Covered SectorsCommodity.
The Indexes track the following sectors:
Deutsche Bank Liquid Commodity Index–DBIQ Optimum Yield EnergySilver Index Excess Return™, or DBLCI-OY Energy ER™, is intended to reflect the energy sector.
Deutsche Bank Liquid Commodity Index–Optimum Yield Crude Oil Excess Return™, or DBLCI-OY CL ER™, is intended to reflect the changes in market value of the crude oil sector.
Deutsche Bank Liquid Commodity Index–Optimum Yield Precious Metals Excess Return™, or DBLCI-OY Precious Metals ER™, is intended to reflect the precious metals sector.
Deutsche Bank Liquid Commodity Index–Optimum Yield Gold Excess Return™, or DBLCI-OY GC ER™, is intended to reflect the changes in market value of the gold sector.
Deutsche Bank Liquid Commodity Index–Optimum Yield Silver Excess Return™, or DBLCI-OY SI ER™,Index, is intended to reflect the changes in market value of the silver sector.
Deutsche Bank Liquid Commodity Index–Optimum Yield Industrial Metals Excess Return™, or DBLCI-OY Industrial Metals ER™, is intended to reflect the base metals sector.
Deutsche Bank Liquid Commodity Index–Optimum Yield Agriculture Excess Return™, or DBLCI-OY Agriculture ER™, is intended to reflect the agricultural sector.
DBLCI-OY CL ER™, DBLCI-OY GC ER™ and DBLCI-OY SI ER™ are Indexes with a single Index Commodity, or Single Commodity Sector Indexes.
EachThe Index has been calculated back to a base date, or Base Date. On the Base Date of December 2, 1988, the closing level of eachthe Index, or Closing Level, was 100.
The sponsor of the each Index is Deutsche Bank AG London, or Index Sponsor.
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39
SECTOR INDEXES OVERVIEW
| | | | | | | | | |
Index | | Index Commodity | | Exchange (Contract Symbol)* | | Base Date | | Index Base Weight | |
DBLCI-OY Energy ER™
| | Light, Sweet Crude Oil (WTI) | | NYMEX (CL) | | June 4, 1990 | | 22.50 | % |
| | Heating Oil | | NYMEX (HO) | | | | 22.50 | % |
| | Brent Crude Oil | | ICE (LCO) | | | | 22.50 | % |
| | RBOB Gasoline | | NYMEX (XB) | | | | 22.50 | % |
| | Natural Gas | | NYMEX (NG) | | | | 10.00 | % |
| | | | |
DBLCI-OY CL ER™
| | Light, Sweet Crude Oil (WTI) | | NYMEX (CL) | | December 2, 1988 | | 100.00 | % |
| | | | |
DBLCI-OY Precious Metals ER™
| | Gold | | COMEX (GC) | | December 2, 1988 | | 80.00 | % |
| | Silver | | COMEX (SI) | | | | 20.00 | % |
| | | | |
DBLCI-OY GC ER™
| | Gold | | COMEX (GC) | | December 2, 1988 | | 100.00 | % |
| | | | |
DBLCI-OY SI ER™
| | Silver | | COMEX (SI) | | December 2, 1988 | | 100.00 | % |
| | | | |
DBLCI-OY Industrial Metals ER™
| | Aluminum | | LME (MAL) | | September 3, 1997 | | 33.33 | % |
| | Zinc | | LME (MZN) | | | | 33.33 | % |
| | Copper - Grade A | | LME (MCU) | | | | 33.33 | % |
| | | | |
DBLCI-OY Agriculture ER™
| | Corn | | CBOT (C) | | December 2, 1988 | | 25.00 | % |
| | Wheat | | CBOT (W) | | | | 25.00 | % |
| | Soybeans | | CBOT (S) | | | | 25.00 | % |
| | Sugar | | ICE (SB) | | | | 25.00 | % |
*Connotes | the exchanges on which the underlying futures contracts are traded with respect to each Index Commodity. |
Legend:
“CBOT” means the Board of Trade of the City of Chicago Inc., or its successor.
“COMEX” means the Commodity Exchange Inc., New York or its successor.
“ICE” means the Intercontinental Exchange, Inc. or its successor.
“LME” means The London Metal Exchange Limited or its successor.
“NYMEX” means the New York Mercantile Exchange or its successor.
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Composition of Indexesthe Index
Each Index, except each Single Commodity SectorThe Index is composed of the notional amounts of eachamount of the underlying Index Commodities. Each Single Commodity Sector Index is composed of one underlying Index Commodity. The notional amountClosing Level of each Index Commodity included in each multi-sector Index is intended to reflect the changes in market value of each such Index Commodity within the specific Index. The closing level of each Index is calculated on each business day by the Index Sponsor based on the closing price of the futures contracts for each of the underlying Index CommoditiesCommodity and the notional amounts of such Index Commodities.Commodity.
Each Index, excluding each Single Commodity Sector Index, is rebalanced annually in November to ensure that each of the Index Commodities is weighted in the same proportion that such Index Commodities were weighted on the Base Date.
The composition of eachthe Index may be adjusted in the event that the Index Sponsor is not able to calculate the closing prices of the Index Commodities.Commodity.
EachThe 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 eachthe Index Commodity, the Master Fund employs a rule-based approach when it ‘rolls’ from one futures contract to another. Rather than select a new futures contract based on a predetermined schedule (e.g., monthly), eachthe 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 eachthe Index. As a result, eachthe Index Commodity is able to potentially maximize the roll benefits in backwardated markets and minimize the losses from rolling in contangoed markets.
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 anthe Index Commodity’s contribution to the Fund’s return while rolling in a backwardated market will tend to cause a push on anthe Index Commodity’s contribution to the Fund’s return.
EachThe Index is calculated in USD on both an excess return (unfunded) and total return (funded) basis.
The futures contract price for eachthe Index Commodity will be the exchange closing price for suchthe Index Commodity on each weekday when banks in New York, New York are open, or 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 eachthe Index Commodity. “Exchange Business Day” means, in respect of anthe Index Commodity, a day that is a trading day for suchthe Index Commodity on the relevant exchange (unless either an Index disruption event or force majeure event has occurred).
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Contract Selection
On the first New York business day, or Verification Date, of each month, each Index Commodity futures contract will be tested in order to determine whether to continue including it in the applicable 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 suchthe Index. For example, if the first New York business day is May 1, 2009,2014, and the Delivery Month of the Index Commodity futures contract currently in suchthe Index is June 2009,2014, a new Index Commodity futures contract with a later Delivery Month will be selected.
For each underlying Index Commodity of an Index, theThe new Index Commodity futures contract selected will be the Index Commodity futures contract with the best possible “implied roll yield” based on the closing price for each eligible Index Commodity futures contract. Eligible Index Commodity futures contracts are any Index Commodity futures contracts having a Delivery Month (i) no sooner than the month after the Delivery Month of the Index Commodity futures contract currently in suchthe Index, and (ii) no later than the 13th month after the Verification Date. For example, if the first New York business day is May 1, 20092014 and the Delivery Month of an Index Commodity futures contract currently in anthe Index is therefore June 2009,2014, the Delivery Month of an eligible new Index Commodity futures contract must be between July 20092014 and July 2010.2015. The implied roll yield is then calculated and the futures contract on the Index Commodity with the best possible implied roll yield is then selected. If two futures contracts have the same implied roll yield, the futures contract with the minimum number of months prior to the Delivery Month is selected.
41
After the futures contract selection, the monthly roll for eachthe Index Commodity that is subject to a roll in that particular month unwinds the old futures contract and enters a position in the new futures contract. This takes place between the 2nd and 6th Index Business Day of the month.
On each day during the roll period, new notional holdings are calculated. The calculations for the old futures contracts underlying the Index CommoditiesCommodity that are leaving anthe Index and the new futures contracts underlying the Index CommoditiesCommodity are then calculated.
On all days that are not monthly index roll days, the notional holdings of eachthe Index Commodity future remainsfutures remain constant.
Each Index is re-weighted on an annual basis on the 6th Index Business Day of each November.
The calculation of each Index is expressed as the weighted average return of the Index Commodities.
Change in the Methodology of anthe Index
The Index Sponsor employs the methodology described above and its application of such methodology shall be conclusive and binding. While the Index Sponsor currently employs the above described methodology to calculate eachthe Index, no assurance can be given that fiscal, market, regulatory, juridical or financial circumstances (including, but not limited to, any changes to or any suspension or termination of or any other events affecting anythe Index Commodity or a futures contract) will not arise that would, in the view of the Index Sponsor, necessitate a modification of or change to such methodology and in such circumstances the Index Sponsor may make any such modification or change as it determines appropriate. The Index Sponsor may also make modifications to the terms of anthe Index in any manner that it may deem necessary or desirable, including (without limitation) to correct any manifest or proven error or to cure, correct or supplement any defective provision of anthe Index. The Index Sponsor will publish notice of any such modification or change and the effective date thereof as set forth below.
Publication of Closing Levels and Adjustments
In order to calculate each indicative Index level, the Index Sponsor polls Reuters every 15 seconds to determine the real time price of each underlying futures contract with respect to eachthe Index Commodity of the applicable Index. The Index Sponsor then applies a set of rules to these values to create the indicative level of eachthe Index. These rules are consistent with the rules which the Index SponsorappliesSponsor applies at the end of each trading day to calculate the closing level of eachthe Index. A similar polling process is applied to the U.S. Treasury bills to determine the indicative value of the U.S. Treasury bills held by the Fund every 15 seconds throughout the trading day.
The intra-day indicative value per Share of each Fund is calculated by adding the intra-day U.S. Treasury bills level plus the intra-day level of the applicable Index which will then be applied to the last published net asset value of suchthe Fund, less accrued fees.
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The Index Sponsor publishes the closing level of eachthe Index daily. The Managing Owner publishes the net asset value of eachthe Fund and the net asset value per Share of each Fund daily. Additionally, the Index Sponsor publishes the intra-day Index level, and the Managing Owner publishes the indicative value per Share of each Fund (quoted in U.S. dollars) once every fifteen seconds throughout each trading day. All of the foregoing information is published as follows:
The current trading price per Share of each Fund (quoted in U.S. dollars) will be published continuously under its ticker symbol as trades occur throughout each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.com, or any successor thereto.
The most recent end-of-day closing level of each Index is published under its own symbol as of the close of business for the Amex each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.com, or any successor thereto. The most recent end-of-day net asset value of each Fund is published under its own symbol as of the close of business on Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.com, or any successor thereto. In addition, the most recent end-of-day net asset value of each Fund is published the following morning on the consolidated tape.
End of Day Index Closing Level Symbols; End-of-Day Net Asset Value Symbols
PowerShares DB Energy Fund. The end-of-day closingintra-day level of the DBLCI-OY Energy ER is published under the symbol DBENIX. The end-of-day net asset value of PowerShares DB Energy Fund is published under the symbol DBE.NV.
PowerShares DB Oil Fund. The end-of-day closing level of the DBLCI-OY CL ER is published
42
under the symbol DBOLIX. The end-of-day net asset value of PowerShares DB Oil Fund is published under the symbol DBO.NV.
PowerShares DB Precious Metals Fund. The end-of-day closing level of the DBLCI-OY Precious Metals ER is published under the symbol DBPMIX. The end-of-day net asset value of PowerShares DB Precious Metals Fund is published under the symbol DBP.NV.
PowerShares DB Gold Fund. The end-of-day closing level of the DBLCI-OY GC ER is published under the symbol DGLDIX. The end-of-day net asset value of PowerShares DB Gold Fund is published under the symbol DGL.NV.
PowerShares DB Silver Fund. The end-of-day closing level of the DBLCI-OY SI ER is published under the symbol DBSLIX. The end-of-day net asset value of PowerShares DB Silver Fund is published under the symbol DBS.NV.
PowerShares DB Base Metals Fund. The end-of-day closing level of the DBLCI-OY Industrial Metals ER is published under the symbol DBBMIX. The end-of-day net asset value of PowerShares DB Base Metals Fund is published under the symbol DBB.NV.
PowerShares DB Agriculture Fund. The end-of-day closing level of the DBLCI-OY Agriculture ER is published under the symbol DBAGIX. The end-of-day net asset value of PowerShares DB Agriculture Fund is published under the symbol DBA.NV.
The Managing Owner publishes the net asset value of each FundIndex (symbol: DBSLIX) and the net asset value per Share of each Fund daily. Additionally, the Index Sponsor publishes the intra-day level of each Index, and the Managing Owner publishes the indicative value per Share of each Fund (quoted(symbol: DBS.IV) (each quoted in U.S. dollars) are published once every fifteen seconds throughout each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbfunds.db.comwww.dbxus.com, or any successor thereto.
The current trading price per Share (symbol: DBS) (quoted in U.S. dollars) is published continuously as trades occur throughout each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbxus.com, or any successor thereto.
The most recent end-of-day Index closing level (symbol: DBCMYESI) is published as of the close of business for the NYSE Arca each trading day on the consolidated tape, Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbxus.com, or any successor thereto.
The most recent end-of-day net asset value of the Fund (symbol: DBS.NV) is published as of the close of business on Reuters and/or Bloomberg and on the Managing Owner’s website athttp://www.dbxus.com, or any successor thereto. In addition, the most recent end-of-day net asset value of the Fund (symbol: DBS.NV) is published the following morning on the consolidated tape.
All of the foregoing information is published underwith respect to the following symbols:
Intra-Day Index, Level Symbols and Intra-Day Indicative Values Per Share Symbols
PowerShares DB Energy Fund. The intra-day index level ofincluding the DBLCI-OY Energy ER is published under the symbol DBENIX. The intra-day indicative value per Share of PowerShares DB Energy Fund is published under the symbol DBE.IV.
PowerShares DB Oil Fund. The intra-day index level of the DBLCI-OY CL ER is published under the symbol DBOLIX. The intra-day indicative value per Share of PowerShares DB Oil Fund is published under the symbol DBO.IV.
PowerShares DB Precious Metals Fund. The intra-day index level of the DBLCI-OY Precious Metals ER is published under the symbol DBPMIX. The intra-day indicative value per Share of PowerShares DB Precious Metals Fund is published under the symbol DBP.IV.
PowerShares DB Gold Fund. The intra-day index level of the DBLCI-OY GC ER is published under the symbol DGLDIX. The intra-day indicative value per Share of PowerShares DB Gold Fund is published under the symbol DGL.IV.
PowerShares DB Silver Fund. The intra-day index level of the DBLCI-OY SI ER is published under the symbol DBSLIX. The intra-day indicative value per Share of PowerShares DB Silver Fund is published under the symbol DBS.IV.
PowerShares DB Base Metals Fund. The intra-day index level of the DBLCI-OY Industrial Metals ER is published under the symbol DBBMIX. The intra-day indicative value per Share of PowerShares DB Base Metals Fund is published under the symbol DBB.IV.
PowerShares DB Agriculture Fund. The intra-day index level of the DBLCI-OY Agriculture ER is published under the symbol DBAGIX. The intra-day indicative value per Share of PowerShares DB Agriculture Fund is published under the symbol DBA.IV.
Each Index’s history, is also availablepublished athttps://index.db.com.
The Index Sponsor obtains information for inclusion in, or for use in the calculation of, the IndexesIndex from sources the Index Sponsor considers reliable. None of the Index Sponsor, the Managing Owner, the Funds, the Master FundsFund or any of their respective affiliates accepts responsibility for or guarantees the accuracy and/or completeness of any of the IndexesIndex or any data included in any of the Indexes.Index.
All of the foregoing information with respect to each Index is also published athttps://index.db.com.
The Index Sponsor publishes any adjustments made to eachthe Index on the Managing Owner’s websitehttp://www.dbfunds.db.comwww.dbxus.com andhttps://index.db.com,, or any successor thereto.
43
Interruption of Index Calculation
Calculation of eachthe Index may not be possible or feasible under certain events or circumstances, including, without limitation, a systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance, that is beyond the reasonable control of the Index Sponsor and that the Index Sponsor determines affects anthe Index or anythe Index Commodity. Upon the occurrence of such force majeure events, the Index Sponsor may, in its discretion, elect one (or more) of the following options:
make such determinations and/or adjustments to the terms of suchthe Index as it considers appropriate to determine any closing level on any such appropriate Index business day;Business Day; and/or
defer publication of the information relating to suchthe Index until the next Index business dayBusiness Day on which it determines that no force majeure event exists; and/or
permanently cancel publication of the information relating to suchthe Index.
Additionally, calculation of anthe Index may also be disrupted by an event that would require the Index Sponsor to calculate the closing price in respect of the relevant Index Commodity on an alternative basis were such event to occur or exist on a day that is a trading day for such Index Commodity on the relevant exchange. If such an Index disruption event in relation to anthe Index Commodity as described in the prior sentence occurs and continues for a period of five successive trading days for suchthe Index Commodity on the relevant exchange, the Index Sponsor will, in its discretion, either
to continue to calculate the relevant closing price for a further period of five successive trading days for suchthe Index Commodity on the relevant exchange or
if such period extends beyond the five successive trading days, the Index Sponsor may elect to replace the exchange traded instrument with respect to a specific Index Commodity and shall make all necessary adjustments to the methodology and calculation of an Index as it deems appropriate.
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| | may elect to replace the exchange traded instrument with respect to the Index Commodity and shall make all necessary adjustments to the methodology and calculation of an Index as it deems appropriate. |
Historical Closing Levels
Set out below are the Closing Levels and related data with respect to eachthe Index as of April 30, 2008.
October 31, 2013.
With respect to each of the Closing Levels Tables, historic daily Index Closing Levels have been calculated with respect to eachthe Index since December 2, 1988, which is the Base Date of eachthe Index.
The Base Date for each Index is as follows:
| | |
Index | | Base Date |
| |
DBLCI-OY Energy ER™
| | June 4, 1990
|
| |
DBLCI-OY CL ER™
| | December 2, 1988
|
| |
DBLCI-OY Precious Metals ER™
| | December 2, 1988
|
| |
DBLCI-OY GC ER™
| | December 2, 1988
|
| |
DBLCI-OY SI ER™
| | December 2, 1988
|
| |
DBLCI-OY Industrial Metals ER™
| | September 3, 1997
|
| |
DBLCI-OY Agriculture ER™
| | December 2, 1988
|
Each Base Date was selected by the Index Sponsor based on the availability of price data with respect to the relevant underlying futures contracts on the Index Commodities of each Index.Commodity.
Since March 2003, the historic data with respect to the closing prices of futures contracts on Light, Sweet Crude Oil (CL), Heating Oil (HO), Wheat (W), Corn (C), Gold (GC) and Aluminum (MAL) originated from Reuters. Prior to March 2003, the closing prices of futures contracts on CL, HO, W, C, GC and MAL were obtained from publicly available information from Logical Information Machines (http://www.lim.com), Bloomberg and Reuters. The Index Sponsor has not independently verified the information extracted from these sources. The Index calculation methodology and commodity future selection are the same prior to and following March 2003.
Since June 2006, the historic data with respect to the closing prices of futures contracts on Brent Crude Oil (LCO), RBOB Gasoline (XB), Natural Gas (NG), Silver (SI), Zinc (MZN), Copper—Grade A (MCU), Soybeans (S) and Sugar (SB) originated from Reuters. Prior to June 2006, the closing prices of futures contracts on LCO, XB, NG, SI MZN, MCU, S and SB were obtained from publicly available information from Logical Information Machines (http:(http://www.lim.com)www.lim.com), Bloomberg and Reuters. The Index Sponsor has not independently verified the information extracted from these sources. The Index calculation methodology and commodity future selection are the same prior to and following June 2006.
44
The Index Sponsor used the return of Unleaded Gasoline (traded on the NYMEX under the symbol “HU”) as a proxy with respect to XB prior to November 2005. On and after November 2005, the Index Sponsor obtained historic data from Reuters with respect to XB. The Index Sponsor considers the use of HU as a proxy for XB prior to November 2005 to be appropriate because XB and HU are sufficiently similar in nature.
Complete price histories regarding certain futures contracts on the Index Commodities wereSilver may not have been available (e.g., due to lack of trading on specific days). In the event that prices on such futures contracts on the Index CommoditiesSilver were unavailable during a contract selection day, such futures contracts were excluded from the futures contract selection process. The Index Sponsor believes that the incomplete price histories should not have a material impact on the calculation of any of the Indexes.
Index.
Each Index Closing Level is equal to the weighted sum of the market value of the commodity futures contracts of all the respective Index CommoditiesCommodity that comprise each specificcomprises the Index. The market value of the commodity futures contracts of anthe Index Commodity is equal to the number of commodity futures
contracts of anthe Index Commodity held multiplied by the commodity futures contracts closing price of anthe Index Commodity.
The weight of eachBecause the Index is comprised by a single Index Commodity, of a specificthe Index is linked to the number of commodity futures contracts held of such Index CommodityBase Weight and the price of commodity futures contracts of the Index Commodity. The weight of an Index Commodity is defined as the market value of the commodity futures contracts of the Index Commodity divided by the sum of all market values of all commodity futures contracts of the Index Commodities that comprise and Index multiplied byweights will equal to 100%.
The Index CommoditiesCommodity Weights Tables reflect the range of the weightings with respect to each of the Index CommoditiesCommodity used to calculate eachthe Index.
The Index rules stipulate the composition and the holding in eachthe Index Commodity futures contract. Holdingscontracts. Such holdings in eachthe futures contracts underlying the Index Commodity change during the Index rebalancing periodsperiod just prior to the upcoming expiration of the applicable futures contracts as determined by the optimum yieldOptimum YieldTM roll rules.
Cautionary Statement–StatisticalStatement-Statistical Information
Various statistical information is presented on the following pages, relating to the Closing Levels of eachthe Index, on an annual and cumulative basis,including certain comparisons of eachthe Index to other commodities indices. In reviewing such information, prospective investors should consider that:
Changes in Closing Levels of eachthe Index during any particular period or market cycle may be volatile.
| | | | |
| Index | | Worst Peak- to-ValleyPeak-to-
Valley
Drawdown
and
Time
Period | | Worst
Monthly
Drawdown
and Month
and Year |
DBLCI-OY Energy ER™ | | (50.61)%,
11/96 — 2/99
| | (20.26)%,
1/91 |
DBLCI-OY CL ER™ | | (57.75)%,
11/96 — 2/99 | | (20.37)%,
1/91 |
DBLCI-OY Precious Metals ER™ | | (65.97)%,
12/88 — 3/01 | | (13.03)%,
4/04 |
DBLCI-OY GC ER™ | | (66.87)%,
12/88 — 3/01 | | (9.58)%,
3/90 |
DBLCI-OYDBIQ-OY SI ER™ | | (66.49)%,
12/88 —– 11/01 | | (23.26)(27.98)%,
4/04 |
DBLCI-OY Industrial Metals ER™ | | (44.10)%,
9/97 — 9/02 | | (9.39)%,
1/07 |
DBLCI-OY Agriculture ER™ | | (61.14)%,
4/96 — 4/02
| | (3.08)%
3/08
11 |
For example, the “Worst Peak-to-Valley Drawdown” of eachthe Index, represents the greatest percentage decline from any month-end Closing Level, without such Closing Level being equaled or exceeded as of a subsequent month-end, which occurred during the above-listed time period.
The “Worst Monthly Drawdown” of eachthe Index occurred during the above-listed month and year.
-36-
See “Volatility“Risk Factor (12) – Price Volatility May Possibly Cause the Total Loss of the Various Indexes”Your Investment.” on page 47.21.
Neither the fees charged by anythe Fund nor the execution costs associated with establishing futures positions in the Index CommoditiesCommodity are incorporated into the Closing Levels of eachthe Index. Accordingly, such Index Levels have not been reduced by the costs associated with an actual investment, such as athe Fund, with an investment objective of tracking the corresponding Index.
The Indexes wereIndex was established between May-Julyin June 2006 and are independentlyis calculated by Deutsche Bank AG London, the Index Sponsor. The Index calculation methodology and commodity futures contracts selection is the same before and after June 2006, as described above. Accordingly, the Closing Levels of the Index, terms of the Index methodology and Index Commodity, reflect an element of hindsight at the time the Index was established. See “The Risks You Face-(10) You May Not Rely on Past Performance or Index Results in Deciding Whether to Buy Shares” and “-(11) Fewer Representative Commodities May Result In Greater Index Volatility.”
45
| Deutsche Bank AG London, the Index Sponsor. The Index calculation methodology and commodity futures contracts selection is the same before and after May-July 2006, as described above. Accordingly, the Closing Levels of each Index, terms of each Index methodology and Index Commodities, reflect an element of hindsight at the time each Index was established. See “The Risks You Face—(10) You May Not Rely on Past Performance or Index Results in Deciding Whether to Buy Shares” and “—(11) Fewer Representative Commodities May Result In Greater Index Volatility.”
|
WHILE EACHTHE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE CORRESPONDING INDEX, BECAUSE EACHTHE INDEX WAS ESTABLISHED BETWEEN MAY-JULYIN JUNE 2006 (RENAMED OCTOBER 2010), CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT EACH INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT EACH FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE CORRESPONDING INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD SINCE INCEPTION WITH RESPECT TO EACH INDEX THROUGH MAY-JULY 2006, AS APPLICABLE, EACH INDEX’S CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’SMETHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF EACH FUND’S EFFORTS TO TRACK ITS CORRESPONDING INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR EACH FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH EACH FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
[Remainder of page left blank intentionally.]
46
Volatility of the Various Indexes
The following table1 reflects various measures of volatility2 of the history of each Index as calculated on an excess return basis:
| | | | | | | | | | | | | | | | | | | | | |
| Volatility Type | | DBLCI-OY
Energy ER™3 | | | DBLCI-OY
CL ER™4 | | | DBLCI-OY
Precious Metals
ER™4 | | | DBLCI-OY
GC ER™4 | | | DBLCI-OY
SI ER™4 | | | DBLCI-OY
Industrial
Metals ER™5 | | | DBLCI-OY
Agriculture
ER™4 | |
Daily volatility over full history | | 24.17 | % | | 26.37 | % | | 15.14 | % | | 14.16 | % | | 24.00 | % | | 18.49 | % | | 14.99 | % |
Average rolling 3 month daily volatility | | 22.68 | % | | 24.94 | % | | 14.20 | % | | 13.17 | % | | 22.54 | % | | 17.25 | % | | 14.38 | % |
Monthly return volatility | | 23.98 | % | | 25.15 | % | | 14.54 | % | | 13.60 | % | | 23.77 | % | | 18.67 | % | | 14.76 | % |
Average annual volatility | | 24.01 | % | | 25.97 | % | | 14.64 | % | | 13.67 | % | | 22.77 | % | | 17.31 | % | | 14.86 | % |
The following table reflects the daily volatility on an annual basis of each Index:
| | | | | | | | | | | | | | | | | | | | | |
| Year | | DBLCI-OY
Energy ER™3 | | | DBLCI-OY
CL ER™4 | | | DBLCI-OY
Precious Metals
ER™4 | | | DBLCI-OY GC
ER™4 | | | DBLCI-OY SI
ER™4 | | | DBLCI-OY
Industrial Metals
ER™5 | | | DBLCI-OY
Agriculture
ER™4 | |
| 1988 | | — | | | 26.56 | % | | 11.17 | % | | 11.41 | % | | 10.73 | % | | — | | | 9.60 | % |
| 1989 | | — | | | 28.11 | % | | 13.57 | % | | 13.14 | % | | 18.53 | % | | — | | | 15.30 | % |
| 1990 | | 44.82 | % | | 40.56 | % | | 16.71 | % | | 17.67 | % | | 19.41 | % | | — | | | 12.77 | % |
| 1991 | | 31.03 | % | | 29.57 | % | | 13.63 | % | | 12.63 | % | | 23.40 | % | | — | | | 15.70 | % |
| 1992 | | 14.60 | % | | 16.66 | % | | 8.90 | % | | 8.32 | % | | 15.67 | % | | — | | | 12.02 | % |
| 1993 | | 15.25 | % | | 17.70 | % | | 16.81 | % | | 14.44 | % | | 28.37 | % | | — | | | 12.81 | % |
| 1994 | | 18.05 | % | | 20.13 | % | | 12.08 | % | | 9.60 | % | | 23.28 | % | | — | | | 13.20 | % |
| 1995 | | 13.45 | % | | 17.07 | % | | 9.89 | % | | 6.62 | % | | 26.37 | % | | — | | | 11.56 | % |
| 1996 | | 23.86 | % | | 31.02 | % | | 7.74 | % | | 6.17 | % | | 17.62 | % | | — | | | 14.73 | % |
| 1997 | | 18.29 | % | | 21.51 | % | | 13.51 | % | | 12.60 | % | | 24.68 | % | | 11.99 | % | | 12.85 | % |
| 1998 | | 23.80 | % | | 27.97 | % | | 14.60 | % | | 12.84 | % | | 29.22 | % | | 14.38 | % | | 14.13 | % |
| 1999 | | 24.43 | % | | 27.10 | % | | 16.54 | % | | 17.35 | % | | 21.74 | % | | 14.07 | % | | 17.49 | % |
| 2000 | | 28.21 | % | | 32.19 | % | | 14.01 | % | | 15.02 | % | | 14.41 | % | | 11.78 | % | | 15.71 | % |
| 2001 | | 27.56 | % | | 29.77 | % | | 13.79 | % | | 14.44 | % | | 17.22 | % | | 12.57 | % | | 14.55 | % |
| 2002 | | 24.63 | % | | 25.52 | % | | 13.51 | % | | 13.44 | % | | 17.43 | % | | 13.12 | % | | 15.07 | % |
| 2003 | | 26.34 | % | | 26.59 | % | | 16.17 | % | | 16.66 | % | | 20.32 | % | | 13.80 | % | | 12.47 | % |
| 2004 | | 28.71 | % | | 30.80 | % | | 19.48 | % | | 16.25 | % | | 35.48 | % | | 20.85 | % | | 19.40 | % |
| 2005 | | 27.49 | % | | 26.55 | % | | 13.23 | % | | 12.38 | % | | 21.32 | % | | 18.18 | % | | 16.31 | % |
| 2006 | | 22.01 | % | | 22.01 | % | | 25.97 | % | | 22.81 | % | | 41.21 | % | | 32.26 | % | | 16.57 | % |
| 2007 | | 19.54 | % | | 21.17 | % | | 14.96 | % | | 13.91 | % | | 21.28 | % | | 20.35 | % | | 14.63 | % |
| 20081 | | 24.21 | % | | 26.79 | % | | 21.08 | % | | 19.44 | % | | 30.52 | % | | 24.32 | % | | 25.13 | % |
1As of April 30, 2008. Past Index levels are not necessarily indicative of future Index levels.
2Volatility, for these purposes, means the following:
Daily Volatility: The relative rate at which the price of the Index moves up and down, found by calculating the annualized standard deviation of the daily change in price.
47
Monthly Return Volatility: The relative rate at which the price of the Index moves up and down, found by calculating the annualized standard deviation of the monthly change in price.
Average Annual Volatility: The average of yearly volatilities for a given sample period. The yearly volatility is the relative rate at which the price of the Index moves up and down, found by calculating the annualized standard deviation of the daily change in price for each business day in the given year.
3As of June 4, 1990. Past Index levels are not necessarily indicative of future Index levels.
4As of December 2, 1988. Past Index levels are not necessarily indicative of future Index levels.
5As of September 3, 1997. Past Index levels are not necessarily indicative of future Index levels.
48
ENERGY SECTOR DATA
RELATING TO
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD ENERGY EXCESS RETURN™
(DBLCI-OY ENERGY ER™)
49
CLOSING LEVELS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD ENERGYEXCESS RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index Changes3 | | | Index Changes
Since Inception4 | |
| 19905 | | 179.19 | | 96.66 | | 45.52 | % | | 45.52 | % |
| 1991 | | 147.42 | | 107.20 | | -20.99 | % | | 14.98 | % |
| 1992 | | 137.39 | | 110.88 | | 9.57 | % | | 25.99 | % |
| 1993 | | 138.78 | | 100.51 | | -20.19 | % | | 0.56 | % |
| 1994 | | 122.19 | | 95.20 | | 6.96 | % | | 7.56 | % |
| 1995 | | 119.82 | | 102.02 | | 11.00 | % | | 19.39 | % |
| 1996 | | 197.83 | | 111.99 | | 63.92 | % | | 95.71 | % |
| 1997 | | 204.30 | | 159.71 | | -18.40 | % | | 59.71 | % |
| 1998 | | 160.51 | | 97.65 | | -36.95 | % | | 0.70 | % |
| 1999 | | 178.20 | | 92.77 | | 72.80 | % | | 74.00 | % |
| 2000 | | 298.97 | | 167.50 | | 41.06 | % | | 145.44 | % |
| 2001 | | 278.42 | | 192.42 | | -16.74 | % | | 104.36 | % |
| 2002 | | 298.19 | | 194.55 | | 41.97 | % | | 190.12 | % |
| 2003 | | 391.72 | | 284.31 | | 32.29 | % | �� | 283.81 | % |
| 2004 | | 715.99 | | 383.42 | | 54.72 | % | | 493.84 | % |
| 2005 | | 1037.13 | | 582.46 | | 55.14 | % | | 821.29 | % |
| 2006 | | 1074.96 | | 812.65 | | -10.74 | % | | 722.36 | % |
| 2007 | | 1112.80 | | 709.23 | | 34.88 | % | | 1009.21 | % |
| 20086 | | 1408.95 | | 1031.64 | | 21.61 | % | | 1248.87 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD ENERGY EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD ENERGY TOTAL RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes
Since Inception4 | |
| 19905 | | 183.60 | | 97.33 | | 51.88 | % | | 51.88 | % |
| 1991 | | 154.30 | | 112.85 | | -16.53 | % | | 26.77 | % |
| 1992 | | 155.82 | | 122.35 | | 13.48 | % | | 43.86 | % |
| 1993 | | 160.01 | | 118.31 | | -17.71 | % | | 18.38 | % |
| 1994 | | 147.06 | | 112.95 | | 11.67 | % | | 32.19 | % |
| 1995 | | 155.68 | | 127.46 | | 17.38 | % | | 55.17 | % |
| 1996 | | 270.11 | | 146.19 | | 72.56 | % | | 167.77 | % |
| 1997 | | 279.83 | | 227.35 | | -14.08 | % | | 130.07 | % |
| 1998 | | 232.17 | | 147.51 | | -33.81 | % | | 52.29 | % |
| 1999 | | 282.30 | | 141.11 | | 81.15 | % | | 175.87 | % |
| 2000 | | 496.29 | | 265.84 | | 49.64 | % | | 312.83 | % |
| 2001 | | 476.58 | | 334.41 | | -13.77 | % | | 255.97 | % |
| 2002 | | 527.96 | | 339.16 | | 44.32 | % | | 413.72 | % |
| 2003 | | 700.53 | | 505.36 | | 33.65 | % | | 586.61 | % |
| 2004 | | 1293.70 | | 686.54 | | 56.88 | % | | 977.16 | % |
| 2005 | | 1917.92 | | 1056.70 | | 60.14 | % | | 1625.00 | % |
| 2006 | | 2070.40 | | 1595.93 | | -6.33 | % | | 1515.87 | % |
| 2007 | | 2285.06 | | 1397.07 | | 41.00 | % | | 2178.45 | % |
| 20086 | | 2911.55 | | 2123.21 | | 22.37 | % | | 2688.14 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD ENERGY TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 55.
50
INDEX COMMODITIES WEIGHTS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD ENERGY EXCESS RETURN™
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | CL7 | | | HO7 | | | LCO7 | | | XB7 | | | NG7 | |
| | | High1 | | | Low2 | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | |
| 19905 | | 21.8 | % | | 21.9 | % | | 21.4 | % | | 22.6 | % | | 27.2 | % | | 22.2 | % | | 23.4 | % | | 22.4 | % | | 6.2 | % | | 10.9 | % |
| 1991 | | 21.8 | % | | 22.5 | % | | 22.8 | % | | 22.7 | % | | 23.8 | % | | 20.0 | % | | 21.5 | % | | 21.8 | % | | 10.1 | % | | 13.1 | % |
| 1992 | | 21.3 | % | | 22.3 | % | | 23.1 | % | | 23.1 | % | | 21.6 | % | | 21.5 | % | | 21.7 | % | | 22.2 | % | | 12.3 | % | | 10.8 | % |
| 1993 | | 21.6 | % | | 22.1 | % | | 21.5 | % | | 22.8 | % | | 21.1 | % | | 22.7 | % | | 21.4 | % | | 22.0 | % | | 14.4 | % | | 10.4 | % |
| 1994 | | 20.6 | % | | 21.7 | % | | 22.4 | % | | 22.5 | % | | 24.7 | % | | 21.9 | % | | 23.0 | % | | 21.8 | % | | 9.3 | % | | 12.1 | % |
| 1995 | | 22.9 | % | | 24.3 | % | | 21.2 | % | | 22.1 | % | | 23.1 | % | | 23.0 | % | | 23.1 | % | | 21.9 | % | | 9.7 | % | | 8.8 | % |
| 1996 | | 22.6 | % | | 22.6 | % | | 21.6 | % | | 21.1 | % | | 22.0 | % | | 22.5 | % | | 21.8 | % | | 22.9 | % | | 12.0 | % | | 10.9 | % |
| 1997 | | 23.2 | % | | 22.5 | % | | 21.6 | % | | 22.6 | % | | 22.2 | % | | 21.6 | % | | 21.4 | % | | 23.1 | % | | 11.4 | % | | 10.1 | % |
| 1998 | | 22.4 | % | | 22.7 | % | | 22.9 | % | | 23.4 | % | | 21.3 | % | | 21.1 | % | | 23.5 | % | | 22.5 | % | | 9.9 | % | | 10.4 | % |
| 1999 | | 22.7 | % | | 23.1 | % | | 21.9 | % | | 22.0 | % | | 23.0 | % | | 22.2 | % | | 23.3 | % | | 22.3 | % | | 9.1 | % | | 10.4 | % |
| 2000 | | 21.8 | % | | 22.9 | % | | 22.5 | % | | 22.2 | % | | 21.2 | % | | 22.8 | % | | 23.2 | % | | 23.2 | % | | 11.4 | % | | 8.9 | % |
| 2001 | | 23.5 | % | | 22.9 | % | | 22.0 | % | | 22.2 | % | | 21.4 | % | | 21.8 | % | | 22.5 | % | | 22.7 | % | | 10.5 | % | | 10.4 | % |
| 2002 | | 21.4 | % | | 23.2 | % | | 22.4 | % | | 22.5 | % | | 24.2 | % | | 22.6 | % | | 21.8 | % | | 23.2 | % | | 10.3 | % | | 8.5 | % |
| 2003 | | 22.7 | % | | 21.2 | % | | 22.6 | % | | 21.5 | % | | 22.3 | % | | 23.2 | % | | 22.3 | % | | 21.8 | % | | 10.2 | % | | 12.3 | % |
| 2004 | | 23.9 | % | | 22.6 | % | | 23.0 | % | | 22.2 | % | | 23.2 | % | | 21.8 | % | | 21.0 | % | | 22.9 | % | | 8.8 | % | | 10.5 | % |
| 2005 | | 20.6 | % | | 22.3 | % | | 23.5 | % | | 22.7 | % | | 21.8 | % | | 22.3 | % | | 24.9 | % | | 23.0 | % | | 9.1 | % | | 9.7 | % |
| 2006 | | 23.3 | % | | 22.8 | % | | 22.7 | % | | 22.7 | % | | 23.2 | % | | 22.9 | % | | 25.3 | % | | 22.8 | % | | 5.5 | % | | 8.7 | % |
| 2007 | | 22.6 | % | | 22.1 | % | | 22.8 | % | | 23.0 | % | | 22.5 | % | | 22.1 | % | | 23.0 | % | | 22.6 | % | | 9.1 | % | | 10.2 | % |
| 20086 | | 22.3 | % | | 22.1 | % | | 23.4 | % | | 22.6 | % | | 22.1 | % | | 22.2 | % | | 21.5 | % | | 22.7 | % | | 10.6 | % | | 10.3 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD ENERGY EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD ENERGY TOTAL RETURN™
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | CL7 | | | HO7 | | | LCO7 | | | XB7 | | | NG7 | |
| | | High1 | | | Low2 | | | High | | | Low | | | High | | | Low | | | High | | | Low | | | High | | | Low | |
| 19905 | | 21.8 | % | | 21.9 | % | | 21.4 | % | | 22.6 | % | | 27.2 | % | | 22.2 | % | | 23.4 | % | | 22.4 | % | | 6.2 | % | | 10.9 | % |
| 1991 | | 21.8 | % | | 22.5 | % | | 22.8 | % | | 22.7 | % | | 23.8 | % | | 20.0 | % | | 21.5 | % | | 21.8 | % | | 10.1 | % | | 13.1 | % |
| 1992 | | 21.3 | % | | 22.3 | % | | 23.2 | % | | 23.1 | % | | 21.6 | % | | 21.5 | % | | 21.5 | % | | 22.2 | % | | 12.5 | % | | 10.8 | % |
| 1993 | | 21.6 | % | | 22.1 | % | | 21.5 | % | | 22.8 | % | | 21.1 | % | | 22.7 | % | | 21.4 | % | | 22.0 | % | | 14.4 | % | | 10.4 | % |
| 1994 | | 20.6 | % | | 21.7 | % | | 22.4 | % | | 22.5 | % | | 24.7 | % | | 21.9 | % | | 23.0 | % | | 21.8 | % | | 9.3 | % | | 12.1 | % |
| 1995 | | 22.9 | % | | 22.9 | % | | 21.2 | % | | 22.4 | % | | 23.1 | % | | 23.1 | % | | 23.1 | % | | 23.3 | % | | 9.7 | % | | 8.4 | % |
| 1996 | | 22.6 | % | | 22.6 | % | | 21.6 | % | | 21.1 | % | | 22.0 | % | | 22.5 | % | | 21.8 | % | | 22.9 | % | | 12.0 | % | | 10.9 | % |
| 1997 | | 23.2 | % | | 22.0 | % | | 21.6 | % | | 22.8 | % | | 22.2 | % | | 21.1 | % | | 21.4 | % | | 23.7 | % | | 11.4 | % | | 10.3 | % |
| 1998 | | 22.4 | % | | 22.7 | % | | 22.9 | % | | 23.4 | % | | 21.3 | % | | 21.1 | % | | 23.5 | % | | 22.5 | % | | 9.9 | % | | 10.4 | % |
| 1999 | | 22.9 | % | | 23.1 | % | | 22.3 | % | | 22.0 | % | | 22.8 | % | | 22.2 | % | | 23.3 | % | | 22.3 | % | | 8.6 | % | | 10.4 | % |
| 2000 | | 21.8 | % | | 22.9 | % | | 22.5 | % | | 22.2 | % | | 21.2 | % | | 22.8 | % | | 23.2 | % | | 23.2 | % | | 11.4 | % | | 8.9 | % |
| 2001 | | 23.5 | % | | 22.9 | % | | 22.0 | % | | 22.2 | % | | 21.4 | % | | 21.8 | % | | 22.5 | % | | 22.7 | % | | 10.5 | % | | 10.4 | % |
| 2002 | | 21.4 | % | | 23.2 | % | | 22.4 | % | | 22.5 | % | | 24.2 | % | | 22.6 | % | | 21.8 | % | | 23.2 | % | | 10.3 | % | | 8.5 | % |
| 2003 | | 22.7 | % | | 21.2 | % | | 22.6 | % | | 21.5 | % | | 22.3 | % | | 23.2 | % | | 22.3 | % | | 21.8 | % | | 10.2 | % | | 12.3 | % |
| 2004 | | 23.9 | % | | 22.6 | % | | 23.0 | % | | 22.2 | % | | 23.2 | % | | 21.8 | % | | 21.0 | % | | 22.9 | % | | 8.8 | % | | 10.5 | % |
| 2005 | | 20.6 | % | | 22.3 | % | | 23.5 | % | | 22.7 | % | | 21.8 | % | | 22.3 | % | | 24.9 | % | | 23.0 | % | | 9.1 | % | | 9.7 | % |
| 2006 | | 23.3 | % | | 22.8 | % | | 22.7 | % | | 22.7 | % | | 23.2 | % | | 22.9 | % | | 25.3 | % | | 22.8 | % | | 5.5 | % | | 8.7 | % |
| 2007 | | 22.6 | % | | 22.1 | % | | 22.8 | % | | 23.0 | % | | 22.5 | % | | 22.1 | % | | 23.0 | % | | 22.6 | % | | 9.1 | % | | 10.2 | % |
| 20086 | | 22.3 | % | | 22.1 | % | | 23.4 | % | | 22.6 | % | | 22.1 | % | | 22.2 | % | | 21.5 | % | | 22.7 | % | | 10.6 | % | | 10.3 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD ENERGY TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 55.
51
All statistics based on data from June 4, 1990 to April 30, 2008.
| | | | | | |
VARIOUS STATISTICAL MEASURES | | DBLCI-OY
Energy ER8 | | DBLCI-OY
Energy TR9 | | Goldman Sachs
US Energy Total Return10 |
Annualized Changes to Index Level11 | | 15.6% | | 20.4% | | 12.4% |
Average rolling 3 month daily volatility12 | | 22.7% | | 22.7% | | 28.6% |
Sharpe Ratio13 | | 0.51 | | 0.72 | | 0.30 |
% of months with positive change14 | | 57% | | 58% | | 54% |
Average monthly positive change15 | | 5.9% | | 6.2% | | 7.7% |
Average monthly negative change16 | | -4.6% | | -4.3% | | -6.1% |
| | | |
ANNUALIZED INDEX LEVELS17 | | DBLCI-OY
Energy ER8 | | DBLCI-OY
Energy TR9 | | Goldman Sachs
US Energy Total Return10 |
1 year | | 53.1% | | 58.4% | | 65.8% |
3 year | | 22.0% | | 27.1% | | 13.7% |
5 year | | 36.0% | | 40.2% | | 21.9% |
7 year | | 25.7% | | 29.1% | | 14.0% |
10 year | | 25.1% | | 29.5% | | 18.3% |
15 year | | 16.4% | | 21.0% | | 11.6% |
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP
DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD JUNE 1990DECEMBER 1988 THROUGH JUNEMAY 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCECOMMENCED OPERATIONS IN JANUARY 2006. AS MANAGING OWNER, THE MANAGING OWNER AND ITS TRADING ACTUAL ACCOUNTSPRINCIPALS HAVE BEEN MANAGING THE DAY-TO-DAY OPERATIONS FOR ITSELF OR FOR CLIENTS.THE FUND AND RELATED PRODUCTS AND MANAGING FUTURES TRADING ACCOUNTS. BECAUSE THERE ARE NOLIMITED ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on[Remainder of page 55.left blank intentionally.]
52
-37-
COMPARISON OF DBLCI-OY ENERGY ER, DBLCI-OY ENERGY TR AND GOLDMAN SACHS US ENERGY TOTAL RETURNCLOSING LEVELS TABLES
DBIQ OPTIMUM YIELD SILVER INDEX EXCESS RETURN™
| | | | | | | | | | | | | | | | |
| | | Closing Level | | | Changes | |
| | | High1 | | | Low2 | | | Annual Index Changes3 | | | Index Changes Since Inception4 | |
19885 | | | 99.56 | | | | 96.35 | | | | -3.14 | % | | | -3.14 | % |
1989 | | | 98.80 | | | | 74.81 | | | | -21.67 | % | | | -24.12 | % |
1990 | | | 77.71 | | | | 52.83 | | | | -26.21 | % | | | -44.01 | % |
1991 | | | 58.55 | | | | 46.28 | | | | -14.31 | % | | | -52.02 | % |
1992 | | | 53.20 | | | | 42.91 | | | | -10.01 | % | | | -56.83 | % |
1993 | | | 62.57 | | | | 41.28 | | | | 33.57 | % | | | -42.33 | % |
1994 | | | 64.94 | | | | 49.92 | | | | -8.36 | % | | | -47.15 | % |
1995 | | | 64.61 | | | | 46.95 | | | | -0.55 | % | | | -47.45 | % |
1996 | | | 58.86 | | | | 45.10 | | | | -13.26 | % | | | -54.41 | % |
1997 | | | 56.61 | | | | 38.79 | | | | 17.06 | % | | | -46.63 | % |
1998 | | | 61.92 | | | | 41.66 | | | | -17.16 | % | | | -55.79 | % |
1999 | | | 49.84 | | | | 42.50 | | | | 5.74 | % | | | -53.26 | % |
2000 | | | 47.98 | | | | 39.06 | | | | -16.40 | % | | | -60.93 | % |
2001 | | | 40.38 | | | | 32.68 | | | | -6.36 | % | | | -63.41 | % |
2002 | | | 41.20 | | | | 34.04 | | | | 4.25 | % | | | -61.86 | % |
2003 | | | 46.80 | | | | 34.43 | | | | 22.10 | % | | | -53.43 | % |
2004 | | | 63.99 | | | | 43.08 | | | | 13.63 | % | | | -47.08 | % |
2005 | | | 68.75 | | | | 50.02 | | | | 27.66 | % | | | -32.44 | % |
2006 | | | 110.77 | | | | 67.36 | | | | 40.22 | % | | | -5.27 | % |
2007 | | | 109.82 | | | | 82.34 | | | | 9.77 | % | | | 3.99 | % |
2008 | | | 142.11 | | | | 59.28 | | | | -27.27 | % | | | -24.37 | % |
2009 | | | 128.69 | | | | 70.03 | | | | 48.53 | % | | | 12.34 | % |
2010 | | | 204.78 | | | | 98.82 | | | | 82.29 | % | | | 104.78 | % |
2011 | | | 319.49 | | | | 176.44 | | | | -10.28 | % | | | 83.72 | % |
2012 | | | 244.65 | | | | 172.62 | | | | 7.68 | % | | | 97.82 | % |
20136 | | | 212.37 | | | | 120.96 | | | | -28.11 | % | | | 42.22 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE
DBIQ OPTIMUM YIELD SILVER INDEX EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,
POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE
PERFORMANCE.
| | | | | | | | | | | | | | | | |
| | | Closing Level | | | Changes | |
| | | High1 | | | Low2 | | | Annual Index Changes3 | | | Index Changes Since Inception4 | |
19885 | | | 99.79 | | | | 96.94 | | | | -2.52 | % | | | -2.52 | % |
1989 | | | 100.47 | | | | 80.40 | | | | -14.91 | % | | | -17.05 | % |
1990 | | | 85.46 | | | | 62.18 | | | | -20.31 | % | | | -33.89 | % |
1991 | | | 70.97 | | | | 55.14 | | | | -9.48 | % | | | -40.16 | % |
1992 | | | 66.46 | | | | 55.38 | | | | -6.80 | % | | | -44.23 | % |
1993 | | | 82.27 | | | | 53.55 | | | | 37.71 | % | | | -23.20 | % |
1994 | | | 87.23 | | | | 69.13 | | | | -4.33 | % | | | -26.53 | % |
1995 | | | 91.63 | | | | 65.91 | | | | 5.16 | % | | | -22.73 | % |
1996 | | | 86.97 | | | | 69.54 | | | | -8.67 | % | | | -29.44 | % |
1997 | | | 92.17 | | | | 61.74 | | | | 23.25 | % | | | -13.03 | % |
1998 | | | 101.42 | | | | 70.42 | | | | -13.04 | % | | | -24.37 | % |
1999 | | | 88.05 | | | | 73.64 | | | | 10.85 | % | | | -16.16 | % |
2000 | | | 86.50 | | | | 74.17 | | | | -11.31 | % | | | -25.64 | % |
2001 | | | 77.17 | | | | 64.30 | | | | -3.02 | % | | | -27.89 | % |
2002 | | | 81.81 | | | | 67.18 | | | | 5.98 | % | | | -23.58 | % |
2003 | | | 94.72 | | | | 69.16 | | | | 23.36 | % | | | -5.73 | % |
2004 | | | 129.84 | | | | 87.49 | | | | 15.21 | % | | | 8.61 | % |
2005 | | | 145.33 | | | | 102.71 | | | | 31.78 | % | | | 43.13 | % |
2006 | | | 238.54 | | | | 142.80 | | | | 47.15 | % | | | 110.61 | % |
2007 | | | 254.17 | | | | 188.78 | | | | 14.75 | % | | | 141.68 | % |
2008 | | | 331.73 | | | | 139.67 | | | | -26.26 | % | | | 78.23 | % |
2009 | | | 303.70 | | | | 165.04 | | | | 48.75 | % | | | 165.11 | % |
2010 | | | 483.90 | | | | 233.22 | | | | 82.53 | % | | | 383.90 | % |
2011 | | | 755.24 | | | | 416.99 | | | | -10.24 | % | | | 334.36 | % |
2012 | | | 578.47 | | | | 408.27 | | | | 7.77 | % | | | 368.09 | % |
20136 | | | 502.54 | | | | 286.31 | | | | -28.08 | % | | | 236.67 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE
DBIQ OPTIMUM YIELD SILVER INDEX TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES,
POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE
PERFORMANCE.
See accompanying Notes and Legends.
-38-
INDEX COMMODITIES WEIGHTS TABLES
DBIQ OPTIMUM YIELD SILVER INDEX EXCESS RETURN™
| | | | | | | | |
| | | SI7 | |
| | | High1 | | | Low2 | |
19885 | | | 100 | % | | | 100 | % |
1989 | | | 100 | % | | | 100 | % |
1990 | | | 100 | % | | | 100 | % |
1991 | | | 100 | % | | | 100 | % |
1992 | | | 100 | % | | | 100 | % |
1993 | | | 100 | % | | | 100 | % |
1994 | | | 100 | % | | | 100 | % |
1995 | | | 100 | % | | | 100 | % |
1996 | | | 100 | % | | | 100 | % |
1997 | | | 100 | % | | | 100 | % |
1998 | | | 100 | % | | | 100 | % |
1999 | | | 100 | % | | | 100 | % |
2000 | | | 100 | % | | | 100 | % |
2001 | | | 100 | % | | | 100 | % |
2002 | | | 100 | % | | | 100 | % |
2003 | | | 100 | % | | | 100 | % |
2004 | | | 100 | % | | | 100 | % |
2005 | | | 100 | % | | | 100 | % |
2006 | | | 100 | % | | | 100 | % |
2007 | | | 100 | % | | | 100 | % |
2008 | | | 100 | % | | | 100 | % |
2009 | | | 100 | % | | | 100 | % |
2010 | | | 100 | % | | | 100 | % |
2011 | | | 100 | % | | | 100 | % |
2012 | | | 100 | % | | | 100 | % |
20136 | | | 100 | % | | | 100 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE
DBIQ OPTIMUM YIELD SILVER INDEX EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND
CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S
FUTURE PERFORMANCE.
DBIQ OPTIMUM YIELD SILVER INDEX TOTAL RETURN™
| | | | | | | | |
| | | SI7 | |
| | | High1 | | | Low2 | |
19885 | | | 100 | % | | | 100 | % |
1989 | | | 100 | % | | | 100 | % |
1990 | | | 100 | % | | | 100 | % |
1991 | | | 100 | % | | | 100 | % |
1992 | | | 100 | % | | | 100 | % |
1993 | | | 100 | % | | | 100 | % |
1994 | | | 100 | % | | | 100 | % |
1995 | | | 100 | % | | | 100 | % |
1996 | | | 100 | % | | | 100 | % |
1997 | | | 100 | % | | | 100 | % |
1998 | | | 100 | % | | | 100 | % |
1999 | | | 100 | % | | | 100 | % |
2000 | | | 100 | % | | | 100 | % |
2001 | | | 100 | % | | | 100 | % |
2002 | | | 100 | % | | | 100 | % |
2003 | | | 100 | % | | | 100 | % |
2004 | | | 100 | % | | | 100 | % |
2005 | | | 100 | % | | | 100 | % |
2006 | | | 100 | % | | | 100 | % |
2007 | | | 100 | % | | | 100 | % |
2008 | | | 100 | % | | | 100 | % |
2009 | | | 100 | % | | | 100 | % |
2010 | | | 100 | % | | | 100 | % |
2011 | | | 100 | % | | | 100 | % |
2012 | | | 100 | % | | | 100 | % |
20136 | | | 100 | % | | | 100 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE
DBIQ OPTIMUM YIELD SILVER INDEX TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND
CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S
FUTURE PERFORMANCE.
See accompanying Notes and Legends.
-39-
All statistics based on data from December 2, 1988 to October 31, 2013.
| | | | | | | | | | | | |
VARIOUS STATISTICAL MEASURES | | DBIQ Optimum Yield
Silver ER8 | | | DBIQ Optimum Yield
Silver TR9 | | | Silver Spot Fix pm10 | |
Annualized Changes to Index Level11 | | | 1.4 | % | | | 5.0 | % | | | 5.3 | % |
Average rolling 3 month daily volatility12 | | | 25.1 | % | | | 25.1 | % | | | 27.1 | % |
Sharpe Ratio13 | | | 0.06 | | | | 0.07 | | | | 0.08 | |
% of months with positive change14 | | | 48 | % | | | 51 | % | | | 49 | % |
Average monthly positive change15 | | | 6.7 | % | | | 6.7 | % | | | 7.0 | % |
Average monthly negative change16 | | | -5.5 | % | | | -5.4 | % | | | -5.2 | % |
| | | | | | | | | | | | |
| | | |
ANNUALIZED INDEX LEVELS17 | | DBIQ Optimum Yield
Silver ER8 | | | DBIQ Optimum Yield
Silver TR9 | | | Silver Spot Fix pm10 | |
1 year | | | -32.8 | % | | | -32.7 | % | | | -31.2 | % |
3 year | | | -4.4 | % | | | -4.3 | % | | | -2.5 | % |
5 year | | | 16.7 | % | | | 16.8 | % | | | 19.0 | % |
7 year | | | 6.7 | % | | | 7.8 | % | | | 9.1 | % |
10 year | | | 13.6 | % | | | 15.4 | % | | | 15.8 | % |
15 year | | | 8.0 | % | | | 10.4 | % | | | 10.4 | % |
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY Energy ER, DBLCI-OY Energy TR and Goldman Sachs US Energy Total Return are indices and do not reflect actual trading.
DBLCI-OY Energy TR and Goldman Sachs US Energy Total Return are calculated on a total return basis and do not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULYJUNE 2006 (RENAMED OCTOBER 2010), CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD JUNE 1990DECEMBER 1988 THROUGH JUNEMAY 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCECOMMENCED OPERATIONS IN JANUARY 2006. AS MANAGING OWNER, THE MANAGING OWNER AND ITS TRADING ACTUAL ACCOUNTSPRINCIPALS HAVE BEEN MANAGING THE DAY-TO-DAY OPERATIONS FOR ITSELF OR FOR CLIENTS.THE FUND AND RELATED PRODUCTS AND MANAGING FUTURES TRADING ACCOUNTS. BECAUSE THERE ARE NOLIMITED ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notesSee accompanying Notes and legends that follow on page 55.Legends.
53
-40-
COMPARISON OF DBLCI-OY ENERGYDBIQ-OY SI ER, DBIQ-OY SI TR AND GOLDMAN SACHS US ENERGY TOTAL RETURNSILVER SPOT FIX PM
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE,
SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY EnergyDBIQ-OY SI ER and DBIQ-OY SI TR and Goldman Sachs US Energy Total Return are indices and do not reflect actual trading.
DBLCI-OY Energy Silver Spot Fix pm reflects a composite of actual trading prices. DBIQ-OY SI TR and Goldman Sachs US Energy Total Return areis calculated on a total return basis and dodoes not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULYJUNE 2006 (RENAMED OCTOBER 2010), CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD JUNE 1990DECEMBER 1988 THROUGH JUNEMAY 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCECOMMENCED OPERATIONS IN JANUARY 2006. AS MANAGING OWNER, THE MANAGING OWNER AND ITS TRADING ACTUAL ACCOUNTSPRINCIPALS HAVE BEEN MANAGING THE DAY-TO-DAY OPERATIONS FOR ITSELF OR FOR CLIENTS.THE FUND AND RELATED PRODUCTS AND MANAGING FUTURES TRADING ACCOUNTS. BECAUSE THERE ARE NOLIMITED ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notesSee accompanying Notes and legends that follow on page 55.Legends.
54
-41-
NOTESCOMPARISON OF DBIQ-OY SI TR AND LEGENDS:SILVER SPOT FIX PM
1. | “High” reflects the highest closing level of the Index during the applicable year. |
2. | “Low” reflects the lowest closing level of the Index during the applicable year. |
3. | “Annual Index Changes” reflect the change to the Index level on an annual basis as of December 31 of each applicable year. |
4. | “Index Changes Since Inception” reflects the change of the Index level since inception on a compounded annual basis as of December 31 of each applicable year. |
5. | Closing levels as of inception on June 4, 1990. |
6. | Closing levels as of April 30, 2008. |
7.
| The Deutsche Bank Liquid Commodity Index–Optimum Yield Energy Excess Return™ and Deutsche Bank Liquid Commodity Index–Optimum Yield Energy Total Return™ reflect the change in market value of the following underlying index commodities: CL (Light, Sweet Crude Oil), HO (Heating Oil), LCO (Brent Crude Oil), XB (RBOB Gasoline) and NG (Natural Gas) on an optimum yield basis.
|
8.
| “DBLCI-OY Energy ER™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Energy Excess Return™.
|
9.
| “DBLCI-OY Energy TR™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Energy Total Return™.
|
10. | “Goldman Sachs US Energy Total Return” is Goldman Sachs US Energy Total Return. |
11. | “Annualized Changes to Index Level” reflect the change to the applicable index level on an annual basis as of December 31 of each applicable year. |
12. | “Average rolling 3 month daily volatility.” The daily volatility reflects the relative rate at which the price of the applicable index moves up and down, which is found by calculating the annualized standard deviation of the daily change in price. In turn, an average of this value is calculated on a 3 month rolling basis. |
13. | “Sharpe Ratio” compares the annualized rate of return minus the annualized risk-free rate of return to the annualized variability — often referred to as the “standard deviation” — of the monthly rates of return. A Sharpe Ratio of 1:1 or higher indicates that, according to the measures used in calculating the ratio, the rate of return achieved by a particular strategy has equaled or exceeded the risks assumed by such strategy. The risk-free rate of return that was used in these calculations was assumed to be 3.97%. |
14. | “% of months with positive change” during the period from inception to April 30, 2008. |
15. | “Average monthly positive change” during the period from inception to April 30, 2008. |
16. | “Average monthly negative change” during the period from inception to April 30, 2008. |
17. | “Annualized Index Levels” reflect the change to the level of the applicable index on an annual basis as of December 31 of each the applicable time period (e.g., 1 year, 3, 5 or 7, 10 or 15 years, as applicable). |
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DBIQ-OY SI TR is an index and does not reflect actual trading. Silver Spot Fix pm reflects a composite of actual trading prices.
DBIQ-OY SI TR is calculated on a total return basis and does not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULYJUNE 2006 (RENAMED OCTOBER 2010), CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD JUNE 1990DECEMBER 1988 THROUGH JUNEMAY 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
55
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCECOMMENCED OPERATIONS IN JANUARY 2006. AS MANAGING OWNER, THE MANAGING OWNER AND ITS TRADING ACTUAL ACCOUNTSPRINCIPALS HAVE BEEN MANAGING THE DAY-TO-DAY OPERATIONS FOR ITSELF OR FOR CLIENTS.THE FUND AND RELATED PRODUCTS AND MANAGING FUTURES TRADING ACCOUNTS. BECAUSE THERE ARE NOLIMITED ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
See accompanying Notes and Legends.
-42-
NOTES AND LEGENDS:
1. “High” reflects the highest closing level of the Index during the applicable year.
2. “Low” reflects the lowest closing level of the Index during the applicable year.
3. “Annual Index Changes” reflect the change to the Index level on an annual basis as of December 31 of each applicable year.
4. “Index Changes Since Inception” reflects the change of the Index level since inception on a compounded annual basis as of December 31 of each applicable year.
5. Closing levels as of inception on December 2, 1988.
6. Closing levels as of October 31, 2013.
7. The DBIQ Optimum Yield Silver Index Excess Return™ and DBIQ Optimum Yield Silver Index Total Return™ reflect the change in market value of SI (Silver) on an Optimum YieldTM basis.
8. “DBIQ-OY SI ER™” is DBIQ Optimum Yield Silver Index Excess Return™.
9. “DBIQ-OY SI TR™” is DBIQ Optimum Yield Silver Index Total Return™.
10. “Silver Spot Fix pm” is an internationally published benchmark for silver and is available through The London Bullion Market Association’s (the “LBMA”) website athttp://www.lbma.org.uk/pages/index.cfm?page_id=54&title=silver_fixings. The fixings are fully transparent and are therefore used to determine the accepted average price of silver. As a benchmark, many other financial instruments (such as cash-settled swaps and options) are priced off the fixing. The silver fixing started in 1897. Three market making members of the LBMA conduct the Silver Fixing meeting under the chairmanship of The Bank of Nova Scotia-ScotiaMocatta by telephone at 12.00 noon each working day. The other two members of the Silver Fixing are Deutsche Bank AG and HSBC Bank USA, NA.
11. “Annualized Changes to Index Level” reflect the change to the applicable index level on an annual basis as of December 31 of each applicable year.
12. “Average rolling 3 month daily volatility.” The daily volatility reflects the relative rate at which the price of the applicable index moves up and down, which is found by calculating the annualized standard deviation of the daily change in price. In turn, an average of this value is calculated on a 3 month rolling basis.
13. “Sharpe Ratio” compares the annualized rate of return minus the annualized risk-free rate of return to the annualized variability - often referred to as the “standard deviation” – of the monthly rates of return. A Sharpe Ratio of 1:1 or higher indicates that, according to the measures used in calculating the ratio, the rate of return achieved by a particular strategy has equaled or exceeded the risks assumed by such strategy. The risk-free rate of return that was used in these calculations was assumed to be 3.12%.
14. “% of months with positive change” during the period from inception to October 31, 2013.
15. “Average monthly positive change” during the period from inception to October 31, 2013.
16. “Average monthly negative change” during the period from inception to October 31, 2013.
-43-
17. “Annualized Index Levels” reflect the change to the level of the applicable index on an annual basis as of December 31 of each applicable time period (e.g., 1 year, 3, 5 or 7, 10 or 15 years, as applicable).
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JUNE 2006 (RENAMED OCTOBER 2010), CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH MAY 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER COMMENCED OPERATIONS IN JANUARY 2006. AS MANAGING OWNER, THE MANAGING OWNER AND ITS TRADING PRINCIPALS HAVE BEEN MANAGING THE DAY-TO-DAY OPERATIONS FOR THE FUND AND RELATED PRODUCTS AND MANAGING FUTURES TRADING ACCOUNTS. BECAUSE THERE ARE LIMITED ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
ALTHOUGH THE INDEX SPONSOR WILL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEX FROM SOURCE(S) WHICH THE INDEX SPONSOR CONSIDERS RELIABLE, THE INDEX SPONSOR WILL NOT INDEPENDENTLY VERIFY SUCH INFORMATION AND DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX SPONSOR SHALL NOT BE LIABLE (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY ERROR IN THE INDEX AND THE INDEX SPONSOR IS UNDER NO OBLIGATION TO ADVISE ANY PERSON OF ANY ERROR THEREIN.
-44-
UNLESS OTHERWISE SPECIFIED, NO TRANSACTION RELATING TO THE INDEX IS SPONSORED, ENDORSED, SOLD OR PROMOTED BY THE INDEX SPONSOR AND THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO (A) THE ADVISABILITY OF PURCHASING OR ASSUMING ANY RISK IN CONNECTION WITH ANY SUCH TRANSACTION (B) THE LEVELS AT WHICH THE INDEX STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DATE (C) THE RESULTS TO BE OBTAINED BY THE ISSUER OF ANY SECURITY OR ANY COUNTERPARTY OR ANY SUCH ISSUER’S SECURITY HOLDERS OR CUSTOMERS OR ANY SUCH COUNTERPARTY’S CUSTOMERS OR COUNTERPARTIES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH ANY LICENSED RIGHTS OR FOR ANY OTHER USE OR (D) ANY OTHER MATTER. THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX SPONSOR HAVE ANY LIABILITY (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
56
CRUDE OIL SECTOR DATA
RELATING TO
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD CRUDE OIL EXCESS RETURN™
(DBLCI-OY CL ER™)
57
-45-
CLOSING LEVELS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD CRUDE OIL EXCESS RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes
Since Inception4
| |
| 19885 | | 112.02 | | 97.53 | | 12.02 | % | | 12.02 | % |
| 1989 | | 192.01 | | 110.98 | | 71.41 | % | | 92.01 | % |
| 1990 | | 294.82 | | 160.13 | | 24.79 | % | | 139.61 | % |
| 1991 | | 238.71 | | 175.06 | | -15.63 | % | | 102.15 | % |
| 1992 | | 224.82 | | 189.93 | | 0.68 | % | | 103.52 | % |
| 1993 | | 217.01 | | 152.46 | | -24.79 | % | | 53.08 | % |
| 1994 | | 173.31 | | 142.13 | | 5.59 | % | | 61.64 | % |
| 1995 | | 202.32 | | 157.90 | | 25.16 | % | | 102.32 | % |
| 1996 | | 414.35 | | 185.87 | | 104.80 | % | | 314.35 | % |
| 1997 | | 425.66 | | 303.27 | | -26.65 | % | | 203.93 | % |
| 1998 | | 302.95 | | 171.33 | | -40.94 | % | | 79.51 | % |
| 1999 | | 346.30 | | 165.23 | | 85.26 | % | | 232.56 | % |
| 2000 | | 551.67 | | 325.69 | | 31.04 | % | | 335.79 | % |
| 2001 | | 532.29 | | 390.80 | | -3.95 | % | | 318.57 | % |
| 2002 | | 608.00 | | 399.11 | | 41.61 | % | | 492.76 | % |
| 2003 | | 847.48 | | 574.29 | | 39.55 | % | | 727.21 | % |
| 2004 | | 1632.10 | | 824.87 | | 63.83 | % | | 1255.23 | % |
| 2005 | | 2171.79 | | 1319.88 | | 42.95 | % | | 1837.28 | % |
| 2006 | | 2389.01 | | 1856.67 | | -2.48 | % | | 1789.17 | % |
| 2007 | | 2523.38 | | 1571.31 | | 33.12 | % | | 2414.88 | % |
| 20086 | | 3171.73 | | 2292.22 | | 20.50 | % | | 2930.43 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD CRUDE OIL EXCESS RETURN™ OVER TIME. NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD CRUDE OIL TOTAL RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes
Since Inception4 | |
| 19885 | | 112.73 | | 97.60 | | 12.73 | % | | 12.73 | % |
| 1989 | | 209.87 | | 111.81 | | 86.17 | % | | 109.87 | % |
| 1990 | | 341.64 | | 182.36 | | 34.76 | % | | 182.82 | % |
| 1991 | | 295.24 | | 208.42 | | -10.88 | % | | 152.05 | % |
| 1992 | | 288.22 | | 237.02 | | 4.27 | % | | 162.81 | % |
| 1993 | | 281.69 | | 202.92 | | -22.45 | % | | 103.80 | % |
| 1994 | | 235.88 | | 190.71 | | 10.24 | % | | 124.67 | % |
| 1995 | | 297.36 | | 219.85 | | 32.36 | % | | 197.36 | % |
| 1996 | | 641.10 | | 274.37 | | 115.60 | % | | 541.10 | % |
| 1997 | | 659.34 | | 493.93 | | -22.77 | % | | 395.14 | % |
| 1998 | | 495.55 | | 292.68 | | -37.99 | % | | 207.03 | % |
| 1999 | | 620.64 | | 284.23 | | 94.21 | % | | 496.27 | % |
| 2000 | | 1035.63 | | 584.55 | | 39.02 | % | | 728.92 | % |
| 2001 | | 1030.69 | | 768.08 | | -0.53 | % | | 724.54 | % |
| 2002 | | 1217.32 | | 786.82 | | 43.96 | % | | 1087.00 | % |
| 2003 | | 1713.97 | | 1154.40 | | 40.99 | % | | 1573.50 | % |
| 2004 | | 3334.95 | | 1670.29 | | 66.12 | % | | 2679.95 | % |
| 2005 | | 4541.88 | | 2707.94 | | 47.56 | % | | 4002.06 | % |
| 2006 | | 5203.49 | | 3969.14 | | 2.34 | % | | 4097.88 | % |
| 2007 | | 5859.72 | | 3499.36 | | 39.16 | % | | 5741.98 | % |
| 20086 | | 7413.44 | | 5335.07 | | 21.26 | % | | 6938.77 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD CRUDE OIL TOTAL RETURN™ OVER TIME. NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 63.
58
INDEX COMMODITIES WEIGHTS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD CRUDE OIL EXCESS RETURN™
| | | | |
| | | CL7 |
| | | High1 | | Low2 |
19885 | | 100% | | 100% |
1989 | | 100% | | 100% |
1990 | | 100% | | 100% |
1991 | | 100% | | 100% |
1992 | | 100% | | 100% |
1993 | | 100% | | 100% |
1994 | | 100% | | 100% |
1995 | | 100% | | 100% |
1996 | | 100% | | 100% |
1997 | | 100% | | 100% |
1998 | | 100% | | 100% |
1999 | | 100% | | 100% |
2000 | | 100% | | 100% |
2001 | | 100% | | 100% |
2002 | | 100% | | 100% |
2003 | | 100% | | 100% |
2004 | | 100% | | 100% |
2005 | | 100% | | 100% |
2006 | | 100% | | 100% |
2007 | | 100% | | 100% |
20086 | | 100% | | 100% |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD CRUDE OIL EXCESS RETURN™ OVER TIME. NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD CRUDE OIL TOTAL RETURN™
| | | | |
| | | CL7 |
| | | High1 | | Low2 |
19885 | | 100% | | 100% |
1989 | | 100% | | 100% |
1990 | | 100% | | 100% |
1991 | | 100% | | 100% |
1992 | | 100% | | 100% |
1993 | | 100% | | 100% |
1994 | | 100% | | 100% |
1995 | | 100% | | 100% |
1996 | | 100% | | 100% |
1997 | | 100% | | 100% |
1998 | | 100% | | 100% |
1999 | | 100% | | 100% |
2000 | | 100% | | 100% |
2001 | | 100% | | 100% |
2002 | | 100% | | 100% |
2003 | | 100% | | 100% |
2004 | | 100% | | 100% |
2005 | | 100% | | 100% |
2006 | | 100% | | 100% |
2007 | | 100% | | 100% |
20086 | | 100% | | 100% |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD CRUDE OIL TOTAL RETURN™ OVER TIME. NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 63.
59
All statistics based on data from December 2, 1988 to April 30, 2008.
| | | | | | |
VARIOUS STATISTICAL MEASURES | | DBLCI-OY
CL ER8 | | DBLCI-OY
CL TR9 | | Goldman Sachs
Crude Oil Total Return
Index10 |
Annualized Changes to Index Level11 | | 19.2% | | 24.5% | | 19.8% |
Average rolling 3 month daily volatility12 | | 24.9% | | 24.9% | | 30.9% |
Sharpe Ratio13 | | 0.60 | | 0.81 | | 0.50 |
% of months with positive change14 | | 58% | | 59% | | 58% |
Average monthly positive change15 | | 6.4% | | 6.7% | | 8.1% |
Average monthly negative change16 | | -4.8% | | -4.6% | | -6.6% |
| | | |
ANNUALIZED INDEX LEVELS17 | | DBLCI-OY
CL ER8 | | DBLCI-OY
CL TR9 | | Goldman Sachs
Crude Oil Total Return
Index10 |
1 year | | 59.9% | | 65.4% | | 81.0% |
3 year | | 23.0% | | 28.1% | | 18.3% |
5 year | | 39.1% | | 43.4% | | 28.7% |
7 year | | 29.0% | | 32.6% | | 19.7% |
10 year | | 27.6% | | 32.1% | | 23.7% |
15 year | | 19.3% | | 24.0% | | 17.6% |
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN MAY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH APRIL 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 63.
60
COMPARISON OF DBLCI-OY CL ER, DBLCI-OY CL TR AND GOLDMAN SACHS CRUDE OIL TOTAL RETURN INDEX
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY CL ER, DBLCI-OY CL TR and Goldman Sachs Crude Oil Total Return Index are indices and do not reflect actual trading. DBLCI-OY CL TR and Goldman Sachs Crude Oil Total Return Index are calculated on a total return basis and do not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN MAY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH APRIL 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 63.
61
COMPARISON OF DBLCI-OY CL TR AND GOLDMAN SACHS CRUDE OIL TOTAL RETURN INDEX
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY CL TR and Goldman Sachs Crude Oil Total Return Index are indices and do not reflect actual trading. DBLCI-OY CL TR and Goldman Sachs Crude Oil Total Return Index are calculated on a total return basis and do not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN MAY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH APRIL 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 63.
62
NOTES AND LEGENDS:
1. | “High” reflects the highest closing level of the Index during the applicable year. |
2. | “Low” reflects the lowest closing level of the Index during the applicable year. |
3. | “Annual Index Changes” reflect the change to the Index level on an annual basis as of December 31 of each applicable year. |
4. | “Index Changes Since Inception” reflects the change of the Index level since inception on a compounded annual basis as of December 31 of each applicable year. |
5. | Closing levels as of inception on December 2, 1988. |
6. | Closing levels as of April 30, 2008. |
7.
| The Deutsche Bank Liquid Commodity Index–Optimum Yield Crude Oil Excess Return™ and Deutsche Bank Liquid Commodity Index–Optimum Yield Crude Oil Total Return™ reflect the change in market value of CL (Light, Sweet Crude Oil) on an optimum yield basis.
|
8.
| “DBLCI-OY CL ER™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Crude Oil Excess Return™.
|
9.
| “DBLCI-OY CL TR™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Crude Oil Total Return™.
|
10. | “Goldman Sachs Crude Oil Total Return Index” is Goldman Sachs Crude Oil Total Return Index. |
11. | “Annualized Changes to Index Level” reflect the change to the applicable index level on an annual basis as of December 31 of each applicable year. |
12. | “Average rolling 3 month daily volatility.” The daily volatility reflects the relative rate at which the price of the applicable index moves up and down, which is found by calculating the annualized standard deviation of the daily change in price. In turn, an average of this value is calculated on a 3 month rolling basis. |
13. | “Sharpe Ratio” compares the annualized rate of return minus the annualized risk-free rate of return to the annualized variability — often referred to as the “standard deviation” — of the monthly rates of return. A Sharpe Ratio of 1:1 or higher indicates that, according to the measures used in calculating the ratio, the rate of return achieved by a particular strategy has equaled or exceeded the risks assumed by such strategy. The risk-free rate of return that was used in these calculations was assumed to be 4.27%. |
14. | “% of months with positive change” during the period from inception to April 30, 2008. |
15. | “Average monthly positive change” during the period from inception to April 30, 2008. |
16. | “Average monthly negative change” during the period from inception to April 30, 2008. |
17. | “Annualized Index Levels” reflect the change to the level of the applicable index on an annual basis as of December 31 of each the applicable time period (e.g., 1 year, 3, 5 or 7, 10 or 15 years, as applicable). |
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN MAY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH APRIL 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
63
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
ALTHOUGH THE INDEX SPONSOR WILL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEX FROM SOURCE(S) WHICH THE INDEX SPONSOR CONSIDERS RELIABLE, THE INDEX SPONSOR WILL NOT INDEPENDENTLY VERIFY SUCH INFORMATION AND DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX SPONSOR SHALL NOT BE LIABLE (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY ERROR IN THE INDEX AND THE INDEX SPONSOR IS UNDER NO OBLIGATION TO ADVISE ANY PERSON OF ANY ERROR THEREIN.
UNLESS OTHERWISE SPECIFIED, NO TRANSACTION RELATING TO THE INDEX IS SPONSORED, ENDORSED, SOLD OR PROMOTED BY THE INDEX SPONSOR AND THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO (A) THE ADVISABILITY OF PURCHASING OR ASSUMING ANY RISK IN CONNECTION WITH ANY SUCH TRANSACTION (B) THE LEVELS AT WHICH THE INDEX STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DATE (C) THE RESULTS TO BE OBTAINED BY THE ISSUER OF ANY SECURITY OR ANY COUNTERPARTY OR ANY SUCH ISSUER’S SECURITY HOLDERS OR CUSTOMERS OR ANY SUCH COUNTERPARTY’S CUSTOMERS OR COUNTERPARTIES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH ANY LICENSED RIGHTS OR FOR ANY OTHER USE OR (D) ANY OTHER MATTER. THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX SPONSOR HAVE ANY LIABILITY (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
64
PRECIOUS METALS SECTOR DATA
RELATING TO
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD PRECIOUS METALS EXCESS RETURN™
(DBLCI-OY PRECIOUS METALS ER™)
65
CLOSING LEVELS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD PRECIOUS METALS EXCESS RETURN™
| | | | | | | | |
| | | CLOSING LEVEL | | CHANGES |
| | | High1 | | Low2 | | Annual Index
Changes3 | | Index Changes
Since Inception4 |
| 19885 | | 99.45 | | 94.47 | | -5.10% | | -5.10% |
| 1989 | | 95.07 | | 78.33 | | -10.54% | | -15.10% |
| 1990 | | 88.33 | | 70.07 | | -12.51% | | -25.72% |
| 1991 | | 75.34 | | 62.42 | | -15.60% | | -37.30% |
| 1992 | | 64.28 | | 56.55 | | -9.44% | | -43.22% |
| 1993 | | 71.31 | | 55.38 | | 18.49% | | -32.72% |
| 1994 | | 68.95 | | 61.70 | | -6.24% | | -36.92% |
| 1995 | | 65.86 | | 60.00 | | -4.13% | | -39.53% |
| 1996 | | 65.24 | | 54.89 | | -9.22% | | -45.11% |
| 1997 | | 55.35 | | 43.82 | | -17.28% | | -54.59% |
| 1998 | | 48.63 | | 40.62 | | -7.08% | | -57.81% |
| 1999 | | 45.88 | | 37.10 | | -1.70% | | -58.53% |
| 2000 | | 44.35 | | 36.32 | | -11.36% | | -63.24% |
| 2001 | | 37.53 | | 33.78 | | -2.66% | | -64.22% |
| 2002 | | 42.57 | | 35.33 | | 18.95% | | -57.43% |
| 2003 | | 50.84 | | 39.24 | | 19.06% | | -49.32% |
| 2004 | | 57.55 | | 46.00 | | 6.35% | | -46.10% |
| 2005 | | 64.36 | | 50.94 | | 16.97% | | -36.95% |
| 2006 | | 89.86 | | 63.88 | | 21.19% | | -23.60% |
| 2007 | | 93.76 | | 72.62 | | 20.64% | | -7.82% |
| 20086 | | 111.75 | | 92.18 | | 3.05% | | -5.02% |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD PRECIOUS METALS EXCESS RETURN™ OVER TIME. NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD PRECIOUS METALS TOTAL RETURN™
| | | | | | | | |
| | | CLOSING LEVEL | | CHANGES |
| | | High1 | | Low2 | | Annual Index
Changes3 | | Index Changes
Since Inception4 |
| 19885 | | 99.52 | | 95.05 | | -4.49% | | -4.49% |
| 1989 | | 98.10 | | 83.59 | | -2.82% | | -7.18% |
| 1990 | | 97.35 | | 81.17 | | -5.51% | | -12.30% |
| 1991 | | 89.20 | | 77.58 | | -10.84% | | -21.81% |
| 1992 | | 80.34 | | 72.71 | | -6.21% | | -26.66% |
| 1993 | | 93.75 | | 71.94 | | 22.16% | | -10.41% |
| 1994 | | 93.57 | | 85.44 | | -2.11% | | -12.31% |
| 1995 | | 93.31 | | 84.23 | | 1.38% | | -11.10% |
| 1996 | | 96.38 | | 84.72 | | -4.43% | | -15.04% |
| 1997 | | 86.39 | | 71.19 | | -12.91% | | -26.00% |
| 1998 | | 80.52 | | 68.46 | | -2.45% | | -27.81% |
| 1999 | | 81.29 | | 65.38 | | 3.05% | | -25.61% |
| 2000 | | 80.04 | | 68.62 | | -5.96% | | -30.05% |
| 2001 | | 73.58 | | 65.10 | | 0.81% | | -29.48% |
| 2002 | | 85.28 | | 69.70 | | 20.93% | | -14.72% |
| 2003 | | 102.89 | | 78.85 | | 20.29% | | 2.58% |
| 2004 | | 117.90 | | 93.42 | | 7.84% | | 10.62% |
| 2005 | | 136.03 | | 104.80 | | 20.74% | | 33.56% |
| 2006 | | 193.51 | | 135.42 | | 27.17% | | 69.85% |
| 2007 | | 216.92 | | 161.55 | | 26.12% | | 114.21% |
| 20086 | | 260.94 | | 214.23 | | 3.69% | | 122.12% |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD PRECIOUS METALS TOTAL RETURN™ OVER TIME. NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 71.
66
INDEX COMMODITIES WEIGHTS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD PRECIOUS METALS EXCESS RETURN™
| | | | | | | | |
| | | |
| | | GC7 | | SI7 |
| | | High1 | | Low2 | | High | | Low |
19885 | | 80.0% | | 79.6% | | 20.0% | | 20.4% |
1989 | | 79.7% | | 80.9% | | 20.3% | | 19.1% |
1990 | | 81.2% | | 80.0% | | 18.8% | | 20.0% |
1991 | | 80.9% | | 80.5% | | 19.1% | | 19.5% |
1992 | | 78.8% | | 80.1% | | 21.2% | | 19.9% |
1993 | | 77.3% | | 80.3% | | 22.7% | | 19.7% |
1994 | | 76.6% | | 81.7% | | 23.4% | | 18.3% |
1995 | | 78.7% | | 82.3% | | 21.3% | | 17.7% |
1996 | | 79.9% | | 79.8% | | 20.1% | | 20.2% |
1997 | | 77.8% | | 77.0% | | 22.2% | | 23.0% |
1998 | | 75.9% | | 78.5% | | 24.1% | | 21.5% |
1999 | | 80.0% | | 77.2% | | 20.0% | | 22.8% |
2000 | | 80.1% | | 80.4% | | 19.9% | | 19.6% |
2001 | | 82.1% | | 81.0% | | 17.9% | | 19.0% |
2002 | | 80.7% | | 79.5% | | 19.3% | | 20.5% |
2003 | | 78.6% | | 80.4% | | 21.4% | | 19.6% |
2004 | | 79.7% | | 77.9% | | 20.3% | | 22.1% |
2005 | | 79.3% | | 81.2% | | 20.7% | | 18.8% |
2006 | | 76.1% | | 79.6% | | 23.9% | | 20.4% |
2007 | | 81.1% | | 80.1% | | 18.9% | | 19.9% |
20086 | | 78.4% | | 80.7% | | 21.6% | | 19.3% |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD PRECIOUS METALS EXCESS RETURN™ OVER TIME. NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD PRECIOUS METALS TOTAL RETURN™
| | | | | | | | |
| | | |
| | | GC7 | | SI7 |
| | | High1 | | Low2 | | High | | Low |
19885 | | 80.0% | | 79.6% | | 20.0% | | 20.4% |
1989 | | 79.5% | | 80.2% | | 20.5% | | 19.8% |
1990 | | 81.2% | | 79.8% | | 18.8% | | 20.2% |
1991 | | 80.9% | | 79.6% | | 19.1% | | 20.4% |
1992 | | 79.1% | | 80.1% | | 20.9% | | 19.9% |
1993 | | 77.1% | | 80.3% | | 22.9% | | 19.7% |
1994 | | 77.0% | | 81.7% | | 23.0% | | 18.3% |
1995 | | 77.8% | | 82.3% | | 22.2% | | 17.7% |
1996 | | 79.9% | | 80.1% | | 20.1% | | 19.9% |
1997 | | 77.8% | | 77.0% | | 22.2% | | 23.0% |
1998 | | 75.9% | | 78.5% | | 24.1% | | 21.5% |
1999 | | 80.0% | | 77.2% | | 20.0% | | 22.8% |
2000 | | 80.1% | | 80.2% | | 19.9% | | 19.8% |
2001 | | 82.1% | | 81.0% | | 17.9% | | 19.0% |
2002 | | 80.4% | | 79.5% | | 19.6% | | 20.5% |
2003 | | 78.6% | | 80.4% | | 21.4% | | 19.6% |
2004 | | 79.7% | | 77.9% | | 20.3% | | 22.1% |
2005 | | 79.3% | | 81.2% | | 20.7% | | 18.8% |
2006 | | 76.1% | | 79.6% | | 23.9% | | 20.4% |
2007 | | 81.1% | | 80.1% | | 18.9% | | 19.9% |
20086 | | 78.4% | | 80.7% | | 21.6% | | 19.3% |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD PRECIOUS METALS TOTAL RETURN™ OVER TIME. NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 71.
67
All statistics based on data from December 2, 1988 to April 30, 2008.
| | | | | | |
VARIOUS STATISTICAL MEASURES | | DBLCI-0Y
Precious Metals ER8 | | DBLCI-OY
Precious Metals TR9 | | Goldman Sachs
US Precious Metals Total
Return10 |
Annualized Changes to Index Level11 | | -0.3% | | 4.2% | | 4.4.% |
Average rolling 3 month daily volatility12 | | 14.2% | | 14.2% | | 13.7% |
Sharpe Ratio13 | | -0.32 | | -0.01 | | 0.01 |
% of months with positive change14 | | 44% | | 49% | | 50% |
Average monthly positive change15 | | 3.7% | | 3.6% | | 3.4% |
Average monthly negative change16 | | -2.8% | | -2.7% | | -2.6% |
| | | | | | |
ANNUALIZED INDEX LEVELS17 | | DBLCI-0Y
Precious Metals ER8 | | DBLCI-OY
Precious Metals TR9 | | Goldman Sachs
US Precious Metals Total
Return10 |
1 year | | 18.6% | | 22.7% | | 24.2% |
3 year | | 21.2% | | 26.2% | | 25.2% |
5 year | | 18.1% | | 21.7% | | 20.4% |
7 year | | 15.6% | | 18.7% | | 17.8% |
10 year | | 7.2% | | 10.9% | | 11.2% |
15 year | | 2.9% | | 7.0% | | 7.2% |
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 71.
68
COMPARISON OF DBLCI-OY PRECIOUS METALS ER, DBLCI-OY PRECIOUS METALS TR AND GOLDMAN SACHS US PRECIOUS METALS TOTAL RETURN INDEX
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY Precious Metals ER, DBLCI-OY Precious Metals TR and Goldman Sachs US Precious Metals Total Return Index are indices and do not reflect actual trading. DBLCI-OY Precious Metals TR and Goldman Sachs US Precious Metals Total Return Index are calculated on a total return basis and do not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 71.
69
COMPARISON OF DBLCI-OY PRECIOUS METALS TR AND GOLDMAN SACHS US PRECIOUS METALS TOTAL RETURN INDEX
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY Precious Metals TR and Goldman Sachs US Precious Metals Total Return Index are indices and do not reflect actual trading. DBLCI-OY Precious Metals TR and Goldman Sachs US Precious Metals Total Return Index are calculated on a total return basis and do not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 71.
70
NOTES AND LEGENDS:
1. | “High” reflects the highest closing level of the Index during the applicable year. |
2. | “Low” reflects the lowest closing level of the Index during the applicable year. |
3. | “Annual Index Changes” reflect the change to the Index level on an annual basis as of December 31 of each applicable year. |
4. | “Index Changes Since Inception” reflects the change of the Index level since inception on a compounded annual basis as of December 31 of each applicable year. |
5. | Closing levels as of inception on December 2, 1988. |
6. | Closing levels as of April 30, 2008. |
7.
| The Deutsche Bank Liquid Commodity Index–Optimum Yield Precious Metals Excess Return™ and Deutsche Bank Liquid Commodity Index–Optimum Yield Precious Metals Total Return™ reflect the change in market value of the following underlying index commodities: GC (Gold) and SI (Silver) on an optimum yield basis.
|
8.
| “DBLCI-OY Precious Metals ER™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Precious Metals Excess Return™.
|
9.
| “DBLCI-OY Precious Metals TR™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Precious Metals Total Return™.
|
10. | “Goldman Sachs US Precious Metals Total Return” is Goldman Sachs US Precious Metals Total Return. |
11. | “Annualized Changes to Index Level” reflect the change to the applicable index level on an annual basis as of December 31 of each applicable year. |
12. | “Average rolling 3 month daily volatility.” The daily volatility reflects the relative rate at which the price of the applicable index moves up and down, which is found by calculating the annualized standard deviation of the daily change in price. In turn, an average of this value is calculated on a 3 month rolling basis. |
13. | “Sharpe Ratio” compares the annualized rate of return minus the annualized risk-free rate of return to the annualized variability — often referred to as the “standard deviation” — of the monthly rates of return. A Sharpe Ratio of 1:1 or higher indicates that, according to the measures used in calculating the ratio, the rate of return achieved by a particular strategy has equaled or exceeded the risks assumed by such strategy. The risk-free rate of return that was used in these calculations was assumed to be 4.27%. |
14. | “% of months with positive change” during the period from inception to April 30, 2008. |
15. | “Average monthly positive change” during the period from inception to April 30, 2008. |
16. | “Average monthly negative change” during the period from inception to April 30, 2008. |
17. | “Annualized Index Levels” reflect the change to the level of the applicable index on an annual basis as of December 31 of each the applicable time period (e.g., 1 year, 3, 5 or 7, 10 or 15 years, as applicable). |
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
71
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
ALTHOUGH THE INDEX SPONSOR WILL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEX FROM SOURCE(S) WHICH THE INDEX SPONSOR CONSIDERS RELIABLE, THE INDEX SPONSOR WILL NOT INDEPENDENTLY VERIFY SUCH INFORMATION AND DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX SPONSOR SHALL NOT BE LIABLE (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY ERROR IN THE INDEX AND THE INDEX SPONSOR IS UNDER NO OBLIGATION TO ADVISE ANY PERSON OF ANY ERROR THEREIN.
UNLESS OTHERWISE SPECIFIED, NO TRANSACTION RELATING TO THE INDEX IS SPONSORED, ENDORSED, SOLD OR PROMOTED BY THE INDEX SPONSOR AND THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO (A) THE ADVISABILITY OF PURCHASING OR ASSUMING ANY RISK IN CONNECTION WITH ANY SUCH TRANSACTION (B) THE LEVELS AT WHICH THE INDEX STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DATE (C) THE RESULTS TO BE OBTAINED BY THE ISSUER OF ANY SECURITY OR ANY COUNTERPARTY OR ANY SUCH ISSUER’S SECURITY HOLDERS OR CUSTOMERS OR ANY SUCH COUNTERPARTY’S CUSTOMERS OR COUNTERPARTIES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH ANY LICENSED RIGHTS OR FOR ANY OTHER USE OR (D) ANY OTHER MATTER. THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX SPONSOR HAVE ANY LIABILITY (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
72
GOLD SECTOR DATA
RELATING TO
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD GOLD EXCESS RETURN™
(DBLCI-OY GC ER™)
73
CLOSING LEVELS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD GOLD EXCESS RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes Since Inception4 | |
| 19885 | | 99.43 | | 94.00 | | -5.59 | % | | -5.59 | % |
| 1989 | | 94.66 | | 79.15 | | -7.60 | % | | -12.77 | % |
| 1990 | | 91.16 | | 72.70 | | -9.12 | % | | -20.72 | % |
| 1991 | | 80.68 | | 66.43 | | -15.91 | % | | -33.34 | % |
| 1992 | | 67.23 | | 60.20 | | -9.29 | % | | -39.53 | % |
| 1993 | | 73.24 | | 59.14 | | 14.87 | % | | -30.54 | % |
| 1994 | | 70.04 | | 64.50 | | -5.82 | % | | -34.58 | % |
| 1995 | | 66.28 | | 61.54 | | -4.98 | % | | -37.84 | % |
| 1996 | | 66.44 | | 57.01 | | -8.28 | % | | -42.99 | % |
| 1997 | | 56.60 | | 42.01 | | -25.00 | % | | -57.24 | % |
| 1998 | | 46.03 | | 39.77 | | -3.80 | % | | -58.87 | % |
| 1999 | | 44.76 | | 34.92 | | -3.54 | % | | -60.32 | % |
| 2000 | | 43.19 | | 34.95 | | -10.07 | % | | -64.32 | % |
| 2001 | | 36.96 | | 32.79 | | -2.15 | % | | -65.08 | % |
| 2002 | | 43.15 | | 34.85 | | 23.03 | % | | -57.04 | % |
| 2003 | | 50.90 | | 39.63 | | 18.18 | % | | -49.24 | % |
| 2004 | | 54.99 | | 45.62 | | 3.76 | % | | -47.33 | % |
| 2005 | | 61.77 | | 49.36 | | 14.51 | % | | -39.68 | % |
| 2006 | | 82.59 | | 61.37 | | 16.20 | % | | -29.91 | % |
| 2007 | | 87.24 | | 66.67 | | 23.43 | % | | -13.49 | % |
| 20086 | | 102.34 | | 86.51 | | 1.58 | % | | -12.12 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD GOLD EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD GOLD TOTAL RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes Since Inception4 | |
| 19885 | | 99.49 | | 94.58 | | -4.99 | % | | -4.99 | % |
| 1989 | | 99.14 | | 83.75 | | 0.37 | % | | -4.64 | % |
| 1990 | | 100.47 | | 82.41 | | -1.85 | % | | -6.40 | % |
| 1991 | | 95.52 | | 81.79 | | -11.18 | % | | -16.86 | % |
| 1992 | | 84.33 | | 77.40 | | -6.06 | % | | -21.90 | % |
| 1993 | | 96.27 | | 76.75 | | 18.43 | % | | -7.50 | % |
| 1994 | | 94.61 | | 88.08 | | -1.68 | % | | -9.06 | % |
| 1995 | | 93.77 | | 88.12 | | 0.48 | % | | -8.62 | % |
| 1996 | | 98.16 | | 88.05 | | -3.43 | % | | -11.76 | % |
| 1997 | | 87.63 | | 68.28 | | -21.03 | % | | -30.32 | % |
| 1998 | | 76.21 | | 67.02 | | 0.99 | % | | -29.62 | % |
| 1999 | | 79.30 | | 61.54 | | 1.12 | % | | -28.84 | % |
| 2000 | | 77.95 | | 65.87 | | -4.59 | % | | -32.10 | % |
| 2001 | | 72.45 | | 63.19 | | 1.34 | % | | -31.19 | % |
| 2002 | | 86.44 | | 68.69 | | 25.06 | % | | -13.95 | % |
| 2003 | | 103.01 | | 79.65 | | 19.39 | % | | 2.74 | % |
| 2004 | | 112.66 | | 92.65 | | 5.21 | % | | 8.09 | % |
| 2005 | | 130.59 | | 101.92 | | 18.20 | % | | 27.77 | % |
| 2006 | | 177.84 | | 130.09 | | 21.94 | % | | 55.81 | % |
| 2007 | | 202.21 | | 148.31 | | 29.04 | % | | 101.05 | % |
| 20086 | | 238.99 | | 201.07 | | 2.21 | % | | 105.50 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD GOLD TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 79.
74
INDEX COMMODITIES WEIGHTS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD GOLD EXCESS RETURN™
| | | | | | |
| | | GC7 | |
| | | High1 | | | Low2 | |
| 19885 | | 100 | % | | 100 | % |
| 1989 | | 100 | % | | 100 | % |
| 1990 | | 100 | % | | 100 | % |
| 1991 | | 100 | % | | 100 | % |
| 1992 | | 100 | % | | 100 | % |
| 1993 | | 100 | % | | 100 | % |
| 1994 | | 100 | % | | 100 | % |
| 1995 | | 100 | % | | 100 | % |
| 1996 | | 100 | % | | 100 | % |
| 1997 | | 100 | % | | 100 | % |
| 1998 | | 100 | % | | 100 | % |
| 1999 | | 100 | % | | 100 | % |
| 2000 | | 100 | % | | 100 | % |
| 2001 | | 100 | % | | 100 | % |
| 2002 | | 100 | % | | 100 | % |
| 2003 | | 100 | % | | 100 | % |
| 2004 | | 100 | % | | 100 | % |
| 2005 | | 100 | % | | 100 | % |
| 2006 | | 100 | % | | 100 | % |
| 2007 | | 100 | % | | 100 | % |
| 20086 | | 100 | % | | 100 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD GOLD EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD GOLD TOTAL RETURN™
| | | | | | |
| | | GC7 | |
| | | High1 | | | Low2 | |
| 19885 | | 100 | % | | 100 | % |
| 1989 | | 100 | % | | 100 | % |
| 1990 | | 100 | % | | 100 | % |
| 1991 | | 100 | % | | 100 | % |
| 1992 | | 100 | % | | 100 | % |
| 1993 | | 100 | % | | 100 | % |
| 1994 | | 100 | % | | 100 | % |
| 1995 | | 100 | % | | 100 | % |
| 1996 | | 100 | % | | 100 | % |
| 1997 | | 100 | % | | 100 | % |
| 1998 | | 100 | % | | 100 | % |
| 1999 | | 100 | % | | 100 | % |
| 2000 | | 100 | % | | 100 | % |
| 2001 | | 100 | % | | 100 | % |
| 2002 | | 100 | % | | 100 | % |
| 2003 | | 100 | % | | 100 | % |
| 2004 | | 100 | % | | 100 | % |
| 2005 | | 100 | % | | 100 | % |
| 2006 | | 100 | % | | 100 | % |
| 2007 | | 100 | % | | 100 | % |
| 20086 | | 100 | % | | 100 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD GOLD TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 79.
75
All statistics based on data from December 2, 1988 to April 30, 2008.
| | | | | | |
VARIOUS STATISTICAL MEASURES | | DBLCI-OY GC ER8 | | DBLCI-OY GC TR9 | | Gold Spot Fix pm10 |
Annualized Changes to Index Level11 | | -0.7% | | 3.8% | | 3.8% |
Average rolling 3 month daily volatility12 | | 13.2% | | 13.2% | | 12.8% |
Sharpe Ratio13 | | -0.38 | | -0.04 | | -0.04 |
% of months with positive change14 | | 44% | | 48% | | 50% |
Average monthly positive change15 | | 3.4% | | 3.5% | | 3.4% |
Average monthly negative change16 | | -2.7% | | -2.5% | | -2.6% |
| | | | | | |
ANNUALIZED INDEX LEVELS17 | | DBLCI-OY GC ER8 | | DBLCI-OY GC TR9 | | Gold Spot Fix pm10 |
1 year | | 19.3% | | 23.4% | | 28.6% |
3 year | | 19.2% | | 24.2% | | 25.9% |
5 year | | 16.0% | | 19.6% | | 20.9% |
7 year | | 14.7% | | 17.9% | | 18.6% |
10 year | | 6.9% | | 10.7% | | 10.8% |
15 year | | 2.1% | | 6.1% | | 6.2% |
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN MAY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH APRIL 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 79
76
COMPARISON OF DBLCI-OY GC ER, DBLCI-OY GC TR AND GOLD SPOT FIX PM
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY GC ER and DBLCI-OY GC TR are indices and do not reflect actual trading. Gold Spot Fix pm reflects a composite of actual trading prices. DBLCI-OY GC TR is calculated on a total return basis and does not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN MAY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH APRIL 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 79.
77
COMPARISON OF DBLCI-OY GC TR AND GOLD SPOT FIX PM
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DBLCI-OY GC TR is an index and does not reflect actual trading. Gold Spot Fix pm reflects a composite of actual trading prices. DBLCI-OY GC TR is calculated on a total return basis and does not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN MAY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH APRIL 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 79.
78
NOTES AND LEGENDS:
1. | “High” reflects the highest closing level of the Index during the applicable year. |
2. | “Low” reflects the lowest closing level of the Index during the applicable year. |
3. | “Annual Index Changes” reflect the change to the Index level on an annual basis as of December 31 of each applicable year. |
4. | “Index Changes Since Inception” reflects the change of the Index level since inception on a compounded annual basis as of December 31 of each applicable year. |
5. | Closing levels as of inception on December 2, 1988. |
6. | Closing levels as of April 30, 2008. |
7.
| The Deutsche Bank Liquid Commodity Index–Optimum Yield Gold Excess Return™ and Deutsche Bank Liquid Commodity Index–Optimum Yield Gold Total Return™ reflect the change in market value of GC (Gold) on an optimum yield basis.
|
8.
| “DBLCI-OY GC ER™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Gold Excess Return™.
|
9.
| “DBLCI-OY GC TR™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Gold Total Return™.
|
10. | “Gold Spot Fix pm” is an internationally published benchmark for gold and is available through The London Bullion Market Association’s (the “LBMA”) website athttp://www.lbma.org.uk/statistics_historic.htm. The fixings are fully transparent and are therefore used to determine the accepted average price of gold. As a benchmark, many other financial instruments (such as cash-settled swaps and options) are priced off the fixing. The gold fixing started in 1919. The gold fixing is conducted twice a day by telephone, at approximately 10:30 am and 3:00 pm. The five Gold Fixing members are the Bank of Nova Scotia–ScotiaMocatta, Barclays Bank Plc, Deutsche Bank AG, HSBC Bank USA, NA and Société Générale. |
11. | “Annualized Changes to Index Level” reflect the change to the applicable index level on an annual basis as of December 31 of each applicable year. |
12. | “Average rolling 3 month daily volatility.” The daily volatility reflects the relative rate at which the price of the applicable index moves up and down, which is found by calculating the annualized standard deviation of the daily change in price. In turn, an average of this value is calculated on a 3 month rolling basis. |
13. | “Sharpe Ratio” compares the annualized rate of return minus the annualized risk-free rate of return to the annualized variability — often referred to as the “standard deviation” — of the monthly rates of return. A Sharpe Ratio of 1:1 or higher indicates that, according to the measures used in calculating the ratio, the rate of return achieved by a particular strategy has equaled or exceeded the risks assumed by such strategy. The risk-free rate of return that was used in these calculations was assumed to be 4.27%. |
14. | “% of months with positive change” during the period from inception to April 30, 2008. |
15. | “Average monthly positive change” during the period from inception to April 30, 2008. |
16. | “Average monthly negative change” during the period from inception to April 30, 2008. |
17. | “Annualized Index Levels” reflect the change to the level of the applicable index on an annual basis as of December 31 of each the applicable time period (e.g., 1 year, 3, 5 or 7, 10 or 15 years, as applicable). |
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN MAY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
79
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH APRIL 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
ALTHOUGH THE INDEX SPONSOR WILL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEX FROM SOURCE(S) WHICH THE INDEX SPONSOR CONSIDERS RELIABLE, THE INDEX SPONSOR WILL NOT INDEPENDENTLY VERIFY SUCH INFORMATION AND DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX SPONSOR SHALL NOT BE LIABLE (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY ERROR IN THE INDEX AND THE INDEX SPONSOR IS UNDER NO OBLIGATION TO ADVISE ANY PERSON OF ANY ERROR THEREIN.
UNLESS OTHERWISE SPECIFIED, NO TRANSACTION RELATING TO THE INDEX IS SPONSORED, ENDORSED, SOLD OR PROMOTED BY THE INDEX SPONSOR AND THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO (A) THE ADVISABILITY OF PURCHASING OR ASSUMING ANY RISK IN CONNECTION WITH ANY SUCH TRANSACTION (B) THE LEVELS AT WHICH THE INDEX STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DATE (C) THE RESULTS TO BE OBTAINED BY THE ISSUER OF ANY SECURITY OR ANY COUNTERPARTY OR ANY SUCH ISSUER’S SECURITY HOLDERS OR CUSTOMERS OR ANY SUCH COUNTERPARTY’S CUSTOMERS OR COUNTERPARTIES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH ANY LICENSED RIGHTS OR FOR ANY OTHER USE OR (D) ANY OTHER MATTER. THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX SPONSOR HAVE ANY LIABILITY (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
80
SILVER SECTOR DATA
RELATING TO
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD SILVER EXCESS RETURN™
(DBLCI-OY SI ER™ )
81
CLOSING LEVELS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD SILVER EXCESS RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes Since Inception4 | |
| 19885 | | 99.56 | | 96.35 | | -3.14 | % | | -3.14 | % |
| 1989 | | 98.80 | | 74.81 | | -21.67 | % | | -24.12 | % |
| 1990 | | 77.71 | | 52.83 | | -26.21 | % | | -44.01 | % |
| 1991 | | 58.55 | | 46.28 | | -14.31 | % | | -52.02 | % |
| 1992 | | 53.20 | | 42.91 | | -10.01 | % | | -56.83 | % |
| 1993 | | 62.57 | | 41.28 | | 33.57 | % | | -42.33 | % |
| 1994 | | 64.94 | | 49.92 | | -8.36 | % | | -47.15 | % |
| 1995 | | 64.61 | | 46.95 | | -0.55 | % | | -47.45 | % |
| 1996 | | 58.86 | | 45.10 | | -13.26 | % | | -54.41 | % |
| 1997 | | 56.61 | | 38.79 | | 17.06 | % | | -46.63 | % |
| 1998 | | 61.92 | | 41.66 | | -17.16 | % | | -55.79 | % |
| 1999 | | 49.84 | | 42.50 | | 5.74 | % | | -53.26 | % |
| 2000 | | 47.98 | | 39.06 | | -16.40 | % | | -60.93 | % |
| 2001 | | 40.38 | | 32.68 | | -6.36 | % | | -63.41 | % |
| 2002 | | 41.20 | | 34.04 | | 4.25 | % | | -61.86 | % |
| 2003 | | 46.80 | | 34.43 | | 22.10 | % | | -53.43 | % |
| 2004 | | 63.99 | | 43.08 | | 13.63 | % | | -47.08 | % |
| 2005 | | 68.75 | | 50.02 | | 27.66 | % | | -32.44 | % |
| 2006 | | 110.77 | | 67.36 | | 40.22 | % | | -5.27 | % |
| 2007 | | 109.82 | | 82.34 | | 9.77 | % | | 3.99 | % |
| 20086 | | 142.11 | | 103.99 | | 9.19 | % | | 13.54 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD SILVER EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD SILVER TOTAL RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes Since Inception4 | |
| 19885 | | 99.79 | | 96.94 | | -2.52 | % | | -2.52 | % |
| 1989 | | 100.47 | | 80.40 | | -14.91 | % | | -17.05 | % |
| 1990 | | 85.46 | | 62.18 | | -20.31 | % | | -33.89 | % |
| 1991 | | 70.97 | | 55.14 | | -9.48 | % | | -40.16 | % |
| 1992 | | 66.46 | | 55.38 | | -6.80 | % | | -44.23 | % |
| 1993 | | 82.27 | | 53.55 | | 37.71 | % | | -23.20 | % |
| 1994 | | 87.23 | | 69.13 | | -4.33 | % | | -26.53 | % |
| 1995 | | 91.63 | | 65.91 | | 5.16 | % | | -22.73 | % |
| 1996 | | 86.97 | | 69.54 | | -8.67 | % | | -29.44 | % |
| 1997 | | 92.17 | | 61.74 | | 23.25 | % | | -13.03 | % |
| 1998 | | 101.42 | | 70.42 | | -13.04 | % | | -24.37 | % |
| 1999 | | 88.05 | | 73.64 | | 10.85 | % | | -16.16 | % |
| 2000 | | 86.50 | | 74.17 | | -11.31 | % | | -25.64 | % |
| 2001 | | 77.17 | | 64.30 | | -3.02 | % | | -27.89 | % |
| 2002 | | 81.81 | | 67.18 | | 5.98 | % | | -23.58 | % |
| 2003 | | 94.72 | | 69.16 | | 23.36 | % | | -5.73 | % |
| 2004 | | 129.84 | | 87.49 | | 15.21 | % | | 8.61 | % |
| 2005 | | 145.33 | | 102.71 | | 31.78 | % | | 43.13 | % |
| 2006 | | 238.54 | | 142.80 | | 47.15 | % | | 110.61 | % |
| 2007 | | 254.17 | | 188.78 | | 14.75 | % | | 141.68 | % |
| 20086 | | 331.73 | | 241.70 | | 9.87 | % | | 165.54 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD SILVER TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 87.
82
INDEX COMMODITIES WEIGHTS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD SILVER EXCESS RETURN™
| | | | |
| | | SI7 |
| | | High1 | | Low2 |
| 19885 | | 100% | | 100% |
| 1989 | | 100% | | 100% |
| 1990 | | 100% | | 100% |
| 1991 | | 100% | | 100% |
| 1992 | | 100% | | 100% |
| 1993 | | 100% | | 100% |
| 1994 | | 100% | | 100% |
| 1995 | | 100% | | 100% |
| 1996 | | 100% | | 100% |
| 1997 | | 100% | | 100% |
| 1998 | | 100% | | 100% |
| 1999 | | 100% | | 100% |
| 2000 | | 100% | | 100% |
| 2001 | | 100% | | 100% |
| 2002 | | 100% | | 100% |
| 2003 | | 100% | | 100% |
| 2004 | | 100% | | 100% |
| 2005 | | 100% | | 100% |
| 2006 | | 100% | | 100% |
| 2007 | | 100% | | 100% |
| 20086 | | 100% | | 100% |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD SILVER EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD SILVER TOTAL RETURN™
| | | | | | |
| | | SI7 | |
| | | High1 | | | Low2 | |
| 19885 | | 100 | % | | 100 | % |
| 1989 | | 100 | % | | 100 | % |
| 1990 | | 100 | % | | 100 | % |
| 1991 | | 100 | % | | 100 | % |
| 1992 | | 100 | % | | 100 | % |
| 1993 | | 100 | % | | 100 | % |
| 1994 | | 100 | % | | 100 | % |
| 1995 | | 100 | % | | 100 | % |
| 1996 | | 100 | % | | 100 | % |
| 1997 | | 100 | % | | 100 | % |
| 1998 | | 100 | % | | 100 | % |
| 1999 | | 100 | % | | 100 | % |
| 2000 | | 100 | % | | 100 | % |
| 2001 | | 100 | % | | 100 | % |
| 2002 | | 100 | % | | 100 | % |
| 2003 | | 100 | % | | 100 | % |
| 2004 | | 100 | % | | 100 | % |
| 2005 | | 100 | % | | 100 | % |
| 2006 | | 100 | % | | 100 | % |
| 2007 | | 100 | % | | 100 | % |
| 20086 | | 100 | % | | 100 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD SILVER TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 87.
83
All statistics based on data from December 2, 1988 to April 30, 2008.
| | | | | | |
VARIOUS STATISTICAL MEASURES | | DBLCI-OY
SI ER8 | | DBLCI-OY
SI TR9 | | Silver Spot
Fix pm10 |
Annualized Changes to Index Level11 | | 0.7% | | 5.2% | | 5.2% |
Average rolling 3 month daily volatility12 | | 22.5% | | 22.5% | | 23.8% |
Sharpe Ratio13 | | -0.16 | | 0.04 | | 0.04 |
% of months with positive change14 | | 46% | | 49% | | 48% |
Average monthly positive change15 | | 5.9% | | 6.0% | | 6.0% |
Average monthly negative change16 | | -4.6% | | -4.4% | | -4.3% |
| | | |
ANNUALIZED INDEX LEVELS17 | | DBLCI-OY
SI ER8 | | DBLCI-OY
SI TR9 | | Silver Spot
Fix pm10 |
1 year | | 15.8% | | 19.8% | | 21.9% |
3 year | | 28.5% | | 33.8% | | 33.1% |
5 year | | 25.3% | | 29.1% | | 29.0% |
7 year | | 17.8% | | 21.1% | | 20.9% |
10 year | | 7.4% | | 11.2% | | 10.2% |
15 year | | 5.5% | | 9.7% | | 9.4% |
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JUNE 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH MAY 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 87.
84
COMPARISON OF DBLCI-OY SI ER, DBLCI-OY SI TR AND SILVER SPOT FIX PM
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY SI ER and DBLCI-OY SI TR are indices and do not reflect actual trading. Silver Spot Fix pm reflects a composite of actual trading prices. DBLCI-OY SI TR is calculated on a total return basis and does not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JUNE 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH MAY 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 87.
85
COMPARISON OF DBLCI-OY SI TR AND SILVER SPOT FIX PM
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DBLCI-OY SI TR is an index and does not reflect actual trading. Silver Spot Fix pm reflects a composite of actual trading prices.
DBLCI-OY SI TR is calculated on a total return basis and does not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JUNE 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH MAY 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 87.
86
NOTES AND LEGENDS:
1. | “High” reflects the highest closing level of the Index during the applicable year. |
2. | “Low” reflects the lowest closing level of the Index during the applicable year. |
3. | “Annual Index Changes” reflect the change to the Index level on an annual basis as of December 31 of each applicable year. |
4. | “Index Changes Since Inception” reflects the change of the Index level since inception on a compounded annual basis as of December 31 of each applicable year. |
5. | Closing levels as of inception on December 2, 1988. |
6. | Closing levels as of April 30, 2008. |
7.
| The Deutsche Bank Liquid Commodity Index–Optimum Yield Silver Excess Return™ and Deutsche Bank Liquid Commodity Index–Optimum Yield Silver Total Return™ reflect the change in market value of SI (Silver) on an optimum yield basis.
|
8.
| “DBLCI-OY SI ER™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Silver Excess Return™.
|
9.
| “DBLCI-OY SI TR™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Silver Total Return™.
|
10. | “Silver Spot Fix pm” is an internationally published benchmark for silver and is available through The London Bullion Market Association’s (the “LBMA”) website athttp://www.lbma.org.uk/statistics_historic.htm. The fixings are fully transparent and are therefore used to determine the accepted average price of silver. As a benchmark, many other financial instruments (such as cash-settled swaps and options) are priced off the fixing. The silver fixing started in 1897. Three market making members of the LBMA conduct the Silver Fixing meeting under the chairmanship of The Bank of Nova Scotia–ScotiaMocatta by telephone at 12.00 noon each working day. The other two members of the Silver Fixing are Deutsche Bank AG and HSBC Bank USA, NA. |
11. | “Annualized Changes to Index Level” reflect the change to the applicable index level on an annual basis as of December 31 of each applicable year. |
12. | “Average rolling 3 month daily volatility.” The daily volatility reflects the relative rate at which the price of the applicable index moves up and down, which is found by calculating the annualized standard deviation of the daily change in price. In turn, an average of this value is calculated on a 3 month rolling basis. |
13. | “Sharpe Ratio” compares the annualized rate of return minus the annualized risk-free rate of return to the annualized variability — often referred to as the “standard deviation” — of the monthly rates of return. A Sharpe Ratio of 1:1 or higher indicates that, according to the measures used in calculating the ratio, the rate of return achieved by a particular strategy has equaled or exceeded the risks assumed by such strategy. The risk-free rate of return that was used in these calculations was assumed to be 4.27%. |
14. | “% of months with positive change” during the period from inception to April 30, 2008. |
15. | “Average monthly positive change” during the period from inception to April 30, 2008. |
16. | “Average monthly negative change” during the period from inception to April 30, 2008. |
17. | “Annualized Index Levels” reflect the change to the level of the applicable index on an annual basis as of December 31 of each the applicable time period (e.g., 1 year, 3, 5 or 7, 10 or 15 years, as applicable). |
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JUNE 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
87
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH MAY 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
ALTHOUGH THE INDEX SPONSOR WILL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEX FROM SOURCE(S) WHICH THE INDEX SPONSOR CONSIDERS RELIABLE, THE INDEX SPONSOR WILL NOT INDEPENDENTLY VERIFY SUCH INFORMATION AND DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX SPONSOR SHALL NOT BE LIABLE (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY ERROR IN THE INDEX AND THE INDEX SPONSOR IS UNDER NO OBLIGATION TO ADVISE ANY PERSON OF ANY ERROR THEREIN.
UNLESS OTHERWISE SPECIFIED, NO TRANSACTION RELATING TO THE INDEX IS SPONSORED, ENDORSED, SOLD OR PROMOTED BY THE INDEX SPONSOR AND THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO (A) THE ADVISABILITY OF PURCHASING OR ASSUMING ANY RISK IN CONNECTION WITH ANY SUCH TRANSACTION (B) THE LEVELS AT WHICH THE INDEX STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DATE (C) THE RESULTS TO BE OBTAINED BY THE ISSUER OF ANY SECURITY OR ANY COUNTERPARTY OR ANY SUCH ISSUER’S SECURITY HOLDERS OR CUSTOMERS OR ANY SUCH COUNTERPARTY’S CUSTOMERS OR COUNTERPARTIES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH ANY LICENSED RIGHTS OR FOR ANY OTHER USE OR (D) ANY OTHER MATTER. THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX SPONSOR HAVE ANY LIABILITY (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
88
INDUSTRIAL METALS SECTOR DATA
RELATING TO
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD INDUSTRIAL METALS EXCESS RETURN™
(DBLCI-OY INDUSTRIAL METALS ER™)
89
CLOSING LEVELS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD INDUSTRIAL METALS EXCESS RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes Since Inception4 | |
| 19975 | | 100.17 | | 82.95 | | -16.46 | % | | -16.46 | % |
| 1998 | | 83.89 | | 66.04 | | -20.69 | % | | -33.75 | % |
| 1999 | | 80.73 | | 63.87 | | 21.85 | % | | -19.27 | % |
| 2000 | | 82.74 | | 73.17 | | -7.70 | % | | -25.49 | % |
| 2001 | | 75.56 | | 56.04 | | -19.70 | % | | -40.17 | % |
| 2002 | | 64.83 | | 55.75 | | -4.02 | % | | -42.57 | % |
| 2003 | | 74.28 | | 56.70 | | 29.34 | % | | -25.72 | % |
| 2004 | | 98.27 | | 74.78 | | 31.88 | % | | -2.04 | % |
| 2005 | | 143.70 | | 91.01 | | 46.59 | % | | 43.60 | % |
| 2006 | | 275.22 | | 144.73 | | 80.98 | % | | 159.88 | % |
| 2007 | | 288.44 | | 215.81 | | -14.86 | % | | 121.26 | % |
| 20086 | | 277.42 | | 217.95 | | 13.60 | % | | 151.34 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD INDUSTRIAL METALS EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD INDUSTRIAL METALS TOTAL RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes Since Inception4 | |
| 19975 | | 100.19 | | 84.33 | | -15.05 | % | | -15.05 | % |
| 1998 | | 85.63 | | 70.50 | | -16.74 | % | | -29.27 | % |
| 1999 | | 90.35 | | 68.63 | | 27.73 | % | | -9.65 | % |
| 2000 | | 96.13 | | 84.03 | | -2.07 | % | | -11.53 | % |
| 2001 | | 90.14 | | 68.73 | | -16.84 | % | | -26.43 | % |
| 2002 | | 80.03 | | 69.47 | | -2.42 | % | | -28.21 | % |
| 2003 | | 93.81 | | 71.10 | | 30.67 | % | | -6.19 | % |
| 2004 | | 125.83 | | 94.46 | | 33.72 | % | | 25.44 | % |
| 2005 | | 189.91 | | 116.58 | | 51.32 | % | | 89.82 | % |
| 2006 | | 380.41 | | 191.40 | | 89.91 | % | | 260.47 | % |
| 2007 | | 407.16 | | 309.75 | | -10.99 | % | | 220.85 | % |
| 20086 | | 404.06 | | 316.66 | | 14.31 | % | | 266.75 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD INDUSTRIAL METALS TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 95.
90
INDEX COMMODITIES WEIGHTS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD INDUSTRIAL METALS EXCESS RETURN™
| | | | | | | | | | | | |
| | | MAL7 | | MZN7 | | MCU7 |
| | | High1 | | Low2 | | High | | Low | | High | | Low |
19975 | | 33.3% | | 34.4% | | 33.1% | | 34.4% | | 33.6% | | 31.2% |
1998 | | 34.0% | | 34.0% | | 34.8% | | 34.2% | | 31.1% | | 31.8% |
1999 | | 33.8% | | 32.7% | | 33.1% | | 37.0% | | 33.1% | | 30.3% |
2000 | | 33.9% | | 33.5% | | 33.1% | | 32.9% | | 32.9% | | 33.7% |
2001 | | 36.3% | | 38.1% | | 31.0% | | 29.3% | | 32.7% | | 32.6% |
2002 | | 32.8% | | 33.3% | | 32.2% | | 31.9% | | 34.9% | | 34.8% |
2003 | | 32.4% | | 32.7% | | 33.4% | | 33.4% | | 34.2% | | 33.8% |
2004 | | 32.7% | | 32.2% | | 34.6% | | 33.3% | | 32.7% | | 34.5% |
2005 | | 32.1% | | 32.5% | | 34.5% | | 34.7% | | 33.4% | | 32.8% |
2006 | | 33.9% | | 32.2% | | 33.4% | | 34.9% | | 32.7% | | 32.9% |
20076 | | 34.5% | | 34.9% | | 30.0% | | 31.5% | | 35.5% | | 33.5% |
20086 | | 35.1% | | 34.1% | | 30.0% | | 30.0% | | 34.7% | | 34.9% |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD INDUSTRIAL METALS EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD INDUSTRIAL METALS TOTAL RETURN™
| | | | | | | | | | | | |
| | | MAL7 | | MZN7 | | MCU7 |
| | | High1 | | Low2 | | High | | Low | | High | | Low |
19975 | | 33.3% | | 34.4% | | 33.1% | | 34.4% | | 33.6% | | 31.2% |
1998 | | 34.0% | | 34.0% | | 34.8% | | 34.2% | | 31.1% | | 31.8% |
1999 | | 33.8% | | 32.7% | | 33.1% | | 37.0% | | 33.1% | | 30.3% |
2000 | | 33.5% | | 33.3% | | 32.8% | | 34.2% | | 33.7% | | 32.4% |
2001 | | 36.3% | | 38.1% | | 31.0% | | 29.3% | | 32.7% | | 32.6% |
2002 | | 32.8% | | 33.3% | | 32.2% | | 31.9% | | 34.9% | | 34.8% |
2003 | | 32.4% | | 32.7% | | 33.4% | | 33.4% | | 34.2% | | 33.8% |
2004 | | 32.7% | | 32.2% | | 34.6% | | 33.3% | | 32.7% | | 34.5% |
2005 | | 32.1% | | 32.5% | | 34.5% | | 34.7% | | 33.4% | | 32.8% |
2006 | | 33.9% | | 32.2% | | 33.4% | | 34.9% | | 32.7% | | 32.9% |
20076 | | 34.5% | | 40.9% | | 30.0% | | 29.0% | | 35.5% | | 30.1% |
20086 | | 35.1% | | 34.1% | | 30.0% | | 30.0% | | 34.9% | | 35.9% |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD INDUSTRIAL METALS TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 95.
91
All statistics based on data from September 3, 1997 to April 30, 2008.
| | | | | | |
VARIOUS STATISTICAL MEASURES | | DBLCI-OY
Industrial Metals ER8 | | DBLCI-OY
Industrial Metals TR9 | | Goldman Sachs
US Industrial Metal Total
Return10 |
Annualized Changes to Index Level11 | | 9.0% | | 13.0% | | 11.8% |
Average rolling 3 month daily volatility12 | | 17.2% | | 17.2% | | 18.5% |
Sharpe Ratio13 | | 0.32 | | 0.55 | | 0.45 |
% of months with positive change14 | | 51% | | 55% | | 56% |
Average monthly positive change15 | | 5.1% | | 5.0% | | 4.8% |
Average monthly negative change16 | | -3.5% | | -3.5% | | -3.6% |
| | | |
ANNUALIZED INDEX LEVELS17 | | DBLCI-OY
Industrial Metals ER8 | | DBLCI-OY
Industrial Metals TR9 | | Goldman Sachs
US Industrial Metal Total
Return10 |
1 year | | -8.2% | | -5.1% | | -3.9% |
3 year | | 35.6% | | 41.2% | | 34.4% |
5 year | | 33.9% | | 38.0% | | 33.9% |
7 year | | 19.7% | | 23.0% | | 20.8% |
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD SEPTEMBER 1997 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 95.
92
COMPARISON OF DBLCI-OY INDUSTRIAL METALS ER, DBLCI-OY INDUSTRIAL METALS TR AND GOLDMAN SACHS US INDUSTRIAL METALS TOTAL RETURN INDEX
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY Industrial Metals ER, DBLCI-OY Industrial Metals TR and Goldman Sachs US Industrial Metals Total Return Index are indices and do not reflect actual trading.
DBLCI-OY Industrial Metals TR and Goldman Sachs US Industrial Metals Total Return Index are calculated on a total return basis and do not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD SEPTEMBER 1997 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 95.
93
COMPARISON OF DBLCI-OY INDUSTRIAL METALS TR AND GOLDMAN SACHS US INDUSTRIAL METALS TOTAL RETURN INDEX
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY Industrial Metals TR and Goldman Sachs US Industrial Metals Total Return Index are indices and do not reflect actual trading. DBLCI-OY Industrial Metals TR and Goldman Sachs US Industrial Metals Total Return Index are calculated on a total return basis and do not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD SEPTEMBER 1997 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 95.
94
NOTES AND LEGENDS:
1. | “High” reflects the highest closing level of the Index during the applicable year. |
2. | “Low” reflects the lowest closing level of the Index during the applicable year. |
3. | “Annual Index Changes” reflect the change to the Index level on an annual basis as of December 31 of each applicable year. |
4. | “Index Changes Since Inception” reflects the change of the Index level since inception on a compounded annual basis as of December 31 of each applicable year. |
5. | Closing levels as of inception on September 3, 1997. |
6. | Closing levels as of April 30, 2008. |
7.
| The Deutsche Bank Liquid Commodity Index–Optimum Yield Industrial Metals Excess Return™ and Deutsche Bank Liquid Commodity Index–Optimum Yield Industrial Metals Total Return™ reflect the change in market value of the following underlying index commodities: MAL (Aluminum), MZN (Zinc) and MCU (Copper – Grade A) on an optimum yield basis.
|
8.
| “DBLCI-OY Industrial Metals ER™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Industrial Metals Excess Return™.
|
9.
| “DBLCI-OY Industrial Metals TR™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Industrial Metals Total Return™.
|
10. | “Goldman Sachs US Industrial Metal Total Return” is Goldman Sachs US Industrial Metal Total Return. |
11. | “Annualized Changes to Index Level” reflect the change to the applicable index level on an annual basis as of December 31 of each applicable year. |
12. | “Average rolling 3 month daily volatility.” The daily volatility reflects the relative rate at which the price of the applicable index moves up and down, which is found by calculating the annualized standard deviation of the daily change in price. In turn, an average of this value is calculated on a 3 month rolling basis. |
13. | “Sharpe Ratio” compares the annualized rate of return minus the annualized risk-free rate of return to the annualized variability — often referred to as the “standard deviation” — of the monthly rates of return. A Sharpe Ratio of 1:1 or higher indicates that, according to the measures used in calculating the ratio, the rate of return achieved by a particular strategy has equaled or exceeded the risks assumed by such strategy. The risk-free rate of return that was used in these calculations was assumed to be 3.51%. |
14. | “% of months with positive change” during the period from inception to April 30, 2008. |
15. | “Average monthly positive change” during the period from inception to April 30, 2008. |
16. | “Average monthly negative change” during the period from inception to April 30, 2008. |
17. | “Annualized Index Levels” reflect the change to the level of the applicable index on an annual basis as of December 31 of each the applicable time period (e.g., 1 year, 3, 5 or 7, 10 or 15 years, as applicable). |
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD SEPTEMBER 1997 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
95
ALTHOUGH THE INDEX SPONSOR WILL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEX FROM SOURCE(S) WHICH THE INDEX SPONSOR CONSIDERS RELIABLE, THE INDEX SPONSOR WILL NOT INDEPENDENTLY VERIFY SUCH INFORMATION AND DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX SPONSOR SHALL NOT BE LIABLE (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY ERROR IN THE INDEX AND THE INDEX SPONSOR IS UNDER NO OBLIGATION TO ADVISE ANY PERSON OF ANY ERROR THEREIN.
UNLESS OTHERWISE SPECIFIED, NO TRANSACTION RELATING TO THE INDEX IS SPONSORED, ENDORSED, SOLD OR PROMOTED BY THE INDEX SPONSOR AND THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO (A) THE ADVISABILITY OF PURCHASING OR ASSUMING ANY RISK IN CONNECTION WITH ANY SUCH TRANSACTION (B) THE LEVELS AT WHICH THE INDEX STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DATE (C) THE RESULTS TO BE OBTAINED BY THE ISSUER OF ANY SECURITY OR ANY COUNTERPARTY OR ANY SUCH ISSUER’S SECURITY HOLDERS OR CUSTOMERS OR ANY SUCH COUNTERPARTY’S CUSTOMERS OR COUNTERPARTIES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH ANY LICENSED RIGHTS OR FOR ANY OTHER USE OR (D) ANY OTHER MATTER. THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX SPONSOR HAVE ANY LIABILITY (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
96
AGRICULTURE SECTOR DATA
RELATING TO
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD AGRICULTURE EXCESS RETURN™
(DBLCI-OY AGRICULTURE ER™ )
97
CLOSING LEVELS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD AGRICULTURE EXCESS RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes Since Inception4 | |
| 19885 | | 104.37 | | 99.09 | | 4.37 | % | | 4.37 | % |
| 1989 | | 110.17 | | 96.30 | | -1.76 | % | | 2.54 | % |
| 1990 | | 111.78 | | 86.63 | | -15.52 | % | | -13.37 | % |
| 1991 | | 94.19 | | 80.78 | | 8.34 | % | | -6.14 | % |
| 1992 | | 101.16 | | 86.77 | | -6.53 | % | | -12.27 | % |
| 1993 | | 101.06 | | 86.44 | | 15.20 | % | | 1.06 | % |
| 1994 | | 104.89 | | 92.32 | | 0.25 | % | | 1.32 | % |
| 1995 | | 122.81 | | 95.76 | | 21.21 | % | | 22.81 | % |
| 1996 | | 146.59 | | 117.81 | | -2.55 | % | | 19.68 | % |
| 1997 | | 132.21 | | 111.96 | | 0.23 | % | | 19.95 | % |
| 1998 | | 120.35 | | 85.16 | | -28.71 | % | | -14.49 | % |
| 1999 | | 89.18 | | 65.03 | | -19.49 | % | | -31.16 | % |
| 2000 | | 76.73 | | 67.18 | | 5.91 | % | | -27.09 | % |
| 2001 | | 73.31 | | 57.42 | | -20.62 | % | | -42.12 | % |
| 2002 | | 70.67 | | 53.68 | | 10.37 | % | | -36.12 | % |
| 2003 | | 75.17 | | 63.93 | | 15.51 | % | | -26.22 | % |
| 2004 | | 91.37 | | 69.95 | | -2.26 | % | | -27.88 | % |
| 2005 | | 81.36 | | 68.79 | | 10.53 | % | | -20.29 | % |
| 2006 | | 90.17 | | 72.91 | | 10.36 | % | | -12.03 | % |
| 2007 | | 111.62 | | 83.37 | | 25.54 | % | | 10.44 | % |
| 20086 | | 144.19 | | 110.44 | | 12.37 | % | | 24.10 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD AGRICULTURE EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD AGRICULTURE TOTAL RETURN™
| | | | | | | | | | |
| | | CLOSING LEVEL | | CHANGES | |
| | | High1 | | Low2 | | Annual Index
Changes3 | | | Index Changes
Since Inception4 | |
| 19885 | | 105.04 | | 99.16 | | 5.04 | % | | 5.04 | % |
| 1989 | | 114.82 | | 100.49 | | 6.72 | % | | 12.09 | % |
| 1990 | | 125.53 | | 102.27 | | -8.76 | % | | 2.27 | % |
| 1991 | | 117.41 | | 98.27 | | 14.44 | % | | 17.04 | % |
| 1992 | | 128.33 | | 111.30 | | -3.20 | % | | 13.30 | % |
| 1993 | | 134.56 | | 111.98 | | 18.77 | % | | 34.56 | % |
| 1994 | | 142.25 | | 125.30 | | 4.66 | % | | 40.84 | % |
| 1995 | | 180.52 | | 135.44 | | 28.18 | % | | 80.52 | % |
| 1996 | | 221.45 | | 174.03 | | 2.60 | % | | 85.21 | % |
| 1997 | | 208.25 | | 177.92 | | 5.53 | % | | 95.45 | % |
| 1998 | | 197.05 | | 143.55 | | -25.15 | % | | 46.28 | % |
| 1999 | | 152.70 | | 113.95 | | -15.60 | % | | 23.47 | % |
| 2000 | | 140.72 | | 121.57 | | 12.36 | % | | 38.73 | % |
| 2001 | | 139.73 | | 113.13 | | -17.79 | % | | 14.05 | % |
| 2002 | | 140.95 | | 106.30 | | 12.19 | % | | 27.96 | % |
| 2003 | | 152.04 | | 128.48 | | 16.69 | % | | 49.32 | % |
| 2004 | | 185.37 | | 143.05 | | -0.89 | % | | 47.99 | % |
| 2005 | | 169.50 | | 141.45 | | 14.10 | % | | 68.85 | % |
| 2006 | | 195.55 | | 159.95 | | 15.82 | % | | 95.55 | % |
| 2007 | | 259.27 | | 187.33 | | 31.24 | % | | 156.65 | % |
| 20086 | | 336.39 | | 256.67 | | 13.07 | % | | 190.19 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD AGRICULTURE TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 103.
98
INDEX COMMODITIES WEIGHTS TABLES
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD AGRICULTURE EXCESS RETURN™
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | C7 | | | W7 | | | S7 | | | SB7 | |
| | | High1 | | | Low2 | | | High | | | Low | | | High | | | Low | | | High | | | Low | |
| 19885 | | 25.7 | % | | 25.1 | % | | 25.0 | % | | 24.9 | % | | 25.9 | % | | 25.1 | % | | 23.4 | % | | 24.9 | % |
| 1989 | | 24.4 | % | | 24.0 | % | | 25.1 | % | | 26.6 | % | | 24.9 | % | | 24.0 | % | | 25.5 | % | | 25.4 | % |
| 1990 | | 26.5 | % | | 25.8 | % | | 22.2 | % | | 23.8 | % | | 25.7 | % | | 25.6 | % | | 25.6 | % | | 24.8 | % |
| 1991 | | 24.0 | % | | 24.8 | % | | 27.3 | % | | 24.2 | % | | 24.1 | % | | 24.1 | % | | 24.6 | % | | 26.8 | % |
| 1992 | | 23.4 | % | | 20.7 | % | | 25.7 | % | | 26.8 | % | | 24.5 | % | | 24.0 | % | | 26.5 | % | | 28.5 | % |
| 1993 | | 25.1 | % | | 25.5 | % | | 26.1 | % | | 25.3 | % | | 24.7 | % | | 25.8 | % | | 24.1 | % | | 23.4 | % |
| 1994 | | 24.6 | % | | 23.0 | % | | 24.4 | % | | 26.1 | % | | 25.4 | % | | 24.2 | % | | 25.6 | % | | 26.6 | % |
| 1995 | | 24.8 | % | | 26.5 | % | | 24.3 | % | | 24.3 | % | | 25.3 | % | | 25.4 | % | | 25.6 | % | | 23.7 | % |
| 1996 | | 27.1 | % | | 24.3 | % | | 22.2 | % | | 25.2 | % | | 24.0 | % | | 25.1 | % | | 26.7 | % | | 25.5 | % |
| 1997 | | 23.8 | % | | 22.6 | % | | 28.4 | % | | 25.2 | % | | 23.8 | % | | 23.6 | % | | 24.0 | % | | 28.6 | % |
| 1998 | | 25.9 | % | | 25.5 | % | | 24.9 | % | | 23.5 | % | | 25.2 | % | | 27.2 | % | | 24.0 | % | | 23.8 | % |
| 1999 | | 24.9 | % | | 27.2 | % | | 24.1 | % | | 25.3 | % | | 24.4 | % | | 24.7 | % | | 26.6 | % | | 22.8 | % |
| 2000 | | 25.4 | % | | 27.4 | % | | 22.9 | % | | 24.8 | % | | 26.2 | % | | 27.6 | % | | 25.5 | % | | 20.1 | % |
| 2001 | | 24.5 | % | | 24.9 | % | | 24.9 | % | | 24.5 | % | | 23.6 | % | | 25.2 | % | | 27.1 | % | | 25.4 | % |
| 2002 | | 25.3 | % | | 25.1 | % | | 25.4 | % | | 25.8 | % | | 27.4 | % | | 27.8 | % | | 21.9 | % | | 21.3 | % |
| 2003 | | 24.6 | % | | 22.3 | % | | 25.2 | % | | 25.4 | % | | 25.6 | % | | 26.4 | % | | 24.6 | % | | 25.9 | % |
| 2004 | | 27.4 | % | | 24.4 | % | | 23.6 | % | | 23.4 | % | | 26.5 | % | | 26.1 | % | | 22.5 | % | | 26.0 | % |
| 2005 | | 24.3 | % | | 24.3 | % | | 22.5 | % | | 23.3 | % | | 29.4 | % | | 25.2 | % | | 23.8 | % | | 27.2 | % |
| 2006 | | 23.7 | % | | 26.0 | % | | 24.7 | % | | 27.7 | % | | 20.6 | % | | 22.2 | % | | 31.0 | % | | 24.0 | % |
| 2007 | | 23.9 | % | | 25.7 | % | | 26.2 | % | | 25.9 | % | | 25.7 | % | | 28.4 | % | | 24.2 | % | | 19.9 | % |
| 20086 | | 21.9 | % | | 24.4 | % | | 28.6 | % | | 25.5 | % | | 25.2 | % | | 25.8 | % | | 24.3 | % | | 24.3 | % |
THE FUND WILL TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD AGRICULTURE EXCESS RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD AGRICULTURE TOTAL RETURN™
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | C7 | | | W7 | | | S7 | | | SB7 | |
| | | High1 | | | Low2 | | | High | | | Low | | | High | | | Low | | | High | | | Low | |
| 19885 | | 25.7 | % | | 25.1 | % | | 25.0 | % | | 24.9 | % | | 25.9 | % | | 25.1 | % | | 23.4 | % | | 24.9 | % |
| 1989 | | 24.8 | % | | 24.0 | % | | 24.7 | % | | 26.6 | % | | 25.2 | % | | 24.0 | % | | 25.3 | % | | 25.4 | % |
| 1990 | | 26.5 | % | | 25.8 | % | | 22.2 | % | | 23.8 | % | | 25.7 | % | | 25.6 | % | | 25.6 | % | | 24.8 | % |
| 1991 | | 24.0 | % | | 24.8 | % | | 27.3 | % | | 24.2 | % | | 24.1 | % | | 24.1 | % | | 24.6 | % | | 26.8 | % |
| 1992 | | 23.4 | % | | 20.9 | % | | 25.7 | % | | 26.9 | % | | 24.5 | % | | 23.7 | % | | 26.5 | % | | 28.5 | % |
| 1993 | | 25.1 | % | | 25.5 | % | | 26.1 | % | | 25.3 | % | | 24.7 | % | | 25.8 | % | | 24.1 | % | | 23.4 | % |
| 1994 | | 24.0 | % | | 23.0 | % | | 24.5 | % | | 26.1 | % | | 23.9 | % | | 24.2 | % | | 27.6 | % | | 26.6 | % |
| 1995 | | 24.8 | % | | 26.5 | % | | 24.3 | % | | 24.3 | % | | 25.3 | % | | 25.4 | % | | 25.6 | % | | 23.7 | % |
| 1996 | | 27.1 | % | | 25.1 | % | | 22.2 | % | | 23.9 | % | | 24.0 | % | | 26.1 | % | | 26.7 | % | | 24.9 | % |
| 1997 | | 24.4 | % | | 22.6 | % | | 24.4 | % | | 25.2 | % | | 24.8 | % | | 23.6 | % | | 26.3 | % | | 28.6 | % |
| 1998 | | 25.9 | % | | 25.5 | % | | 24.9 | % | | 23.5 | % | | 25.2 | % | | 27.2 | % | | 24.0 | % | | 23.8 | % |
| 1999 | | 24.9 | % | | 27.2 | % | | 24.1 | % | | 25.3 | % | | 24.4 | % | | 24.7 | % | | 26.6 | % | | 22.8 | % |
| 2000 | | 25.4 | % | | 27.4 | % | | 22.9 | % | | 24.8 | % | | 26.2 | % | | 27.6 | % | | 25.5 | % | | 20.1 | % |
| 2001 | | 24.5 | % | | 24.9 | % | | 24.9 | % | | 24.5 | % | | 23.6 | % | | 25.2 | % | | 27.1 | % | | 25.4 | % |
| 2002 | | 25.3 | % | | 25.1 | % | | 25.4 | % | | 25.8 | % | | 27.4 | % | | 27.8 | % | | 21.9 | % | | 21.3 | % |
| 2003 | | 24.6 | % | | 25.0 | % | | 25.2 | % | | 24.3 | % | | 25.6 | % | | 25.5 | % | | 24.6 | % | | 25.1 | % |
| 2004 | | 27.4 | % | | 21.0 | % | | 23.6 | % | | 22.4 | % | | 26.5 | % | | 22.6 | % | | 22.5 | % | | 34.0 | % |
| 2005 | | 24.3 | % | | 24.3 | % | | 22.5 | % | | 23.3 | % | | 29.4 | % | | 25.2 | % | | 23.8 | % | | 27.2 | % |
| 2006 | | 25.6 | % | | 26.0 | % | | 25.4 | % | | 27.7 | % | | 25.7 | % | | 22.2 | % | | 23.3 | % | | 24.0 | % |
| 2007 | | 23.9 | % | | 25.6 | % | | 26.2 | % | | 24.8 | % | | 25.7 | % | | 25.9 | % | | 24.2 | % | | 23.6 | % |
| 20086 | | 21.9 | % | | 24.4 | % | | 28.6 | % | | 25.5 | % | | 25.2 | % | | 25.8 | % | | 24.3 | % | | 24.3 | % |
THE FUND WILL NOT TRADE WITH A VIEW TO TRACKING THE
DEUTSCHE BANK LIQUID COMMODITY INDEX–OPTIMUM YIELD AGRICULTURE TOTAL RETURN™ OVER TIME.
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Please refer to notes and legends that follow on page 103.
99
All statistics based on data from December 2, 1988 to April 30, 2008.
| | | | | | |
VARIOUS STATISTICAL MEASURES | | DBLCI-OY
Agriculture ERTM8 | | DBLCI-OY
Agriculture TRTM9 | | Goldman Sachs
US Agriculture Total
Return10 |
Annualized Changes to Index Level11 | | 1.1% | | 5.6% | | 0.4% |
Average rolling 3 month daily volatility12 | | 14.4% | | 14.4% | | 14.9% |
Sharpe Ratio13 | | -0.22 | | 0.09 | | -0.26 |
% of months with positive change14 | | 50% | | 56% | | 48% |
Average monthly positive change15 | | 3.4% | | 3.4% | | 3.7% |
Average monthly negative change16 | | -3.1% | | -3.1% | | -3.2% |
| | | | | | |
ANNUALIZED INDEX LEVELS17 | | DBLCI-OY
Agriculture ERTM8 | | DBLCI-OY
Agriculture TRTM9 | | Goldman Sachs
US Agriculture Total
Return10 |
1 year | | 47.5% | | 52.6% | | 44.6% |
3 year | | 19.6% | | 24.6% | | 14.0% |
5 year | | 13.5% | | 17.0% | | 6.3% |
7 year | | 9.6% | | 12.6% | | 3.5% |
10 year | | 1.7% | | 5.2% | | -2.6% |
15 year | | 1.9% | | 6.0% | | 0.6% |
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 103.
100
DBLCI-OY AGRICULTURE ER, DBLCI-OY AGRICULTURE TR AND GOLDMAN SACHS US AGRICULTURE TOTAL RETURN INDEX
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
Each of DBLCI-OY Agriculture ER, DBLCI-OY Agriculture TR and Goldman Sachs US Agriculture Total Return Index are indices and do not reflect actual trading. DBLCI-OY Agriculture TR and Goldman Sachs US Agriculture Total Return Index are calculated on a total return basis and do not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 103.
101
COMPARISON OF DBLCI-OY AGRICULTURE TR AND GOLDMAN SACHS US AGRICULTURE TOTAL RETURN INDEX
NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE AND NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.
DBLCI-OY Agriculture TR and Goldman Sachs US Agriculture Total Return Index are indices and do not reflect actual trading. DBLCI-OY Agriculture TR and Goldman Sachs US Agriculture Total Return Index are calculated on a total return basis and do not reflect any fees or expenses.
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
Please refer to notes and legends that follow on page 103.
102
NOTES AND LEGENDS:
1. | “High” reflects the highest closing level of the Index during the applicable year. |
2. | “Low” reflects the lowest closing level of the Index during the applicable year. |
3. | “Annual Index Changes” reflect the change to the Index level on an annual basis as of December 31 of each applicable year. |
4. | “Index Changes Since Inception” reflects the change of the Index level since inception on a compounded annual basis as of December 31 of each applicable year. |
5. | Closing levels as of inception on December 2, 1988. |
6. | Closing levels as of April 30, 2008. |
7. | The Deutsche Bank Liquid Commodity Index–Optimum Yield Agriculture Excess Return™ and Deutsche Bank Liquid Commodity Index–Optimum Yield Agriculture Total Return™ reflect the change in market value of the following underlying index commodities: C (Corn), W (Wheat), S (Sugar) and SB (Soybeans) on an optimum yield basis. |
8. | “DBLCI-OY Agriculture ER™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Agriculture Excess Return™. |
9. | “DBLCI-OY Agriculture TR™” is Deutsche Bank Liquid Commodity Index–Optimum Yield Agriculture Total Return™. |
10. | “Goldman Sachs US Agriculture Total Return” is Goldman Sachs US Agriculture Total Return. |
11. | “Annualized Changes to Index Level” reflect the change to the applicable index level on an annual basis as of December 31 of each applicable year. |
12. | “Average rolling 3 month daily volatility.” The daily volatility reflects the relative rate at which the price of the applicable index moves up and down, which is found by calculating the annualized standard deviation of the daily change in price. In turn, an average of this value is calculated on a 3 month rolling basis. |
13. | “Sharpe Ratio” compares the annualized rate of return minus the annualized risk-free rate of return to the annualized variability — often referred to as the “standard deviation” — of the monthly rates of return. A Sharpe Ratio of 1:1 or higher indicates that, according to the measures used in calculating the ratio, the rate of return achieved by a particular strategy has equaled or exceeded the risks assumed by such strategy. The risk-free rate of return that was used in these calculations was assumed to be 4.27%. |
14. | “% of months with positive change” during the period from inception to April 30, 2008. |
15. | “Average monthly positive change” during the period from inception to April 30, 2008. |
16. | “Average monthly negative change” during the period from inception to April 30, 2008. |
17. | “Annualized Index Levels” reflect the change to the level of the applicable index on an annual basis as of December 31 of each the applicable time period (e.g., 1 year, 3, 5 or 7, 10 or 15 years, as applicable). |
WHILE THE FUND’S OBJECTIVE IS NOT TO GENERATE PROFIT THROUGH ACTIVE PORTFOLIO MANAGEMENT, BUT IS TO TRACK THE INDEX, BECAUSE THE INDEX WAS ESTABLISHED IN JULY 2006, CERTAIN INFORMATION RELATING TO INDEX CLOSING LEVELS MAY BE CONSIDERED TO BE “HYPOTHETICAL.” HYPOTHETICAL INFORMATION MAY HAVE CERTAIN INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.
NO REPRESENTATION IS BEING MADE THAT THE INDEX WILL OR IS LIKELY TO ACHIEVE ANNUAL OR CUMULATIVE CLOSING LEVELS CONSISTENT WITH OR SIMILAR TO THOSE SET FORTH HEREIN. SIMILARLY, NO REPRESENTATION IS BEING MADE THAT THE FUND WILL GENERATE PROFITS OR LOSSES SIMILAR TO THE FUND’S PAST PERFORMANCE, WHEN AVAILABLE, OR THE HISTORICAL ANNUAL OR CUMULATIVE CHANGES IN THE INDEX CLOSING LEVELS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY INVESTMENT METHODOLOGIES, WHETHER ACTIVE OR PASSIVE.
ONE OF THE LIMITATIONS OF HYPOTHETICAL INFORMATION IS THAT IT IS GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. TO THE EXTENT THAT INFORMATION PRESENTED HEREIN RELATES TO THE PERIOD DECEMBER 1988 THROUGH JUNE 2006, THE INDEX CLOSING LEVELS REFLECT THE APPLICATION OF THE INDEX’S METHODOLOGY, AND SELECTION OF INDEX COMMODITIES, IN HINDSIGHT.
103
NO HYPOTHETICAL RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THERE ARE NUMEROUS FACTORS, INCLUDING THOSE DESCRIBED UNDER “THE RISKS YOU FACE” HEREIN, RELATED TO THE COMMODITIES MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF THE FUND’S EFFORTS TO TRACK ITS INDEX OVER TIME WHICH CANNOT BE, AND HAVE NOT BEEN, ACCOUNTED FOR IN THE PREPARATION OF SUCH INDEX INFORMATION SET FORTH ON THE FOLLOWING PAGES, ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL PERFORMANCE RESULTS FOR THE FUND. FURTHERMORE, THE INDEX INFORMATION DOES NOT INVOLVE FINANCIAL RISK OR ACCOUNT FOR THE IMPACT OF FEES AND COSTS ASSOCIATED WITH THE FUND.
THE MANAGING OWNER HAS HAD LIMITED EXPERIENCE IN TRADING ACTUAL ACCOUNTS FOR ITSELF OR FOR CLIENTS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE INDEX CLOSING LEVELS SET FORTH HEREIN, PROSPECTIVE INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THE ANNUAL OR CUMULATIVE INDEX RESULTS.
ALTHOUGH THE INDEX SPONSOR WILL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEX FROM SOURCE(S) WHICH THE INDEX SPONSOR CONSIDERS RELIABLE, THE INDEX SPONSOR WILL NOT INDEPENDENTLY VERIFY SUCH INFORMATION AND DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX SPONSOR SHALL NOT BE LIABLE (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY ERROR IN THE INDEX AND THE INDEX SPONSOR IS UNDER NO OBLIGATION TO ADVISE ANY PERSON OF ANY ERROR THEREIN.
UNLESS OTHERWISE SPECIFIED, NO TRANSACTION RELATING TO THE INDEX IS SPONSORED, ENDORSED, SOLD OR PROMOTED BY THE INDEX SPONSOR AND THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES AS TO (A) THE ADVISABILITY OF PURCHASING OR ASSUMING ANY RISK IN CONNECTION WITH ANY SUCH TRANSACTION (B) THE LEVELS AT WHICH THE INDEX STANDS AT ANY PARTICULAR TIME ON ANY PARTICULAR DATE (C) THE RESULTS TO BE OBTAINED BY THE ISSUER OF ANY SECURITY OR ANY COUNTERPARTY OR ANY SUCH ISSUER’S SECURITY HOLDERS OR CUSTOMERS OR ANY SUCH COUNTERPARTY’S CUSTOMERS OR COUNTERPARTIES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH ANY LICENSED RIGHTS OR FOR ANY OTHER USE OR (D) ANY OTHER MATTER. THE INDEX SPONSOR MAKES NO EXPRESS OR IMPLIED REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN.
WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX SPONSOR HAVE ANY LIABILITY (WHETHER IN NEGLIGENCE OR OTHERWISE) TO ANY PERSON FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
104
PERFORMANCE OF COMMODITY POOLS OPERATED BY THE MANAGING OWNER AND ITS AFFILIATES
General
The performance information included herein is presented in accordance with CFTC regulations. The Funds differ materially in certain respects from the following pools’ performance which are included herein. The following sets forth summary performance information for all pools operated by the Managing Owner (other than the Funds).
The below pools, the performance of which are summarized herein, are materially different in certain respects from the Funds and the past performance summary of such pools are generally not representative of how the Funds might perform in the future. These pools also have material differences from the Funds, such as different investment objectives and strategies, leverage, employment of short in addition to long positions and fee structures, among other variations. The performance record of these pools may give some general indication of the Managing Owner’s capabilities by indicating the past performance of other pools sponsored by the Managing Owner.
All summary performance information is current as of April 30, 2008. Performance information is set forth, in accordance with CFTC Regulations, since (i) January 31, 2006 (inception with respect to PowerShares DB Commodity Index Tracking Fund) and (ii) September 18, 2006 (inception with respect to PowerShares DB G10 Currency Harvest Fund (DBV)), (iii) February 20, 2007 (inception with respect to each of PowerShares DB US Dollar Index Bullish Fund (UUP) and PowerShares DB US Dollar Index Bearish Fund (UDN)). CFTC Regulations require inclusion of only performance information within the five most recent calendar years and year-to-date, or, if inception of the pool has been less than five years and year-to-date, then since inception.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, AND MATERIAL DIFFERENCES EXIST AMONG THE FUNDS AND THE POOLS WHOSE PERFORMANCE ARE SUMMARIZED HEREIN.
INVESTORS SHOULD NOTE THAT INTEREST INCOME MAY CONSTITUTE A SIGNIFICANT PORTION OF A COMMODITY POOL’S INCOME AND, IN CERTAIN INSTANCES, MAY GENERATE PROFITS WHERE THERE HAVE BEEN REALIZED AND UNREALIZED LOSSES FROM COMMODITY TRADING.
PERFORMANCE OF POWERSHARES DB COMMODITY INDEX TRACKING FUND(TICKER: DBC)
Name of Pool:PowerShares DB Commodity Index Tracking Fund
Type of Pool: Public, Exchange-Listed Commodity Pool
Inception of Trading: February 2006
Aggregate Gross Capital Subscriptions as of April 30, 2008:$2,136,365,252
Net Asset Value as of April 30, 2008:$2,527,264,508
Net Asset Value per Share as of April 30, 2008:$37.50
Worst Monthly Drawdown: (4.70)% December 2006*
Worst Peak-to-Valley Drawdown:(7.14)% July 2006 –September 2006
| | | | | | |
Monthly Rate of Return | | 2008(%) | | 2007(%) | | 2006(%) |
January | | 3.24 | | (2.36) | | |
February | | 11.21 | | 5.30 | | (4.66) |
March | | (0.61) | | 0.67 | | 3.63 |
April | | 4.46 | | 0.55 | | 6.51 |
May | | | | (0.51) | | (0.42) |
June | | | | 1.22 | | (0.29) |
July | | | | 1.94 | | 1.65 |
August | | | | (2.21) | | (2.71) |
September | | | | 8.58 | | (4.54) |
October | | | | 8.58 | | 1.21 |
November | | | | 0.26 | | 6.40 |
December | | | | 3.76*** | | (4.70)* |
Compound Rate of Return | | 19.20%
(4 months) | | 28.15% | | 1.23%**
(11 months) |
* | The December 2006 return of (4.70)% includes the $0.61 per Share distribution made to Shareholders of record as of December 20, 2006. Prior to the December 29, 2006 distribution, the pool’s return for December 2006 was (2.33)%. |
** | “Compound Rate of Return” is based on an initial net asset value per share of $24.25 and is calculated by multiplying on a compound basis each of the monthly rates of return set forth in the chart above and not by adding or averaging such monthly rates of return. For periods of less than one year, the results are year-to-date. |
*** | The December 2007 return of 3.76% includes the $0.76 per Share distribution made to Shareholders of record as of the December 19, 2007. Prior to the December 28, 2007 distribution, the pool’s return for December 2007 was 6.23%. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
See accompanying Footnotes to Performance Information on page 107.
105
PERFORMANCE OF POWERSHARES DB G10 CURRENCY HARVEST FUND(TICKER: DBV)
Name of Pool:PowerShares DB G10 Currency Harvest Fund
Type of Pool:Public, Exchange-Listed Commodity Pool
Inception of Trading:September 2006
Aggregate Gross Capital Subscriptions as of April 30, 2008:$696,486,636
Net Asset Value as of April 30, 2008:$541,088,986
Net Asset Value per Share as of April 30, 2008:$26.79
Worst Monthly Drawdown:(4.00)% March 2008
Worst Peak-to-Valley Drawdown:(12.11)% October 2007 – March 2008*
| | | | | | |
Monthly Rate of Return | | 2008(%) | | 2007(%) | | 2006(%) |
January | | (1.31) | | 1.01 | | — |
February | | (0.96) | | 0.65 | | — |
March | | (4.00) | | 2.47 | | — |
April | | 4.28 | | 2.27 | | — |
May | | | | 2.14 | | — |
June | | | | 3.09 | | — |
July | | | | (0.97) | | — |
August | | | | (3.94) | | — |
September | | | | 2.79 | | (0.24) |
October | | | | 3.10 | | 1.92 |
November | | | | (3.76) | | (1.30) |
December | | | | (2.67)** | | 2.99*** |
Compound Rate of Return | | (2.15)%
(4 months) | | 5.96% | | 3.36%
(3 1/2 months) |
* | The Worst Peak-to-Valley Drawdown from October 2007 – March 2008 includes the effect of the distribution made to Shareholders of record as of December 19, 2007. Please see Footnote **. |
** | The December 2007 return of (2.67)% includes the $0.80 per Share distribution made to Shareholders of record as of December 19, 2007. Prior to the December 28, 2007 distribution, the pool’s return for December 2007 was 0.14%. |
*** | The December 2006 return of 2.99% includes the $0.06 per Share distribution made to Shareholders of record as of December 20, 2006. Prior to the December 29, 2006 distribution, the pool’s return for December 2006 was 3.23%. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
PERFORMANCE OF POWERSHARES DB US DOLLAR INDEX BULLISH FUND(TICKER: UUP), A
SERIES OF POWERSHARES DB US DOLLAR INDEX TRUST
Name of Pool:PowerShares DB US Dollar Index Bullish Fund
Type of Pool:Public, Exchange-Listed Commodity Pool
Inception of Trading:February 2007
Aggregate Gross Capital Subscriptions as of April 30, 2008:$324,565,276
Net Asset Value as of April 30, 2008:$266,218,558
Net Asset Value per Share as of April 30, 2008:$22.56
Worst Monthly Drawdown:(3.31)% September 2007
Worst Peak-to-Valley Drawdown:(10.19)% February 2007 – March 2008*
| | | | |
Monthly Rate of Return | | 2008(%) | | 2007(%) |
January | | (1.47) | | — |
February | | (1.84) | | (0.32) |
March | | (2.48) | | (0.32) |
April | | 0.80 | | (1.29) |
May | | | | 1.55 |
June | | | | 0.00 |
July | | | | (0.92) |
August | | | | 0.57 |
September | | | | (3.31) |
October | | | | (1.17) |
November | | | | 0.04 |
December | | | | 0.04** |
Compound Rate of Return | | (4.93)%
(4 months) | | (5.08)%
(10 ¼ months) |
* | The Worst Peak-to-Valley Drawdown from February 2007 - March 2008 includes the effect of the distribution made to Shareholders of record as of December 19, 2007. Please see Footnote **. |
** | The December 2007 return of 0.04% includes the $0.20 per Share distribution made to Shareholders of record as of December 19, 2007. Prior to the December 28, 2007 distribution, the pool’s return for December 2007 was 0.76%. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
See accompanying Footnotes to Performance Information on page 107.
106
PERFORMANCE OF POWERSHARES DB US DOLLAR INDEX BEARISH FUND(TICKER: UDN), A SERIES OF POWERSHARES DB US DOLLAR INDEX TRUST
Name of Pool:PowerShares DB US Dollar Index Bearish Fund
Type of Pool:Public, Exchange-Listed Commodity Pool
Inception of Trading:February 2007
Aggregate Gross Capital Subscriptions as of April 30, 2008:$133,081,124
Net Asset Value as of April 30, 2008:$122,972,537
Net Asset Value per Share as of April 30, 2008:$29.28
Worst Monthly Drawdown:(1.92)% December 2007*
Worst Peak-to-Valley Drawdown:(1.92)% November – December 2007**
| | | | |
Monthly Rate of Return | | 2008(%) | | 2007(%) |
January | | 2.14 | | — |
February | | 4.28 | | 0.64 |
March | | 2.65 | | 0.99 |
April | | (0.68) | | 2.01 |
May | | | | (0.73) |
June | | | | 0.74 |
July | | | | 1.54 |
August | | | | 0.38 |
September | | | | 3.82 |
October | | | | 1.68 |
November | | | | 0.68 |
December | | | | (1.92)* |
Compound Rate of Return | | 8.60 %
(4 months) | | 10.16%
(10 ¼ months) |
* | The December 2007 return of (1.92)% includes the $0.40 per Share distribution made to Shareholders of record as of December 19, 2007. Prior to the December 28, 2007 distribution, the pool’s return for December 2007 was 0.39%. |
** | The Worst Peak-to-Valley Drawdown from November - December 2007 includes the effect of the distribution made to Shareholders of record as of December 19, 2007. Please see Footnote *. |
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
See accompanying footnotes to performance information.
Footnotes to Performance Information
1. “Aggregate Gross Capital Subscriptions” is the aggregate of all amounts ever contributed to the relevant pool, including investors who subsequently redeemed their investments.
2. “Net Asset Value” is the net asset value of each pool as of April 30, 2008.
3. “Net Asset Value per Share” is the Net Asset Value of the relevant pool divided by the total number of Shares outstanding with respect to such pool as of April 30, 2008.
4. “Worst Monthly Drawdown” is the largest single month loss sustained since inception of trading. “Drawdown” as used in this section of the Prospectus means losses experienced by the relevant pool over the specified period and is calculated on a rate of return basis, i.e., dividing net performance by beginning equity. “Drawdown” is measured on the basis of monthly returns only, and does not reflect intra-month figures. “Month” is the month of the Worst Monthly Drawdown.
5. “Worst Peak-to-Valley Drawdown” is the largest percentage decline in the Net Asset Value per Share over the history of the relevant pool. This need not be a continuous decline, but can be a series of positive and negative returns where the negative returns are larger than the positive returns. “Worst Peak-to-Valley Drawdown” represents the greatest percentage decline from any month-end Net Asset Value per Share that occurs without such month-end Net Asset Value per Share being equaled or exceeded as of a subsequent month-end. For example, if the Net Asset Value per Share of a particular pool declined by $1 in each of January and February, increased by $1 in March and declined again by $2 in April, a “peak-to-valley drawdown” analysis conducted as of the end of April would consider that “drawdown” to be still continuing and to be $3 in amount, whereas if the Net Asset Value per Share had increased by $2 in March, the January-February drawdown would have ended as of the end of February at the $2 level.
107
INFORMATION BARRIERS BETWEEN THE INDEX SPONSOR AND THE MANAGING OWNER
It is Deutsche Bank’s policy that procedures are implemented to prevent the improper sharing of information between different departments of the bank. Specifically, the procedures discussed below create an information barrier between the personnel within Deutsche Bank AG London that calculate and reconstitute the Indexes,Index, or the Calculation Group, and other Deutsche Bank personnel, including but not limited to the Managing Owner, those in sales and trading, external or internal fund managers and bank personnel who are involved in hedging the bank’s exposure to instruments linked to the Indexes,Index, or Public Personnel, in order to prevent the improper sharing of information relating to the recomposition of the Indexes.Index. Effective information barriers between the Calculation Group and Public Personnel will help ensure that Public Personnel may continue to trade in the futures contracts underlying the IndexesIndex and securities linked to the IndexesIndex (otherwise, restrictions might apply regarding trading on nonpublic information under the securities laws of the United States).
As such, the information barriers erected under these procedures require the Calculation Group to adhere to the following procedures:
| • | | The Calculation Group may not share any non-public, proprietary or confidential information concerning the Indexes.Index. In particular, the Calculation Group may not release any information concerning a change in the methodology of calculating anythe Index or a new composition of anythe Index to Public Personnel or others unless and until such information has been previously published by Amex,NYSE Arca, on Reuters, or Bloomberg under the symbols DBE, DBENIX, DBE.IV, DBE.NV, DBE.SO, DBE.EU, DBE.TC, DBO, DBOLIX, DBO.IV, DBO.NV, DBO.SO, DBO.EU, DBO.TC, DBP, DBPMIX, DBP.IV, DBP.NV, DBP.SO, DBP.EU, DBP.TC, DGL, DGLDIX, DGL.IV, DGL.NV, DGL.SO, DGL.EU, DGL.TC, DBS, DBSLIX, DBS.IV, DBS.NV, DBS.SO, DBS.EU DBS.TC, DBB, DBBMIX, DBB.IV, DBB.NV, DBB.SO, DBB.EU, DBB.TC, DBA, DBAGIX, DBA.IV, DBA.NV, DBA.SO, DBA.EU and DBA.TCDBS.TC and on the websites athttp://www.dbfunds.db.comwww.dbxus.com andhttps://index.db.com, or any successor thereto. |
The Calculation Group and Public Personnel may not coordinate or seek to coordinate decision-making on the selection of anythe Index constituent instruments.
The Calculation Group also may not enter into any trades based on any non-public, proprietary or confidential information with respect to any Index.
| | proprietary or confidential information with respect to the Index. |
These procedures supplement and do not override policies and procedures concerning information barriers otherwise adopted by Deutsche Bank AG or any of Deutsche Bank’s affiliates.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview/Introduction
You should read Management’s DiscussionThe Fund seeks to track the changes, whether positive or negative, in the level of the DBIQ Optimum Yield Silver Index Excess Return™, referred to as either 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 and Analysisother high credit quality short-term fixed income securities over the expenses of the Fund. The Shares are designed for investors who want a cost-effective and convenient way to invest in a group of commodity futures on U.S. and, if applicable, non-U.S. markets. The Index is intended to reflect the change in market value of the silver sector. The single commodity comprising the Index is silver, or the Index Commodity.
As of the date of this prospectus, each of Deutsche Bank Securities Inc., Merrill Lynch Professional Clearing Corp., Newedge USA LLC, Virtu Financial ConditionCapital 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 LLC, Nomura Securities International Inc., RBC Capital Markets, LLC, UBS Securities LLC, Cantor Fitzgerald & Co., BNP Paribas Securities Corp., Goldman, Sachs & Co. and Results of OperationsGoldman Sachs Execution & Clearing, L.P. has executed a Participant Agreement.
The CFTC and/or commodity exchanges, as applicable, impose position limits on market participants trading in the commodity included in the documents incorporatedIndex. The Index is comprised of futures contracts on the Index Commodity that expire in a specific month and trade on a specific exchange, or the Index
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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 referenceinvesting in this prospectus.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) are referred to collectively as 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. Please referseehttp://www.dbxus.com with respect to “Incorporationthe most recently available weighted composition of the Fund and the composition of the Index on the Base Date.
The Fund pursues its investment objective by Referenceinvesting in a portfolio the Index Contracts, which are exchange traded futures contracts that expire in a specific month and trade on a specific exchange on the single commodity comprising the Index, or the Index Commodity. The single Index Commodity is silver. The Index is composed of Certain Documents” at page 149.notional amounts of the Index Commodity. The Fund also holds United States Treasury Obligations and other high credit quality short-term fixed income securities for deposit with the Fund’s commodity broker as margin.
DBIQ™, DBLCI™ and Deutsche Bank Liquid Commodity Index™ are trademarks of Deutsche Bank AG London, or the Index Sponsor. Trademark applications in the United States are pending with respect to the Trust, the Fund and aspects of the Index. Any use of these trademarks must be with the consent of or under license from the Index Sponsor. The Trust, the Fund and the Managing Owner have been licensed by the Index Sponsor to use the above noted trademarks. The Index Sponsor is an affiliate of the Trust, the Fund and the Managing Owner.
General
Under the Trust Agreement, Wilmington Trust Company, the Trustee of the Trust, has delegated to the Managing Owner the exclusive management and control of all aspects of the business of the Trust and the Fund. The Trustee will have no duty or liability to supervise or monitor the performance of the Managing Owner, nor will the Trustee have any liability for the acts or omissions of the Managing
Owner. The Index Sponsor obtains information for inclusion in, or for use in the calculation of, the Index from sources the Index Sponsor considers reliable. None of the Index Sponsor, the Managing Owner, the Trust, the Fund or any of their respective affiliates accepts responsibility for or guarantees the accuracy and/or completeness of the Index or any data included in the Index.
The Shares are intended to provide investment results that generally correspond to the changes, positive or negative, in the levels of the Index over time. The value of the Shares is expected to fluctuate in relation to changes in the value of the Fund’s portfolio. The market price of the Shares may not be identical to the net asset value per Share, but these two valuations are expected to be very close.
Margin Calls
Like other futures and derivatives traders, the Fund will be subject to margin calls from time-to-time. The term “margin” has a different meaning in the context of futures contracts and other derivatives than it does in the context of securities. In particular, “margin” on a futures position does not constitute a borrowing of money or the collateralization of a loan. The Fund does not borrow money.
To establish a position in an exchange-traded futures contract, the Fund makes a deposit of “initial margin.” The amount of initial margin required to be deposited in order to establish a position in an exchange-traded futures contract varies from instrument to instrument depending, generally, on the historical volatility of the futures contract in question. Determination of the amount of the required initial margin deposit in respect of a particular contract is made by the exchange on which the contract is listed. To establish a long position in an over-the-counter instrument, the counterparty may require an analogous deposit of collateral, depending upon the anticipated volatility of the instrument and the creditworthiness of the person seeking to establish the position. The deposit of initial margin provides assurance to futures commission merchants and clearing brokers involved in the settlement process that sufficient resources are likely to be on deposit to enable a client’s position to be closed by recourse to the initial margin deposit should the client fail to meet a demand for variation margin, even if changes in the value of the contract in
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question, which are marked to market from day to day, continue to reflect the contract’s historical volatility. Collateral deposited in support of an over-the-counter instrument serves a similar purpose.
Once a position has been established on a futures exchange, “variation margin” generally is credited or assessed at least daily to reflect changes in the value of the position. In contrast to “initial margin,” “variation margin” represents a system of marking to market the futures contract’s value. Thus, traders in exchange-traded futures contracts are assessed daily in an amount equal to that day’s accumulated losses in respect of any open position (or are credited daily with accumulated gains in respect of such position). Collateral may move between the parties to an over-the-counter instrument in a similar manner as gains or losses accumulate in the instrument. As with initial margin, variation margin serves to secure the obligations of the investor under the contract and to protect those involved in the settlement process against the possibility that a client will have insufficient resources to meet its contractual obligations. Collateral deposited in support of an over-the-counter instrument serves a similar purpose. Like initial margin (or an equivalent deposit of collateral), variation margin (or an equivalent deposit of collateral) does not constitute a borrowing of money, is not considered to be part of the contract purchase price and is returned upon the contract’s termination unless it is used to cover a loss in the contract position. United States Treasury Obligations are used routinely to collateralize OTC derivative positions, and are deposited routinely as margin to collateralize futures positions. The Fund may liquidate United States Treasury Obligations to meet an initial or variation margin requirement.
Performance Summary
The Fund commenced trading on the American Stock Exchange (which became the NYSE Alternext US LLC) on January 5, 2007, and, as of November 25, 2008, is listed on the NYSE Arca, Inc., or the NYSE Arca.
Performance of the Fund and the exchange traded Shares are detailed below in “Results of Operations.” Past performance of the Fund and the exchange traded Shares are not necessarily indicative of future performance.
The Index is intended to reflect the change in market value of the Index Commodity. In turn, the Index is intended to reflect the silver sector. The DBIQ Optimum Yield Silver Index Total Return™, or the DBIQ-OY SI TR™, consists of the Index plus 3-month United States Treasury Obligations returns. Past Index results are not necessarily indicative of future changes, positive or negative, in the Index closing levels.
The section “Summary of the DBIQ-OY Silver TR™ and Underlying Index Commodity Returns for the Three Months Ended December 31, 2013, 2012 and 2011 and the Years Ended December 31, 2013, 2012 and 2011” below provides an overview of the changes in the closing levels of the DBIQ-OY Silver TR™ by disclosing the change in market value of the underlying component Index Commodity through a “surrogate” (and analogous) index plus 3-month United States Treasury Obligations returns. Please note also that the Fund’s objective is to track the Index (not the DBIQ-OY Silver TR™) and the Fund does not attempt to outperform or underperform the Index. The Index employs the optimum yield roll method with the objective of mitigating the negative effects of contango, the condition in which distant delivery prices for futures exceed spot prices, and maximizing the positive effects of backwardation, a condition opposite of contango.
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Summary of the DBIQ-OY Silver TR™ and Underlying Index Commodity Returns for the Three Months Ended December 31, 2013, 2012 and 2011 and the Years Ended December 31, 2013, 2012 and 2011
| | | | | | | | | | | | |
| | | AGGREGATE RETURNS | |
Underlying Index | | Three Months Ended
December 31, 2013 | | | Three Months Ended
December 31, 2012 | | | Three Months Ended
December 31, 2011 | |
DB Silver Indices | | | ([-])% | | | | (12.59)% | | | | (7.07)% | |
| | | | | | | | | | | | |
AGGREGATE RETURN | | | ([-])% | | | | (12.59)% | | | | (7.07)% | |
| | | | | | | | | | | | |
| |
| | | AGGREGATE RETURNS | |
Underlying Index | | Year Ended
December 31, 2013 | | | Year Ended
December 31, 2012 | | | Year Ended
December 31, 2011 | |
DB Silver Indices | | | [-]% | | | | [-]% | | | | (10.24)% | |
| | | | | | | | | | | | |
AGGREGATE RETURN | | | [-]% | | | | [-]% | | | | (10.24)% | |
| | | | | | | | | | | | |
If the Fund’s interest income from its holdings of fixed income securities were to exceed the Fund’s fees and expenses, the aggregate return on an investment in the Fund is expected to outperform the Index and underperform the DBIQ-OY SI TR™. The only difference between (i) the Index and (ii) the DBIQ-OY SI TR™ is that the Index does not include interest income from a hypothetical basket of fixed income securities while the DBIQ-OY SI TR™ does include such a component. Thus, the difference between the Index and the DBIQ-OY SI TR™ is attributable entirely to the hypothetical interest income from this hypothetical basket of fixed income securities. If the Fund’s interest income from its holdings of fixed income securities exceeds the Fund’s fees and expenses, then the amount of such excess is expected to be distributed periodically. The market price of the Shares is expected to closely track the Index. The aggregate return on an investment in the Fund over any period is the sum of the capital appreciation or depreciation of the Shares over the period plus the amount of any distributions during the period. Consequently, the Fund’s aggregate return is expected to outperform the Index by the amount of the excess, if any, of its interest income over its fees and expenses but, as a result of the Fund’s fees and expenses, the aggregate return on the Fund is expected to underperform the DBIQ-OY SI TR™. If the Fund’s fees and expenses were to exceed the Fund’s interest income from its holdings of fixed income securities, the aggregate return on an investment in the Fund is expected to underperform the Index.
[Remainder of page left blank intentionally.]
108
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Critical Accounting Policies
The Fund’s critical accounting policies are as follows:
Preparation of the financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires the application of appropriate accounting rules and guidance, as well as the use of estimates, and requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expense and related disclosure of contingent assets and liabilities during the reporting period of the financial statements and accompanying notes. The Fund’s application of these policies involves judgments and actual results may differ from the estimates used.
The Fund holds a significant portion of its assets in futures contracts and United States Treasury Obligations, both of which are recorded on trade date and at fair value in the financial statements, with changes in fair value reported in the statement of income and expenses.
The use of fair value to measure financial instruments, with related unrealized gains or losses recognized in earnings in each period is fundamental to the Fund’s financial statements. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).
In determining fair value of United States Treasury Obligations and commodity futures contracts, the Fund uses unadjusted quoted market prices in active markets. Financial Accounting Standards Board (FASB) Accounting Standards Codification for fair value measurement and disclosure guidance requires a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The hierarchy gives the highest priority to unadjusted quoted prices for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
When market closing prices are not available, the Managing Owner may value an asset of the Fund pursuant to policies the Managing Owner has adopted, which are consistent with normal industry standards.
Realized gains (losses) and changes in unrealized gain (loss) on open positions are determined on a specific identification basis and recognized in the statement of income and expenses in the period in which the contract is closed or the changes occur, respectively.
Interest income on United States Treasury Obligations is recognized on an accrual basis when earned. Premiums and discounts are amortized or accreted over the life of the United States Treasury Obligations.
Market Risk
Trading in futures contracts involves the Fund entering into contractual commitments to purchase a particular commodity at a specified date and price. The market risk associated with the Fund’s commitments to purchase commodities is limited to the gross or face amount of the contracts held.
The Fund’s exposure to market risk is also influenced by a number of factors including the volatility of interest rates and foreign currency exchange rates, the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of the Fund’s trading as well as the development of drastic market occurrences could ultimately lead to a loss of all or substantially all of the investors’ capital.
Credit Risk
When the Fund enters into futures contracts, the Fund is exposed to credit risk that the counterparty to the contract will not meet its obligations. The counterparty for futures contracts traded on United States and on most foreign futures exchanges is the clearing house associated with the particular exchange. In general, clearing houses are backed by their corporate members who may be required to share in the financial burden resulting from the nonperformance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearing house is not backed by the clearing members (i.e., some foreign exchanges), the clearing house may be backed by a consortium of
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banks or other financial institutions. There can be no assurance that any counterparty, clearing member or clearinghouse will meet its obligations to the Fund.
The Commodity Broker, when acting as the Fund’s futures commission merchant in accepting orders for the purchase or sale of domestic futures contracts, is required by CFTC regulations to separately account for and segregate as belonging to the Fund all assets of the Fund relating to domestic futures trading and the Commodity Broker is not allowed to commingle such assets with other assets of the Commodity Broker. In addition, CFTC regulations also require the Commodity Broker to hold in a secure account assets of the Fund related to foreign futures trading. Please see The Risks You Fact - “Failure of Futures Commission Merchants or Commodity Brokers to Segregate Assets May Increase Losses; Despite Segregation of Assets, The Fund Remains at Risk of Significant Losses Because The Fund May Only Receive a Pro-Rata Share of the Assets, or No Assets at All” for additional information.
Liquidity
The Fund’s entire source of capital is derived from the Fund’s offering of Shares to Authorized Participants. The Fund in turn allocates its net assets to commodities trading. A significant portion of the net asset value is held in United States Treasury Obligations and cash, which is used as margin for the Fund’s trading in commodities. The percentage that United States Treasury Obligations bear to the total net assets will vary from period to period as the market values of the Fund’s commodity interests change. The balance of the net assets is held in the Fund’s commodity trading account. Interest earned on the Fund’s interest-bearing funds is paid to the Fund.
The Fund’s commodity contracts may be subject to periods of illiquidity because of market conditions, regulatory considerations or for other reasons. For example, commodity exchanges generally have the ability to limit fluctuations in certain commodity futures contract prices during a single day by regulations referred to as “daily limits.” During a single day, no trades may be executed at prices beyond the daily limit. Once the price of a particular futures contract has increased or decreased by an amount equal to the daily limit, positions in the commodity futures contract can neither be taken nor
liquidated unless the traders are willing to effect trades at or within the limit. Commodity futures prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent the Fund from promptly liquidating its commodity futures positions.
Because the Fund trades futures contracts, its capital is at risk due to changes in the value of futures contracts (market risk) or the inability of counterparties (including the Commodity Broker and/or exchange clearinghouses) to perform under the terms of the contracts (credit risk).
On any business day, an Authorized Participant may place an order with the Transfer Agent to redeem one or more Baskets. Redemption orders must be placed by 10:00 a.m., Eastern Time. The day on which the Managing Owner receives a valid redemption order is the redemption order date. The day on which a redemption order is settled is the redemption order settlement date. As provided below, the redemption order settlement date may occur up to 3 business days after the redemption order date. Redemption orders are irrevocable. The redemption procedures allow Authorized Participants to redeem Baskets. Individual Shareholders may not redeem directly from the Fund. Instead, individual Shareholders may only redeem Shares in integral multiples of 200,000 and only through an Authorized Participant.
Unless otherwise agreed to by the Managing Owner and the Authorized Participant as provided in the next sentence, by placing a redemption order, an Authorized Participant agrees to deliver the Baskets to be redeemed through DTC’s book-entry system to the Fund not later than the redemption order settlement date as of 2:45 p.m., Eastern time, on the business day immediately following the redemption order date. Upon submission of a redemption order, the Authorized Participant may request the Managing Owner to agree to a redemption order settlement date up to 3 business days after the redemption order date. By placing a redemption order, and prior to receipt of the redemption proceeds, an Authorized Participant’s DTC account is charged the non-refundable transaction fee due for the redemption order.
Redemption orders may be placed either (i) through the Continuous Net Settlement (“CNS”) clearing processes of the National Securities Clearing Corporation (the “NSCC”) or (ii) if outside the CNS
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Clearing Process, only through the facilities of The Depository Trust Company (“DTC” or the “Depository”) (the “DTC Process”), or a successor depository, and only in exchange for cash. By placing a redemption order, and prior to receipt of the redemption proceeds, an Authorized Participant’s DTC account is charged the non-refundable transaction fee due for the redemption order and such fee is not borne by the Fund.
Cash Flows
The primary cash flow activity of the Fund is to raise capital from Authorized Participants through the issuance of Shares. This cash is used to invest in United States Treasury Obligations and to meet margin requirements as a result of the positions taken in futures contracts to match the fluctuations of the Index the Fund is tracking.
Operating Activities
Net cash flow provided by [and (used for)] operating activities was $[ ] million, $11.3 million and $126.0 million for the Years Ended December 31, 2013, 2012 and 2011, respectively. These amounts primarily include net purchases and sales of United States Treasury Obligations which are held at fair value on the statement of financial condition.
During the Year Ended December 31, 2013, $[ ] million was paid to purchase United States Treasury Obligations and $[ ] million was received from sales and maturing contracts. During the Year Ended December 31, 2012, $222.0 million was paid to purchase United States Treasury Obligations and $243.0 million was received from sales and maturing contracts. During the Year Ended December 31, 2011, $768.9 million was paid to purchase United States Treasury Obligations and $857.0 million was received from sales and maturing contracts. Unrealized appreciation on United States Treasury Obligations and futures [increased/decreased] by $[ ] million, increased by $15.8 million and decreased by $50.6 million during the Years Ended December 31, 2013, 2012 and 2011, respectively.
Financing Activities
The Fund’s net cash flow [provided by and] (used for) financing activities was $[ ] million, $(21.3) million and $(117.4) million during the Years Ended December 31, 2013, 2012 and 2011,
respectively. This included $[ ], $244.3 million and $86.0 million from the sale of Shares to Authorized Participants during the Years Ended December 31, 2013, 2012 and 2011, respectively.
Results of Operations
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
Fund Share Price Performance
For the Year Ended December 31, 2013, the NYSE Arca market value of each Share [increased/decreased] [ ]% from $[ ] per Share to $[ ] per Share. The Share price low and high for the Year Ended December 31, 2013 and related change from the Share price on December 31, 2012 was as follows: Shares traded from a low of $[ ] per Share ([ ]%) on [ ] to a high of $[ ] per Share ([ ]%) on [ ]. The Fund did not make a distribution to Shareholders in 2013. Therefore, the total return for the Fund on a market value basis, was [ ]%.
For the Year Ended December 31, 2012, the NYSE Arca market value of each Share increased 9.09% from $47.99 per Share to $52.35 per Share. The Share price low and high for the Year Ended December 31, 2012 and related change from the Share price on December 31, 2011 was as follows: Shares traded from a low of $45.61 per Share(-4.96%) on June 28, 2012 to a high of $64.42 per Share (+34.24%) on February 28, 2012. The Fund did not make a distribution to Shareholders in 2012. Therefore, the total return for the Fund on a market value basis, was 9.09%.
For the Year Ended December 31, 2011, the NYSE Arca market value of each Share decreased 11.96% from $54.51 per Share to $47.99 per Share. The Share price high and low for the Year Ended December 31, 2011 and related change from the Share price on December 31, 2010 was as follows: Shares traded from a high of $84.98 per Share (+55.90%) on April 28, 2011 to a low of $46.95 per Share (-13.87%) on December 28, 2011. The Fund did not make a distribution to Shareholders in 2011. Therefore, the total return for the Fund on a market value basis, was -11.96%.
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Fund Share Net Asset Performance
For the Year Ended December 31, 2013, the net asset value of each Share increased [ ]% from $[ ] per Share to $[ ] per Share. [Appreciation] in the price of silver futures contracts during the Year Ended December 31, 2013 contributed to an overall [ ]% [increase] in the level of the DBIQ-OY SI TR™. The Fund did not make a distribution to Shareholders during the Year Ended December 31, 2013. Therefore, the total return for the Fund on a net asset value basis was [ ]%.
Net income for the Year Ended December 31, 2013 was $[ ] million, resulting from $[ ] million of interest income, net realized gains of $[ ] million, net change in unrealized gains of $[ ] million and operating expenses of $[ ] million.
For the Year Ended December 31, 2012, the net asset value of each Share increased 7.03% from $48.54 per Share to $51.95 per Share. Appreciation in the price of silver futures contracts during the Year Ended December 31, 2012 contributed to an overall 7.77% increase in the level of the DBIQ-OY SI TR™. The Fund did not make a distribution to Shareholders during the Year Ended December 31, 2012. Therefore, the total return for the Fund on a net asset value basis was +7.03%.
Net income for the Year Ended December 31, 2012 was $6.0 million, resulting from $0.1 million of interest income, net realized losses of $9.3 million, net change in unrealized gains of $15.7 million and operating expenses of $0.5 million.
For the Year Ended December 31, 2011, the net asset value of each Share decreased 11.13% from $54.62 per Share to $48.54 per Share. Depreciation in the price of silver futures contracts during the Year Ended December 31, 2011 contributed to an overall 10.24% decrease in the level of the DBIQ-OY SI TR™. The Fund did not make a distribution to Shareholders during the Year Ended December 31, 2011. Therefore, the total return for the Fund on a net asset value basis was -11.13%.
Net loss for the Year Ended December 31, 2011 was $12.5 million, resulting from $0.1 million of interest income, net realized gains of $39.7 million, net change in unrealized losses of $50.6 million and operating expenses of $1.7 million.
FOR THE THREE MONTHS ENDED DECEMBER 31, 2013, 2012 AND 2011
Fund Share Price Performance
For the Three Months Ended December 31, 2013, the NYSE Arca market value of each Share increased [ ]% from $[ ] per Share to $[ ] per Share. The Share price low and high for the Three Months Ended December 31, 2013 and related change from the Share price on September 30, 2013 was as follows: Shares traded from a low of $[ ] per Share [ ]%) on [ ] to a high of $[ ] per Share ([ ]%) on December 31, 2013. The Fund did not make a distribution to Shareholders in 2010. Therefore, the total return for the Fund on a market value basis was [ ]%.
For the Three Months Ended December 31, 2012, the NYSE Arca market value of each Share decreased 12.40% from $59.76 per Share to $52.35 per Share. The Share price high and low for the Three Months Ended December 31, 2012 and related change from the Share price on September 30, 2012 was as follows: Shares traded from a high of $60.50 per Share (+1.24%) on October 4, 2012 to a low of $51.42 per Share (-13.96%) on December 24, 2012. The Fund did not make a distribution to Shareholders in 2012. Therefore, the total return for the Fund on a market value basis was -12.40%.
For the Three Months Ended December 31, 2011, the NYSE Arca market value of each Share decreased 7.09% from $51.65 per Share to $47.99 per Share. The Share price high and low for the Three Months Ended December 31, 2011 and related change from the Share price on September 30, 2011 was as follows: Shares traded from a high of $61.28 per Share (+18.64%) on October 28, 2011 to a low of $46.95 per Share (-9.10%) on December 28, 2011. The Fund did not make a distribution to Shareholders in 2011. Therefore, the total return for the Fund on a market value basis was -7.09%.
Fund Share Net Asset Performance
For the Three Months Ended December 31, 2013, the net asset value of each Share increased [ ]% from $[ ] per Share to $[ ] per Share. [Appreciation] in the price of silver futures contracts during the Three Months Ended December 31, 2013 contributed to an overall [ ]% increase in the level of the DBIQ-OY SI TR™. No distributions were paid to Shareholders during the Year Ended December 31, 2013. Therefore, the total return for the Fund on a net asset value basis was [ ]%.
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Net income for the Three Months Ended December 31, 2013 was $[ ] million, resulting from net realized gains of $[ ] million, net change in unrealized gains of $[ ] million and operating expenses of $[ ] million.
For the Three Months Ended December 31, 2012, the net asset value of each Share decreased 13.00% from $59.71 per Share to $51.95 per Share. Depreciation in the price of silver futures contracts during the Three Months Ended December 31, 2012 contributed to an overall 12.59% decrease in the level of the DBIQ-OY SI TR™. No distributions were paid to Shareholders during the Year Ended December 31, 2012. Therefore, the total return for the Fund on a net asset value basis was -13.00%.
Net loss for the Three Months Ended December 31, 2012 was $9.3 million resulting from $0.01 million of interest income, net realized losses of $6.8 million, net change in unrealized losses of $2.4 million and operating expenses of $0.1 million.
For the Three Months Ended December 31, 2011, the net asset value of each Share decreased 7.37% from $52.40 per Share to $48.54 per Share. Depreciation in the price of silver futures contracts during the Three Months Ended December 31, 2011 contributed to an overall 7.07% decrease in the level of the DBIQ-OY SI TR™. No distributions were paid to Shareholders during the Year Ended December 31, 2011. Therefore, the total return for the Fund on a net asset value basis was -7.37%.
Net loss for the Three Months Ended December 31, 2011 was $2.3 million resulting from $0.01 million of interest income, net realized losses of $25.9 million, net change in unrealized gains of $23.8 million and operating expenses of $0.2 million.
Off-Balance Sheet Arrangements and Contractual Obligations
In the normal course of its business, the Fund is party to financial instruments with off-balance sheet risk. The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in a future obligation or loss. The financial instruments used by the Fund are commodity futures, whose values are based upon an underlying asset and generally represent future commitments which have a reasonable possibility to be settled in cash or through
physical delivery. The financial instruments are traded on an exchange and are standardized contracts.
The Fund has not utilized, nor does it expect to utilize in the future, special purpose entities to facilitate off-balance sheet financing arrangements and has no loan guarantee arrangements or off-balance sheet arrangements of any kind, other than agreements entered into in the normal course of business noted above, which may include indemnification provisions related to certain risks service providers undertake in performing services which are in the best interest of the Fund. While the Fund’s exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on the Fund’s financial position.
The Fund’s contractual obligations are with the Managing Owner and the Commodity Broker. Management Fee payments made to the Managing Owner are calculated as a fixed percentage of the Fund’s net asset value. Commission payments to the Commodity Broker are on a contract-by-contract, or round-turn, basis. As such, the Managing Owner cannot anticipate the amount of payments that will be required under these arrangements for future periods as net asset values are not known until a future date. These agreements are effective for one year terms, renewable automatically for additional one year terms unless terminated. Additionally, these agreements may be terminated by either party for various reasons.
USE OF PROCEEDS
A substantial amount of proceeds of the offering of the Shares of each Fund are used by each Fund, through its corresponding Masterthe Fund to engage in the trading of exchange-traded futures on itsthe Index CommoditiesCommodity with a view to tracking the changes, positive or negative, in the level of itsthe Index over time, less the expenses of the operations of the Fund and its corresponding Master Fund. Each MasterThe Fund’s portfolio also includes United States Treasury securities and other high credit quality short-term fixed income securities for deposit with such Masterthe Fund’s Commodity Broker as margin.
To the extent that a Masterthe Fund trades in futures contracts on United States exchanges, the assets deposited by such Masterthe Fund with its Commodity Broker as margin must be segregated pursuant to the regulations of the CFTC. Such segregated funds may
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be invested only in a limited range of instruments —- principally U.S. government obligations.
To the extent, if any, that a Masterthe Fund trades in futures on markets other than regulated United States futures exchanges, funds deposited to margin positions held on such exchanges are invested in bank deposits or in instruments of a credit standing generally comparable to those authorized by the CFTC for investment of “customer segregated funds,” although applicable CFTC rules prohibit funds employed in trading on foreign exchanges from being deposited in “customer segregated fund accounts.”
Although the following percentages may vary substantially over time, as of the date of this Prospectus, each Masterthe Fund estimates that approximately 100% of the net asset value of each Masterthe Fund is maintained in segregated accounts in the name of such Masterthe Fund with the Commodity Broker in the form of cash or United States Treasury bills. Approximately 10% of the net asset value of each Masterthe Fund may be held in cash at any one time. Such funds are segregated pursuant to CFTC rules.
The Managing Owner, a registered commodity pool operator and commodity trading advisor, is responsible for the cash management activities of each Masterthe Fund, including investing in United States Treasury and United States Government Agencies issues.
In addition, assets of each Masterthe Fund not required to margin positions may be maintained in United States bank accounts opened in the name of such Masterthe Fund and may be held in United States Treasury bills (or other securities approved by the CFTC for investment of customer funds).
Each MasterThe Fund receives 100% of the interest income earned on its fixed income assets.
CHARGES
See “Summary — Breakeven Amounts” and “Summary — ‘Breakeven Table’” for additional breakeven related information.
Management Fee
Each Master Fund with respect to PowerShares DB Oil Fund, PowerShares DB Gold Fund and PowerShares DB SilverThe Fund pays the Managing Owner a Management Fee, monthly in arrears, in an amount equal to 0.50% per annum of the daily net asset value of such Master Fund. Each Master Fund with respect to PowerShares DB Energy Fund, PowerShares DB Precious Metals Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculture Fund pays the Managing Owner a Management Fee, monthly in arrears, in an amount
equal to 0.75% per annum of theits daily net asset value of such Master Fund. No separate management fee is paid by any corresponding Fund.value. The Management Fee will beis paid in consideration of the Managing Owner’s commodity futures trading advisory services.
Organization and Offering Expenses
Expenses incurred in connection with organizing each Fund and its corresponding Masterthe Fund and the initial offering of its Shares were paid by the Managing Owner. Expenses incurred in connection with the continuous offering of Shares of each Fund after the commencement of its corresponding Master Fund’s trading operations are also paid by the Managing Owner.
Organization and offering expenses relating to both a Masterthe Fund and its corresponding Fund, as applicable, means those expenses incurred in connection with theirits formation, the qualification and registration of the Shares of such Fund and in offering, distributing and processing the Shares of such Fund under applicable federal law, and any
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other expenses actually incurred and, directly or indirectly, related to the organization of such Fund, and its corresponding Masterthe Fund or the offering of the Shares, of such Fund, including, but not limited to, expenses such as:
initial and ongoing registration fees, filing fees and taxes;
costs of preparing, printing (including typesetting), amending, supplementing, mailing and distributing the Registration Statement, the exhibits thereto and the Prospectus;
the costs of qualifying, printing (including typesetting), amending, supplementing, mailing and distributing sales materials used in connection with the offering and issuance of the Shares;
travel, telegraph, telephone and other expenses in connection with the offering and issuance of the Shares; and
accounting, auditing and legal fees (including disbursements related thereto) incurred in connection therewith.
The Managing Owner will not allocate to the Funds or the Master FundsFund the indirect expenses of the Managing Owner.
The aggregatepro-rated amount of the original organization and offering expenses for the Fund offered pursuant to this Prospectus was approximately $3,125,000.$446,429.
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Brokerage Commissions and Fees
Each MasterThe Fund pays to the Commodity Broker all brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with its trading activities. On average, total charges paid to the Commodity Broker are expected to be less than $10.00 per round-turn trade, although the Commodity Broker’s brokerage commissions and trading fees are determined on a contract-by-contract basis. A round-turn trade is a completed transaction involving both a purchase and a liquidating sale, or a sale followed by a covering purchase. The Managing Owner does not expect brokerage commissions and fees to exceed (i) 0.03% of the net asset value of each Master Fund with respect to PowerShares DB Energy Fund and PowerShares DB Base Metals Fund, (ii) 0.04% of the net asset value of each Master Fund with respect to PowerShares DB Oil Fund, PowerShares DBPrecious Metals Fund, PowerShares DB Gold Fund and PowerShares DB Silver Fund, or (iii) 0.16% of the net asset value of the Master Fund with respect to PowerShares DB Agriculture Fund in any year, although the actual amount of brokerage commissions and fees in any year or any part of any year may be greater.
Routine Operational, Administrative and Other Ordinary Expenses
The Managing Owner pays all of the routine operational, administrative and other ordinary expenses of each Fund and its corresponding Masterthe Fund, generally, as determined by the Managing Owner, including, but not limited to, computer services, the fees and expenses of the Trustee, legal and accounting fees and expenses, tax preparation expenses, filing fees, and printing, mailing and duplication costs. The Managing Owner expects that all of the routine operational, administrative and other ordinary expenses of each Fund and its corresponding Masterthe Fund will be approximately 0.40%.
per annum of the Fund’s net asset value.
Non-recurring and UnusualNon-Recurring Fees and Expenses
Each MasterThe Fund pays all non-recurring and unusual fees and expenses (referred to as extraordinary fees and expenses in the Trust Agreement)Declaration), if any, of itself, and its corresponding Fund, as determined by the Managing Owner. Non-recurring and unusual fees and expenses are fees and expenses which are non-recurring and unusual in nature, such as legal claims and liabilities and litigation costs or indemnification or other unanticipated expenses. Such non-recurring and unusual fees and expenses, by their nature, are unpredictable in terms of timing and amount. Non-recurring and unusual fees and expenses will also include material expenses which are not currently anticipated obligations of the Funds or Master FundsFund or of managed futures funds in general. Routine operational,
administrative and other ordinary expenses will not be deemed non-recurring and unusual expenses.
Management Fee and Expenses to be Paid First out of Interest Income
The Management Fee and the brokerage commissions and fees of each Master Fund and its correspondingthe Fund are paid first out of interest income from such Masterthe Fund’s holdings of U.S. Treasury bills and other high credit quality short-term fixed income securities on deposit with the Commodity Broker as margin or otherwise. Such
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interest income has historically been sufficient to cover the fees and expenses of each Master Fund and its corresponding Fund and it is expected to continue to do so. To the extentFund. If, however, the interest income is not sufficient to cover the fees and expenses of a Master Fund and its correspondingthe Fund during any period, the excess of such fees and expenses over such interest income will be paid out of income from futures trading, if any, or from sales of the Master Fund’s fixed income securities.
Selling Commission
Retail investors may purchase and sell Shares through traditional brokerage accounts. Investors are expected to be charged a customary commission by their brokers in connection with purchases of Shares that will vary from investor to investor. Investors are encouraged to review the terms of their brokerage accounts for applicable charges. Also, the excess, if any, of the price at which an Authorized Participant sells a Share over the price paid by such Authorized Participant in connection with the creation of such Share in a Basket maywill be deemed to be underwriting compensation.
compensation by the Financial Industry Regulatory Authority, or FINRA, Corporate Financing Department.
WHO MAY SUBSCRIBE
Baskets may be created or redeemed only by Authorized Participants. Each Authorized Participant must (1) be a registered broker-dealer or other securities market participant such as a bank or other financial institution which is not required to register as a broker-dealer to engage in securities transactions, (2) be a participant in DTC, and (3) have entered into an agreement with the FundsFund and the Managing Owner, (aor a Participant Agreement).Agreement. The Participant Agreement sets forth the procedures for the creation and redemption of Baskets of Shares and for the delivery of cash required for such creations or redemptions. A list of the current Authorized Participants can be obtained from the Administrator. A similar agreement between each Fund and its corresponding Master Fund sets forth the procedures for the creation and redemption of Master Unit Baskets by such Fund. See “Creation and Redemption of Shares” for more details.
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CREATION AND REDEMPTION OF SHARES
EachThe Fund creates and redeems Shares from time-to-time, but only in one or more Baskets. ABasketA Basket is a block of 200,000 Shares. Baskets may be created or redeemed only by Authorized Participants. Except when aggregated in Baskets, the Shares are not redeemable securities. Authorized Participants pay a transaction fee of $500 in connection with each order to create or redeem a Basket of Shares.Basket. Authorized Participants may sell the Shares included in the Baskets they purchase from the FundsFund to other investors.
Each Master Fund creates and redeems Master Fund Units from time-to-time, but only in one or more Master Unit Baskets. A Master Unit Basket is a block of 200,000 Master Fund Units. Master Unit Baskets may be created or redeemed only by the Fund corresponding to such Master Fund. Each Master Fund is wholly-owned by its corresponding Fund and the Managing Owner. Each Share issued by a Fund correlates with a Master Fund Unit issued by its corresponding Master Fund and held by the Fund.
Authorized Participants are the only persons that may place orders to create and redeem Baskets. Authorized Participants must be (1) registered broker-dealers or other securities market participants, such as banks and other financial institutions, which are not required to register as broker-dealers to engage in securities transactions, and (2) participants in DTC. To become an Authorized Participant, a person must enter into a Participant Agreement with the FundsFund and the Managing Owner. The Participant Agreement sets forth the procedures for the creation and redemption of Baskets and for the payment of cash required for such creations and redemptions. The Managing Owner may delegate its duties and obligations under the Participant Agreement to ALPS Distributors, Invesco Aim Distributors, the Administrator or the AdministratorTransfer Agent without consent from any Shareholder or Authorized Participant. The Participant Agreement and the related procedures attached thereto may be amended by the Managing Owner without the consent of any Shareholder or Authorized Participant. To compensate the AdministratorTransfer Agent for services in processing the creation and redemption of Baskets, an Authorized Participant is required to pay a transaction fee of $500 per order to create or redeem Baskets. Authorized Participants who purchase Baskets from athe Fund receive no fees, commissions or other form of compensation or inducement of any kind from either the Managing Owner or the Fund, and no such person has any obligation or responsibility to the Managing Owner or the Fund to effect any sale or resale of Shares.
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Authorized Participants are cautioned that some of their activities will result in their being deemed participants in a distribution in a manner which would render them statutory underwriters and subject them to the prospectus delivery and liability
provisions of the Securities Act of 1933, (theor the Securities Act),Act, as described in “Plan of Distribution.”
Each Authorized Participant must be registered as a broker-dealer under the Securities Exchange Act of 1934 (the Exchange Act) and regulated by the Financial Industry Regulatory Authority, or FINRA, or exempt from being, or otherwise not be required to be, so regulated or registered, and qualified to act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires. Certain Authorized Participants may be regulated under federal and state banking laws and regulations. Each Authorized Participant will have its own set of rules and procedures, internal controls and information barriers as it determines is appropriate in light of its own regulatory regime.
Authorized Participants may act for their own accounts or as agents for broker-dealers, custodians and other securities market participants that wish to create or redeem Baskets.
Persons interested in purchasing Baskets should contact the Managing Owner or the Administrator to obtain the contact information for the Authorized Participants. Shareholders who are not Authorized Participants will only be able to redeem their Shares through an Authorized Participant.
Under the Participant Agreements, the Managing Owner has agreed to indemnify the Authorized Participants and certain parties related to the Authorized Participants against certain liabilities including liabilities under the Securities Act, and to contribute to the payments the Authorized Participants may be required to make in respect of those liabilities. The Managing Owner has agreed to reimburse the Authorized Participants, solely from and to the extent of the Master Funds’ assets, for indemnification and contribution amounts due fromas a result of:
any breach by the Managing Owner, the Trust, or any of their respective agents or employees, of any provision of the Participant Agreement, including any representations, warranties and covenants by any of them or the Trust therein or in respectthe Officers’ Certificate (as defined in the Participant Agreement);
any failure on the part of such liabilities to the extent the Managing Owner hasto perform any obligation of the Managing Owner set forth in the Participant Agreement;
any failure by the Managing Owner to comply with applicable laws and regulations in connection with the Participant Agreement, except that the Managing
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| | Owner will not be required to indemnify a Managing Owner Indemnified Party (as defined in the Participant Agreement) to the extent that such failure was caused by the reasonable reliance on instructions given or representations made by one or more Managing Owner Indemnified Parties or the negligence or willful malfeasance of any Managing Owner Indemnified Party; |
any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, of which this Prospectus is a part of, or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not paid such amounts when due.misleading, except those statements in the Registration Statement based on information furnished in writing by or on behalf of the Authorized Participant expressly for use in the Registration Statement;
any untrue statement or alleged untrue statement of a material fact contained in the Prospectus or arising out of or based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except those statements in this Prospectus based on information furnished in writing by or on behalf of the Authorized Participant expressly for use in the Prospectus.
As provided in the Participant Agreements, in the absence of gross negligence, bad faith or willful misconduct, neither the Managing Owner nor an Authorized Participant will be liable to each other or to any other person, including any party claiming by, through or on behalf of the Authorized Participant, for any losses, liabilities, damages, costs or expenses arising out of any mistake or error in data or other information provided to any of them by each other or any other person or out of any interruption or delay in the electronic means of communications used by them.
The following description of the procedures for the creation and redemption of Baskets is only a
summary and an investor should refer to the relevant provisions of the Trust Declaration and the form of Participant Agreement for more detail. The Trust Declaration and the form of Participant AgreementareAgreement are filed as exhibits to the registration statement of which this Prospectus is a part.
Creation Procedures
On any business day, an Authorized Participant may place an order with the Managing OwnerTransfer Agent to create one or more Baskets. For purposes of processing both purchasecreation and redemption orders, a “business day” means any day other than a day when banks in New York City are required or permitted to be closed. PurchaseCreation orders must be placed by 10:00 a.m., New YorkEastern time. The day on which the Managing OwnerTransfer Agent receives a valid purchasecreation order is the purchasecreation order date. Purchase orders are irrevocable.The day on which a creation order is settled is the creation order settlement date. As provided below, the creation order settlement date may occur up to 3 business days after the creation order date. By placing a purchasecreation order, and prior to delivery of such Baskets, an Authorized Participant’s DTC account is charged the non-refundable transaction fee due for the purchasecreation order.
Unless otherwise agreed to by the Managing Owner and the Authorized Participant as provided in the next sentence, Baskets are issued on the creation order settlement date as of 2:45 p.m., Eastern time, on the business day immediately following the creation order date at the applicable net asset value per Share as of the closing time of the NYSE Arca or the last to close of the exchanges on which its futures contracts are traded, whichever is later, on the creation order date, but only if the required payment has been timely received. Upon submission of a creation order, the Authorized Participant may request the Managing Owner to agree to a creation order settlement date up to 3 business days after the creation order date. By placing a creation order, and prior to receipt of the Baskets, an Authorized Participant’s DTC account is charged the non-refundable transaction fee due for the creation order.
Determination of required paymentRequired Payment
The total payment required to create each Basket is the net asset value of 200,000 Shares of the applicable Fund as of the closing time of the AmexNYSE Arca or the last to close of the exchanges on which its corresponding Master Fund’s futures contracts are traded, whichever is later, on the purchasecreation order date. Baskets are issued as of noon, New York time, on the Business Day immediately following the purchase order date at the applicable net asset value per Share as of the closing time of the Amex or the last to close of the exchanges on which the corresponding Master Fund’s futures contracts are traded, whichever is later, on the purchase order date, but only if the required payment has been timely received.
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Because orders to purchase Baskets must be placed by 10:00 a.m., New YorkEastern time, but the total payment required to create a Basket will not be determined until 4:00 p.m., New YorkEastern time, on the date the purchasecreation order is received, Authorized Participants will not know the total amount of the payment required to create a Basket at the time they submit an irrevocable purchasethe creation order for the Basket. The net asset value of athe Fund and the total amount of the payment required to create a Basket could rise or fall substantially between the time an irrevocable purchasea creation order is submitted and the time the amount of the purchase price in respect thereof is determined.
Rejection of purchase ordersCreation Orders
The Managing Owner or the Transfer Agent may reject a purchasecreation order if:
ItThe Managing Owner or the Transfer Agent determines that the purchasecreation order is not in proper form;
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The Managing Owner believes that the purchaseacceptance or receipt of the creation order would have adverse tax consequences to anythe Fund or its Shareholders; or
Circumstances outside the control of the Managing Owner or the Transfer Agent make it, for all practical purposes, not feasible to process creations of Baskets.
The Managing Owner will not be liable for the rejection of any purchasecreation order.
Redemption Procedures
The procedures by which an Authorized Participant can redeem one or more Baskets mirror the procedures for the creation of Baskets. On any business day, an Authorized Participant may place an order with the Managing OwnerTransfer Agent to redeem one or more Baskets. Redemption orders must be placed by 10:00 a.m., New YorkEastern time. The day on which the Managing Owner receives a valid redemption order is the redemption order date. Redemption orders are irrevocable.The day on which a redemption order is settled is the redemption order settlement date. As provided below, the redemption order settlement date may occur up to 3 business days after the redemption order date. The redemption procedures allow Authorized Participants to redeem Baskets. Individual Shareholders may not redeem
directly from athe Fund. Instead, individual Shareholders may only redeem Shares in integral multiples of 200,000 and only through an Authorized Participant.
ByUnless otherwise agreed to by the Managing Owner and the Authorized Participant as provided in the next sentence, by placing a redemption order, an Authorized Participant agrees to deliver the Baskets to be redeemed through DTC’s book-entry system to the applicable Fund not later than noon, New Yorkthe redemption order settlement date as of 2:45 p.m., Eastern time, on the business day immediately following the redemption order date. Upon submission of a redemption order, the Authorized Participant may request the Managing Owner to agree to a redemption order settlement date up to 3 business days after the redemption order date. By placing a redemption order, and prior to receipt of the redemption proceeds, an Authorized Participant’s DTC account is charged the non-refundable transaction fee due for the redemption order.
Determination of redemption proceedsRedemption Proceeds
The redemption proceeds from athe Fund consist of the cash redemption amount. The cash redemption amount is equal to the net asset value of the number of Basket(s) of suchthe Fund requested in the Authorized Participant’s redemption order as of the closing time of the AmexNYSE Arca or the last to close of the exchanges on which such corresponding Master Fund’sits futures contracts are traded, whichever is later, on the redemption order date. The Managing Owner will distribute the cash redemption amount at noon, New Yorkthe redemption order settlement date as of 2:45 p.m., Eastern time, on the business day immediately following the redemption order datethroughsettlement date through DTC to the account of the Authorized Participant as recorded on DTC’s book-entry system.
Delivery of redemption proceedsRedemption Proceeds
The redemption proceeds due from athe Fund are delivered to the Authorized Participant at noon, New York2:45 p.m., Eastern time, on the business day immediately following the redemption order settlement date if, by such time, on such business day immediately following the redemption order date, the Fund’s DTC account has been credited with the Baskets to be redeemed. If the Fund’s DTC account has not been credited with all of the Baskets to be redeemed by such time, the redemption distribution is delivered to the extent of whole Baskets received. Any remainder of the redemption distribution is delivered on the next business day to the extent of remaining whole
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Baskets received if the Managing OwnerTransfer Agent receives the fee applicable to the extension of the redemption distribution date which the Managing Owner may, from time-to-time, determine and the remaining Baskets to be redeemed are credited to the Fund’s DTC account by noon, New York2:45 p.m., Eastern time, on such next business day. Any further outstanding amount of the redemption order shallwill be cancelled. The Managing Owner is also authorized to deliver the redemption distribution notwithstanding that the Baskets to be redeemed are not credited to the Fund’s DTC account by noon, New York2:45 p.m., Eastern time, on the business day immediately following the redemption order settlement date if the Authorized Participant has collateralized its obligation to deliver the Baskets through DTC’s book-entry system on such terms as the Managing Owner may determine from time-to-time.
Suspension, Postponement or rejectionRejection of redemption ordersRedemption Orders
In respect of any Fund, theThe Managing Owner may, in its discretion, suspend the right of redemption, or postpone the redemption order settlement date for (1) for any period during which an emergency exists as a result of which the redemption distribution is not reasonably practicable, or (2) for such other period as the Managing Owner determines to be necessary for the protection of the Shareholders. The Managing Owner will not be liable to any person or in any way for any loss or damages that may result from any such suspension or postponement.
The Managing Owner willor the Transfer Agent may reject a redemption order if the order is not in proper form as described in the Participant AgreementAgreement. The Managing Owner or the Transfer Agent will reject a redemption order if the fulfillmentacceptance or receipt of the order, in the opinion of its counsel, might be unlawful.
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Creation and Redemption Transaction Fee
To compensate the AdministratorTransfer Agent for services in processing the creation and redemption of Baskets, an Authorized Participant is required to pay a transaction fee of $500 per order to create or redeem Baskets. An order may include multiple Baskets. The transaction fee may be reduced, increased or otherwise changed by the Managing Owner. The Managing Owner will notify DTC of any agreement to change the transaction fee and will not implement
any increase in the fee for the redemption of Baskets until 30 days after the date of the notice.
Monthly account statements conforming to CFTC and NFA requirements are posted on the Managing Owner’s website atwww.dbfunds.db.com.http://www.dbxus.com. Additional reports may be posted on the Managing Owner’s website in the discretion of the Managing Owner or as required by regulatory authorities.
THE COMMODITY BROKER
A variety of executing brokers execute futures transactions on behalf of each Masterthe Fund. Such executing brokers give-up all such transactions to Deutsche Bank Securities Inc., a Delaware corporation, which serves as the clearing broker, or Commodity Broker, for each Masterthe Fund. The Commodity Broker is an affiliate of Deutsche Bank AG. In its capacity as clearing broker, the Commodity Broker executes and clears each of the futures transactions of each of the Master FundsFund and performs certain administrative services for each of the Master Funds.Fund. Deutsche Bank Securities Inc. is also registered with the Commodity Futures Trading CommissionCFTC as a futures commission merchant and is a member of the National Futures AssociationNFA in such capacity.
There is no litigation pending regardingAt any given time and in the ordinary course of their business, Deutsche Bank Securities Inc. that would(“DBSI”) is involved in and subject to a number of legal actions, administrative proceedings and regulatory examinations, inquiries and investigations, which, in the aggregate, are not, as of the date of this disclosure document, expected to have a material effect upon their condition, financial or otherwise, or to materially adversely affect itsimpair their ability to carryperform their obligation as a clearing member or in rendering services to the Fund. Except as disclosed below, there have been no administrative, civil or criminal proceedings pending, on appeal or concluded against DBSI or its commodity futures, foreign exchange futuresprincipals within the five years preceding the date of this disclosure document that DBSI would deem material for purposes of Part 4 of CFTC regulations.
On November 27, 2012, a Business Conduct Committee of the CME Group approved settlements/fines in the amounts of $550K and options brokerage business.$250K to resolve three separate actions concerning DB’s allegedly inaccurate reporting of block trades on the Chicago Mercantile Exchange and Chicago Board of Trade.
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The settlement resolves approximately 50 alleged violations relating to approximately 30 trades from 2009-2011, including two incidents of alleged intentional misreporting. DB neither admitted nor denied the rule violations upon which the fines are based.
Mortgage-Related and Asset-Backed Securities Matters
Deutsche Bank, along with certain affiliates (collectively referred in these paragraphs to as “Deutsche Bank”), have received subpoenas and requests for information from certain regulators and government entities concerning its activities regarding the origination, purchase, securitization, sale and/or trading of mortgage loans, residential mortgage-backed securities (RMBS), collateralized debt obligations, other asset-backed securities, commercial paper and credit derivatives. Deutsche Bank is cooperating fully in response to those subpoenas and requests for information.
Deutsche Bank has been named as defendant in numerous civil litigations in various roles as issuer or underwriter in offerings of RMBS and other asset-backed securities. These cases include putative class action suits, actions by individual purchasers of securities, actions by trustees on behalf of RMBS trusts, and actions by insurance companies that guaranteed payments of principal and interest for particular tranches of securities offerings. Although the allegations vary by lawsuit, these cases generally allege that the RMBS offering documents contained material misrepresentations and omissions, including with regard to the underwriting standards pursuant to which the underlying mortgage loans were issued, or assert that various representations or warranties relating to the loans were breached at the time of origination.
Deutsche Bank and several current or former employees were named as defendants in a putative class action commenced on June 27, 2008, relating to two Deutsche Bank-issued RMBS offerings. Following a mediation, the court has approved a settlement of the case.
Deutsche Bank is a defendant in putative class actions relating to its role, along with other financial institutions, as underwriter of RMBS issued by various third-parties and their affiliates including
Countrywide Financial Corporation, IndyMac MBS, Inc., Novastar Mortgage Corporation, and Residential Accredit Loans, Inc. These cases are in various stages up through discovery. On March 29, 2012, the United States District Court for the Southern District of New York dismissed with prejudice and without leave to replead the putative Novastar Mortgage Corporation class action, which the plaintiffs appealed. On March 1, 2013, the United States Court of Appeals for the Second Circuit reversed the dismissal and remanded the case for further proceedings to the District Court. These cases are in various stages up through discovery. On April 17, 2013, Bank of America announced that it had reached a settlement in principle to dismiss various class action claims, which include the class action claims brought against underwriters, including Deutsche Bank, relating to RMBS issued by Countrywide Financial Corporation. The settlement in principle which is subject to final court approval does not require any payment by underwriters, including Deutsche Bank.
Deutsche Bank is a defendant in various non-class action lawsuits by alleged purchasers of, and counterparties involved in transactions relating to, RMBS, and their affiliates, including Allstate Insurance Company, Asset Management Fund, Assured Guaranty Municipal Corporation, Bayerische Landesbank, Cambridge Place Investments Management Inc., Dexia SA/NV, the Federal Deposit Insurance Corporation (as conservator for Colonial Bank, Franklin Bank S.S.B., Guaranty Bank, Citizens National Bank and Strategic Capital Bank), the Federal Home Loan Bank of Boston, the Federal Home Loan Bank of San Francisco, the Federal Home Loan Bank of Seattle, the Federal Housing Finance Agency (as conservator for Fannie Mae and Freddie Mac), HSBC Bank USA, National Association (as trustee for certain RMBS trusts), Freedom Trust 2011-2, John Hancock, Landesbank Baden-Württemberg, Mass Mutual Life Insurance Company, Moneygram Payment Systems, Inc., Phoenix Light SF Limited (as purported assignee of claims of special purpose vehicles created and/or managed by WestLB AG), Royal Park Investments (as purported assignee of claims of a special-purpose vehicle created to acquire certain assets of Fortis Bank), RMBS Recovery Holdings 4, LLC, VP Structured Products, LLC, Sealink Funding Ltd. (as purported assignee of claims of special purpose vehicles created and/or managed by Sachsen Landesbank and its subsidiaries), Spencerview Asset
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Management Ltd., Teachers Insurance and Annuities Association of America, The Charles Schwab Corporation, The Union Central Life Insurance Company, The Western and Southern Life Insurance Co., and the West Virginia Investment Management Board. These civil litigations are in various stages up through discovery.
In the actions against Deutsche Bank solely as an underwriter of other issuers’ RMBS offerings, Deutsche Bank has contractual rights to indemnification from the issuers, but those indemnity rights may in whole or in part prove effectively unenforceable where the issuers are now or may in the future be in bankruptcy or otherwise defunct.
On February 6, 2012, the United States District Court for the Southern District of New York issued an order dismissing claims brought by Dexia SA/NV and Teachers Insurance and Annuity Association of America and their affiliates, and on January 4, 2013, the court issued an opinion explaining the basis for this order. The court dismissed some of the claims with prejudice and granted the plaintiffs leave to replead other claims. The plaintiffs repled the claims dismissed without prejudice by filing a new complaint on February 4, 2013.
On July 16, 2012, the Minnesota District Court dismissed with prejudice without leave to replead claims by Moneygram Payment Systems, Inc., which the plaintiffs have appealed. On January 13, 2013, Moneygram filed a summons with notice in New York State Supreme Court seeking to assert claims similar to those dismissed in Minnesota.
On February 4, 2013, pursuant to the terms of a settlement agreement, Stichting Pensioenfonds ABP dismissed two lawsuits that had been filed against Deutsche Bank. The financial terms of the settlement are not material to Deutsche Bank.
A number of entities have threatened to assert claims against Deutsche Bank in connection with various RMBS offerings and other related products, and Deutsche Bank has entered into agreements with a number of these entities to toll the relevant statutes of limitations. It is possible that these potential claims may have a material impact on Deutsche Bank. In addition, Deutsche Bank has entered into settlement agreements with some of these entities, the financial terms of which are not material to Deutsche Bank.
On May 8, 2012, Deutsche Bank reached a settlement with Assured Guaranty Municipal Corporation regarding claims on certain residential mortgage-backed securities (RMBS) issued and underwritten by Deutsche Bank that are covered by financial guaranty insurance provided by Assured. Pursuant to this settlement, Deutsche Bank made a payment of U.S. $166 million and agreed to participate in a loss share arrangement to cover a percentage of Assured’s future losses on certain RMBS issued by Deutsche Bank. This settlement resolves two litigations with Assured relating to financial guaranty insurance and limits claims in a third litigation where all the underlying mortgage collateral was originated by Greenpoint Mortgage Funding, Inc. (a subsidiary of Capital One), which is required to indemnify Deutsche Bank.
Additional or replacement Commodity Brokers may be appointed in respect of any Masterthe Fund in the future.
CONFLICTS OF INTEREST
General
The Managing Owner has not established formal procedures to resolve all potential conflicts of interest. Consequently, investors may be dependent on the good faith of the respective parties subject to such conflicts to resolve them equitably. Although the Managing Owner attempts to monitor these conflicts, it is extremely difficult, if not impossible, for the Managing Owner to ensure that these conflicts do not, in fact, result in adverse consequences to the Funds.Fund.
Prospective investors should be aware that the Managing Owner presently intends to assert that Shareholders have, by subscribing for Shares, of a Fund, consented to the following conflicts of interest in the event of any proceeding alleging that such conflicts violated any duty owed by the Managing Owner to investors.
The Managing Owner
The Managing Owner has a conflict of interest in allocating its own limited resources among different clients and potential future business ventures, to each of which it owes fiduciary duties.
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Additionally, the professional staff of the Managing Owner also serviceservices other affiliates of the Managing Owner and their respective clients. Although the Managing Owner and its professional staff cannot and will not devote all of its or their respective time or resources to the management of the business and affairs of the Funds and the Master Funds,Fund, the Managing Owner intends to devote, and to cause its professional staff to devote, sufficient time and resources to manage properly the business and affairs of the Funds and the Master FundsFund consistent with its or their respective fiduciary duties to the FundsFund and the Master Funds and others.
Relationship of the Managing Owner to the Commodity Broker
The Managing Owner and the Commodity Broker are indirect wholly-owned subsidiaries of Deutsche Bank AG. The Commodity Broker receives a brokerage commission for futures interests transactions effected for each Masterthe Fund. Customers of the Commodity Broker who maintain commodity and foreign exchange trading accounts may pay commissions at negotiated rates which are greater or less than the rate paid by the Master Funds.Fund.
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The Managing Owner has a disincentive to replace the Commodity Broker as the Master Funds’Fund’s broker because it is an affiliate of the Managing Owner. In connection with this conflict of interest, Shareholders should understand that the Commodity Broker receives a round-turn brokerage fee from each of the Master FundsFund for serving as such Master Funds’the Fund’s commodity broker. A round-turn trade is a completed transaction involving both a purchase and a liquidating sale, or a sale followed by a covering purchase.
The Managing Owner and the Commodity Broker may, from time-to-time, have conflicting demands in respect of their obligations to the Master FundsFund and to the Funds and, in the future, to other commodity pools and accounts. It is possible that future pools that the Managing Owner may become involved with may generate larger brokerage commissions, resulting in increased payments to employees.
There is an absence of arm’s length negotiation with respect to some of the terms of this offering, and there has been no independent due diligence conducted with respect to this offering.
The Commodity Broker
The Commodity Broker may act from time-to-time as a commodity broker for other accounts with which it is affiliated or in which it or one of its affiliates has a financial interest. The compensation received by the Commodity Broker from such accounts may be more or less than the compensation received for brokerage services provided to each Masterthe Fund. In addition, various accounts traded through the Commodity Broker (and over which their personnel may have discretionary trading authority) may take positions in the futures markets opposite to those of each Masterthe Fund or may compete with each Masterthe Fund for the same positions. The Commodity Broker may have a conflict of interest in its execution of trades for each Masterthe Fund and for other customers. The Managing Owner will, however, not retain any commodity broker for a Masterthe Fund which the Managing Owner has reason to believe would knowingly or deliberately favor any other customer over a Masterthe Fund with respect to the execution of commodity trades.
The Commodity Broker will benefit from executing orders for other clients, whereas each Masterthe Fund may be harmed to the extent that theCommoditythe Commodity Broker has fewer resources to allocate to such Masterthe Fund’s accounts due to the existence of such other clients.
Certain officers or employees of the Commodity Broker may be members of United States commodities exchanges and/or serve on the governing bodies and standing committees of such exchanges, their clearing houses and/or various other industry organizations. In such capacities, these officers or employees may have a fiduciary duty to the exchanges, their clearing houses and/or such various other industry organizations which could compel such employees to act in the best interests of these entities, perhaps to the detriment of a Masterthe Fund.
Proprietary Trading/Other Clients
The Managing Owner does not trade for its own account.
Because the principals of the Managing Owner may trade for their own personal trading accounts (subject to certain internal Deutsche Bank employee trading policies and procedures) at the same time that they are managing the account of the Fund, prospective investors should be aware that the
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activities of the principals of the Managing Owner, subject to their fiduciary duties, may, from time-to-time, result in taking positions in their personal trading accounts which are opposite of the positions taken for the Fund. Records of the Managing Owner principals’ personal trading accounts will not be available for inspection by Shareholders.
The Commodity Broker and their respectiveits affiliates may trade in the commodity and foreign exchange markets for their own accounts and for the accounts of their clients, and in doing so may take positions opposite to those held by a Masterthe Fund or may compete with a Masterthe Fund for positions in the marketplace. Such trading may create conflicts of interest on behalf of one or more such persons in respect of their obligations to each Masterthe Fund. Records of proprietary trading and trading on behalf of other clients will not be available for inspection by Shareholders.
Because the Managing Owner, the Commodity Broker and their respective affiliatesprincipals may trade for their own personal trading accounts (subject to certain internal Deutsche Bank trading policies and procedures with respect to both the Commodity Broker and its principals) at the same time that they arethe Managing Owner is managing the account of each Masterthe Fund, prospective investors should be aware that — as a result of a neutral allocation system, testing a new trading system, trading their proprietary accounts more aggressively or other activities not constituting a breach of fiduciary duty — such persons may from time-to-time take positions in their proprietary accounts which are opposite or ahead of the positions taken for a Masterthe Fund.
Records of the Commodity Broker principals’ personal trading accounts will not be available for inspection by Shareholders.
DESCRIPTION OF THE SHARES ANDSHARES; THE MASTER FUND UNITS; THE FUNDS;FUND; CERTAIN MATERIAL TERMS OF THE TRUST DECLARATIONSDECLARATION
The following summary describes in brief the Shares and the Master Fund Units and certain aspects of the operation of the Trust, each Fund, the Master Trust and each Master Fund and the
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respective responsibilities of the Trustee and the Managing Owner concerning the Trust and Master Trust and the material terms of the Declarations of Trust each of which are substantially identical except as set forth below.Declaration. Prospective investors should carefully review the Forms of DeclarationsForm of Trust filed as exhibits to the registration statement ofDeclaration which is incorporated by reference into this Prospectus is a part and consult with their own advisers concerning the implications to such prospective subscribers of investing in a series of a Delaware statutory trust. Capitalized terms used in this section and not otherwise defined shall have such meanings assigned to them under the applicable Trust Declaration.
Description of the Shares and the Master Fund Units
EachThe Fund issues common units of beneficial interest, or Shares, which represent units of fractional undivided beneficial interest in and ownership of suchthe Fund. The Shares of each Fund are listed on the AmexNYSE Arca under the following symbols:
PowerShares DB Energy Fund – DBE;
PowerShares DB Oil Fund – DBO;
PowerShares DB Precious Metals Fund – DBP;
PowerShares DB Gold Fund – DGL;
PowerShares DB Silver Fund – DBS;
PowerShares DB Base Metals Fund – DBB; and
PowerShares DB Agriculture Fund – DBA.
symbol “DBS.”
The Shares may be purchased from eachthe Fund or redeemed on a continuous basis, but only by Authorized Participants and only in blocks of 200,000 Shares, or Baskets. Individual Shares may not be purchased from eachthe Fund or redeemed. Shareholders that are not Authorized Participants may not purchase from eachthe Fund or redeem Shares or Baskets.
Each Fund invests the proceeds of its offering of Shares in a corresponding Master Fund. Each Master Fund issues common units of beneficial interest, or Master Fund Units, which represent units of fractional undivided beneficial interest in and ownership of such Master Fund. Master Fund Units may be purchased or redeemed on a continuous basis, but only by the Fund and only in blocks of 200,000 Master Fund Units, or Master Unit Baskets. Each Master Fund is wholly-owned by the corresponding Fund and the Managing Owner. Each Share issued bya Fund correlates with a Master Fund Unit issued by such Fund’s corresponding Master Fund and held by such Fund.
Principal Office; Location of Records
Each ofThe Trust was organized under the Delaware Statutory Trust and the Master Trust is organizedAct in seven separate series as a Delaware statutory trust underrather than as separate statutory trusts in order to achieve certain administrative efficiencies. The interests of investors are not adversely affected by the Delaware Statutorychoice of form of organization. As of the date of this Prospectus, the Trust Act.consists of the following seven series –PowerShares DB Energy Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund, PowerShares DB Silver Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculture Fund. This Prospectus is for the Fund only and not for the remaining 6 funds listed in the prior sentence, or the Sectors Funds. The Sectors Funds, which are series of the Trust, are not being offered by this Prospectus. Information regarding both the Fund and the Sectors Funds (and any other additional series of the Trust, as applicable) is available atwww.dbxus.com. The Trust and Master Trust areis managed by the Managing Owner, whose office is located at 60 Wall Street, New York, New York 10005, telephone: (212) 250-5883.
The books and records of each Fund and each Masterthe Fund are maintained as follows: all marketing materials are maintained at the offices of ALPS Distributors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203; telephone number (303) 623-2577; Basket creation and redemption books and records, certain financial books and records (including Fund and Master Fund accounting records, ledgers with respect to assets, liabilities, capital, income and expenses, the registrar, transfer journals and related details) and trading and related documents received from futures commission
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merchants are maintained by The Bank of New York Mellon, 2 Hanson Place, 12th Floor, Brooklyn, New York 11217, telephone number (718) 315-4850.315-7500. All other books and records of each Fund and each Masterthe Fund (including minute books and other general corporate records, trading records and related reports and other items received from each Masterthe Fund’s Commodity Brokers) are maintained at eachthe Fund’s principal office, c/o DB Commodity Services LLC, 60 Wall Street, New York, New York 10005; telephone number (212) 250-5883.
The books and records of each Fund, and the Master Fund are located at the foregoing addresses, and available for inspection and copying (upon payment of reasonable reproduction costs) by Shareholders of such Fund or their representatives for any purposes reasonably related to a Shareholder’s interest as a beneficial owner of suchthe Fund during regular business hours as provided in the Declarations of Trust.Trust Declaration. The Managing Owner will maintain and preserve the books and records of each Fund and Masterthe Fund for a period of not less than six years.
The FundsFund
Solely for the purposes of this sub-section, the term “Fund” or “Funds” refers to all the series of the Trust (including the DBS Fund). The term “DBS Fund” refers to the series that is offered pursuant to this Prospectus. The term “Non-DBS Funds” refers to all the remaining series of the Trust, excluding the DBS Fund.
The Trust and the Master Trust arewas formed and areis operated in a manner such that each Fund isthe Funds are liable
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only for obligations attributable to such Fundthe applicable Funds and the Shareholders of a Fundthe Funds are not subject to the losses or liabilities of any of the other Fund. IfFunds. For example, if any creditor or Shareholder in any particulara Non-DBS Fund asserted against a Fund or Masterthe DBS Fund a valid claim with respect to its indebtedness or Shares, the creditor or Shareholder of the Non-DBS Fund would only be able to recover money from that particular Non-DBS Fund and its assets and from the Managing Owner and its assets. Accordingly, the debts, liabilities, obligations and expenses, or collectively, Claims, incurred, contracted for or otherwise existing solely with respect to a particular Non-DBS Fund are enforceable only against the assets of that Non-DBS Fund and against the Managing Owner and its assets, and not against the DBS Fund or any other Fund or MasterNon-DBS Fund or the Trust or Master Trust generally or any of their respective assets. The assets of any particular Fund include only
those funds and other assets that are paid to, held by or distributed to the Fund or Master Fund on account of and for the benefit of thatsuch Fund, including, without limitation, funds delivered to the Trust or Master Trust for the purchase of Shares or Units in a Fund or Mastersuch Fund. This limitation on liability is referred to as the “Inter-Series Limitation on Liability.” The Inter-Series Limitation on Liability is expressly provided for under the Delaware Statutory Trust Act, which provides that if certain conditions (as set forth in Section 3804(a)) are met, then the debts of any particular series will be enforceable only against the assets of such series and not against the assets of any other Fund or Master Fund or the Trust or Mastergenerally. For the avoidance of doubt, the Inter-Series Limitation on Liability applies to all series of the Trust, generally.
including those that are not being offered through this Prospectus.
In furtherance of the Inter-Series Limitation on Liability, every party providing services to the Trust, or Master Trust, any Fund or Master Fund or the Managing Owner on behalf of the Trust or Master Trust or any Fund or Master Fund has acknowledged and consented in writing to:
the Inter-Series Limitation on Liability with respect to such party’s Claims;
voluntarily reduce the priority of its Claims against the Funds or the Master Funds or their respective assets, such that its Claims are junior in right of repayment to all other parties’ Claims against the Funds or the Master Funds or their respective assets, except that Claims against the Trust or Master Trust where recourse for the payment of such Claims was, by agreement, limited to the assets of a particular Fund, or Master Fund, will not be junior in right of repayment, but will receive repayment from the assets of such particular Fund or Master Fund (but not from the assets of any other Fund or theTrust or Master Fund or the Master Trust generally) equal to the treatment received by all other creditors and Shareholders that dealt with such Fund or Master Fund; and
| • | | a waiver of certain rights that such party may have under the United States Bankruptcy Code, if such party held collateral for its Claims, in the event that the Trust or Master Trust is a debtor in a chapter 11 case under the United States Bankruptcy Code, to have any deficiency Claim (i.e., the difference, if any, between the amount of the Claim and the value of the collateral) treated as an unsecured Claim against the Trust or Master Trust generally or any Fund or Master Fund. |
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No special custody arrangements are applicable to any Fund, and the existence of a trustee should not be taken as an indication of any additional level of management or supervision over any Fund or Master Fund. To the greatest extent permissible under Delaware law, the Trustee acts in an entirely passive role, delegating all authority over the operation of eachthe Trust, Master Trust, Fund and Mastereach Fund to the Managing Owner.
Although Shares in athe DBS Fund need not carry any voting rights, the Trust Declaration of Trust gives Shareholders of eachthe DBS Fund voting rights in respect of the business and affairs of suchthe DBS Fund comparable to those typically extended to limited partners in publicly-offered futures funds.
The Trustee
Wilmington Trust Company, a Delaware banking corporation,trust company, is the sole Trustee of the Trust each Fund and of the Master Trust and each Master Fund. The Trustee’s principal offices are located at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001. The Trustee is unaffiliated with the Managing Owner. The Trustee’s duties and liabilities with respect to the offering of the Shares and the management of the Trust and eachthe Fund and Master Trust and the Master Funds are limited to its express obligations under the Trust Declarations.
Declaration.
The rights and duties of the Trustee, the Managing Owner and the Shareholders are governed by the provisions of the Delaware Statutory Trust Act and by the applicable Trust Declaration.
The Trustee serves as the sole trustee of the Trust and the Master Trust in the State of Delaware.
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The Trustee accepts service of legal process on any Trust, the Funds and the Master Trust and the Master FundsFund in the State of Delaware and will make certain filings under the Delaware Statutory Trust Act. The Trustee does not owe any other duties to the Trust, or the Master Trust, the Managing Owner or the Shareholders of any Fund.Shareholders. The Trustee is permitted to resign upon at least sixty (60) days’ notice to the Trust, and the Master Trust, provided, that any such resignation will not be effective until a successor Trustee is appointed by the Managing Owner. Each of theThe Trust DeclarationsDeclaration provides that the Trustee is compensated by each Fund or Masterthe Fund, as appropriate, and is indemnified by each Fund or Masterthe Fund, as appropriate, against any expenses it incurs relating to or arising out of the formation, operation or termination of such Fund or Masterthe Fund, as appropriate, or the performance of its duties pursuant to the Trust Declarations,Declaration, except to the extent that
such expenses result from the gross negligence or willful misconduct of the Trustee. The Managing Owner has the discretion to replace the Trustee.
Only the Managing Owner has signed the registration statement of which this Prospectus is a part, and only the assets of the Trust, the Master Trust and the Managing Owner are subject to issuer liability under the federal securities laws for the information contained in this Prospectus and under federal securities laws with respect to the issuance and sale of the Shares. Under such laws, neither the Trustee, either in its capacity as Trustee or in its individual capacity, nor any director, officer or controlling person of the Trustee is, or has any liability as, the issuer or a director, officer or controlling person of the issuer of the Shares. The Trustee’s liability in connection with the issuance and sale of the Shares is limited solely to the express obligations of the Trustee set forth in eachthe Trust Declaration.
Under eachthe Trust Declaration, the Trustee has delegated to the Managing Owner the exclusive management and control of all aspects of the business of the Funds, the Trust, the Master TrustFund and the Master Funds.Trust. The Trustee has no duty or liability to supervise or monitor the performance of the Managing Owner, nor does the Trustee have any liability for the acts or omissions of the Managing Owner. The Shareholders have no voice in the day-to-day management of the business and operations of the Funds,Fund and the Trust, the Master Trust and the Master Funds, other than certain limited voting rights as set forth in eachthe Trust Declaration. IntheIn the course of its management of the business and affairs of the Funds,Fund and the Trust, the Master Trust and the Master Funds, the Managing Owner may, in its sole and absolute discretion, appoint an affiliate or affiliates of the Managing Owner as additional managing owners (except where the Managing Owner has been notified by the Shareholders that it is to be replaced as the managing owner) and retain such persons, including affiliates of the Managing Owner, as it deems necessary for the efficient operation of the Funds,Fund or the Trust, the Master Trust or the Master Funds, as appropriate.
Because the Trustee has delegated substantially all of its authority over the operation of the Funds,Fund and the Trust the Master Trust and the Master Funds to the Managing Owner, the Trustee itself is not registered in any capacity with the CFTC.
Performance information with respect to the offered poolspool starts on page 35. The section “Performance of Commodity Pools Operated by the Managing Owner and its Affiliates” on page 105 includes performance information of other pools managed by the Managing Owner.31.
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The Managing Owner
Background and Principals
DB Commodity Services LLC, a Delaware limited liability company, is the Managing Owner of the Trust and each Fund and the Master Trust and each Master Fund. The Managing Owner serves as both commodity pool operator and commodity trading advisor of the Trust and each Fund and Master Trust and each Masterthe Fund. The Managing Owner has been registered with the CFTC as a commodity pool operator and commodity trading advisor since June 7, 2005 and ishas been a member in good standing of the NFA in such capacity.since June 16, 2005. Its principal place of business is 60 Wall Street, New York, New York 10005, telephone number (212) 250-5883. The Managing Owner is a wholly-owned subsidiary of DB U.S. Financial Markets Holding Corporation, which is a wholly-owned, indirect subsidiary of Deutsche Bank AG. DB U.S. Financial Markets Holding Corporation has been a principal of the Managing Owner since June 7,May 31, 2005.The registration of the Managing Owner with the CFTC and its membership in the NFA must not be taken as an indication that either the CFTC or the NFA has recommended or approved the Managing Owner, the Trust and each Fund or the Master Trust and each Master Fund.
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In its capacity as a commodity pool operator, the Managing Owner is an organization which operates or solicits funds for commodity pools; that is, an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts. In its capacity as a commodity trading advisor, the Managing Owner is an organization which, for compensation or profit, advises others as to the value of or the advisability of buying or selling futures contracts.
Principals and Key Employees
Kevin Rich, Michael Gilligan and Martin KremensteinThe following principals serve asin the Chief Executive Officer, Principal Financial Officer, and Chief Operating Officer, Chief Investment Officer and Vice Presidentbelow capacities on behalf of the Managing Owner, respectively.Owner:
| | |
Name | | Capacity |
| Martin Kremenstein | | Chief Executive Officer, Chief Investment Officer and Managing Director |
| |
| Alex Depetris | | Chief Operating Officer and Director |
| |
| Michael Gilligan | | Chief Financial Officer and Director |
DB U.S. Financial Markets Holding Corporation is also a principal of the Managing Owner.
The Managing Owner is managed by a Board of Managers. The Board of Managers is comprised of Messrs. RichKremenstein, Depetris and Gilligan.
The Managing Owner has designated Messrs. Kremenstein and Hans Ephraimson.
Depetris as the trading principals of the Fund.
Kevin RichMartin Kremensteinjoined Deutsche Bank AG, a large international financial institution, in August 2006, and serves as Americas Head of Passive Investments (also known as DBX Group). Mr. Kremenstein also serves as Managing Director of the DBX Group. The Passive Investments Group is the team that structures and manages exchange-traded products. Mr. Kremenstein serves as the Chief Executive Officer, Chief Investment Officer and Managing Director of the Managing Owner. Mr. Kremenstein has been a principal and associated person of the Managing Owner since November 1, 2006 and November 3, 2006, respectively, and an associate member of the NFA since November 3, 2006. Mr. Kremenstein received his B.A. from the University of Leeds in 1998.
Alex Depetris joined Deutsche Bank AG, a large international financial institution, in June 20032008 and serves as a Managing Director in the Global Markets Investment ProductsDBX Group with responsibility for providing currency and commodity-based investorcross-asset investment solutions to the DB sales force in the Americas. The DBX Group is the team that structures and manages exchange-traded products. Mr. RichDepetris serves as an associated person, principalChief Operating Officer and Chief Executive OfficerDirector of the Managing Owner and as an associated person of Deutsche Bank Securities Inc.is responsible for its general oversight and strategy. From June 9, 2008 to January 31, 2012, Mr. RichDepetris served as the Principal Financial Officera Vice President of the Managing Owner from April 2007 through April 2008. Prior to joining Deutsche Bank, Mr. Richand was a Regional Vice President from November 2002 through May 2003 in Product Distribution for Claymore Securities, Inc. (“Claymore”), responsible for distributionthe daily oversight of closed-end fundsthe Managing Owner. Mr. Depetris has been a principal and unit investment trustsassociated person of the Managing Owner since April 13, 2009 and June 17, 2009, respectively, and an associate member of the NFA since June 17, 2009. From December 2006 to May 2008, Mr. Depetris was an associate with the law firm of Arnold & Porter LLP in the State of New York. Mr. Rich acted as an independent product development consultantYork, and prior to joining Claymore (Augustthat he was an associate with the law firm Sullivan & Worcester LLP in Boston, Massachusetts from September 2005 through October, 2002). From January 2000 through July 2002,November 2006. Mr. Rich worked at Lehman Brothers, Inc. Mr. Rich served in several roles supporting the equities, fixed income and investment banking product lines. Mr. RichDepetris received his MBA in FinanceJ.D. from the New YorkBoston University Leonard N. Stern School of BusinessLaw in 1996 2005
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and his Bachelors of Science in Business AdministrationFinance from Taylor University of Maryland, College Park in Upland, Indiana in 1983.
2002.
Michael Gilligan joined Deutsche Bank AG, a large international financial institution, in March 2008 and is a Director in the Finance Group. Mr. Gilligan serves as a principal and PrincipalChief Financial Officer of the Managing Owner. Mr. Gilligan also serves as a Director of the Managing Owner. Mr. Gilligan has been a principal of the Managing Owner since April 29, 2008. Prior to joining Deutsche Bank, Mr. Gilligan worked for Credit Suisse, a large international financial institution, from September 1998 to March 2008 and held a number of positions in finance;finance, including Controller of their residential and commercial real estate business; immediately prior to joining Deutsche Bank, Mr. Gilligan was the Chief Operating Officer of the Americas Credit Trading Group, a business group within Credit Suisse, from May 2007 to March 2008.2008 with responsibility for the U.S. High Grade bond trading and Emerging Markets credit trading desks and his duties included business planning and management. Mr. Gilligan is a Chartered Accountant and received his Bachelors of Science in Management from Trinity College in 1989 and his Post Graduate Diploma in Professional Accounting from University College Dublin in 1990.
Martin KremensteinDB U.S. Financial Markets Holding Corporation,joinedwhich is a wholly owned, indirect subsidiary of Deutsche Bank AG, in August 2006, and serves as a Vice President in the Global Markets Investment Products Group with responsibility for providing currency and commodity-based investor solutions to the DB sales force in the Americas. Mr. Kremenstein serves as the Chief Operating Officer, Chief Investment Officer and Vice President of the Managing Owner. Prior to joining Deutsche Bank, Mr. Kremenstein worked for JPMorgan Chase from September 1998 to August 2006, initially in London and then, from June 2003, in New York. From February 2005 to August 2006, Mr. Kremenstein worked in Market Risk Management, covering the Credit Portfolio division initially as an Associate, and later as a Vice President. From September 1998 to February 2005, Mr. Kremenstein worked in various roles in Operations at JPMorgan Chase, including managing the Credit Portfolio Credit Hedge Analysis team, managing projects for the Credit Portfolio Market Hedge team, and managing P&L production for the Counterparty Risk Book (London). Mr. Kremenstein received his B.A. from the University of Leeds in 1998. Mr. Kremenstein is a principal and an associated person of the Managing Owner.
Hans Ephraimson joined Deutsche Bank AG in June 1986 and is a Managing Director in the North American Structured Sales and Global Markets Investment Products Group. Mr. Ephraimson has also been a Desk Head for foreign exchange in Deutsche Bank AG’s Institutional Clients Group for North America since January 1999. Mr. Ephraimson serves as a member of the Board of Managers of the Managing Owner. Mr. Ephraimson will serve as a principal of the Managing Owner pending approval by the National Futures Association. Mr. Ephraimson received his Bachelors of Science from Syracuse University in 1986 and an MBA from Columbia University in 1995.since May 31, 2005.
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Fiduciary and Regulatory Duties of the Managing Owner
An investor should be aware that the Managing Owner has a fiduciary responsibility to the Shareholders to exercise good faith and fairness in all dealings affecting the Trust and each Fund and the Master Trust and each Master Fund.
As managing owner of the Trust and each Fund and the Master Trust and each Master Fund, the Managing Owner effectively is subject to the duties and restrictions imposed on “fiduciaries” under both statutory and common law. The Managing Owner has a fiduciary responsibility to the Shareholders to exercise good faith, fairness and loyalty in all dealings affecting the Trust and each Fund and the Master Trust and each Master Fund, consistent with the terms of the Trust Declarations.Declaration. A form of each of the Trust DeclarationsDeclaration is filed
as an exhibit to the registration statement of which this Prospectus is a part. The general fiduciary duties which would otherwise be imposed on the Managing Owner (which would make the operation of the Trust and each Fund and the Master Trust and each Master Fund as described herein impracticable due to the strict prohibition imposed by such duties on, for example, conflicts of interest on behalf of a fiduciary in its dealings with its beneficiaries), are defined and limited in scope by the disclosure of the business terms of the Trust and each Fund and the Master Trust and each Master Fund, as set forth herein and in the Trust DeclarationsDeclaration (to which terms all Shareholders, by subscribing to the Shares, are deemed to consent).
The Trust Declarations provideDeclaration provides that the Managing Owner and its affiliates shall have no liability to the Trust and each Fund or the Master Trust and each Master Fund or to any Shareholder for any loss suffered by the Trust and each Fund or the Master Trust and each Master Fund arising out of any action or inaction of the Managing Owner or its affiliates or their respective directors, officers, shareholders, partners, members, managers or employees, (the “Managingor the Managing Owner Related Parties”)Parties, if the Managing Owner Related Parties, in good faith, determined that such course of conduct was in the best interests of the Fund, or the Master Fund, as applicable, and such course of conduct did not constitute negligence or misconduct by the Managing Owner Related Parties. The Trust and each Fund and the Master Trust and each Master Fund have agreed to indemnify the Managing Owner Related Parties against claims, losses or liabilities based on their conduct relating to the FundTrust and the Master Trust andeach Master Fund,provided that the conduct resulting in the claims, losses or liabilities for which indemnity is sought did not constitute negligence or misconduct and was done in good faith and in a manner reasonably believed to be in the best interests of the Fund or the Master Fund, as applicable.
Fund.
Under Delaware law, a beneficial owner of a business trust (such as a Shareholder of eachthe Fund) may, under certain circumstances, institute legal action on behalf of himself and all other similarly situated beneficial owners (a “class action”) to recover damages from a managing owner of such business trust for violations of fiduciary duties, or on behalf of a business trust (a “derivative action”) to recover damages from a third party where a managing owner has failed or refused to institute proceedings to recover such damages. In addition, beneficial owners may have the right, subject to certain legal requirements, to bring class actions in federal court to enforce their rights under the federal securities laws and the rules and regulations
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promulgated thereunder by the Securities and Exchange Commission, (“SEC”).or the SEC. Beneficial owners who have suffered losses in connection with the purchase or sale of their beneficial interests may be able to recover such losses from a managing owner where the losses result from a violation by the managing ownerManaging Owner of the anti-fraud provisions of the federal securities laws.
Under certain circumstances, Shareholders also have the right to institute a reparations proceeding before the CFTC against the Managing Owner (a registered commodity pool operator and commodity trading advisor), the Commodity Broker (registered futures commission merchant), as well as those of their respective employees who are required to be registered under the Commodity Exchange Act, as amended, and the rules and regulations promulgated thereunder. Private rights of action are conferred by the Commodity Exchange Act, as amended. Investors in futures and in commodity pools may, therefore, invoke the protections provided thereunder.
There are substantial and inherent conflicts of interest in the structure of the Trust and each Fund and the Master Trust and each Master Fund which are, on their face, inconsistent with the Managing Owner’s fiduciary duties. One of the purposes underlying the disclosures set forth in this Prospectus is to disclose to all prospective Shareholders these conflicts of interest so that the Managing Owner may have the opportunity to obtain investors’ informed consent to such conflicts. Prospective investors who
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are not willing to consent to the various conflicts of interest described under “Conflicts of Interest” and elsewhere should not invest in the Funds.Fund. The Managing Owner currently intends to raise such disclosures and consent as a defense in any proceeding brought seeking relief based on the existence of such conflicts of interest.
The foregoing summary describing in general terms the remedies available to Shareholders under federal law is based on statutes, rules and decisions as of the date of this Prospectus. This is a rapidly developing and changing area of the law. Therefore, Shareholders who believe that they may have a legal cause of action against any of the foregoing parties should consult their own counsel as to their evaluation of the status of the applicable law at such time.
Ownership or Beneficial Interest in the FundsFund
The Managing Owner has made and expects to maintain an aggregate investment of $1,000 in the Fund. As of the date of this document,Prospectus, principals of the Managing Owner own less than 1% of the Shares of the Fund.
Shares.
Management; Voting by Shareholders
The Shareholders of each Fund take no part in the management or control, and have no voice in the operations or the business of the Trust such Fund, the Master Trust, or the Master Funds.Fund. Shareholders, voting together as a single series, may, however, remove and replace the Managing Owner as the managing owner of the Trust and all of the Funds,Fund, and may amend the Trust Declaration, of the Trust, except in certain limited respects, by the affirmative vote of a majority of the outstanding Shares then owned by Shareholders (as opposed to by the Managing Owner and its affiliates). The owners of a majority of the outstanding Shares then owned by Shareholders may also compel dissolution of the Trust and all of the Funds.Fund. The owners of 10% of the outstanding Shares then owned by Shareholders have the right to bring a matter before a vote of the Shareholders. The Managing Owner has no power under the Trust Declaration to restrict any of the Shareholders’ voting rights. Any Shares purchased by the Managing Owner or its affiliates, as well as the Managing Owner’s general liability interest in eachthe Fund, of the Trust or Master Trust and Master Funds, are non-voting.
The Managing Owner has the right unilaterally to amend the Trust Declaration as it applies to anythe Fund provided that any such amendment is for thebenefitthe benefit of and not adverse to the Shareholders of such Fund or the Trustee and also in certain unusual circumstances —- for example, if doing so is necessary to comply with certain regulatory requirements.
Recognition of the Trust the Master Trust, the Funds and each Masterthe Fund in Certain States
A number of states do not have “business trust” statutes such as that under which the Trust and the Master Trust havehas been formed in the State of Delaware. It is possible, although unlikely, that a court in such a state could hold that, due to the absence of any statutory provision to the contrary in such jurisdiction, the Shareholders, although entitled under Delaware law to the same limitation on personal liability as stockholders in a private corporation for profit organized under the laws of the State of Delaware,
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are not so entitled in such state. To protect Shareholders against any loss of limited liability, the Trust Declarations provideDeclaration provides that no written obligation may be undertaken by any Fund or Masterthe Fund unless such obligation is explicitly limited so as not to be enforceable against any Shareholder personally. Furthermore, eachthe Fund and Master Fund, respectively, itself indemnifies all its Shareholders against any liability that such Shareholders might incur in addition to that of a beneficial owner. The Managing Owner is itself generally liable for all obligations of each Fund and Masterthe Fund and will use its assets to satisfy any such liability before such liability would be enforced against any Shareholder individually.
Possible Repayment of Distributions Received by Shareholders; Indemnification by Shareholders
The Shares are limited liability investments; investors may not lose more than the amount that they invest plus any profits recognized on their investment. However, Shareholders of a Fund could be required, as a matter of bankruptcy law, to return to the estate of suchthe Fund any distribution they received at a time when suchthe Fund was in fact insolvent or in violation of the Trust Declaration. In addition, although the Managing Owner is not aware of this provision ever having been invoked in the case of any public futures fund, Shareholders of each Fund agree in the Trust Declaration that they will indemnify suchthe Fund for any harm suffered by it as a result of
Shareholders’ actions unrelated to the business of suchthe Fund, or
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taxes separately imposed on the Fund by any state, local or foreign taxing authority.
The foregoing repayment of distributions and indemnity provisions (other than the provision for Shareholders of athe Fund indemnifying such Fund for taxes imposed upon it by a state, local or foreign taxing authority, which is included only as a formality due to the fact that many states do not have business trust statutes so that the tax status of athe Fund in such states might, theoretically, be challenged —– although the Managing Owner is unaware of any instance in which this has actually occurred) are commonplace in statutory trusts and limited partnerships.
Shares Freely Transferable
The Shares of each Fund trade on the AmexNYSE Arca and provide institutional and retail investors with direct access to each Fund. Each Fund holds no investment assets other than the Master Fund Units of the corresponding Master Fund. The SharesFund trades with a view of each Fundtracking the Index, over time, less expenses. The Fund’s Shares may be bought and sold on the AmexNYSE Arca like any other exchange-listedexchange listed security.
Book-Entry Form
Individual certificates will not be issued for the Shares. Instead, global certificates are deposited by the Trustee with DTC and registered in the name of Cede & Co., as nominee for DTC. The global certificates evidence all of the Shares outstanding at any time. Under the Trust’s Trust Declaration, Shareholders are limited to (1) participants in DTC such as banks, brokers, dealers and trust companies (DTC Participants), (2) those who maintain, either directly or indirectly, a custodial relationship with a DTC Participant (Indirect Participants), and (3) those banks, brokers, dealers, trust companies and others who hold interests in the Shares through DTC Participants or Indirect Participants. The Shares are only transferable through the book-entry system of DTC. Shareholders who are not DTC Participants may transfer their Shares through DTC by instructing the DTC Participant holding their Shares (or by instructing the Indirect Participant or other entity through which their Shares are held) to transfer the Shares. Transfers are made in accordance with standard securities industry practice.
Reports to Shareholders
The Managing Owner will furnish you with an annual report of eachthe Fund within 90 calendar days after the end of its fiscal year as required by the rulesand regulations of the SEC as well as with those reports required by the CFTC, and the National Futures Association, or the NFA, including, but not limited to, an annual audited financial statement certified by independent registered public accountants and any other reports required by any other governmental authority that has jurisdiction over the activities of the Trust each Fund and the Master Trust and each Master Fund. You also will be provided with appropriate information to permit you to file your U.S. federal and state income tax returns (on a timely basis) with respect to your Shares. Monthly account statements conforming to CFTC and NFA requirements are posted on the Managing Owner’s website atwww.dbfunds.db.comhttp://www.dbxus.com. Additional reports may be
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posted on the Managing Owner’s website in the discretion of the Managing Owner or as required by applicable regulatory authorities.
The Managing Owner will notify Shareholders of any change in the fees paid by the Trust and the Master Trust or of any material changes to any Fund or any Masterthe Fund by filing with the SEC a supplement to this Prospectus and a Form 8-K, which will be publicly available athttp://www.sec.gov and at the Managing Owner’s website atwww.dbfunds.db.comhttp://www.dbxus.com. Any such notification will include a description of Shareholders’ voting rights.
Net Asset Value
Net asset value in respect of any Masterthe Fund means the total assets of the Master Fund including, but not limited to, all cash and cash equivalents or other debt securities less total liabilities of such Masterthe Fund, each determined on the basis of generally accepted accounting principles in the United States, consistently applied under the accrual method of accounting. In particular, net asset value includes any unrealized profit or loss on open futures contracts, and any other credit or debit accruing to a Masterthe Fund but unpaid or not received by a Masterthe Fund. All open futures contracts traded on a United States exchange are calculated at their then current market value, which are based upon the settlement price for that particular futures contract traded on the applicable United States exchange on the date with respect to which net asset value is being determined; provided, that if a futures contract traded on a United States exchange could not be liquidated on such day, due to the operation of daily limits or other rules of the exchange upon which that position is traded or otherwise, the settlement price onManaging Owner may value such futures contract pursuant to policies the most recent day onManaging Owner has adopted, which the position could have been liquidated will
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be the basis for determining the market value of such position for such day.are consistent with normal industry standards. The current market value of all open futures contracts traded on a non-United States exchange, to the extent applicable, will be based upon the settlement price for that particular futures contract traded on the applicable non-United States exchange on the date with respect to which net asset value is being determined; provided further, that if a futures contract traded on a non-United States exchange, to the extent applicable, could not be liquidated on such day, due to the operation of daily limits (if applicable) or other rules of the exchange upon which that position is traded or otherwise, the settlement price onManaging Owner may value such futures contract pursuant to policies the most recent day onManaging Owner has
adopted, which the position could have been liquidated will be the basis for determining the market value of such position for such day.are consistent with normal industry standards. The Managing Owner may in its discretion (and under extraordinary circumstances, including, but not limited to, periods during which a settlement price of a futures contract is not available due to exchange limit orders or force majeure type events such as systems failure, natural or man-mademanmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance) value any asset of a Masterthe Fund pursuant to such other principles as the Managing Owner deems fair and equitable so long as such principles are consistent with normal industry standards. Interest earned on any Masterthe Fund’s foreign exchange futures brokerage account is accrued at least monthly. The amount of any distribution will be a liability of such Masterthe Fund from the day when the distribution is declared until it is paid.
Net asset value per Master Fund Unit, in respect of any Master FundShare is the net asset value of the Master Fund divided by the number of its outstanding Master Fund Units. Because there is a one-to-one correlation between Shares of a Fund and Master Fund Units of its corresponding Master Fund, the net asset value per Share of any Fund and the net asset value per Master Fund Unit of its corresponding Master Fund is equal.
Shares.
Termination Events
The Trust, or, as the case may be, anythe Fund, will dissolve at any time upon the happening of any of the following events:
The filing of a certificate of dissolution or revocation of the Managing Owner’s charter (and the expiration of 90 days after the date of notice to the Managing Owner of revocationwithoutrevocation without a reinstatement of its charter) or upon the withdrawal, removal, adjudication or admission of bankruptcy or insolvency of the Managing Owner, or an event of withdrawal unless (i) at the time there is at least one remaining Managing Owner and that remaining Managing Owner carries on the business of the Fund or (ii) within 90 days of such event of withdrawal all the remaining Shareholders agree in writing to continue the business of athe Fund and to select, effective as of the date of such event, one or more successor Managing Owners. If the Trust is terminated as the result of an event of withdrawal and a failure of all remaining Shareholders to continue the business of the Trust and to appoint a successor Managing Owner as provided above within 120 days of such event of withdrawal, Shareholders holding Shares representing at least a majority (over 50%) of the net asset value of each Fund (not including Shares held by the Managing Owner and its affiliates) may elect to continue the business of the Trust by forming a new statutory trust, or reconstituted trust, on the same terms and provisions as set forth in the Trust Declaration. Any such election must also provide for the election of a Managing Owner to the reconstituted trust. If such an election is made, all Shareholders of the Funds will be bound thereby and continue as Shareholders of series of the reconstituted trust.
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| | 50%) of the net asset value of the Fund (not including Shares held by the Managing Owner and its affiliates) may elect to continue the business of the Trust by forming a new statutory trust, or reconstituted trust, on the same terms and provisions as set forth in the Trust Declaration. Any such election must also provide for the election of a Managing Owner to the reconstituted trust. If such an election is made, all Shareholders will be bound thereby and continue as Shareholders of series of the reconstituted trust. |
The occurrence of any event which would make unlawful the continued existence of the Trust or anythe Fund, as the case may be.
In the event of the suspension, revocation or termination of the Managing Owner’s registration as a commodity pool operator, or membership as a commodity pool operator with the NFA (if, in either case, such registration is required at such time unless at the time there is at least one remaining Managing Owner whose registration or membership has not been suspended, revoked or terminated.terminated).
The Trust or anythe Fund, as the case may be, becomes insolvent or bankrupt.
The Shareholders holding Shares representing at least a majority (over 50%) of the net asset value (which excludes the Shares of the Managing Owner) vote to dissolve the Trust, notice of which is sent to the Managing Owner not less than ninety (90) Business Days prior to the effective date of termination.
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The determination of the Managing Owner that the aggregate net assets of athe Fund in relation to the operating expenses of suchthe Fund make it unreasonable or imprudent to continue the business of suchthe Fund, or, in the exercise of its reasonable discretion, the determination by the Managing Owner to dissolve the Trust because the aggregate net asset value of the Trust as of the close of business on any business day declines below $10 million.
The Trust or anythe Fund becomingis required to be registered as an investment company under the Investment Company Act of 1940.
DTC is unable or unwilling to continue to perform its functions, and a comparable replacement is unavailable.
DISTRIBUTIONS
The Managing Owner has discretionary authority over all distributions made by each Fund and its corresponding Masterthe Fund. To the extent that a Masterthe Fund’s actual and projected interest income from its holdings of United States Treasury securities and other high credit quality short-term fixed income securities exceeds the actual and projected fees and expenses of the Master Fund and its corresponding Fund, the Managing Owner expects periodically to make distributions of the amount of such excess. The FundsFund currently dodoes not expect to make distributions with respect to capital gains. Depending on the applicable Fund’s performance for the taxable year and your own tax situation for such year, your income tax liability for the taxable year for your allocable share of suchthe Fund’s net ordinary income or loss and capital gain or loss may exceed any distributions you receive with respect to such year.
THE ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
The Trust and Master Trust, on behalf of eachthe Fund, and each Master Fund, respectively, has appointed The Bank of New York Mellon as the administrator of each Fund and each Masterthe Fund and has entered into an Administration Agreement in connection therewith.
The Bank of New York Mellon serves as custodian, or Custodian, of the Fund and has entered into a Global Custody Agreement, or Custody Agreement, in connection therewith. The Bank of New York Mellon serves as the transfer agent, or Transfer Agent, of the Fund and has entered into a Transfer Agency and Service Agreement in connection therewith.
The Bank of New York Mellon, a banking corporation organized under the laws of the State of New York with trust powers, has an office at 2 Hanson Place, 12th Floor, Brooklyn, New York 11217. The Bank of New York Mellon is subject to supervision by the New YorkStateYork State Banking Department and the Board of Governors of the Federal Reserve System. Information regarding the net asset value of eachthe Fund, creation and redemption transaction fees and the names of the parties that have executed a Participant Agreement may be obtained from The Bank of
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New York Mellon by calling the following number: (718) 315-4412.315-7500. A copy of the Administration Agreement is available for inspection at The Bank of New York’s trustYork Mellon’s office identified above.
The Administrator retains, separately for the Fund, certain financial books and records, including: Basket creation and redemption books and records, Fund and Master Fund accounting records, ledgers with respect to assets, liabilities, capital, income and expenses, the registrar, transfer journals and related details and trading and related documents received from futures commission merchants, c/o The Bank of New York Mellon, 2 Hanson Place, 12th Floor, Brooklyn, New York 11217, telephone number (718) 315-4850.
315-7500.
A summary of the material terms of the Administration Agreement is disclosed in the “Material Contracts” section.
The Administrator’s monthly fees of up to 0.05% per annum are paid on behalf of each Fund and each Masterthe Fund by the Managing Owner out of each Masterthe Fund’s Management Fee.
The Administrator and any of its affiliates may from time-to-time purchase or sell Shares for their own account, as agent for their customers and for accounts over which they exercise investment discretion.
The Administrator and any successor administrator must be a participant in DTC or such other securities depository as shall then be acting.
The AdministratorTransfer Agent receives a transaction processing fee in connection with orders from Authorized Participants to create or redeem Baskets in the amount of $500 per order. These transaction processing fees are paid indirectlydirectly by the Authorized Participants and not by any Fund or any Masterthe Fund.
The Trust retainsmay retain the services of one or more additional service providers to assist with certain tax reporting requirements of eachthe Fund and the Shareholders of eachthe Fund.
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ALPS DISTRIBUTORS, INC.
The Trust, on behalf of eachthe Fund, has appointed ALPS Distributors, Inc. or ALPS Distributors, to
assist the Managing Owner and the Administrator with certain functions and duties relating to distribution and marketing, which include the following: consultation with the marketing staff of the Managing Owner and its affiliates with respect to FINRA compliance in connection with marketing efforts; review and filing of marketing materials with FINRA; and consultation with the Managing Owner and its affiliates in connection with marketing and sales strategies. Investors may contact ALPS Distributors toll-free in the U.S. at (877) 369-4617.
ALPS Distributors retains all marketing materials separately for each Fund and Masterthe Fund, at the offices of ALPS Distributors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203; telephone number (303) 623-2577.
The Managing Owner, out of the relevant Management Fee, pays ALPS Distributors for performing its duties on behalf of each Fund and its corresponding Masterthe Fund and may pay ALPS Distributors additional compensation in consideration of the performance by ALPS Distributors of additional marketing, distribution and ongoing support services to such Fund or its Masterthe Fund. Such additional services may include, among other services, the development and implementation of a marketing plan and the utilization of ALPS Distributors’ resources, which include an extensive broker database and a network of internal and external wholesalers. ALPS Distributors is affiliated with ALPS Fund Services, Inc., a Denver-based outsourcing solution for administration, compliance, fund accounting, legal, marketing, tax administration, transfer agency and shareholder services for open-end, closed-end, hedge and exchange-traded funds. ALPS Fund Services, Inc. and its affiliates provide fund administration services to funds with over 350,000 shareholder accountsassets in excess of $48 billion. ALPS Distributors and approximately $17 billion in client mutual fundits affiliates provide distribution services to funds with assets under administration. of more than $438 billion.
ALPS Distributors, Inc. provides distribution services to approximately $232 billion in client assets.
ALPS Distributors, Inc. is the distributor of PowerShares DB Energy Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund, PowerShares DB Silver Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculture Fund. Certain marketing services may be provided for eachthe Fund by Invesco Aim Distributors, Inc. or Invesco PowerSharesCapital Management, LLC. This assistance includes the licensing of the PowerShares® registered service mark to the Managing Owner for use with eachthe Fund. PowerShares® is a registered service mark of Invesco PowerShares Capital Management LLC. Invesco PowerShares Capital Management LLC is not a
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sponsor or promoter of any of the FundsFund and has no responsibility for the performance of any of the FundsFund or the decisions made or actions taken by the Managing Owner.
“800” Number for Investors
Investors may contact Invesco PowerShares Capital Management LLC toll free in the U.S. at (800) 983-0903.
INVESCO AIM DISTRIBUTORS, INC.
Through a marketing agreement between the Managing Owner and Invesco Aim Distributors, Inc. (formerly known as A I M Distributors, Inc.), or Invesco Aim Distributors, an affiliate of Invesco PowerShares Capital Management LLC, (formerly known as PowerShares Capital Management LLC), or Invesco PowerShares, the Managing Owner, on behalf of each Fund and each Masterthe Fund, has appointed Invesco Aim Distributors as a marketing agent. Invesco Aim Distributors assists the Managing Owner and the Administrator with certain functions and duties such as providing various educational and marketing activities regarding eachthe Fund, primarily in the secondary trading market, which activities include, but are not limited to, communicating eachthe Fund’s name, characteristics, uses, benefits, and risks, consistent with the prospectus.this Prospectus. Invesco Aim Distributors will not open or maintain customer accounts or handle orders for eachthe Fund. Invesco AimDistributors engages in public seminars, road shows, conferences, media interviews, and distributing sales literature and other communications (including electronic media) regarding the Fund.
Invesco Distributors is aan indirect and wholly-owned subsidiary of Invesco Ltd. Invesco Ltd. is a leading independent global investment manager operating under the AIM, Atlantic Trust, Invesco, Perpetual, PowerShares, TrimarkInvesco Canada and WL Ross brands.
The Managing Owner, out of the relevant Management Fee, pays Invesco Aim Distributors for performing its duties on behalf of each Fund and its corresponding Masterthe Fund.
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THE SECURITIES DEPOSITORY;
BOOK-ENTRY-ONLY SYSTEM; GLOBAL SECURITY
SECURITY
DTC acts as securities depository for the Shares. DTC is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of section 17A of the Exchange Act. DTC was created to hold securities of DTC Participants and to facilitate the clearance and settlement of transactions in such securities among the DTC Participants through electronic book-entry changes. This eliminates the need for physical movement of securities certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. Access to the DTC system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly. DTC has agreed to administer its book-entry system in accordance with its rules and by-laws and the requirements of law.
Individual certificates will not be issued for the Shares. Instead, global certificates are signed by the Trustee and the Managing Owner on behalf of eachthe Fund, registered in the name of Cede & Co., as nominee for DTC, and deposited with the Trustee on behalf of DTC. The global certificates evidence all of the Shares of each Fund outstanding at any time. The representations, undertakings and agreements made on the part of eachthe Fund in the global certificates are made and intended for the purpose of binding only the applicable Fund and not the Trustee or the Managing Owner individually.
Upon the settlement date of any creation, transfer or redemption of Shares, DTC credits or debits, on its book-entry registration and transfer system, the amount of the Shares so created, transferred or redeemed to the accounts of the appropriate DTC Participants. The Managing Owner and the Authorized Participants designate the accounts to be credited and charged in the case of creation or redemption of Shares.
Beneficial ownership of the Shares is limited to DTC Participants, Indirect Participants and persons
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holding interests through DTC Participants andIndirectand Indirect Participants. Owners of beneficial interests in the Shares is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC Participants), the records of DTC Participants (with respect to Indirect Participants), and the records of Indirect Participants (with respect to Shareholders that are not DTC Participants or Indirect Participants). Shareholders are expected to receive from or through the DTC Participant maintaining the account through which the Shareholder has purchased their Shares a written confirmation relating to such purchase.
Shareholders that are not DTC Participants may transfer the Shares through DTC by instructing the DTC Participant or Indirect Participant through which the Shareholders hold their Shares to transfer the Shares. Shareholders that are DTC Participants may transfer the Shares by instructing DTC in accordance with the rules of DTC. Transfers are made in accordance with standard securities industry practice.
DTC may decide to discontinue providing its service with respect to Baskets and/or the Shares of each Fund by giving notice to the Trustee and the Managing Owner. Under such circumstances, the Trustee and the Managing Owner will either find a replacement for DTC to perform its functions at a comparable cost or, if a replacement is unavailable, terminate suchthe Fund.
The rights of the Shareholders generally must be exercised by DTC Participants acting on their behalf in accordance with the rules and procedures of DTC. Because the Shares can only be held in book-entry form through DTC and DTC Participants, investors must rely on DTC, DTC Participants and any other financial intermediary through which they hold the Shares to receive the benefits and exercise the rights described in this section. Investors should consult with their broker or financial institution to find out about procedures and requirements for securities held in book-entry form through DTC.
SHARE SPLITS
If the Managing Owner believes that the per Share price of athe Fund in the secondary market has fallen outside a desirable trading price range, the
Managing Owner may direct the Trustee to declare a split or reverse split in the number of Shares outstanding and to make a corresponding change in the number of Shares of such Fund constituting a Basket.
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MATERIAL CONTRACTS
Brokerage Agreement
The Commodity Broker and the Master Trust (on behalf of each Masterthe Fund) entered into athe brokerage agreement with respect to each Masterthe Fund, or, each athe Brokerage Agreement. As a result the Commodity Broker:
acts as the clearing broker;
acts as custodian of each Masterthe Fund’s assets; and
performs such other services for each Masterthe Fund as the Managing Owner may from time-to-time request.
As clearing broker for each Masterthe Fund, the Commodity Broker receives orders for trades from the Managing Owner.
Confirmations of all executed trades are given to each Masterthe Fund by the Commodity Broker. EachThe Brokerage Agreement incorporates the Commodity Broker’s standard customer agreements and related documents, which generally include provisions that:
all funds, futures and open or cash positions carried for each Masterthe Fund are held as security for each respective Masterthe Fund’s obligations to the Commodity Broker;
the margins required to initiate or maintain open positions are as from time-to-time established by the Commodity Broker and may exceed exchange minimum levels; and
the Commodity Broker may close out positions, purchase futures or cancel orders at any time it deems necessary for its protection, without the consent of the Master Trust on behalf of any Masterthe Fund.
As custodian of each Masterthe Fund’s assets, the Commodity Broker is responsible, among other things, for providing periodic accountings of all dealings and actions taken by the Master Trust on behalf of each Masterthe Fund during the reporting period, together with an accounting of all securities, cash or other indebtedness or obligations held by it or its nominees for or on behalf of each Masterthe Fund.
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Administrative functions provided by the Commodity Broker to each Masterthe Fund include, but are not limited to, preparing and transmitting daily confirmations of transactions and monthly statements of account, calculating equity balances and margin requirements.
As long as athe Brokerage Agreement between the Commodity Broker and the Master Trust, on behalf of each Masterthe Fund, is in effect, the Commodity Broker will not charge any Masterthe Fund a fee for any of the services it has agreed to perform, except for the agreed upon brokerage fee.
EachThe Brokerage Agreement is not exclusive and runs for successive one-year terms to be renewed automatically each year unless terminated. The Brokerage Agreement is terminable by the Master Trust, on behalf of each Masterthe Fund, or the Commodity Broker without penalty upon thirty (30) days’ prior written notice (unless where certain events of default occur or there is a material adverse change to a Masterthe Fund’s financial position, in which case only prior written notice is required to terminate the Brokerage Agreement).
EachThe Brokerage Agreement provides that neither the Commodity Broker nor any of its managing directors, officers, employees or affiliates will be liable for any costs, losses, penalties, fines, taxes and damages sustained or incurred by the Master Trust or each Masterthe Fund other than as a result of the Commodity Broker’s gross negligence or reckless or intentional misconduct or breach of such agreement.
Administration Agreement
Pursuant to the Administration Agreement among the Trust, the Master Trust, each on behalf of itself and on behalf of each of their respective Funds and Master Funds,the Fund, and the Administrator, the Administrator performs or supervises the performance of services necessary for the operation and administration of each Fund and each Masterthe Fund (other than making investment decisions), including receiving and processing orders from Authorized Participants to create and redeem Baskets, net asset value calculations, accounting and other fund administrative services.
The Administration Agreement will continue in effect from the commencement of trading operations unless terminated on at least 90 days’ prior written notice by either party to the other party. Notwithstanding the foregoing, the Administrator
may terminate the Administration Agreement with respect to a Fund or its corresponding Masterthe Fund upon 30 daysdays’ prior written notice if the Fund and/or Master Fund has materially failed to perform its obligations under the Administration Agreement or upon the termination of the Global Custody Agreement.
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The Administrator is both exculpated and indemnified under the Administration Agreement.
Except as otherwise provided in the Administration Agreement, the Administrator will not be liable for any costs, expenses, damages, liabilities or claims (including attorneys’ and accountants’ fees) incurred by the Trust the Master Trust or any Fund or Masterthe Fund, except those costs, expenses, damages, liabilities or claims arising out of the Administrator’s own gross negligence or willful misconduct. In no event will the Administrator be liable to the Trust, the Master Trust, the Funds, the Master FundsFund or any third party for special, indirect or consequential damages, or lost profits or loss of business, arising under or in connection with the Administration Agreement, even if previously informed of the possibility of such damages and regardless of the form of action. The Administrator will not be liable for any loss, damage or expense, including counsel fees and other costs and expenses of a defense against any claim or liability, resulting from, arising out of, or in connection with its performance under the Administration Agreement, including its actions or omissions, the incompleteness or inaccuracy of any Proper Instructions (as defined therein), or for delays caused by circumstances beyond the Administrator’s control, unless such loss, damage or expense arises out of the gross negligence or willful misconduct of the Administrator.
Subject to limitations, the Trust the Master Trust and/or each of their respective Funds and Master Funds, each Fund and each Masterthe Fund will indemnify and hold harmless the Administrator from and against any and all costs, expenses, damages, liabilities and claims (including claims asserted by the Trust Master Trust or any Fund or Masterthe Fund), and reasonable attorneys’ and accountants’ fees relating thereto, which are sustained or incurred or which may be asserted against the Administrator by reason of or as a result of any action taken or omitted to be taken by the Administrator in good faith under the Administration Agreement or in reliance upon (i) any law, act, regulation or interpretation of the same even though the same may thereafter have been altered, changed, amended or repealed, (ii) the registration statement or Prospectus, (iii) any Proper Instructions,
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or (iv) any opinion of legal counsel for any Fund or any Masterthe Fund or arising out of transactions or other activities of any Fund or any Masterthe Fund which occurred prior to the commencement of the Administration Agreement;provided, that neither the Trust Master Trust, anyFund any Masternor the Fund will indemnify the Administrator for costs, expenses, damages, liabilities or claims for which the Administrator is liable under the preceding paragraph. This indemnity will be a continuing obligation of each of the Trust, Master Trust, each Fund and Masterthe Fund and their respective successors and assigns, notwithstanding the termination of the Administration Agreement. Without limiting the generality of the foregoing, the Trust Master Trust, each Fund or Masterand the Fund will indemnify the Administrator against and save the Administrator harmless from any loss, damage or expense, including counsel fees and other costs and expenses of a defense against any claim or liability, arising from any one or more of the following: (i) errors in records or instructions, explanations, information, specifications or documentation of any kind, as the case may be, supplied to the Administrator by any third partythird-party described above or by or on behalf of the Fund or Master Fund; (ii) action or inaction taken or omitted to be taken by the Administrator pursuant to Proper Instructions of the Trust, or Master Trust, on behalf of each of their respective corresponding Funds or Master Fundsthe Fund, or otherwise without gross negligence or willful misconduct; (iii) any action taken or omitted to be taken by the Administrator in good faith in accordance with the advice or opinion of counsel for the Trust Master Trust or any Fund or Masterthe Fund or its own counsel; (iv) any improper use by anythe Trust Master Trust, Fund or Masterthe Fund or their respective agents, distributor or investment advisor of any valuations or computations supplied by the Administrator pursuant to the Administration Agreement; (v) the method of valuation and the method of computing net asset value; or (vi) any valuations or net asset value provided by any Fund or Masterthe Fund.
Actions taken or omitted in reliance on Proper Instructions, or upon any information, order, indenture, stock certificate, power of attorney, assignment, affidavit or other instrument believed by the Administrator to be genuine or bearing the signature of a person or persons believed to be authorized to sign, countersign or execute the same, or upon the opinion of legal counsel for the Trust, or the Master Trust, on behalf of each of their respective Funds or Master Fundsthe Fund, or its own counsel, will be conclusively presumed to have been taken or omitted in good faith.
Notwithstanding any other provision contained in the Administration Agreement, the Administrator
will have no duty or obligation with respect to,
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including, without limitation, any duty or obligation to determine, or advise or notify any Fund or Masterthe Fund of: (a) the taxable nature of any distribution or amount received or deemed received by, or payable to any Fund or Masterthe Fund; (b) the taxable nature or effect on anythe Fund or Master Fund or theirits shareholders of any corporate actions, class actions, tax reclaims, tax refunds, or similar events; (c) the taxable nature or taxable amount of any distribution or dividend paid, payable or deemed paid by each Fund or Masterthe Fund to their respective shareholders; or (d) the effect under any federal, state, or foreign income tax laws of each Fund or Masterthe Fund making or not making any distribution or dividend payment, or any election with respect thereto.
Global Custody Agreement
The Bank of New York Mellon serves as eachthe Fund’s custodian, or Custodian. Pursuant to the Global Custody Agreement between the Trust, on its own behalf and on behalf of eachthe Fund, and the Custodian, or Custody Agreement, the Custodian serves as custodian of all securities and cash at any time delivered to Custodian by each respectivethe Fund during the term of the Custody Agreement and has authorized the Custodian to hold its securities in registered form in its name or the name of its nominees. The Custodian has established and will maintainmaintains one or more securities accounts and cash accounts for eachthe Fund pursuant to the Custody Agreement. The Custodian will maintainmaintains separate and distinct books and records segregating the assets of each Fund and its corresponding Masterthe Fund.
The Trust, on behalf of eachthe Fund, independently, and the Custodian may terminate the Custody Agreement by giving to the other party a notice in writing specifying the date of such termination, which will be not less than ninety (90) days after the date of such notice. Upon termination thereof, the applicable Fund will pay to the Custodian such compensation as may be due to the Custodian, and will likewise reimburse the Custodian for other amounts payable or reimbursable to the Custodian thereunder. The Custodian will follow such reasonable oral or written instructions concerning the transfer of custody of records, securities and other items as the Trust, on behalf of eachthe Fund, gives; provided, that (a) the Custodian will have no liability for shipping and insurance costs associated therewith, and (b) full payment will have been made to the Custodian of its compensation, costs, expenses and other amounts to
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which it is entitled hereunder.thereunder. If any securities or cash remain inanyin any account, the Custodian may deliver to the Trust, on behalf of eachthe Fund, such securities and cash. Except as otherwise provided herein, all obligations of the parties to each other hereunder will cease upon termination of the Custody Agreement.
The Custodian is both exculpated and indemnified under the Custody Agreement.
Except as otherwise expressly provided in the Custody Agreement, the Custodian will not be liable for any costs, expenses, damages, liabilities or claims, including attorneys’ and accountants’ fees, or losses, incurred by or asserted against the Trust or anythe Fund, except those losses arising out of the gross negligence or willful misconduct of the Custodian. The Custodian will have no liability whatsoever for the action or inaction of any depository. Subject to the Custodian’s delegation of its duties to its affiliates, the Custodian’s responsibility with respect to any securities or cash held by a subcustodian is limited to the failure on the part of the Custodian to exercise reasonable care in the selection or retention of such subcustodian in light of prevailing settlement and securities handling practices, procedures and controls in the relevant market. With respect to any losses incurred by the Trust or anythe Fund as a result of the acts or the failure to act by any subcustodian (other than an affiliate of the Custodian), the Custodian will take appropriate action to recover such losses from such subcustodian; and the Custodian’s sole responsibility and liability to the Trust or anythe Fund will be limited to amounts so received from such subcustodian (exclusive of costs and expenses incurred by the Custodian). In no event will the Custodian be liable to the Trust or anythe Fund or any third partythird-party for special, indirect or consequential damages, or lost profits or loss of business, arising in connection with the Custody Agreement.
The Trust, on behalf of eachthe Fund, as applicable, will indemnify the Custodian and each subcustodian for the amount of any tax that the Custodian, any such subcustodian or any other withholding agent is required under applicable laws (whether by assessment or otherwise) to pay on behalf of, or in respect of income earned by or payments or distributions made to or for the account of eachthe Fund (including any payment of tax required by reason of
an earlier failure to withhold). The Custodian will, or will instruct the applicable subcustodian or other withholding agent to, withhold the amount of any tax which is required to be withheld under applicable law upon collection of any dividend, interest or other distribution made with
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respect to any security and any proceeds or income from the sale, loan or other transfer of any security. In the event that the Custodian or any subcustodian is required under applicable law to pay any tax on behalf of eachthe Fund, the Custodian is hereby authorized to withdraw cash from any cash account in the amount required to pay such tax and to use such cash, or to remit such cash to the appropriate subcustodian, for the timely payment of such tax in the manner required by applicable law.
The Trust, on its own behalf and on behalf of eachthe Fund, will indemnify the Custodian and hold the Custodian harmless from and against any and all losses sustained or incurred by or asserted against the Custodian by reason of or as a result of any action or inaction, or arising out of the Custodian’s performance under the Custody Agreement, including reasonable fees and expenses of counsel incurred by the Custodian in a successful defense of claims by anythe Fund;provided however, that the Trust, on its own behalf and on behalf of eachthe Fund, as applicable, will not indemnify the Custodian for those losses arising out of the Custodian’s gross negligence or willful misconduct. This indemnity will be a continuing obligation of the Trust, on its own behalf and on behalf of eachthe Fund, as applicable, their successors and assigns, notwithstanding the termination of the Custody Agreement.
Transfer Agency and Service Agreement
The Bank of New York Mellon serves as eachthe Fund’s transfer agent, or Transfer Agent. Pursuant to the Transfer Agency and Service Agreement between the Trust, the Trust on its own behalf and on behalf of eachthe Fund and the Transfer Agent, the Transfer Agent serves as eachthe Fund’s transfer agent, dividend or distribution disbursing agent, and agent in connection with certain other activities as provided under the Transfer Agency and Service Agreement.
The term of the Transfer Agency and Service Agreement is one year from the effective date and will automatically renew for additional one year terms unless any party provides written notice of
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termination (with respect to a specificthe Fund) at least ninety (90) days prior to the end of any one year term or, unless earlier terminated as provided below:
Either party terminates prior to the expiration of the initial term in the event the other party breaches any material provision of the Transfer Agency and Service Agreement, including, without limitation in the case of the Trust, onbehalfon behalf of eachthe Fund, its obligations to compensate the Transfer Agent, provided that the non-breaching party gives written notice of such breach to the breaching party and the breaching party does not cure such violation within 90 days of receipt of such notice.
EachThe Fund may terminate the Transfer Agency and Service Agreement prior to the expiration of the initial term upon ninety (90) days’ prior written notice in the event that the Managing Owner determines to liquidate the Trust or anythe Fund and terminate its registration with the Securities and Exchange Commission other than in connection with a merger or acquisition of the Trust.
The Transfer Agent will have no responsibility and will not be liable for any loss or damage unless such loss or damage is caused by its own gross negligence or willful misconduct or that of its employees, or its breach of any of its representations. In no event will the Transfer Agent be liable for special, indirect or consequential damages regardless of the form of action and even if the same were foreseeable.
Pursuant to the Transfer Agency and Service Agreement, the Transfer Agent will not be responsible for, and the Trust or each applicablethe Fund will indemnify and hold the Transfer Agent harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability, or Losses, arising out of or attributable to:
All actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to the Transfer Agency and Service Agreement, provided that such actions are taken without gross negligence, or willful misconduct.
The Trust’s or the respective Fund’s gross negligence or willful misconduct.
The breach of any representation or warranty of the Trust thereunder.
The conclusive reliance on or use by the Transfer Agent or its agents or subcontractors of information, records, documents or services which (i) are received by the Transfer Agent or its agents or subcontractors, and (ii) have been prepared, maintained or performed by the Trust, on its own behalf or on behalf of anythe Fund, or any other person or firm on behalf of the Trust or athe Fund including but not limited to any previous transfer agent or registrar.
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The conclusive reliance on, or the carrying out by the Transfer Agent or its agents or subcontractors of any instructions or requests of the Trust, on its own behalf and the Trust on behalf of each Fund on behalf of eachthe Fund.
The offer or sale of Shares in violation of any requirement under the federal securities laws or regulations or the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any federal agency or any state with respect to the offer or sale of such Shares in such state.
Distribution Services Agreement
ALPS Distributors provides certain distribution services to eachthe Fund. Pursuant to the Distribution Services Agreement between the Trust, with respect to eachthe Fund and ALPS Distributors, as amended from time-to-time, ALPS Distributors assists the Managing Owner and the Administrator with certain functions and duties relating to distribution and marketing including reviewing and approving marketing materials.
The date of the Distribution Services Agreement is the effective date and such Agreement will continue until two years from such date and thereafter will continue automatically for successive annual periods, provided that such continuance is specifically approved at least annually (i) by the Managing Owner with respect to eachthe Fund or (ii) otherwise as provided under the Distribution Services Agreement. The Distribution Services Agreement is terminable without penalty on sixty
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days’ written notice by the Managing Owner of eachthe Fund (with respect to any individual Fund) or by ALPS Distributors. The Distribution Services Agreement will automatically terminate in the event of its assignment.
Pursuant to the Distribution Services Agreement, eachthe Fund will indemnify ALPS Distributors as follows:
EachThe Fund indemnifies and holds harmless ALPS Distributors and each of its directors and officers and each person, if any, who controls ALPS Distributors within the meaning of Section 15 of the Securities Act, against any loss, liability, claim, damages or expenses (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damages or expenses and reasonable counsel fees incurred in connection therewith) arising by reason of any person acquiring any Shares, baseduponbased upon the ground that the registration statement, Prospectus, statement of additional information, Shareholder reports or other information filed or made public by each respectivethe Fund (as from time-to-time amended) included an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading under the Securities Act or any other statute or the common law. However, the Funds doFund does not indemnify ALPS Distributors or hold it harmless to the extent that the statement or omission was made in reliance upon, and in conformity with, information furnished to each respectivethe Fund by or on behalf of ALPS Distributors. In no case
is the indemnity of eachthe Fund in favor of ALPS Distributors or any person indemnified to be deemed to protect ALPS Distributors or any person against any liability to eachthe Fund or its security holders to which ALPS Distributors or such person would otherwise be subject by reason of willful misfeasance, bad faith or negligence in the performance of its duties or by reason of its reckless disregard of its obligations and duties under the Distribution Services Agreement, or
is anythe Fund to be liable under its indemnity agreement contained in this paragraph with respect to any claim made against ALPS Distributors or any person indemnified unless ALPS Distributors or the person, as the case may be, will have notified the applicable Fund in writing of the claim promptly after the summons or other first written notification giving information of the nature of the claims will have been served upon ALPS Distributors or any such person (or after ALPS Distributors or such person will have received notice of service on any designated agent).
| | the case may be, will have notified the Fund in writing of the claim promptly after the summons or other first written notification giving information of the nature of the claims will have been served upon ALPS Distributors or any such person (or after ALPS Distributors or such person will have received notice of service on any designated agent). |
However, failure to notify eachthe Fund of any claim will not relieve eachthe Fund from any liability which it may have to any person against whom such action is brought otherwise than on account of its indemnity agreement described herein. EachThe Fund will be entitled to participate at its own expense in the defense, or, if it so elects, to assume the defense of any suit brought to enforce any claims, and if anythe Fund elects to assume the defense, the defense will be conducted by counsel chosen by suchthe Fund. In the event anythe Fund elects to assume the defense of any suit and retain counsel, ALPS Distributors, officers or directors or controlling person(s), defendant(s) in the suit, will bear the fees and expenses of any
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additional counsel retained by them. If nothe Fund elects not to assume the defense of any suit, it will reimburse ALPS Distributors, officers or directors or controlling person(s) or defendant(s) in the suit for the reasonable fees and expenses of any counsel retained by them. EachThe Fund agrees to notify ALPS Distributors promptly of the commencement of any litigation or proceeding against it or any of its officers in connection with the issuance or sale of any of the Shares.
Marketing Agreement
Invesco Aim Distributors provides certain marketing services to eachthe Fund. Pursuant to the Marketing Agreement, as amended from time-to-time, between the Managing Owner on behalf of eachthe Fund, Deutsche Bank AG, London Branch and Invesco Aim Distributors, Invesco Aim Distributors assists the Managing Owner and the Administrator with certain functions and duties such as providing various educational and marketing activities regarding eachthe Fund, primarily in the secondary trading market, which activities include, but are not limited to, communicating eachthe Fund’s name, characteristics, uses, benefits, and risks, consistent with the prospectus.this Prospectus. Invesco Aim Distributors willdoes not open or maintain customer accounts or handle orders for the Funds.Fund. Invesco Aim Distributors
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engages in public seminars, road shows, conferences, media interviews and distributedistributes sales literature and other communications (including electronic media) regarding eachthe Fund.
The effective date of the Marketing Agreement will be the effective date of the registration statement and such Marketing Agreement will continue until terminated. The Marketing Agreement is terminable upon written notice by the Managing Owner of eachthe Fund (with respect to any individual Fund) or by Invesco Aim Distributors. The Marketing Agreement may be terminated upon 30 days’ prior written notice for cause as provided under the Marketing Agreement or upon 90 days’ prior written notice as provided under the Marketing Agreement.
The Marketing Agreement may not be assigned without the prior written consent of the parties to the Marketing Agreement.
Pursuant to the Marketing Agreement, each party to this Agreement will indemnify and hold harmless the other parties to this Agreement against all losses, claims, damages, liabilities or expenses (including reasonable fees and disbursements of counsel) from any claim, demand, action or suit arising out of or inconnectionin connection with the indemnifying party’s failure to comply with applicable laws, rules and regulations in connection with performing its obligations under this Agreement;obligations; negligence or willful misconduct in carrying out its duties and responsibilities under this agreement;responsibilities; or material breach of the terms of thisthe Marketing Agreement. The indemnities granted by the parties in this Agreement will survive the termination of thisthe Marketing Agreement. Additionally, the Managing Owner and Deutsche Bank AG, London Branch will indemnify Invesco Aim Distributors and hold Invesco Aim Distributors harmless from any losses, claims, damages, liabilities or expenses (including reasonable fees and disbursements of counsel) from any claim, demand, action or suit arising out of or in connection with any product sales materials relating to eachthe Fund provided by the Managing Owner to Invesco Aim Distributors.
Invesco Aim Distributors will not perform any marketing in respect of anythe Fund prior to Invesco Aim Distributors’ receipt of written notice from the Managing Owner that suchthe Fund’s registration statement has been declared effective by the SEC.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material U.S. federal (and certain state and local) income tax considerations associated with the purchase, ownership and disposition of Shares as of the date hereof by U.S. Shareholders (as defined below) and non-U.S. Shareholders (as defined below). Exceptwhere noted, this discussion deals only with Shares held as capital assets by Shareholders who acquired Shares by purchase and does not address special situations, such as those of:
dealers in securities, commodities or currencies;
regulated investment companies, or RICs, other than the status of the FundsFund as a qualified PTPspublicly traded partnership, or qualified PTP, within the meaning of the Code;
real estate investment trusts;
tax-exempt organizations;
persons holding Shares as a part of a hedging, integrated or conversion transaction or a straddle;
traders in securities or commodities that elect to use a mark-to-market method of accounting for their securities or commodities holdings; or
persons liable for alternative minimum tax.
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Furthermore, the discussion below is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, the Treasury Regulations promulgated thereunder, or the Treasury Regulations, and administrative and judicial interpretations thereof, all as of the date hereof, and such authorities may be repealed, revoked, modified or subject to differing interpretations, possibly on a retroactive basis, so as to result in U.S. federal income tax consequences different from those described below.
A “U.S. Shareholder” of Shares means a beneficial owner of Shares that is for U.S. federal income tax purposes:
an individual citizen or resident of the United States;
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a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States or any state thereof or the District of Columbia;
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of such trust or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
A “non-U.S. Shareholder” of Shares means a beneficial owner of Shares that is not a U.S. Shareholder.
If a partnership or other entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Shares, the tax treatment of a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partner ofin a partnership holding Shares, we urge you to consult your own tax adviser.
No statutory, administrative or judicial authority directly addresses the treatment of Shares or instruments similar to Shares for U.S. federal income tax purposes. As a result, we cannot assure you that the United States Internal Revenue Service, or the IRS, or the courts will agree with the tax consequences described herein. A different treatment from that described below could adversely affect the amount, timing and character of items of income, gain, loss ordeduction in respect of an investment in the Shares.If you are considering the purchase of Shares, we urge you to consult your own tax adviser concerning the particular U.S. federal income taxconsequences to you of the purchase, ownership and disposition of Shares, as well as any consequences to you arising under the laws of any other taxing jurisdiction.
Status of the Funds and the Master FundsFund
Under current law and assuming full compliance with the terms of the Trust Declaration and applicable law (and other relevant documents), in the opinion of Sidley AustinLLP each of, the Funds and each of the Master FundsFund will be
classified as a partnership for U.S. federal income tax purposes. Accordingly, each ofsubject to the Funds and each ofdiscussion below regarding publicly traded partnerships, the Master FundsFund will not be a taxable entitiesentity for U.S. federal income tax purposes and the Fund will not incur U.S. federal income tax liability.
Special Rules for Publicly Traded Partnerships
A partnership is not a taxable entity and incurs no U.S. federal income tax liability. Section 7704 of the Code provides that publicly traded partnerships will, as a general rule, be taxed as corporations. However, an exception exists with respect to publicly traded partnerships of which 90% or more of the gross income during each taxable year consists of “qualifying income” within the meaning of Section 7704(d) of the Code, (“or the qualifying income exception”).exception. Qualifying income includes dividends, interest, capital gains from the sale or other disposition of stocks and debt instruments and, in the case of a partnership (such as each Masterthe Fund) a principal activity of which is the buying and selling of commodities or futures contracts with respect to commodities, income and gains derived from commodities or futures contracts with respect to commodities. Each Fund and each MasterThe Fund anticipates that at least 90% of its gross income for each taxable year will constitute qualifying income within the meaning of Section 7704(d) of the Code.
There can be no assurance that the IRS will not assert that a Fund or a Masterthe Fund should be treated as a publicly traded partnership taxable as a corporation. No ruling has been or will be sought from the IRS, and the IRS has made no determination as to the status of any Fund or any Masterthe Fund for U.S. federal income tax purposes or whether any Fund’s or any Masterthe Fund’s operations generate
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“qualifying “qualifying income” under Section 7704(d) of the Code. Whether a Fund or a Masterthe Fund will continue to meet the qualifying income exception is a matter that will be determined by the Fund’s or the Master Fund’s operations and the facts existing at the time of future determinations. However, each Fund’s and each Masterthe Fund’s Managing Owner will use its best efforts to cause the operation of the Fund and its corresponding Master Fundto operate in such manner as is necessary for the Fund and its corresponding Master Fund to continue to meet the qualifying income exception.
If a Fund or a Masterthe Fund were taxable as a corporation in any taxable year, either as a result of a failure to meet the qualifying income exception described above or
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otherwise, itsthe Fund’s items of income, gain, loss and deduction would be reflected only on its tax return rather than being passed through to the Shareholders, and itsthe Fund’s net income would be taxed to it at the income tax rates applicable to domestic corporations. In addition, if athe Fund were taxable as a corporation, any distribution made by suchthe Fund to a Shareholder would be treated as taxable dividend income, to the extent of suchthe Fund’s current or accumulated earnings and profits, or, in the absence of current and accumulated earnings and profits, as a nontaxable return of capital to the extent of the Shareholder’s tax basis in its Shares, or as taxable capital gain, after the Shareholder’s tax basis in its Shares is reduced to zero. Furthermore, if a Master Fund were taxable as a corporation, any distribution made by such Master Fund to the corresponding Fund would be treated as taxable dividend income, to the extent of such Master Fund’s current or accumulated earnings and profits, or, in the absence of current and accumulated earnings and profits, as a nontaxable return of capital to the extentTaxation of the Fund’s tax basis in its Master Fund Units, or as taxable capital gain, after the Fund’s tax basis in its Master Fund Units is reduced to zero. Taxation of a Fund or its corresponding Master Fund as a corporation could result in a material reduction in a Shareholder’s cash flow and after-tax return and thus could result in a substantial reduction of the value of the Shares of such Fund.Shares.
The discussion below is based on Sidley Austin LLP’sLLP’s opinion that each of the Funds and each of the Master FundsFund will be classified as a partnership for U.S. federal income tax purposes that is not subject to corporate income tax for U.S. federal income tax purposes.
U.S. Shareholders
Treatment of Fund Income
A partnership does not incur U.S. federal income tax liability. Instead, each partner of a partnership is required to take into account its share of items of income, gain, loss, deduction and other items of the partnership. Accordingly, each Shareholder in a Fund will be required to include in income its allocable share of the Fund’s income, gain, loss, deduction and other items (which includes the Fund’s share of the corresponding Master Fund’s income, gain, loss, deduction and other items) for the Fund’s taxable year ending with or within its taxable year. In computing a partner’s U.S. federal income tax liability, suchthe items must be included, regardless of whether cash distributions are made by a Fund.the partnership. Thus, Shareholders in the Fund which corresponds to a particular Master Fund may be required to take into account taxable income without a corresponding current receipt of cash if the Master Fund generates taxable income but does not make cash distributions in an amount equal to suchthe taxable income, or if the Shareholder is not able to deduct, in whole or in part, suchthe Shareholder’s allocable share of the Fund’s or the Master Fund’s expenses or capital losses. Each Fund’s and each MasterThe Fund’s taxable year will end on December 31 unless otherwise required by law. Each Fund and each MasterThe Fund will use the accrual method of accounting.
Shareholders will take into account their sharerespective shares of ordinary income realized by such Fund’s corresponding Masterthe Fund from accruals of interest on U.S. Treasury Bills (“T-Bills”)bills, or T-Bills, held in the Master Fund’s portfolio. Each MasterThe Fund may hold T-Bills or other debt instruments with “acquisition discount” or “original issue discount”, in which case Shareholders in the Fund which corresponds to a particular Master Fund wouldwill be required to include accrued amounts in taxable income on a current basis even though receipt of those amounts may occur in a subsequent year. Each MasterThe Fund may also acquire debt instruments with “market discount.” Upon disposition of such obligations, gain wouldwill generally be required to be treated as interest income to the extent of the market discount and Shareholders in the Fund that corresponds to a particular Master Fund wouldwill be required to include as ordinary income their share of suchthe market discount that accrued during the period the obligations were held by the Master Fund.
With the exception of futures on Aluminum, Zinc and Copper – Grade A, traded by DB Base Metals Master Fund, itIt is expected that a substantial
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portion of the futures on the Index CommoditiesCommodity held by the Master FundsFund will constitute Section 1256 Contracts (see “Special Notice(as defined below). The Code generally applies a “mark-to-market” system of taxing unrealized gains and losses on and otherwise provides for Investors in PowerShares DB Base Metals Fund” below).special rules of taxation with respect to futures and other contracts that are Section 1256 Contracts. A Section 1256 Contract includes certain regulated futures contracts. Section 1256 Contracts held by the Master FundsFund at the end of a taxable year of the Master FundsFund will be treated for U.S. federal income tax purposes as if they were sold by the Master FundsFund at their fair market value on the last business day of the taxable year. The net gain or loss, if any, resulting from these deemed sales (known as “marking-to-market”), together with any gain or loss resulting from any actual sales of Section 1256 Contracts (or other termination of a Masterthe Fund’s obligations under such contracts), must be taken into account by the Master Fund in computing its taxable income for the year. If a Section 1256 Contract held by a Masterthe Fund at the end of a taxable year is sold in the following year, the amount of any gain or loss realized on the sale will be adjusted to reflect the gain or loss previously taken into account under the mark-to-market rules.
Capital gains and losses from Section 1256 Contracts generally are characterized as short-term capital gains or losses to the extent of 40% of the gains or losses and as long-term capital gains or losses to the extent of 60% of the gains or losses. Thus, Shareholders of a Fund will generally take into account their pro rata share of the long-term capital gains and
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losses and short-term capital gains and losses from Section 1256 Contracts held by the corresponding Master Fund and taken into account by the Fund in computing its taxable income. If a non-corporate taxpayer incurs a net capital loss for a year, the portion of the loss, if any, which consists of a net loss on Section 1256 Contracts may, at the election of the taxpayer, be carried back three years. A loss carried back to a year by a non-corporate taxpayer may be deducted only to the extent (1) the loss does not exceed the net gain on Section 1256 Contracts for the year and (2) the allowance of the carryback does not increase or produce a net operating loss for the year.
Any futures on the Index CommoditiesCommodity held by a Masterthe Fund that are not classified as Section 1256 Contracts will not be subject to the year end “mark-to-market” rules of Section 1256, as described above. Accordingly, any long-term or short-term capital gains or losses with respect to such futures held by a Masterthe Fund that are not classified as Section 1256 Contracts will only be recognized by such Master Fund and the corresponding Fund when such futures positions are assigned or closed (by offset or otherwise). The applicable holding period for qualification for long-term capital gain or loss treatment for suchthe commodity futures held by a Masterthe Fund that are not Section 1256 Contracts is more than six months (rather than the more than one year holding period applicable to other capital assets).
Special Notice for Investors in PowerShares DB Base Metals Fund
Prospective investors in PowerShares DB Base Metals Fund should be aware that this Fund and its corresponding Master Fund do not invest in Section 1256 Contracts when tracking the DBLCI-OY Industrial Metals ER™. As a result, all gains or losses will be characterized as short-term or long-term capital gains or losses rather than being characterized as a mixture of short-term and long-term capital gains or losses as applicable to the other Funds that invest in Section 1256 Contracts. The applicable holding period for qualification for long-term capital gain or loss treatment for such futures held by the PowerShares DB Base Metals Fund and its Master Fund that are not Section 1256 Contracts is more than six months (rather than the more than one year holding period applicable to other capital assets). In addition, since such futures are not subject to the year end “mark-to-market” rules of Section 1256 described above, long-term or short-term capital gains and losses will only be recognized by the Fund and its Master Fund when such futures positions are assigned or closed (by offset or otherwise).
Allocation of the Funds’ and the Master Funds’Fund’s Profits and Losses
For U.S. federal income tax purposes, a Shareholder’s distributive share of a Fund’s income, gain, loss, deduction and other items and the Fund’s distributive share of the corresponding Master Fund’s income, gain, loss, deduction and other items will be determined by the Trust’s Declaration of Trust, and the Master Trust’s Trust Declaration, respectively, unless an allocation under either agreement does not have “substantial economic effect,” in which case the allocations will be determined in accordance with the “partners’ interests in the partnership.” Subject to the discussion below under “—Monthly Allocation and Revaluation Conventions”Conventions and Transferor/Transferee Allocations” and “—Section 754 Election,” the allocations pursuant to the Trust’s Declaration of Trust and the Master Trust’s Trust Declaration should be considered to have substantial economic effect or deemed to be made in accordance with the partners’ interests in the partnership.
Fund.
If the allocations provided by the Trust’s Declaration of Trust or the Master Trust’s Trust
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Declaration were successfully challenged by the IRS, the amount of income or loss allocated to Shareholders for U.S. federal income tax purposes
under the agreementDeclaration of Trust could be increased or reduced or the character of the income or loss could be modified.
modified or both.
As described in more detail below, the U.SU.S. federal income tax rules that apply to partnerships are complex and their application is not always clear. Additionally, the rules generally were not written for, and in some respects are difficult to apply to, publicly traded partnerships. Each Fund and each MasterThe Fund will apply certain assumptions and conventions intended to comply with the intent of the rules and to report income, gain, loss, deduction and credit to Shareholders in a manner that reflects the economic gains and losses, but these assumptions and conventions may not comply with all aspects of the applicable Treasury Regulations. It is possible therefore that the IRS will successfully assert that assumptions made and/or conventions used do not satisfy the technical requirements of the Code or the Treasury Regulations and will require that tax items be adjusted or reallocated in a manner that could adversely impact you.
Shareholders.
Monthly Allocation and Revaluation Conventions and Transferor/Transferee Allocations
In general, eachthe Fund’s taxable income and losses (including each Fund’s share of the corresponding Master Fund’s taxable income and losses) will be determined monthly and will be apportioned among the Sharesholders of such FundShareholders in proportion to the number of Shares owned by each of them as of the close of the last trading day of the preceding month. By investing in Shares, a U.S. Shareholder agrees that, in the absence of an administrative determination or judicial ruling to the contrary, it will report income and loss under the monthly allocation and revaluation conventions described below.
Under the monthly allocation convention, whomever is treated for U.S. federal income tax purposes as holding Shares as of the close of the last trading day of the preceding month will be treated as continuing to hold the Shares until immediately before the close of the last trading day of the following month. With respect to any Shares that were not treated as outstanding as of the close of the last trading day of the preceding month, the first person that is treated as holding such Shares (other than an underwriter or other person holding in a similar capacity) for U.S. federal income tax purposes will be treated as holding such Shares for
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this purpose as of the close of the last trading day of the preceding month. As a result, a holderShareholder who has disposed of sharesShares prior to the close of the last trading day of a month may be allocated items of income, gain, loss and deduction realized after the date of transfer.
TheSection 706 of the Code generally requires that items of partnership income and deductions be allocatedbetweenallocated between transferors and transferees of partnership interests on a daily basis. It is possible that transfers of Shares could be considered to occur for U.S. federal income tax purposes when the transfer is completed without regard to athe Fund’s monthly convention for allocating income and deductions. If this were to occur, the Fund’s allocation method might be deemedconsidered a monthly convention that does not literally comply with that requirement. If the IRS treats transfers of Shares as occurring throughout each month and a monthly convention is not allowed by the Treasury Regulations (or only applies to violatetransfers of less than all of a Shareholder’s Shares) or if the IRS otherwise does not accept the Fund’s convention, the IRS may contend that requirement.
taxable income or losses of the Fund must be reallocated among the Shareholders. If such a contention was sustained, the Shareholders’ respective tax liabilities would be adjusted to the possible detriment of certain Shareholders. The Managing Owner is authorized to revise the Fund’s methods of allocation between transferors and transferees (as well as among Shareholders whose interests otherwise vary during a taxable period).
In addition, for any month in which a creation or redemption of Shares takes place, athe Fund generally will credit or debit, respectively, the “book” capital accounts of the holders of existing SharesShareholders with any unrealized gain or loss in the Fund’s assets. This will result in the allocation of the Fund’s items of a Fund’s income, gain, loss, deduction and credit (including the Fund’s share of the corresponding Master Fund’s income, gain, loss, deduction and credit) to existing Shareholders to account for the difference between the tax basis and fair market value of property owned by the Fund or the Master Fund at the time new Shares are issued or old Shares are redeemed, (“or reverse sectionSection 704(c) allocations”).allocations. The intended effect of these allocations is to allocate any built-in gain or loss in a Fund’s or a Masterthe Fund’s assets at the time of a creation or redemption of Shares to the investors that economically have earned such gain or loss.
As with the other allocations described above, eachthe Fund generally will use a monthly convention for purposes of the reverse sectionSection 704(c) allocations. More specifically, eachthe Fund generally will credit or debit, respectively, the “book” capital accounts of the holders of existing SharesShareholders with any unrealized gain or loss in the Fund’s assets based on a calculation utilizing the average price of the corresponding Fund’s Shares during the month in which the creation or redemption transaction takes place, rather than the fair market value of its assets at the time of such creation or redemption, (the “revaluation convention”).or the revaluation convention. As a result, it is possible that, for U.S. federal income tax purposes, (i) a purchaser of newly issued Shares will be allocated some or all of the unrealized gain in the Fund’s assets at the time it acquires the Shares or (ii) an existing Shareholder will not be allocated its entire share in the unrealized loss in the Fund’s assets at the time of such acquisition. Furthermore, the applicable Treasury Regulations generally require that the “book” capital accounts will be adjusted based on the fair market value of partnership property on the date of adjustment and do not explicitly allow the adoption of a monthly revaluation convention.
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The Code and applicable Treasury Regulations generally require that items of partnership income and deductions be allocated between transferors and transferees of partnership interests on a daily basis, and that adjustments to “book” capital accounts be made based on the fair market value of partnership property on the date of adjustment. The Code and Treasury Regulations do not contemplate monthly allocation or revaluation conventions. If the IRS does not accept a Fund’s or a Masterthe Fund’s monthly allocation or revaluation convention, the IRS may contend that taxable income or losses of the Fund or the Master Fund must be reallocated among the SharesholdersShareholders of the Fund or holders of Master Fund Units, as applicable.Fund. If such a contention were sustained, the holders’Shareholders’ respective tax liabilities would be adjusted to the possible detriment of certain holders.Shareholders. The Managing Owner is authorized to revise the Fund’s and the Master Fund’s allocation and revaluation methods in order to comply with applicable law or to allocate items of partnership income and deductions in a manner that reflects more accurately the Shareholders’ interests in the Fund and the corresponding Master Fund.
Section 754 Election
EachThe Fund and each Master Fund intends to makehas made the election permitted by Section 754 of the Code. Such an election, once
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made, is irrevocable without the consent of the IRS. The making of such electionsthe Section 754 election by a Fund and its corresponding Masterthe Fund will generally have the effect of requiring a purchaser of Shares in its corresponding Fund to adjust its proportionate share of the basis in the Master Fund’s assets, or the inside basis, pursuant to Section 743(b) of the Code to fair market value (as reflected in the purchase price for the purchaser’s Shares), as if it had acquired a direct interest in the Master Fund’s assets. The Section 743(b) adjustment is attributed solely to a purchaser of Shares and is not added to the bases of the Master Fund’s assets associated with all of the other Shareholders. Depending on the relationship between a holder’sShareholder’s purchase price for Shares and its unadjusted share of the Master Fund’s inside basis at the time of the purchase, the Section 754 election may be either advantageous or disadvantageous to the holderShareholder as compared to the amount of gain or loss a holderShareholder would be allocated absent the Section 754 election.
The calculations under Section 754 of the Code are complex, and there is little legal authority concerning the mechanics of the calculations, particularly in the context of publicly tradedpartnerships.traded partnerships. To help reduce the complexity of those calculations and the resulting administrative costs, each Fund and each Masterthe Fund will apply certain conventions in determining and allocating the Section 743 basis adjustments. It is possible that the IRS will successfully assert that some or all of such conventions utilized by a Fund and a Masterthe Fund do not satisfy the technical requirements of the Code or the Treasury Regulations and, thus, will require different basis adjustments to be made.
If the IRS were to sustain such a position, a Shareholder may have adverse tax consequences.
In order to make the basis adjustments permitted by Section 754, each Fund and its corresponding Masterthe Fund will be required to obtain information regarding each holder’sShareholder’s secondary market transactions in Shares as well as creations and redemptions of Shares. Each Fund and each MasterThe Fund will seek suchthe requested information from the record Shareholders, and, by purchasing Shares, each beneficial owner of Shares will be deemed to have consented to the provision of suchthe information by the record owner of suchthe beneficial owner’s Shares. Notwithstanding the foregoing, however, there can be no guarantee that any Fund or any Masterthe Fund will be able to obtain such information from record owners or other sources, or that the basis adjustments that any Fund or any Masterthe Fund makes based on the information it is able to obtain will be effective in
eliminating disparity between a holder’sShareholder’s outside basis in its Shares and its interest in the inside basis in the corresponding Master Fund’s assets.
Constructive Termination
A Fund and the corresponding MasterThe Fund will experience a constructive termination for tax purposes if there is a sale or exchange of 50 percent or more of the total Shares in suchthe Fund within a 12-month period. A constructive termination results in the closing of a Fund’s and the corresponding Master Fund’s taxable year for all SharesholdersShareholders in the Fund. In the case of a Shareholder reporting on a taxable year other than the taxable year used by a Masterthe Fund (which is a fiscal year ending December 31), the early closing of the Master Fund’s taxable year may result in more than 12 months of its taxable income or loss being includable in such holder’sthe Shareholder’s taxable income for the year of termination. The Fund and the corresponding Master Fund would be required to make new tax elections after a termination, including a new election under Section 754. A termination could also result in penalties if a Fund or a Masterthe Fund were unable to determine that the termination had occurred.
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Treatment of Distributions
Distributions of cash by a partnership are generally not taxable to the distributee to the extent the amount of cash does not exceed the distributee’s tax basis in its partnership interest. Thus, any cash distributions made by athe Fund will be taxable to a Shareholder only to the extent suchthe distributions exceed the Shareholder’s tax basis in the partnership interestsShares it is treated as owning (see “—“- Tax Basis in Fund Shares” below). Any cash distributions in excess of a Shareholder’s tax basis generally will be considered to be gain from the sale or exchange of the Shares (see “—“- Disposition of Shares” below).
Creation and Redemption of Share Baskets
Shareholders, other than Authorized Participants (or holders for which an Authorized Participant is acting), generally will not recognize gain or loss as a result of an Authorized Participant’s creation or redemption of a Basket of Shares.Basket. If a Masterthe Fund disposes of assets in connection with the redemption of a Basket, of Shares, however, the disposition may give rise to gain or loss that will be allocated in part to you.Shareholders. An Authorized Participant’s creation or redemption of a Basket of Shares also may affect youra Shareholder’s share of a Master the
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Fund’s tax basis in its assets, which could affect the amount of gain or loss allocated to youthe Shareholder on the a sale or disposition of portfolio assets by the Master Fund.
Disposition of Shares
If a U.S. Shareholder transfers Shares of a Fund and such transfer is a sale or other taxable disposition, the U.S. Shareholder will generally be required to recognize gain or loss measured by the difference between the amount realized on the sale and the U.S. Shareholder’s adjusted tax basis in the Shares sold. The amount realized will include an amount equal to the U.S. Shareholder’s share of the Master Fund’s liabilities, as well as any proceeds from the sale. The gain or loss recognized will generally be taxable as capital gain or loss. Capital gain of non-corporate U.S. Shareholders is eligible to be taxed at reduced rates where the Shares sold are considered held for more than one year. Capital gain of corporate U.S. Shareholders is taxed at the same rate as ordinary income. Any capital loss recognized by a U.S. Shareholder on a sale of Shares will generally be deductible only against capital gains, except that a non-corporate U.S. Shareholder may also offset up to $3,000 per year of ordinary income with capital losses.
Tax Basis in Fund Shares
A U.S. Shareholder’s initial tax basis in theits Shares will equal the sum of (a) the amount of cash paid by suchthe U.S. Shareholder for its Shares and (b) suchthe U.S. Shareholder’s share of the Master Fund’s liabilities. A U.S. Shareholder’s tax basis in theits Shares will be increased by (a) the U.S. Shareholder’s share of the Master Fund’s taxable income, including capital gain, (b) the U.S. Shareholder’s share of the Master Fund’s income, if any, that is exempt from tax and (c) any increase in the U.S. Shareholder’s share of the Master Fund’s liabilities. A U.S. Shareholder’s tax basis in Shares will be decreased (but not below zero) by (a) the amount of any cash distributed (or deemed distributed) to the U.S. Shareholder, (b) the U.S. Shareholder’s share of the Master Fund’s losses and deductions, (c) the U.S. Shareholder’s share of the Master Fund’s expenditures that are neither deductible nor properly chargeable to its capital account and (d) any decrease in the U.S. Shareholder’s share of the Master Fund’s liabilities.
Limitations on Interest Deductions
The deductibility of a non-corporate U.S. Shareholder’s “investment interest expense” is generally limited to the amount of thatthe Shareholder’s “net investment income.” Investment interest expense wouldwill generally include interest expense incurred by a Masterthe Fund, if any, and investment interest expense incurred by the U.S. Shareholder on any margin account borrowing or other loan incurred to purchase or carry Shares. Net investment income includes gross income from property held for investment and amounts treated as portfolio income, such as dividends and interest, under the passive loss rules, less deductible expenses, other than interest, directly connected with the production of investment income. For this purpose, any long-term capital gain or qualifying dividend income that is taxable at long-term capital gains rates is excluded from net investment income unless the U.S. Shareholder elects to pay tax on such capital gain or dividend income at ordinary income rates.
Organization, Syndication and Other Expenses
In general, expenses incurred that are considered “miscellaneous itemized deductions” may be deducted by a U.S. Shareholder that is an individual, estate or trust only to the extent that they exceed 2% of the adjusted gross income of suchthe U.S. Shareholder. The Code imposes additional limitations
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(which limitations are scheduled to be phased out between 2006 and 2010) on the amount of certain itemized deductions allowable to individuals, by reducing the otherwise allowable portion of such deductions by an amount equal to the lesser of:
3% of the individual’s adjusted gross income in excess of certain threshold amounts; or
80% of the amount of certain itemized deductions otherwise allowable for the taxable year.
In addition, these expenses are also not deductible in determining the alternative minimum tax liability of a U.S. Shareholder. EachThe Fund will report suchits expenses on a pro rata basis to the Shareholders, and each U.S. Shareholder will determine separately to what extent they are deductible on suchthe U.S. Shareholder’s tax return. A U.S. Shareholder’s inability to deduct all or a portion of suchthe expenses could result in an amount of taxable income to suchthe U.S. Shareholder with respect to the
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Fund that exceeds the amount of cash actually distributed to such U.S. Shareholder for the year. It is anticipated that management fees each Masterthe Fund will pay will constitute miscellaneous itemized deductions.
Under Section 709(b) of the Code, amounts paid or incurred to organize a partnership may, at the election of the partnership, be treated as deferred expenses, which are allowed as a deduction ratably over a period of 180 months. Each of the Funds and each of the Master Funds intends to make such anThe Fund has made a Section 709(b) election. A non-corporate U.S. Shareholder’s allocable share of suchthe organizational expenses wouldwill constitute miscellaneous itemized deductions. Expenditures in connection with the issuance and marketing of Shares (so called “syndication fees”) are not eligible for the 180-month amortization provision and are not deductible.
Passive Activity Income and Loss
Individuals are subject to certain “passive activity loss” rules under Section 469 of the Code. Under these rules, losses from a passive activity generally may not be used to offset income derived from any source other than passive activities. Losses that cannot be currently used under this rule may generally be carried forward. Upon an individual’s disposition of an interest in the passive activity, the individual’s unused passive losses may generally be used to offset other (i.e., non passive)non-passive) income. Under current Treasury Regulations, income or loss from aMasterthe Fund’s investments generally will not constitute income or losses from a passive activity. Therefore, income or loss realized by Shareholders of a Fund will not be available to offset a U.S. Shareholder’s passive losses or passive income from other sources.
Transferor/Transferee Allocations
In general, a Fund’s and the corresponding Master Fund’s taxable income and losses will be determined monthly and will be apportioned among the Fund’s Shareholders in proportion to the number of Shares owned by each of them as of the close of the last trading day of the preceding month. With respect to any Shares that were not treated as outstanding as of the close of the last trading day of the preceding month, the first person that is treated as holding such Shares (other than an underwriter or other person holding in a similar capacity) for U.S. federal income tax purposes will be treated as holding such Shares for this purpose as of the close of the last trading day of the preceding month. As a result, a Shareholder transferring its Shares may be allocated income, gain, loss and deduction realized after the date of transfer.
Section 706 of the Code generally requires that items of partnership income and deductions be allocated between transferors and transferees of partnership interests on a daily basis. It is possible that transfers of Shares could be considered to occur for U.S. federal income tax purposes when the transfer is completed without regard to a Fund’s convention for allocating income and deductions. In that event, the Fund’s allocation method might be considered a monthly convention that does not literally comply with that requirement.
If the IRS treats transfers of Shares as occurring throughout each month and a monthly convention is not allowed by the Treasury Regulations (or only applies to transfers of less than all of a Shareholder’s Shares) or if the IRS otherwise does not accept a Fund’s convention, the IRS may contend that taxable income or losses of the Fund must be reallocated among the Shareholders. If such a contention were sustained, the Shareholders’ respective tax liabilities would be adjusted to the possible detriment of certain Shareholders. Each Fund’s and each Master Fund’s Managing Owner is authorized to revise the Fund’s and Master Fund’s methods of allocation between transferors and transferees (as well as among Shareholders whose interests otherwise vary during a taxable period).
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Reporting by eachthe Fund to its Shareholders
EachThe Fund will file a partnership tax return. Accordingly, tax information will be provided to investorsShareholders on a Schedule K-1 for each calendar year as soon as practicable after the end of such taxable year but in no event later than March 15. Each Schedule K-1 provided to a Shareholder will set forth the Shareholder’s share of the corresponding Master Fund’s tax items (i.e., interest income from Treasury Bills,T-Bills, short-term and long-term capital gain or loss with respect to the futures contracts, and investment expenses for suchthe year) in a manner sufficient for a U.S. Shareholder to complete its tax return with respect to its investment in the Shares.
Each holder,Shareholder, by its acquisition of Shares, of a Fund, will be deemed to agree to allow brokers and nominees to provide to the Fund and the corresponding Master Fund its name and address and suchthe other information and forms as may be reasonably requested by the Fund and such Master Fund for purposes of complying with their tax reporting and withholding obligations (and to waive any confidentiality rights with respect to suchthe information and forms for suchthis purpose) and to provide such information or forms upon request.
We note that, givenGiven the lack of authority addressing structures similar to that of the Funds and the Master Funds,Fund, it is not certain that the IRS will agree with the manner in which tax reporting by the Funds and the Master FundsFund will be undertaken. Therefore, Shareholders should be aware that future IRS interpretations or revisions to Treasury Regulations could alter the manner in which tax reporting by the FundsFund and any nominee will be undertaken.
Treatment of Securities Lending Transactions Involving Shares
If your Shares are borrowed by your broker and sold to a third party, for example as part of a loan to a “short seller” to cover a short sale of Shares, you may be considered as having disposed of those Shares. If so, you would no longer be a beneficial owner of a pro rata portion of the Shares during the period of the loan and may recognize gain or loss from the disposition. In addition, during the period of the loan, (1) any of the relevant Master Fund’s income, gain, loss, deduction or other items with respect to those Shares would not be reported by you, and (2) any cash distributions received by you with respect to such Shares could be fully taxable, likely as ordinaryincome. Accordingly, Shareholders who desire to avoid the risk of income recognition from a loan of their Shares are urged to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their Shares.
Audits and Adjustments to Tax Liability
Any challenge by the IRS to the tax treatment by a partnership of any item must be conducted at the partnership, rather than at the partner, level. A partnership ordinarily designates a “tax matters partner” (as defined under Section 6231 of the Code) as the person to receive notices and to act on its behalf in the conduct of such a challenge or audit by the IRS.
Pursuant to the governing documents, the Managing Owner has been appointed the “tax matters partner” of each Fund and of each Masterthe Fund for all purposes of the Code. The tax matters partner, which is required by the Master Trust’s Trust Declaration to notify all U.S. Shareholders of any U.S. federal income tax audit of any Masterthe Fund, has the authority under the Trust Declaration to conduct any IRS audits of each Masterthe Fund’s tax returns or other tax related administrative or judicial proceedings and to settle or further contest any issues in such proceedings. The decision in any proceeding initiated by the tax matters partner will be binding on all U.S. Shareholders. As the tax matters partner, the Managing Owner has the right on behalf of all Shareholders to extend the statute of limitations relating to the Shareholders’ U.S. federal income tax liabilities with respect to Master Fund items.
A U.S. federal income tax audit of a Fund’s or a Masterthe Fund’s partnership tax return may result in an audit of the returns of the U.S. Shareholders, which, in turn,
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could result in adjustments of items of a Shareholder that are unrelated to the Master Fund as well as to the Master Fund’s related items. In particular, there can be no assurance that the IRS, upon an audit of a partnership tax return of a Fund or a Masterthe Fund or of an income tax return of a U.S. Shareholder, might not take a position that differs from the treatment thereof by the Fund or the Master Fund. A U.S. Shareholder would be liable for interest on any deficiencies that resulted from any adjustments. Prospective U.S. Shareholders should also recognize that they might be forced to incur substantial legal and accounting costs in resisting any challenge by the IRS to items in their individual returns, even if the challenge by the IRS should prove unsuccessful.
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Foreign Tax Credits
Subject to generally applicable limitations, U.S. Shareholders will be able to claim foreign tax credits with respect to certain foreign income taxes paid or incurred by a Master Fund, withheld on payments made to us or paid by us on behalf of Fund Shareholders. If a Shareholder elects to claim foreign tax credit, it must include in its gross income, for U.S. federal income tax purposes, both its share of the Master Fund’s items of income and gain and also its share of the amount which is deemed to be the Shareholder’s portion of foreign income taxes paid with respect to, or withheld from, interest or other income derived by the Master Fund. U.S. Shareholders may then subtract from their U.S. federal income tax the amount of such taxes withheld, or else treat such foreign taxes as deductions from gross income; however, as in the case of investors receiving income directly from foreign sources, the above described tax credit or deduction is subject to certain limitations. Even if the Shareholder is unable to claim a credit, the Shareholder must include all amounts described above in income. U.S. Shareholders are urged to consult their tax advisers regarding this election and its consequences to them.
Reportable Transactions
Treasury Regulations require U.S. taxpayers to report certain types of transactions to the IRS, or Reportable Transactions. Under these Treasury Regulations, a U.S. Shareholder (i) who disposes of Shares and recognizes a loss with respect to such disposition in excess of certain thresholds, or (ii) whose distributive share of a Fund loss under Section 165 of the Code exceeds such thresholds, would be required to report the loss on IRS Form 8886 (Reportable Transaction Statement). The applicable loss threshold is $10 million is any single taxable year or $20 million in any combination of taxable years for corporations, and $2 million in any single taxable year or $4 million in any combination of taxable years for most partnerships, individuals, S corporations or trusts. However, in the case of an individual or a trust, if the loss is with respect to certain foreign currency transactions, the reporting threshold is reduced to $50,000 in any taxable year. You should consult with your own tax advisor regarding any tax filing and reporting obligation that may apply in connection with acquiring, owning and disposing of Shares.
Non-U.S. Shareholders
Each of the Funds and each of the Master FundsThe Fund will conduct its activities in such a manner that a non-U.S. Shareholder who is not otherwise carrying on a trade or business in the United States will not be considered to be engaged in a trade or business in the United States as a result of an investment in the Shares of a Fund.Shares. A non-U.S. Shareholder’s share of the interest income realized by a Masterthe Fund on its holdings of U.S. Treasury BillsT-Bills will be exempt from U.S. withholding tax provided the non-U.S. Shareholder certifies on IRS Form W-8BEN (or other applicable form) that such holderthe Shareholder is not a U.S. person, provides name and address information and otherwise satisfies applicable documentation requirements.
Non-U.S. Shareholders will not be subject to U.S. federal income tax on gaingains realized on the sale of Shares of a Fund or on such holder’sthe non-U.S. Shareholder’s share of the Fund’s and the corresponding Master Fund’s gains. However, in the case of an individual non-U.S. Shareholder, suchthe non-U.S. Shareholder will be subject to U.S. federal income tax on gains on the sale of Shares or suchthe non-U.S. Shareholder’s distributive share of gains if suchthe non-U.S. Shareholder is present in the United States for 183 days or more during a taxable year and certain other conditions are met.
Non-U.S. Shareholders that are individuals will be subject to U.S. federal estate tax on the value of U.S. situs property owned at the time of their death (unless a statutory exemption or tax treaty exemption applies). It is unclear whether partnership interests (such as the Shares of a Fund or interests in the corresponding Master Fund)Shares) will be considered U.SU.S. situs property. Accordingly, non-U.S. Shareholders may be
subject to U.S. federal estate tax on all or part of the value of the Shares owned at the time of their death.
Non-U.S. Shareholders are advised to consult their own tax advisers with respect to the particular tax consequences to them of an investment in the Shares.
Regulated Investment Companies
RICs may invest up to 25% of their assets in “qualified PTPs” and net income derived from such investments is qualifying income under the income source test applicable to entities seeking to qualify for the special tax treatment available to RICs under the Code. In addition, interests in a qualified PTP are
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treated as issued by such PTP and a RIC is not required to look through to the underlying partnership assets when testing compliance with the asset diversification tests applicable to RICs under the Code. EachThe Fund anticipates that it will qualify as a qualified PTP for any taxable year in which its corresponding Masterthe Fund realizes sufficient gross income from its commodities futures transactions. However, qualification of athe Fund as a qualified PTP depends on performance of the corresponding Master Fund for the particular tax year and there is no assurance that it will qualify in a given year or that future results of any Indexthe Fund will conform to prior experience. Additionally, there is, to date, no regulatory guidance on the application of these rules, and it is possible that future guidance may adversely affect qualification of a Fund or Masterthe Fund as a qualified PTP. In a 2005 revenue ruling, the IRS clarified that derivative contracts owned by a RIC that provide for a total-return exposure on a commodity index will not produce qualifying income for purposes of the RIC qualification rules. The IRS interpretation set forth in such ruling, however, does not adversely affect the Funds’Fund’s ability to be treated as a qualified PTP for purposes of applying the RIC qualification rules. RIC investors are urged to monitor their investment in the Fund and consult with a tax advisor concerning the impact of such an investment on their compliance with the income source and asset diversification requirements applicable to RICs. EachThe Fund will make available on the Managing Owner’s website periodic tax information designed to enable RIC investors in its Shares to make a determination as to the Fund’s status under the qualified PTP rules.
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Tax-Exempt Organizations
An organization that is otherwise exempt from U.S. federal income tax is nonetheless subject to taxation with respect to its “unrelated business taxable income,” or UBTI. Except as noted below with respect to certain categories of exempt income, UBTI generally includes income or gain derived (either directly or through a partnership) from a trade or business, the conduct of which is substantially unrelated to the exercise or performance of the organization’s exempt purpose or function.
UBTI generally does not include passive investment income, such as dividends, interest and capital gains, whether realized by the organization directly or indirectly through a partnership (such as the Funds and the corresponding Master Funds)Fund) in which it is a partner. This type of income is exempt,subject to the discussion of “unrelated debt-financed income” below, even if it is realized from securities trading activity that constitutes a trade or business.
UBTI includes not only trade or business income or gain as described above, but also “unrelated debt-financed income.” This latter type of income generally consists of (1) income derived by an exempt organization (directly or through a partnership) from income producing property with respect to which there is “acquisition indebtedness” at any time during the taxable year and (2) gains derived by an exempt organization (directly or through a partnership) from the disposition of property with respect to which there is acquisition indebtedness at any time during the twelve-month period ending with the date of the disposition.
All of the income realized by a Fund or its corresponding Masterthe Fund is expected to be short-term or long-term capital gain income, interest income or other passive investment income of the type specifically exempt from UBTI as discussed above. None of the Funds or Master FundsThe Fund will not borrow funds for the purpose of acquiring or holding any investments or otherwise incur “acquisition indebtedness” with respect to such investments. Therefore, a tax-exempt entity purchasing Shares of a Fund wouldwill not incur any UBTI by reason of its investment in the Shares or upon sale of such Shares provided that such tax-exempt entity does not borrow funds for the purpose of investing in the Shares.
Certain State and Local Taxation Matters
Prospective Shareholders should consider, in addition to the U.S. federal income tax consequences described, potential state and local tax considerations in investing in the Shares.
State and local laws often differ from U.S. federal income tax laws with respect to the treatment of specific items of income, gain, loss, deduction and credit. A Shareholder’s distributive share of the taxable income or loss of athe Fund generally will be required to be included in determining its reportable income for state and local tax purposes in the jurisdiction in which the Shareholder is a resident. Each MasterThe Fund may conduct business in one or more jurisdictions that will subject a Shareholder to tax (and require a Shareholder to file an income tax return with the jurisdiction in respect to the Shareholder’s share of the income derived from that business.)business). A prospective Shareholder should consult its tax adviser with respect to the availability of a
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credit for such tax in the jurisdiction in which the Shareholder is resident.
None of the Funds or the Master FundsThe Fund should not be subject to the New York City unincorporated business tax because such tax is not imposed on an entity that is primarily engaged in the purchase and sale of financial instruments and securities for its “own account.” By reason of a similar “own account” exemption, it is also expected that a nonresident individual U.S. Shareholder should not be subject to New York State personal income tax with respect to his or her share of income or gain recognized by anythe Fund. A nonresident individual U.S. Shareholder will not be subject to New York City earnings tax on nonresidents with respect to his or her investment in anythe Fund. New York State and New York City residents will be subject to New York State and New York City personal income tax on their income recognized in respect of Shares. Because each Masterthe Fund may conduct its business, in part, in New York City, corporate U.S. Shareholders generally will be subject to the New York franchise tax and the New York City general corporation tax by reason of their investment in athe Fund, unless certain exemptions apply. However, pursuant to applicable regulations, non-New York corporate U.S. Shareholders not otherwise subject to New York State franchise tax or New York City general corporation tax should not be subject to these taxes solely by reason of investing in shares based on
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qualification of athe Fund as a “portfolio investment partnership” under applicable rules. No ruling from the New York State Department of Taxation and Finance or the New York City Department of Finance has been, or will be, requested regarding such matters.
Backup Withholding
EachThe Fund is required in certain circumstances to backup withhold on certain payments paid to non-corporate Shareholders whothat do not furnish the Fund with their correct taxpayer identification number (in the case of individuals, their social security number) and certain certifications, or who are otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amounts withheld from payments made to youa Shareholder may be refunded or credited against yourthe Shareholder’s U.S. federal income tax liability, if any, provided that the required information is furnished to the IRS.
IRS in a timely manner.
Shareholders should be aware that certain aspects of the U.S. federal, state and local income tax treatment regarding the purchase, ownership anddispositionand disposition of Shares are not clear under existing law. Thus, Shareholders are urged to consult their own tax advisers to determine the tax consequences of ownership of the Shares in their particular circumstances, including the application of U.S. federal, state, local and foreign tax laws.
HIRE Act
The Hiring Incentives to Restore Employment Act (the “HIRE Act”) will (i) require certain foreign entities that are foreign financial institutions (as defined in Section 1471(d)(4) of the Code) to enter into an agreement with the IRS to disclose to the IRS the name, address and tax identification number of certain U.S. persons who own an interest in the foreign entity and require certain other foreign entities to provide certain other information; and (ii) impose a 30% withholding tax on certain payments of U.S. source income and proceeds from the sale of property that produces U.S. source interest or dividends if the foreign entity fails to enter into the agreement or satisfy its obligations under the legislation. Non-U.S. Shareholders are encouraged to consult with their own tax advisors regarding the possible implications of the HIRE Act on an investment in the Fund.
Medicare Tax
Other recently enacted legislation will impose a 3.8% tax on the net investment income (as defined in the Code) of certain individuals, trusts and estates. U.S. Shareholders are encouraged to consult with their own advisors regarding the possible implications of this legislation on an investment in the Fund.
Tax Agent
The beneficial owners who are of a type, as identified by the nominee through whom their Shares are held, that do not ordinarily have U.S. federal tax return filing requirements (collectively, “Certain K-1 Unitholders”) have designated the Managing Owner as their tax agent (the “Tax Agent”) in dealing with the Trust. In light of such designation and pursuant to Treasury Regulation section 1.6031(b)-1T(c), as amended from time to time, the Trust will provide to the Tax Agent Certain K-1 Unitholders’ statements (as such term is defined under Treasury Regulation section 1.6031(b)-1T(a)(3)), as amended from time to time).
Prospective investors are urged to consult their tax advisers before deciding whether to invest in the Shares.PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS BEFORE DECIDING WHETHER TO INVEST IN THE SHARES.
PURCHASES BY EMPLOYEE BENEFIT PLANS
PLANS
Although there can be no assurance that an investment in athe Fund, or any other managed futures product, will achieve the investment objectives of an employee benefit plan in making such investment, futures investments have certain features which may be of interest to such a plan. For example, the futures markets are one of the few investment fields in which employee benefit plans can participate in leveraged strategies without being required to pay tax on “unrelated business taxable income.” See “Material U.S. Federal Income Tax Considerations—‘Tax ExemptConsiderations- ‘Tax-Exempt Organizations’” at page 142.90. In addition, because they are not taxpaying entities, employee benefit plans are not subject to paying annual tax on profits (if any) of athe Fund.
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General
The following section sets forth certain consequences under the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”),or ERISA, and the Code, which a fiduciary of an “employee benefit plan” as defined in, and subject to the fiduciary responsibility provisions of, ERISA or of a “plan” as defined in and subject to Section 4975 of the Code who has investment discretion should consider before deciding to invest the plan’s assets in athe Fund (such “employee benefit plans” and “plans” being referred to herein as “Plans,” and such fiduciaries with investment discretion being referred to herein as “Plan Fiduciaries”). The following summary is not intended to be complete, but only to address certain questions under ERISA and the Code which are likely to be raised by the Plan Fiduciary’s own counsel.
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In general, the terms “employee benefit plan” as defined in ERISA and “plan” as defined in Section 4975 of the Code together refer to any plan or account of various types which provide retirement benefits or welfare benefits to an individual or to an employer’s employees and their beneficiaries. Such plans and accounts include, but are not limited to, corporate pension and profit-sharing plans, “simplified employee pension plans,” Keogh plans for self-employed individuals (including partners), individual retirement accounts described in Section 408 of the Code and medical benefit plans.
Each Plan Fiduciary must give appropriate consideration to the facts and circumstances that are relevant to an investment in athe Fund, including the role an investment in suchthe Fund plays in the Plan’s investment portfolio. Each Plan Fiduciary, before deciding to invest in athe Fund, must be satisfied that such investment in such Fund is a prudent investment for the Plan, that the investments of the Plan, including the investment in athe Fund, are diversified so as to minimize the risk of large losses and that an investment in athe Fund complies with the documents of the Plan and related trust.
EACH PLAN FIDUCIARY CONSIDERING ACQUIRING SHARES MUST CONSULT WITH ITS OWN LEGAL AND TAX ADVISERS BEFORE DOING SO. AN INVESTMENT IN ANYTHE FUND IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. NOTHE FUND IS
NOT INTENDED AS A COMPLETE INVESTMENT PROGRAM.
“Plan Assets”
ERISA and a regulation issued thereunder, (the “Planor the Plan Asset Rules”)Rules, contain rules for determining when an investment by a Plan in an entity will result in the underlying assets of such entity being assets of the Plan for purposes of ERISA and Section 4975 of the Code (i.e., “plan assets”). Those rules provide that assets of an entity will not be plan assets of a Plan which purchases an interest therein if certain exceptions apply, including (i) an exception applicable if the equity interest purchased is a “publicly-offered security” (the “Publicly-Offeredsecurity,” or the Publicly-Offered Security Exception”)Exception, and (ii) an exception applicable if the investment by all “benefit plan investors” is not “significant” or certain other exceptions apply, (the “Insignificantor the Insignificant Participation Exception”).Exception.
The Publicly-Offered Security Exception applies if the equity interest is a security that is (1) “freely transferable,” (2) part of a class of securities that is “widely held” and (3) either (a) part of a class of securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, or (b) sold to the Plan as part of a public offering pursuant to an effective registration statement under the Securities Act of 1933 and the class of which such security is a part is registered under the Securities Exchange Act of 1934 within 120 days (or such later time as may be allowed by the SEC) after the end of the fiscal year of the issuer in which the offering of such security occurred. The Plan Asset Rules state that the determination of whether a security is “freely transferable” is to be made based on all relevant facts and circumstances. Under the Plan Asset Rules, a class of securities is “widely held” only if it is of a class of securities owned by 100 or more investors independent of the issuer and of each other.
The Shares of each Fund should be considered to be publicly-offered securities. First, the Shares are being sold only as part of a public offering pursuant to an effective registration statement under the Securities Act of 1933, and the Shares were timely registered under the Securities Exchange Act of 1934. Second, it appears that the Shares are freely transferable because the Shares of each Fund may be freely bought and sold on AmexNYSE Arca like any other exchange-listed security. Third, the Shares of each Fund have been owned by at least 100
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investors independent of suchthe Fund and of each other from the date the Shares were first sold. Therefore, the underlying assets of eachthe Fund should not be considered to constitute assets of any Plan which purchases Shares.
Because each Fund and the Managing Owner are the only investors in the corresponding Master Fund and the assets of the Funds and the Managing Owner are not “plan assets”, the Master Funds will not have any benefit plan investors, and therefore, each Master Fund’s assets should not constitute plan assets.
Ineligible Purchasers
In general, Shares may not be purchased with the assets of a Plan if the Managing Owner, the Commodity Broker, the Administrator, ALPS Distributors, Inc., Invesco Aim Distributors, Inc., the Trustee, the Index Sponsor, or any of their respective affiliates or any of their respective employees either: (a) has investment discretion with respect to the
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investment of such plan assets; (b) has authority or responsibility to give or regularly gives investment advice with respect to such plan assets, for a fee, and pursuant to an agreement or understanding that such advice will serve as a primary basis for investment decisions with respect to such plan assets and that such advice will be based on the particular investment needs of the Plan; or (c) is an employer maintaining or contributing to such Plan. A party that is described in clause (a) or (b) of the preceding sentence is a fiduciary under ERISA and the Code with respect to the Plan, and any such purchase might result in a “prohibited transaction” under ERISA and the Code.
Except as otherwise set forth, the foregoing statements regarding the consequences under ERISA and the Code of an investment in athe Fund are based on the provisions of the Code and ERISA as currently in effect, and the existing administrative and judicial interpretations thereunder. No assurance can be given that administrative, judicial or legislative changes will not occur that will not make the foregoing statements incorrect or incomplete.
THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT WITH HIS OR HER ATTORNEY AND FINANCIAL ADVISERS AS TO THE PROPRIETY OF AN INVESTMENT IN ATHE FUND IN LIGHT OF THE CIRCUMSTANCES OF THE PARTICULAR PLAN AND CURRENT TAX LAW.
PLAN OF DISTRIBUTION
Authorized Participants
EachUnless otherwise agreed to by the Managing Owner and the Authorized Participant as provided in the next sentence, the Fund issues Shares in Baskets to Authorized Participants continuously on the creation order settlement date as of noon New York2:45 p.m., Eastern time, on the business day immediately following the date on which a valid order to create a Basket is accepted by the Fund, at the net asset value of 200,000 Shares of the Fund as of the closing time of the AmexNYSE Arca or the last to close of the exchanges on which the corresponding Master Fund’s futures contracts are traded, whichever is later, on the date that a valid order to create a Basket is accepted by the Fund.
Each Master Fund issues Master Fund Units in Master Unit Baskets to its corresponding Fund continuously as Upon submission of noon New York time ona creation order, the business day immediately following the date onwhich a valid order to create a Master Unit Basket is accepted by the Master Fund, at the net asset value of 200,000 Master Fund Units as of the closing time of the Amex or the last to close of the exchanges on which the corresponding Master Fund’s futures contracts are traded, whichever is later, on the date that a valid order to create a Master Unit Basket is accepted by the Master Fund. Each Master Fund will be wholly-owned by its corresponding Fund andAuthorized Participant may request the Managing Owner. Each Share issued byOwner to agree to a Fund will correlate with a Master Fund Unit issued by its corresponding Master Fund and held bycreation order settlement date up to 3 business days after the Fund.creation order date.
Authorized Participants may offer to the public, from time-to-time, Shares from any Baskets they create. Shares offered to the public by Authorized Participants will be offered at a per Share offering price that will vary depending on, among other factors, the trading price of the Fund on the Amex,NYSE Arca, the net asset value per Share and the supply of and demand for the Shares at the time of the offer. Shares initially comprising the same Basket but offered by Authorized Participants to the public at different times may have different offering prices. The excess, if any, of the price at which an Authorized Participant sells a Share over the price paid by such Authorized Participant in connection with the creation of such Share in a Basket maywill be deemed to be underwriting compensation.compensation by the FINRA Corporate Financing Department. Authorized Participants will not receive from the Fund, the Managing Owner or any of their affiliates, any fee or other compensation in connection with their sale of Shares to the public, although investors are expected to be charged a customary commission by their brokers in connection with purchases of Shares that will vary from investor to investor. Investors are encouraged to review the terms of their brokerage accounts for applicable charges.
As of the date of this Prospectus,prospectus, each of Deutsche Bank Securities Inc., Prudential Bache Securities, LLC, Merrill Lynch Professional Clearing Corp., Newedge USA LLC, Virtu Financial Capital Markets, LLC, Citigroup
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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 LLC, Nomura Securities International Inc., RBC Capital Markets, LLC, UBS Securities LLC, Cantor Fitzgerald & Co., BNP Paribas Securities Corp., Goldman, Sachs & Co. and EWT, LLC have eachGoldman Sachs Execution & Clearing, L.P. has executed a Participant Agreement and are the only Authorized Participants.
Agreement.
Likelihood of Becoming a Statutory Underwriter
EachThe Fund issues Shares in Baskets to Authorized Participants from time-to-time in exchange for cash. Because new Shares can be created and issued on an ongoing basis at any point during the life of eachthe Fund, a “distribution,” as such term is used in the Securities Act, will be occurring. An Authorized Participant, other broker-dealer firm or its client will be deemed a statutory underwriter,
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and thus will be subject to the prospectus-delivery and liability provisions of the Securities Act, if it purchases a Basket from anythe Fund, breaks the Basket down into the constituent Shares and sells the Shares to its customers; or if it chooses to couple the creation of a supply of new Shares with an active selling effort involving solicitation of secondary market demand for the Shares. A determination of whether one is an underwriter must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that would lead to categorization as an underwriter. Authorized Participants, other broker-dealers and other persons are cautioned that some of their activities will result in their being deemed participants in a distribution in a manner which would render them statutory underwriters and subject them to the prospectus-delivery and liability provisions of the Securities Act.
Dealers who are neither Authorized Participants nor “underwriters” but are participating in a distribution (as contrasted to ordinary secondary trading transactions), and thus dealing with Shares that are part of an “unsold allotment” within the meaning of section 4(3)(C) of the Securities Act,
would be unable to take advantage of the prospectus delivery exemption provided by section 4(3) of the Securities Act.
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Summary of Items of Value Paid Pursuant to FINRA Rule 2310
| | | | | | | | |
| Nature of Payment | | Recipient | | Payor | | Amount of Payment | | Services Provided |
| Selling Commission | | Authorized
Participants | | Shareholders | | No greater than 0.99% of the gross offering proceeds. | | Brokering purchases and sales of the Shares and creating and redeeming Baskets for the Fund. |
| Distribution Services Fee | | ALPS
Distributors | | Managing Owner | | Approximately $25,000 per annum, plus any fees or disbursements incurred; not to exceed 0.25% of the gross offering proceeds. | | Assisting the Managing Owner and the Administrator with certain functions and duties relating to distribution and marketing, including reviewing and approving marketing materials, consulting with FINRA and ensuring compliance with FINRA marketing rules and maintaining certain books and records pertaining to the Trust and the Fund. |
| Marketing Fee | | Invesco
Distributors | | Managing Owner | | A range from 0.10%—0.20% per annum of the average amount of the daily net assets of all “DB Funds” (as defined herein) during each calendar year calculated in U.S. dollars, or Total Net Assets; not to exceed 8.75% of the gross offering proceeds. | | Assisting the Managing Owner and the Administrator with certain functions and duties such as providing various educational and marketing activities regarding the Fund, primarily in the secondary trading market, which activities include, but are not limited to, communicating the Fund’s name, characteristics, uses, benefits, and risks, consistent with this Prospectus. Invesco Distributors engages in public seminars, road shows, conferences and media interviews and distributes sales literature and other communications (including electronic media) regarding the Fund. |
For additional details see below.
General
Retail investors may purchase and sell Shares through traditional brokerage accounts. Investors who purchase Shares through a commission/fee-based brokerage account may pay commissions/fees charged by the brokerage account. Investors are encouraged to review the terms of their brokerage accounts for applicable charges.
The Managing Owner intends to qualify the Shares in certain states and through broker-dealers who are members of FINRA. Investors intending to create or redeem Baskets through Authorized Participants in transactions not involving a broker-dealer registered in such investor’s state of domicile or residence should consult their legal advisor regarding applicable broker-dealer or securities regulatory requirements under the state securities laws prior to such creation or redemption.
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The Managing Owner has agreed to indemnify certain parties against certain liabilities, includingliabilitiesincluding liabilities under the Securities Act, and to contribute to payments that such parties may be required to make in respect of those liabilities. The Trustee has agreed to reimburse such parties, solely from and to the extent of each respectivethe Fund’s assets, for indemnification and contribution amounts due from the Managing Owner in respect of such liabilities to the extent the Managing Owner has not paid such amounts when due.
The offering of Baskets is being made in compliance with ConductFINRA Rule 2810 of the NASD.2310. Accordingly, the Authorized Participants will not make any sales to any account over which they have discretionary authority without the prior written approval of a purchaser of Shares. The maximum amount of items of value to be paid to FINRA Members in connection with the offering of the Shares by athe Fund will not exceed 10% plus 0.5% for bona fide due diligence.of the gross offering proceeds of such Shares.
The Authorized Participants will not charge a commission of greater than 0.99% of the gross offering proceeds of such Shares (which represents a maximum of $140,662,171.25$12,440,142 of the aggregate $14,208,300,126.10$1,256,580,000 registered on (i) the initialthis Registration Statement onForm S-1, SEC Registration Number 333-135422,333-[ ]) of the Trust and the Master Trust, on which $3,500,000,000 was previously registered, (ii) the Registration Statement on Form S-1, SEC Registration Number 333-142163, of the Trust and the Master Trust, on which $1,020,800,000 was registered, (iii) the Registration Statement on Form S-1, SEC Registration Number 333-148613, of the Trust and the Master Trust, on which $5,000,000,126.10 was registered and (iv) this Registration Statement on form S-1, SEC Registration Number 333-150501, of the Trust and the Master Trust, on which $4,687,500,000.00 was registered).
Trust.
Pursuant to the Distribution Services Agreement, ALPS Distributors will be paid out of the Management Fee of each Master Fund in an amount of approximately either (i) $35,000 per annum with respect to each of PowerShares DB Gold Fund and PowerShares DB Silver Fund or (ii) $25,000 per annum with respect to each of PowerShares DB Energy Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculturethe Fund, plus any fees or disbursements incurred by ALPS Distributors in connection with the performance by ALPS Distributors of its duties on behalf of each Fund and its corresponding Masterthe Fund.
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Pursuant to the Marketing Agreement, Invesco Aim Distributors will be paid the following fees out of the Management Fee of each Masterthe Fund in an amount of (i) 0.10% per annum on the first $3 billion of the average amount of the daily net assets of all “DB Funds” up to the first $3 billion (as defined in the following paragraph) during each calendar year calculated in U.S. dollars, or Total Net Assets,Assets; (ii) 0.12% per annum on the next $2 billion of Total Net Assets (i.e.(i.e., the amount of Total NetsNet Assets abovefrom $3 billion but belowup to $5 billion); and (iii) 0.15% per annum on the next $2 billion of Total Net Assets in excess(i.e., the amount of Total Net Assets from $5 billion.billion up to $7 billion); (iv) 0.16% per annum on
the next $1 billion of Total Net Assets (i.e., the amount of Total Net Assets from $7 billion up to $8 billion); (v) 0.17% per annum on the next $1 billion of Total Net Assets (i.e., the amount of Total Net Assets from $8 billion up to $9 billion); (vi) 0.18% per annum on the next $1 billion of Total Net Assets (i.e., the amount of Total Net Assets from $9 billion up to $10 billion); (vii) 0.19% per annum on the next $1 billion of Total Net Assets (i.e., the amount of Total Net Assets from $10 billion up to $11 billion); and (viii) 0.20% per annum of Total Net Assets of $11 billion or more.
“DB Funds” means PowerShares DB Commodity Index Tracking Fund, DB Commodity Index Tracking Master Fund, PowerShares DB G10 Currency Harvest Fund, DB G10 Currency Harvest Master Fund, PowerShares DB Energy Fund, DB Energy Master Fund, PowerShares DB Oil Fund, DB Oil Master Fund, PowerShares DB Precious Metals Fund, DB Precious Metals Master Fund, PowerShares DB Gold Fund, DB Gold Master Fund, PowerShares DB Silver Fund, DB Silver Master Fund, PowerShares DB Base Metals Fund, DB Base Metals Master Fund, PowerShares DB Agriculture Fund, DB Agriculture Master Fund, PowerShares DB US Dollar Index Bullish Fund, DB US Dollar Index Bullish Master Fund, PowerShares DB US Dollar Index Bearish Fund, andPowerShares DB Gold Double Short ETN, PowerShares DB Gold Double Long ETN, PowerShares DB Gold Short ETN, PowerShares DB Agriculture Double Short ETN, PowerShares DB Agriculture Double Long ETN, PowerShares DB Agriculture Short ETN, PowerShares DB Agriculture Long ETN, PowerShares DB Commodity Index Double Short ETN, PowerShares DB Commodity Double Long ETN, PowerShares DB Commodity Index Short ETN, PowerShares DB Commodity Long ETN, PowerShares DB Base Metals Double Short ETN, PowerShares DB Base Metals Double Long ETN, PowerShares DB Base Metals Short ETN, PowerShares DB Base Metals Long ETN, PowerShares DB Crude Oil Index Double Short ETN, PowerShares DB Crude Oil Index Short ETN, PowerShares DB Crude Oil Long ETN, PowerShares DB 3x Long 25+ Year Treasury Bond ETN, PowerShares DB 3x Short 25+ Year Treasury Bond ETN, PowerShares DB Inflation ETN, PowerShares DB Deflation ETN, PowerShares DB 3x Long US Dollar Index Bearish Master Fund.Futures ETN, PowerShares DB 3x Short US Dollar Index Futures ETN, PowerShares DB 3x German Bond Futures ETN, PowerShares DB German Bond Futures ETN, PowerShares DB 3x Italian Treasury Bond Futures ETN, PowerShares DB Italian Treasury Bond Futures ETN, PowerShares DB 3x Japanese Govt Bond Futures ETN, PowerShares DB Japanese Govt Bond Futures ETN, PowerShares
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DB 3x Inverse Japanese Govt Bond Futures ETN and PowerShares DB Inverse Japanese Govt Bond Futures ETN.
The payments to ALPS Distributors and Invesco Aim Distributors will not, in the aggregate (of the Trust, and not on a Fund by Fund basis), exceed 0.25% and 8.75%, respectively, of the aggregate dollar amountgross offering proceeds of the offering (or in an aggregate amount equal to $35,520,750.32$3,141,450 and $1,243,226,261.03$109,950,750, respectively, of the aggregate $14,208,300,126.10$1,256,580,000 registered on the (i) initial Registration Statement on Form S-1, SEC Registration Number 333-135422 of the Trust and Master Trust, on which, $3,500,000,000 was previously registered, (ii) the Registration Statement, on Form S-1, SEC Registration Number 333-142163 of the Trust and Master Trust, on which, $1,020,800,000 was registered only in respect of PowerShares DB Agriculture Fund, (iii) the Registration Statement, on Form S-1, SEC Registration Number 333-148613 of the Trust and Master Trust, on which, an aggregate of $5,000,000,126.10 was registered and (iv) this Registration Statement on Form S-1, SEC Registration Number 333-150501333-[ ]) of the Trust andMaster Trust, on which 125,000,000 common units of beneficial interest ($4,687,500,000.00) was registered only in respect of PowerShares DB Agriculture Fund). The Trust will adviseTrust. ALPS Distributors and Invesco Aim Distributors will monitor compensation received in connection with the Trust to determine if the payments described hereunder must be limited, when combined with selling commissions charged and any price spreads realized by other FINRA members, in order to comply with the 10% limitation on total underwriters’ compensation pursuant to NASDFINRA Rule 2810.
2310.
The Shares of eachthe Fund of the Trust will beare listed on the AmexNYSE Arca under the following symbols:
PowerShares DB Energy Fund – DBE;
PowerShares DB Oil Fund – DBO;
PowerShares DB Precious Metals Fund – DBP;
PowerShares DB Gold Fund – DGL;
PowerShares DB Silver Fund – DBS;
PowerShares DB Base Metals Fund – DBB; and
PowerShares DB Agriculture Fund – DBA.
symbol “DBS.”
LEGAL MATTERS
Sidley AustinLLP has advised the Managing Owner in connection with the Shares being offered hereby. Sidley AustinLLP also advises the Managing Owner with respect to its responsibilities as managing owner of, and with respect to matters relating to the Trust the Master Trust and each Fund and Masterthe Fund. Sidley AustinLLP has prepared the sections “Material U.S. Federal Income Tax Considerations” and “Purchases By Employee Benefit Plans” with respect to ERISA. Sidley AustinLLP has not represented, nor will it represent the Trust the Master Trust, any Fund or Masterthe Fund or the Shareholders in matters relating to the Trust or anythe Fund and no other counsel has been engaged to act on their behalf. Certain opinions of counsel have been filed with the SEC as exhibits to the Registration Statement of which this Prospectus is a part.
Richards, Layton & Finger, P.A., special Delaware counsel to the Trust, and Master Trust, has advised the Trust and Master Trust in connection with the legality of the Shares being offered hereby.
147
EXPERTS
PowerShares DB Silver Fund
PricewaterhouseCoopers has not commenced its audits and this section will be amended in the following filing. The financial statements as of December 31, 2013 and for the year ended December 31, 2013 and management’s assessment of the effectiveness of internal control over financial reporting (which is included in Management's Report on Internal Control over Financial Reporting) as of December 31, 2013 included in this Prospectus have been so included in reliance on the report(s) of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The consolidated statements of financial condition, and consolidatedincluding the schedules of investments, of the Funds and their respective SubsidiariesPowerShares DB Silver Fund, as of December 31, 2007,2012 and 2011, and the related consolidated statements of income and expenses, changes in shareholders’ equity, and cash flows for each of the years in the three year period from January 3, 2007 (commencement of investment operations) toended December 31, 2007 and the statements of financial condition of the Funds as of December 31, 20062012, have been incorporated by reference herein in reliance upon the report of KPMG LLP, an independent registered public accounting firm, appearing elsewhere herein, and upon the authority of suchsaid firm as experts in accounting and auditing.
DB Commodity Services LLC
PricewaterhouseCoopers has not commenced its audits and this section will be amended in the following filing. The financial statements as of December 31, 2013 and for the year ended December 31, 2013 incorporated in this Prospectus by reference to the Annual Report on Form 10-K for the year ended December 31, 2013 have been so incorporated in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The statements of financial condition of DB Commodity Services LLC as of December 31, 20072012 and 2006, and the related statements of income and expenses, changes in member’s deficit, and cash flows for each of the years in the two-year period ended December 31, 2007, have been included in reliance upon the report of KPMG LLP, an independent registered public accounting firm, appearing elsewhere herein, and upon the authority of such firm as experts in accounting and auditing.
UNAUDITED FINANCIAL INFORMATION
Incorporated by reference in this Prospectus are the unaudited consolidated statements of financial condition of the Funds and their respective Subsidiaries as of March 31, 2008 and December 31, 2007, and the related statements of income and expenses, changes in shareholders’ equity and cash flows for the three months and period ended March 31, 2008. In the opinion of DB Commodity Services LLC, such unaudited statements reflect all adjustments, which were of a normal and recurring nature, necessary for a fair presentation of financial position.
Included in this Prospectus are the unaudited statement of financial condition of DB Commodity Services LLC, the Managing Owner, as of March 31, 2008,2011 and the related statements of income and expenses, changes in member’s capital (deficit), and cash flows for each of the three monthsyears in the two year period ended MarchDecember 31, 2008 and March 31, 2007. In the opinion of DB Commodity Services LLC, such unaudited statements reflect all adjustments, which were of a normal and recurring nature, necessary for a fair presentation of financial position.2012, have been
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incorporated by reference herein in reliance upon the report of KPMG LLP, an independent registered accounting firm, and upon the authority of said firm as experts in accounting and auditing.
Effective May 28, 2013, PricewaterhouseCoopers LLP replaced KPMG LLP as the independent registered public accounting firm of the registrant.
ADDITIONAL INFORMATION
This Prospectus constitutes part of the Registration Statement filed by the Trust the Master Trust and the Trust and Master Trust on behalf of eachthe Fund and Master Fund, respectively, with the SEC in Washington, D.C. Additionally, as further discussed under “Incorporation by Reference of Certain Documents”,Documents,” we have incorporated by reference certain information. This Prospectus does not contain all of the information set forth in such Registration Statement, certain portions of which have been omitted pursuant to the rules and regulations of the SEC, including, without limitation, certain exhibits thereto (for example, the forms of the Participant Agreement and the Customer Agreement). The descriptions contained herein of agreements included as exhibits to the Registration Statement are necessarily summaries; the exhibits themselves may be inspected without charge at the public reference facilities maintained by the SEC in Washington, D.C., and copies of all or part thereof may be obtained from the Commission upon payment of the prescribed fees. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of such site ishttp://www.sec.gov.
RECENT FINANCIAL INFORMATION AND ANNUAL REPORTS
ANNUAL REPORTS
The Managing Owner will furnish you with an annual report of eachthe Fund in which you are invested within 90 calendar days after the end of its fiscal year as required by the rules and regulations of the SEC as well as with those reports required by the CFTC, and the NFA, including, but not limited to, an annual audited financial statement certified by independent registered public accountants and any other reports required by any other governmental authority that has jurisdiction over the activities of the Funds and the Master Funds.Fund. You also will be provided with appropriate information to permit you to file your U.S. federal and
state income tax returns (on a timely basis) with respect to your Shares. Monthly account statements conforming to CFTC and NFA requirements will be posted on the Managing Owner’s website atwww.dbfunds.db.com.http://www.dbxus.com. Additional reports may be posted on the Managing Owner’s website in the discretion of the Managing Owner or as required by regulatory authorities.
148
PRIVACY POLICY OF THE MANAGING OWNER
MANAGING OWNER
The Managing Owner collects non-public information about you from the following sources: (i) information received from you on applications or other forms; and (ii) information about your transactions with the Managing Owner and others. The Managing Owner does not disclose any non-public personal information about you to anyone, other than as set forth below, as permitted by applicable law and regulation. The Managing Owner may disclose non-public personal information about you to the funds in which you invest. The Managing Owner may disclose non-public personal information about you to non-affiliated companies that work with the Managing Owner to service your account(s), or to provide services or process transactions that you have requested. The Managing Owner may disclose non-public personal information about you to parties representing you, such as your investment representative, your accountant, your tax adviser, or to other third parties at your direction/consent. If you decide to close your account(s) or become an inactive customer, the Managing Owner will adhere to the privacy policies and practices as described in this notice. The Managing Owner restricts access to your personal and account information to those employees who need to know that information to provide products and services to you. The Managing Owner maintains appropriate physical, electronic and procedural safeguards to guard your non-public personal information.
INCORPORATION BY REFERENCE OF CERTAIN DOCUMENTS
CERTAIN DOCUMENTS
The Securities and Exchange Commission, or the SEC, allows us to “incorporate by reference” into this Prospectus the information that we file with it, meaning we can disclose important information to
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you by referring you to those documents already on file with the SEC.
The information we incorporate by reference is an important part of this prospectus, and later information that we file with the SEC will automatically update and supersede some of this information. We incorporate by reference the documents listed below, and any future filings we make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the effectiveness of the registration statement.
This filingProspectus incorporates by reference the following documents, which we have previously filedwithfiled with the SEC, in response to certain disclosures pursuant to Item 11 of Form S-1:disclosures:
The Annual ReportsReport on Form 10-K for the fiscal year ended December 31, 2007, as2012 filed on March 26, 2008 with respect1, 2013; Amendment No. 1 to each of the following:
PowerShares DB Energy Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Energy Master Fund, a series of DB Multi-Sector Commodity Master Trust;Annual Report for the year ended December 31, 2012 on Form 10-K/A filed on March 29, 2013;
PowerShares DB Oil Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Oil Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Precious Metals Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Precious Metals Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Gold Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Gold Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Silver Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Silver Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Base Metals Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Base Metals Master Fund, a series of DB Multi-Sector Commodity Master Trust; and
PowerShares DB Agriculture Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Agriculture Master Fund, a series of DB Multi-Sector Commodity Master Trust.
The Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2008, as filed on May 9, 2008 with respect to PowerShares DB Agriculture Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Agriculture Master Fund, a series of DB Multi-Sector Commodity Master Trust;
The Quarterly Reports on Form 10-Q for the fiscal quarterquarters ended March 31, 2008, as2013, June 30, 2013 and September 30, 3013 filed on May 14, 2008 with respect to each of the following:
PowerShares DB Energy Fund, a series of PowerShares DB Multi-Sector Commodity
149
| Trust and DB Energy Master Fund, a series of DB Multi-Sector Commodity Master Trust;
|
PowerShares DB Oil Fund, a series of PowerShares DB Multi-Sector Commodity Trust3, 2013, August 8, 2013, and DB Oil Master Fund, a series of DB Multi-Sector Commodity Master Trust;November 5, 2013, respectively;
PowerShares DB Precious Metals Fund, a series of PowerShares DB Multi-Sector Commodity TrustThe Current Reports on Form 8-K filed March 21, 2013, May 24, 2013, May 30, 2013, October 4, 2013 and DB Precious Metals Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Gold Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Gold Master Fund, a series of DB Multi-Sector Commodity Master Trust;
PowerShares DB Silver Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Silver Master Fund, a series of DB Multi-Sector Commodity Master Trust;December 4, 2013; and
PowerShares DB Base Metals Fund, a seriesAll other reports filed pursuant to Section 13(a) or 15(d) of PowerShares DB Multi-Sector Commodity Trust and DB Base Metals Master Fund, a series of DB Multi-Sector Commodity Master Trust.
The Current Report onthe Exchange Act since December 31, 2012, except for information furnished under Form 8-K, which is not deemed filed on February 20, 2008 with respect to PowerShares DB Multi-Sector Commodity Trust and DB Multi-Sector Commodity Master Trust.not incorporated herein by reference.
The Current Report on Form 8-K filed on February 28, 2008 with respect to PowerShares DB Agriculture Fund, a series of PowerShares DB Multi-Sector Commodity Trust and DB Agriculture Master Fund, a series of DB Multi-Sector Commodity Master Trust.
The Current Report on Form 8-K filed on April 11, 2008 with respect to PowerShares DB Multi-Sector Commodity Trust and DB Multi-Sector Commodity Master Trust.
The Current Report on Form 8-K filed on June 23, 2008 with respect to PowerShares DB Multi-Sector Commodity Trust and DB Multi-Sector Commodity Master Trust.
Any statement contained in a document that is incorporated by reference will be modified or superseded for all purposes to the extent that astatementa statement contained in this prospectus (or in any other document that is subsequently filed with the SEC and incorporated by reference)Prospectus modifies or is contrary to that previous statement. Any statement so modified or superseded will not be deemed a part of this prospectusProspectus except as so modified or superseded.
We will provide to you a copy of the filings that have been incorporated by reference in this prospectusProspectus upon your request, at no cost. Any request may be made by writing or calling us at the following address or telephone number:
Invesco PowerShares Capital Management LLC
301 West Roosevelt Road
Wheaton, IL 60187
Telephone: (800) 983-0903
These documents may also be accessed through our website atwww.dbfunds.db.comhttp://www.dbxus.com or as described herein under “Additional Information.” The information and other content contained on or linked from our website isare not incorporated by reference in this prospectusProspectus and should not be considered a part of this prospectus.Prospectus.
We file annual, quarterly, current reports and other information with the SEC. You may read and copy these materials at the SEC’s Public Reference Room at 100 F Street, NW,N.E., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site athttp://www.sec.gov that contains reports, proxy and information statements and other information regarding the company.Fund.
[Remainder of page left blank intentionally.]
150
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INDEX TO FINANCIAL STATEMENTS
You should read the financial statements and the notes to those financial statements in the Annual Report on Form 10-K and the Quarterly Report on Form 10-Q with respect to each Fund. The Annual Report on Form 10-K and the Quarterly Report on Form 10-Q with respect to each Fund has been incorporated by reference in this prospectus. Please refer to “Incorporation by Reference of Certain Documents” at page 149.
| | | | |
| | | Page | |
PowerShares DB Commodity Services LLCSilver Fund* | | |
| |
Report of Independent Registered Public Accounting Firm | | | [ | ] |
Statement of Financial Condition as of December 31, 2013 | | | [ | ] |
Notes to Statement of Financial Condition | | | [ | ] |
DB Commodity Services LLC* | | 152 | | |
StatementsIndependent Auditors’ Report
| | | [ | ] |
Statement of Financial Condition for the Year Endedas of December 31, 20072013 and 20062012 | | 153 | [ | ] |
Statements of Income and Expenses for the YearYears Ended December 31, 20072013 and 2006December 31, 2012 | | 154 | [ | ] |
Statements of Changes in Member’s DeficitCapital (Deficit) for the Years Ended December 31, 20072013 and 2006December 31, 2012 | | 155 | [ | ] |
StatementsStatement of Cash Flows for the Years Ended December 31, 20072013 and 2006December 31, 2012
| | 156 | [ | ] |
Notes to Financial Statements | | 157 |
Statement of Financial Condition as of March 31, 2008 (unaudited) and December 31, 2007
| [ | 166 |
Unaudited Statements of Income and Expenses For the Three Months Ended March 31, 2008 and 2007
| | 167 |
Unaudited Statement of Changes in Member’s Capital For the Three Months Ended March 31, 2008 and 2007
| | 168 |
Unaudited Statement of Cash Flows For the Three Months Ended March 31, 2008 and 2007
| | 169 |
Notes to Unaudited Financial Statements
| | 170 |
151
Report of Independent Registered Public Accounting Firm
The Unit Holder
DB Commodity Services LLC:
We have audited the accompanying statements of financial condition of DB Commodity Services LLC (the Company) as of December 31, 2007 and 2006, and the related statements of income and expenses, changes in member’s deficit, and cash flows for each of the years in the two-year period ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of DB Commodity Services LLC as of December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2007 in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
April 8, 2008
152
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Statements of Financial Condition
December 31, 2007 and 2006
| | | | | | | |
| | | 2007 | | | 2006 | |
Assets | | | | | | | |
Due from DB Exchange Traded Funds | | $ | 2,084,602 | | | 512,115 | |
Investment in DB Exchange Traded Funds | | | 22,000 | | | 22,000 | |
Due from affiliate | | | 2,867,336 | | | — | |
| | | | | | | |
Total assets | | $ | 4,973,938 | | | 534,115 | |
| | | | | | | |
Liabilities and Member’s Capital | | | | | | | |
Liabilities: | | | | | | | |
Accrued expenses | | $ | 7,226,836 | | | 1,621,064 | |
Due to affiliate | | | — | | | 2,674,315 | |
| | | | | | | |
Total liabilities | | | 7,226,836 | | | 4,295,379 | |
Member’s deficit | | | (2,252,898 | ) | | (3,761,264 | ) |
| | | | | | | |
Total liabilities and member’s deficit | | $ | 4,973,938 | | | 534,115 | |
| | | | | | | |
See accompanying notes to financial statements.
153
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Statements of Income and Expenses
Years ended December 31, 2007 and 2006
| | | | | | |
| | | 2007 | | 2006 | |
Income: | | | | | | |
Management fees | | $ | 15,533,475 | | 3,924,547 | |
| | | | | | |
Total income | | | 15,533,475 | | 3,924,547 | |
| | | | | | |
Expense: | | | | | | |
Legal fees | | | 1,770,546 | | 1,825,738 | |
Audit fees and tax services | | | 6,486,023 | | 1,528,279 | |
Printing services | | | 1,184,335 | | 223,552 | |
Administrator and trustees fees | | | 1,943,817 | | 289,729 | |
Marketing costs | | | 2,423,774 | | 529,418 | |
Organizational and offering costs | | | — | | 2,642,543 | |
Registration fees | | | — | | 636,000 | |
Other | | | 216,614 | | 60,552 | |
| | | | | | |
Total expenses | | | 14,025,109 | | 7,735,811 | |
| | | | | | |
Net income (loss) | | $ | 1,508,366 | | (3,811,264 | ) |
| | | | | | |
See accompanying notes to financial statements.
154
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Statements of Changes in Member’s Deficit
Years ended December 31, 2007 and 2006
| | | | | | | |
| | | 2007 | | | 2006 | |
Member’s capital (deficit), January 1 | | $ | (3,761,264 | ) | | 50,000 | |
Net income (loss) | | | 1,508,366 | | | (3,811,264 | ) |
| | | | | | | |
Member’s deficit, December 31 | | $ | (2,252,898 | ) | | (3,761,264 | ) |
| | | | | | | |
See accompanying notes to financial statements.
155
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Statements of Cash Flows
Years ended December 31, 2007 and 2006
| | | | | | | |
| | | 2007 | | | 2006 | |
Cash flows from operating activities: | | | | | | | |
Net income (loss) | | $ | 1,508,366 | | | (3,811,264 | ) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | | | | |
(Increase) decrease in operating assets: | | | | | | | |
Due from DB Exchange Traded Fund | | | (1,572,487 | ) | | (512,115 | ) |
Due from affiliate | | | (2,867,336 | ) | | | |
Increase (decrease) in operating liabilities: | | | | | | | |
Due to affiliate | | | (2,674,315 | ) | | 2,674,315 | |
Accrued expenses | | | 5,605,772 | | | 1,621,064 | |
Due to DB US Financial Market Holdings Corporation | | | — | | | (2,000 | ) |
| | | | | | | |
Net cash used in operating activities | | | — | | | (30,000 | ) |
| | | | | | | |
Cash flows from investing activities: | | | | | | | |
Investments in DB Exchange Traded Funds | | | — | | | (20,000 | ) |
| | | | | | | |
Net cash used in investing activities | | | — | | | (20,000 | ) |
| | | | | | | |
Decrease in cash held by affiliate | | | — | | | (50,000 | ) |
Cash and cash equivalents at beginning of year | | | — | | | 50,000 | |
| | | | | | | |
Cash and cash equivalents at end of year | | $ | — | | | — | |
| | | | | | | |
See accompanying notes to financial statements.
156
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Financial Statements
December 31, 2007 and 2006
(1) | Organization and Basis of Presentation |
DB Commodity Services LLC (the Company), a Delaware limited liability company, was formed on May 23, 2005, and is an indirect wholly owned subsidiary of Deutsche Bank AG and a direct wholly owned subsidiary of DB U.S. Financial Markets Holding Corporation. The Company is registered as a commodity pool operator and commodity trading advisor with the Commodity Futures Trading Commission and is a member of the National Futures Association.
The Company serves as the managing owner, commodity pool operator, and commodity trading advisor to the following funds:
PowerShares DB Commodity Index Tracking Fund; a Delaware statutory trust organized on May 23, 2005; commenced investment operations on January 31, 2006 (the DBC Feeder Fund). DBC Feeder Fund was originally named “DB Commodity Index Tracking Fund” and changed its name to “PowerShares DB Commodity Index Tracking Fund” effective August 10, 2006,
DB Commodity Index Tracking Master Fund; a Delaware statutory trust organized on May 23, 2005; commenced investment operations on January 31, 2006 (the DBC Master Fund),
PowerShares DB G10 Currency Harvest Fund; a Delaware statutory trust organized on April 12, 2006; commenced investment operations on September 15, 2006 (the DBV Feeder Fund). DBV Feeder Fund was originally named “DB Currency Index Value Fund” and changed its name to “PowerShares DB G10 Currency Harvest Fund” effective July 20, 2006,
DB G10 Currency Harvest Master Fund; a Delaware statutory trust organized on April 12, 2006; commenced investment operations on September 15, 2006 (the DBV Master Fund). DBV Master Fund was originally named “DB Currency Index Value Master Fund” and changed its name to “DB G10 Currency Harvest Master Fund” effective July 20, 2006,
PowerShares DB Multi-Sector Commodity Trust; a Delaware statutory trust, in seven separate series (the Sectors Funds), organized on August 3, 2006; commenced investment operations on January 3, 2007:
| – | PowerShares DB Energy Fund (the DBE Feeder Fund),] |
| * | – | PowerShares DB Oil Fund (the DBO Feeder Fund),To be filed with amendment. |
| – | PowerShares DB Precious Metals Fund (the DBP Feeder Fund), |
| – | PowerShares DB Gold Fund (the DGL Feeder Fund), |
| – | PowerShares DB Silver Fund (the DBS Feeder Fund), |
| – | PowerShares DB Base Metals Fund (the DBB Feeder Fund), |
| – | PowerShares DB Agriculture Fund (the DBA Feeder Fund). |
DB Multi-Sector Commodity Master Trust; a Delaware statutory trust, in seven separate series (the Sectors Master Funds), organized on August 3, 2006; commenced investment operations on January 3, 2007:
| – | DB Energy Master Fund (the DBE Master Fund), |
| – | DB Oil Master Fund (the DBO Master Fund), |
| – | DB Precious Metals Master Fund (the DBP Master Fund), |
(Continued)
157
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DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Financial Statements
December 31, 2007 and 2006
| – | DB Gold Master Fund (the DGL Master Fund), |
| – | DB Silver Master Fund (the DBS Master Fund), |
| – | DB Base Metals Master Fund (the DBB Master Fund), |
| – | DB Agriculture Master Fund (the DBA Master Fund). |
PowerShares DB US Dollar Index Trust; a Delaware statutory trust, in two separate series (the DXY Funds), organized on August 3, 2006; commenced investment operations on February 15, 2007:
| – | PowerShares DB US Dollar Index Bullish Fund (the UUP Feeder Fund), |
| – | PowerShares DB US Dollar Index Bearish Fund (the UDN Feeder Fund). |
DB US Dollar Index Master Trust; a Delaware statutory trust, in two separate series (the DXY Master Funds), organized on August 3, 2006; commenced investment operations on February 15, 2007:
| – | DB US Dollar Index Bullish Master Fund (the UUP Master Fund), |
| – | DB US Dollar Index Bearish Master Fund (the UDN Master Fund). |
The above noted Feeder Funds and Master Funds will be collectively referred to herein as the “DB Exchange Traded Funds”, “Funds”, “Feeder Funds”, or the “Master Funds”, as applicable.
(2) | Summary of Significant Accounting Policies |
The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles.
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses, and disclosure of contingent assets and liabilities during the reporting period of the financial statements. Actual results could differ from those estimates.
| (c) | Due from DB Exchange Traded Funds |
Due from DB Exchange Traded Funds is recorded at the invoiced amounts and do not bear interest. Amounts collected on Due from DB Exchange Traded Funds are included in net cash provided by operating activities in the statement of cash flow. Management has determined that there was no risk of unrecoverable amounts, and no allowance for doubtful accounts was provided for as of December 31, 2007.
| (d) | Investment in DB Exchange Traded Funds |
The Company’s investments in DB Exchange Traded Funds consist of capital contributions in the general shares of the Funds.
(Continued)
158
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Financial Statements
December 31, 2007 and 2006
Upon the establishment of the Funds, the Company’s investment represents 100% ownership and is stated at cost. Upon commencement of the Funds’ investment operations and issuance of the Funds’ limited shares, the Company’s general share ownership of the Feeder Funds is recorded as capital in the consolidated financial statements of the Funds, and the Company’s general share ownership of the Master Funds is recorded as a minority shareholder.
The Company is a limited liability company and did not elect to be taxable as a corporation for U.S. income tax purposes. Accordingly, the Company will not incur U.S. income taxes. No provision for federal, state, and local income taxes has been made in the accompanying financial statements, as its owner-member is individually liable for income taxes, if any, on its share of the Company’s income, loss, and other items. The following is the major tax jurisdiction for the Company and the earliest tax year subject to examination: United States – 2005.
Fees earned for management services are recorded on the accrual method of accounting. Fees for management services are received from each of the Master Funds upon commencement of operations. No separate fee is received from each of the Feeder Funds.
Certain amounts in the 2006 financial statements have been reclassified to conform to the 2007 presentation.
(3) | Related Party Transactions |
| (a) | Management Fees and Due from DB Exchange Traded Funds |
The DBC Master Fund pays the Company a management fee, monthly in arrears, in an amount equal to 0.75% per annum of its net asset value. Prior to July 12, 2006, the management fee was 0.95% per annum.
The DBA, DBB, DBE, DBP, and DBV Master Funds pay the Company a management fee, monthly in arrears, in an amount equal to 0.75% per annum of their net asset values.
The DBO, DBS, DGL, UDN, and UUP Master Funds pay the Company a management fee, monthly in arrears, in an amount equal to 0.50% per annum of their net asset values.
(Continued)
159
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Financial Statements
December 31, 2007 and 2006
Management fees and Due from DB Exchange Traded Funds as of December 31, 2007 and 2006 amounted to:
| | | | | | | | | |
| | | 2007
Management
fees | | 2006
Management
fees | | 2007 Due
from DB
Exchange-
Traded Funds | | 2006 Due
from DB
Exchange-
Traded Funds |
DBA Master Fund | | $ | 3,200,975 | | — | | 610,088 | | — |
DBB Master Fund | | | 430,403 | | — | | 30,794 | | — |
DBC Master Fund | | | 7,698,406 | | 3,802,033 | | 943,961 | | 454,280 |
DBE Master Fund | | | 270,256 | | — | | 31,370 | | — |
DBO Master Fund | | | 131,443 | | — | | 11,577 | | — |
DBP Master Fund | | | 185,982 | | — | | 30,081 | | — |
DBS Master Fund | | | 111,270 | | — | | 11,679 | | — |
DBV Master Fund | | | 3,088,003 | | 122,514 | | 330,845 | | 57,835 |
DGL Master Fund | | | 130,429 | | — | | 16,780 | | — |
UDN Master Fund | | | 174,173 | | — | | 34,492 | | — |
UUP Master Fund | | | 112,135 | | — | | 32,935 | | — |
| | | | | | | | | |
| | $ | 15,533,475 | | 3,924,547 | | 2,084,602 | | 512,115 |
| | | | | | | | | |
| (b) | Organization and Offering Costs |
Prior to July 12, 2006, cost incurred in connection with organization of the DBC and DBV Feeder Funds and Master Funds, including the initial offering of the limited shares of the Funds, were paid by Deutsche Bank AG on behalf of DBC and DBV Master Fund. Cost incurred in connection with the continuous offering of limited shares of the Funds after the commencement of the DBC and DBV Master Funds’ investment trading operations were also paid by Deutsche Bank AG on behalf of DBC and DBV Master Fund. These costs were subject to reimbursement by the DBC and DBV Master Funds, without interest, in 36 monthly payments during each of the first 36 months after the commencement of the DBC and DBV Master Fund’s trading operations. Also, prior to July 12, 2006, DBC and DBV Master Fund’s liability to Deutsche Bank AG was transferred to the Company, of which, the Company received $185,575.
Effective July 12, 2006 the Company assumed DBC and DBV Master Fund’s organization and offering costs incurred prior to July 12, 2006, which amounted to $2,642,543. Such costs have been recorded in the Company’s statement of income and expense as organizational and offering costs.
The Company assumes all organization and offering costs subsequent to July 12, 2006.
(Continued)
160
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Financial Statements
December 31, 2007 and 2006
| (c) | Administration Expenses |
Effective July 12, 2006, the Managing Owner has agreed to assume all future routine operational, administrative and other ordinary expenses of the Funds and Master Funds, including, but not limited to, computer services, trustee fees and expenses, legal and accounting fees and expenses, tax preparation expenses, filing fees and printing, mailing and duplication costs. Accordingly, such expenses are recorded in the statement of income and expenses of the Company. Please refer to Note 6 for further details on service agreements.
Prior to July 12, 2006, all routine operational, administrative and other ordinary expenses of the DBC and DBV Funds were paid by the DBC and DBV Master Funds.
The Company, in its capacity as the managing owner and on behalf of the Funds, entered into a service agreement with Deutsche Bank AG for services including, but not limited to, trading, accounting, legal, human resources, and other. The costs of these services are assumed by Deutsche Bank AG with no cost allocation to the Company or the Funds.
Deutsche Bank AG New York Branch, provides the Company with a cash facility to cover its operational expenses and to deposit management fees received from the DB Exchange Traded Funds. This cash management program is non interest bearing and there is no expiration date. As of December 31, 2007, the Company had a net balance due to the Company of $2,867,336 on this facility.
The Company has received from Deutsche Bank AG a letter of support that provides to the Company the funds and support to allow the Company to meet all of its current and currently foreseeable obligations for a year and a day from December 31, 2007.
(Continued)
161
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Financial Statements
December 31, 2007 and 2006
(4) | Investments in DB Exchange Traded Funds |
Investments in DB Exchange Traded Funds as of December 31, 2007 consist of the following:
| | | |
| | | Amount |
PowerShares DB Commodity Index Tracking Fund | | $ | 1,000 |
DB Commodity Index Tracking Master Fund | | | 1,000 |
PowerShares DB G10 Currency Harvest Fund | | | 1,000 |
DB G10 Currency Harvest Master Fund | | | 1,000 |
PowerShares DB Energy Fund | | | 1,000 |
DB Energy Master Fund | | | 1,000 |
PowerShares DB Oil Fund | | | 1,000 |
DB Oil Master Fund | | | 1,000 |
PowerShares DB Precious Metals Fund | | | 1,000 |
DB Precious Metals Master Fund | | | 1,000 |
PowerShares DB Gold Fund | | | 1,000 |
DB Gold Master Fund | | | 1,000 |
PowerShares DB Silver Fund | | | 1,000 |
DB Silver Master Fund | | | 1,000 |
PowerShares DB Base Metals Fund | | | 1,000 |
DB Base Metals Master Fund | | | 1,000 |
PowerShares DB Agriculture Fund | | | 1,000 |
DB Agriculture Master Fund | | | 1,000 |
PowerShares DB US Dollar Index Bullish Fund | | | 1,000 |
DB US Dollar Index Bullish Master Fund | | | 1,000 |
PowerShares DB US Dollar Index Bearish Fund | | | 1,000 |
DB US Dollar Index Bearish Master Fund | | | 1,000 |
| | | |
| | $ | 22,000 |
| | | |
The Company’s ownership in each of the above DB Exchange Traded Funds represents less than 1.0%.
(Continued)
162
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Financial Statements
December 31, 2007 and 2006
Accrued expenses as of December 31, 2007 and 2006 consist of the following:
| | | | | |
| | | 2007 | | 2006 |
Audit fees and tax services | | $ | 5,346,247 | | 1,243,979 |
Marketing costs | | | 817,335 | | 237,513 |
Administrator and trustees fees | | | 484,118 | | 118,955 |
Legal fees | | | 318,520 | | 11,575 |
Printing services | | | 166,950 | | 9,042 |
Other | | | 93,666 | | — |
| | | | | |
| | $ | 7,226,836 | | 1,621,064 |
| | | | | |
Under the trust agreement of the Funds, Wilmington Trust Company (the “Trustee” of the Funds) has delegated to the Company the exclusive management and control of all aspects of the business of the Funds.
Trustee fees are paid on behalf of the Funds by the Company.
| (b) | Administration Agreement |
The Company, in its capacity as the managing owner and on behalf of each of the Funds and Master Funds, has appointed The Bank of New York as the administrator (the Administrator), custodian and transfer agent of the Funds and have entered into separate administrative, custodian, transfer agency and service agreements (collectively referred to as the Administration Agreement). The Administrator performs or supervises the performance of services necessary for the operation and administration of each of the Funds (other than making investment decisions), including receiving and processing orders to create and redeem shares of the Funds, net asset value calculations, accounting, and other fund administrative services.
The Administrator’s monthly fees are paid on behalf of the Funds by the Company.
| (c) | Distribution Services Agreement |
ALPS Distributors, Inc. (the Distributor) provides certain distribution services to the Funds. Pursuant to the Distribution Services Agreement between the Company in its capacity as managing owner of the Funds and the Distributor, the Distributor assists the Company and the Administrator with certain functions and duties relating to distribution and marketing services to the funds.
(Continued)
163
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Financial Statements
December 31, 2007 and 2006
The Distribution Services Agreement is effective for two years and thereafter will continue automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the Company or otherwise as provided under the Distribution Services Agreement. The Distribution Services Agreement is terminable without penalty on sixty days’ written notice by the Company or by the Distributor. The Distribution Services Agreement will automatically terminate in the event of its assignment.
Under the License Agreement among Invesco PowerShares Capital Management LLC (formerly known as PowerShares Capital Management LLC) (the Licensor), the Company in its own capacity, and in its capacity as the managing owner and on behalf of the Funds the Licensor granted to the Funds a nonexclusive license to use the PowerShares® trademark anywhere in the world, solely in connection with the marketing and promotion of the Funds, and issuance and trading of the Funds’ shares as necessary.
License fees are paid on behalf of the Funds by the Company.
Pursuant to a marketing agreement between Invesco Aim Distributors, Inc. (formerly known as AIM Distributors, Inc.) (an affiliate of the Licensor) and the Company in its capacity as the managing owner and on behalf of the Funds, Invesco Aim Distributors, Inc. assists the Company and the Administrator with certain functions and duties such as providing various educational and marketing activities regarding each of the Funds, primarily in the secondary trading market. Activities include, but are not limited to, communicating each of the Funds’ names, characteristics, uses, benefits, and risks, consistent with the prospectus, engagement in public seminars, road shows, conferences, media interviews, fielding incoming telephone “800” number calls, and distributing sales literature and other communications (including electronic media) regarding each of the Funds.
Marketing fees are paid on behalf of the Funds by the Company.
(7) | Commitments and Contingencies |
The Company has entered into various service agreements on behalf of the Funds that contain a variety of representations, or provide indemnification provisions related to certain risks service providers undertake in performing services that are in the best interests of the Funds. While the Company’s exposure under such indemnification provisions cannot be estimated until a claim arises, these general business indemnifications are not expected to have a material impact on the Company’s financial position.
(8) | Business and Credit Concentration |
The Company’s business is to serve as the managing owner, commodity pool operator, and commodity trading advisor to the DB Exchange Traded Funds. Basis for the management fee calculation is the Funds’ net asset value. Accordingly, factors that may have the effect of causing a decline in the Funds’ net asset value will affect the Company’s income from management fees.
(Continued)
164
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Financial Statements
December 31, 2007 and 2006
(9) | Recently Issued Accounting Standards |
In September 2006, the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 157,Fair Value Measurement (Statement 157). Statement 157 defines fair value, establishes framework for the measurement of fair value, and enhances disclosures about fair value measurements. The Statement does not require any new fair value measures. The Statement is effective for fair value measures already required or permitted by other standards for fiscal years beginning after November 15, 2007. The Company is required to adopt Statement 157 beginning on January 1, 2008. Statement 157 is required to be applied prospectively, except for certain financial instruments. Any transition adjustment will be recognized as an adjustment to opening retained earnings in the year of adoption. The Company is currently evaluating the impact of adopting Statement 157 on its financial statements disclosures.
In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements – an amendment to ARB No. 51 (Statement 160). Statement 160 requires noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. Statement 160 is effective for periods beginning on or after December 15, 2008 and earlier adoption is prohibited. Statement 160 will be applied prospectively to all noncontrolling interests including any that arose before the effective date and presentation and disclosure requirements shall be applied retrospectively for all periods presented. The Company is currently evaluating the impact of adopting Statement 160 on its results of operations and financial position.
(10) | Recently Adopted Accounting Standards |
In July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48),Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement 109. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a threshold of more-likely-than-not for recognition of tax benefits of uncertain tax positions taken or expected to be taken in a tax return. FIN 48 also provides related guidance on measurement, derecognition, classification, interest and penalties, and disclosure. The Company adopted FIN 48 on January 1, 2007, and has determined that the application of this Interpretation did not have any impact on its results of operation and financial position.
165
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Statements of Financial Condition
March 31, 2008 (unaudited) and December 31, 2007
| | | | | | |
| Assets | | March 31,
2008 | | December
31, 2007 | |
Due from DB Exchange Traded Funds | | $ | 7,018,823 | | 2,084,602 | |
Investment in DB Exchange Traded Funds, at fair value | | | 28,134 | | 22,000 | |
Due from affiliate | | | 3,715,830 | | 1,933,954 | |
| | | | | | |
Total assets | | $ | 10,762,787 | | 4,040,556 | |
| | | | | | |
Liabilities and Member’s Capital | | | | | | |
Liabilities: | | | | | | |
Accrued expenses | | $ | 9,144,122 | | 6,293,454 | |
| | | | | | |
Total liabilities | | | 9,144,122 | | 6,293,454 | |
| | | | | | |
Member’s Capital (Deficit) | | $ | 1,618,665 | | (2,252,898 | ) |
| | | | | | |
Total liabilities and member’s capital (deficit) | | $ | 10,762,787 | | 4,040,556 | |
| | | | | | |
See accompanying notes to unaudited financial statements.
166
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Unaudited Statements of Income and Expenses
For the Three Months Ended March 31, 2008 and 2007
| | | | | | | |
| | | 2008 | | 2007 | |
Income: | | | | | | | |
Management fees | | $ | 9,603,349 | | $ | 2,266,011 | |
Change in net unrealized appreciation in investment in
DB Exchange Traded Funds | | | 6,134 | | | — | |
| | | | | | | |
Total income | | | 9,609,483 | | | 2,266,011 | |
| | | | | | | |
Expense: | | | | | | | |
Legal fees | | | 1,023,414 | | | 375,000 | |
Audit fees and tax services | | | 1,700,008 | | | 1,223,038 | |
Printing services | | | 746,903 | | | 212,500 | |
Administrator and Trustees fees | | | 624,502 | | | 485,954 | |
Marketing fees | | | 1,539,173 | | | 600,536 | |
Other | | | 103,920 | | | 88,416 | |
| | | | | | | |
Total expenses | | | 5,737,920 | | | 2,985,444 | |
| | | | | | | |
Net income / (loss) | | $ | 3,871,563 | | $ | (719,433 | ) |
| | | | | | | |
See accompanying notes to unaudited financial statements.
167
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Unaudited Statements of Changes in Member’s Capital (Deficit)
For the Three Months Ended March 31, 2008 and 2007
| | | | | | | | |
| | | 2008 | | | 2007 | |
Member’s deficit, January 1 | | $ | (2,252,898 | ) | | $ | (3,761,264 | ) |
Net income / (loss) | | | 3,871,563 | | | | (719,433 | ) |
| | | | | | | | |
Member’s capital (deficit), March 31 | | $ | 1,618,665 | | | $ | (4,480,697 | ) |
| | | | | | | | |
See accompanying notes to unaudited financial statements.
168
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Unaudited Statement of Cash Flows
For the Three Months Ended March 31, 2008 and 2007
| | | | | | | | |
| | | 2008 | | | 2007 | |
Cash flows from operating activities: | | | | | | | | |
Net income / (loss) | | $ | 3,871,563 | | | $ | (719,433 | ) |
Adjustments to reconcile net income / (loss) to net cash used in operating activities: | | | | | | | | |
| | |
(Increase) / decrease in operating assets: | | | | | | | | |
Due from DB Exchange Traded Funds | | | (4,934,221 | ) | | | (389,986 | ) |
Due from affiliate | | | (1,781,876 | ) | | | — | |
Net change in unrealized gain on Investment in DB Exchange Traded Funds | | | (6,134 | ) | | | | |
| | |
Increase (decrease) in operating liabilities: | | | | | | | | |
Due to affiliate | | | — | | | | (178,464 | ) |
Accrued expenses | | | 2,850,668 | | | | 1,287,883 | |
| | | | | | | | |
Net cash provided by (used for) operating activities | | | — | | | | — | |
Cash and cash equivalents at beginning of period | | | — | | | | — | |
| | | | | | | | |
Cash and cash equivalents at end of period | | $ | — | | | $ | — | |
| | | | | | | | |
See accompanying notes to unaudited financial statements.
169
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
March 31, 2008
(1) | Organization and Basis of Presentation |
DB Commodity Services LLC (the Company), a Delaware limited liability company, was formed on May 23, 2005, and is an indirect wholly owned subsidiary of Deutsche Bank AG and a direct wholly owned subsidiary of DB U.S. Financial Markets Holding Corporation. The Company is registered as a commodity pool operator and commodity trading advisor with the Commodity Futures Trading Commission and is a member of the National Futures Association.
The Company serves as the managing owner, commodity pool operator, and commodity trading advisor to the following funds:
PowerShares DB Commodity Index Tracking Fund; a Delaware statutory trust organized on May 23, 2005; commenced investment operations on January 31, 2006 (the DBC Feeder Fund). DBC Feeder Fund was originally named “DB Commodity Index Tracking Fund” and changed its name to “PowerShares DB Commodity Index Tracking Fund” effective August 10, 2006,
DB Commodity Index Tracking Master Fund; a Delaware statutory trust organized on May 23, 2005; commenced investment operations on January 31, 2006 (the DBC Master Fund),
PowerShares DB G10 Currency Harvest Fund; a Delaware statutory trust organized on April 12, 2006; commenced investment operations on September 15, 2006 (the DBV Feeder Fund). DBV Feeder Fund was originally named “DB Currency Index Value Fund” and changed its name to “PowerShares DB G10 Currency Harvest Fund” effective July 20, 2006,
DB G10 Currency Harvest Master Fund; a Delaware statutory trust organized on April 12, 2006; commenced investment operations on September 15, 2006 (the DBV Master Fund). DBV Master Fund was originally named “DB Currency Index Value Master Fund” and changed its name to “DB G10 Currency Harvest Master Fund” effective July 20, 2006,
PowerShares DB Multi-Sector Commodity Trust; a Delaware statutory trust, in seven separate series (the Sectors Feeder Funds), organized on August 3, 2006; commenced investment operations on January 3, 2007:
| – | | PowerShares DB Energy Fund (the DBE Feeder Fund),
|
| – | | PowerShares DB Oil Fund (the DBO Feeder Fund),
|
| – | | PowerShares DB Precious Metals Fund (the DBP Feeder Fund),
|
| – | | PowerShares DB Gold Fund (the DGL Feeder Fund),
|
| – | | PowerShares DB Silver Fund (the DBS Feeder Fund),
|
| – | | PowerShares DB Base Metals Fund (the DBB Feeder Fund),
|
| – | | PowerShares DB Agriculture Fund (the DBA Feeder Fund).
|
DB Multi-Sector Commodity Master Trust; a Delaware statutory trust, in seven separate series (the Sectors Master Funds), organized on August 3, 2006; commenced investment operations on January 3, 2007:
| – | | DB Energy Master Fund (the DBE Master Fund),
|
| – | | DB Oil Master Fund (the DBO Master Fund),
|
| – | | DB Precious Metals Master Fund (the DBP Master Fund),
|
| – | | DB Gold Master Fund (the DGL Master Fund),
|
| – | | DB Silver Master Fund (the DBS Master Fund),
|
| – | | DB Base Metals Master Fund (the DBB Master Fund),
|
| – | | DB Agriculture Master Fund (the DBA Master Fund).
|
170
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
March 31, 2008
PowerShares DB US Dollar Index Trust; a Delaware statutory trust, in two separate series (the DXY Feeder Funds), organized on August 3, 2006; commenced investment operations on February 15, 2007:
| – | | PowerShares DB US Dollar Index Bullish Fund (the UUP Feeder Fund),
|
| – | | PowerShares DB US Dollar Index Bearish Fund (the UDN Feeder Fund).
|
DB US Dollar Index Master Trust; a Delaware statutory trust, in two separate series, (the DXY Master Funds), organized on August 3, 2006; commenced investment operations on February 15, 2007:
| – | | DB US Dollar Index Bullish Master Fund (the UUP Master Fund),
|
| – | | DB US Dollar Index Bearish Master Fund (the UDN Master Fund).
|
The above noted will be referred to either as DBC Feeder Fund, DBV Feeder Fund, Sectors Feeder Funds, and DXY Feeder Funds (collectively, the Feeder Funds) or the DBC Master Fund, DBV Master Fund, Sectors Master Funds, and DXY Master Funds (collectively, the Master Funds), as applicable. The Feeder Funds and the Master Funds will also be collectively referred to herein as the “DB Exchange Traded Funds” or the “Funds”, as applicable.
(2) | Summary of Significant Accounting Policies |
The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles.
The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income, expenses, and related disclosure of contingent assets and liabilities during the reporting period of the financial statements and accompanying notes. Actual results could differ from those estimates.
(c) | Due from DB Exchange Traded Funds |
Due from DB Exchange Traded Funds represent outstanding management fees for the Company’s commodity futures trading advisory services to the DB Exchange Traded Funds. The fees are recorded at the invoiced amounts and do not bear interest. Management has determined that there was no risk of unrecoverable amounts, and therefore, no allowance for doubtful accounts was provided for as of March 31, 2008 or December 31, 2007.
(d) | Investment in DB Exchange Traded Funds |
The Company’s investments in DB Exchange Traded Funds consist of capital contributions in the general shares of the Funds.
Upon the establishment of the Funds, the Company’s investment represents 100% ownership and is stated at cost. Upon commencement of the Funds’ investment operations and issuance of the Funds’ limited shares, the Company’s general share ownership of the Feeder Funds is recorded as capital in the consolidated financial statements of the Funds, and the Company’s general share ownership of the Master Funds is recorded as a minority shareholder.
The Company is a limited liability company and did not elect to be taxable as a corporation for U.S. income tax purposes. Accordingly, the Company will not incur U.S. income taxes. No provision for federal, state, and local income taxes has been made in the accompanying financial statements, as its owner-member is individually liable for income taxes, if any, on its share of the Company’s income, loss, and other items. The following is the major tax jurisdiction for the Company and the earliest tax year subject to examination: United States – 2005.
171
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
March 31, 2008
Fees for management services are recognized on an accrual basis when earned. Fees for management services are accrued from each of the Master Funds monthly. No separate fee is received from each of the Feeder Funds.
Certain amounts in the 2007 financial statements have been reclassified to conform to the 2008 presentation.
(3) | Related Party Transactions |
(a) | Management Fees and Due from DB Exchange Traded Funds |
The DBA, DBB, DBC, DBE, DBP, and DBV Master Funds pay the Company a management fee, monthly in arrears, in an amount equal to 0.75% per annum of their net asset values.
The DBO, DBS, DGL, UDN, and UUP Master Funds pay the Company a management fee, monthly in arrears, in an amount equal to 0.50% per annum of their net asset values.
During the three months ended March 31, 2008 and March 31, 2007 the Company earned management fees of $9,603,349 and $2,266,011 respectively. As of March 31, 2008 and December 31, 2007 management fees due from DB Exchange Traded Funds were $7,018,823 and $2,084,602, respectively.
| | | | | | | | | |
| | | 2008
Management
fees | | 2007
Management
fees | | 2008 Due
from DB
Exchange-
Traded
Funds | | 2007 Due
from DB
Exchange-
Traded
Funds |
DBA Master Fund | | $ | 4,142,724 | | 221,586 | | 3,151,890 | | 610,088 |
DBB Master Fund | | | 151,656 | | 42,287 | | 118,744 | | 30,794 |
DBC Master Fund | | | 3,647,571 | | 1,380,353 | | 2,608,623 | | 943,961 |
DBE Master Fund | | | 93,369 | | 50,569 | | 63,986 | | 31,370 |
DBO Master Fund | | | 45,651 | | 33,138 | | 30,490 | | 11,577 |
DBP Master Fund | | | 174,043 | | 45,661 | | 134,476 | | 30,081 |
DBS Master Fund | | | 58,301 | | 30,863 | | 45,072 | | 11,679 |
DBV Master Fund | | | 983,445 | | 403,741 | | 651,608 | | 330,845 |
DGL Master Fund | | | 82,719 | | 30,345 | | 61,402 | | 16,780 |
UDN Master Fund | | | 104,544 | | 13,782 | | 71,580 | | 34,492 |
UUP Master Fund | | | 119,326 | | 13,686 | | 80,952 | | 32,935 |
| | | | | | | | | |
| | $ | 9,603,349 | | 2,266,011 | | 7,018,823 | | 2,084,602 |
| | | | | | | | | |
(b) | Organization and Offering Costs |
The Company assumes all organization and offering costs of the Funds and Master Funds. Expenses incurred with the continuous offering of limited shares will also be paid by the Company.
(c) | Administration Expenses |
The Company assumes all routine operational, administrative and other ordinary expenses of the Funds and Master Funds, including, but not limited to, computer services, the fees and expenses of the Trustee, legal and accounting fees and expenses, tax preparation expenses, filing fees and printing, mailing and duplication costs. Accordingly, such expenses are recorded in the statement of income and expenses of the Company. Please refer to Note 6 for further details on service agreements.
The Company, in its capacity as the managing owner and on behalf of the Funds, entered into a service agreement with Deutsche Bank AG for services including, but not limited to, trading, accounting, legal, human resources, and other. The costs of these services are assumed by Deutsche Bank AG with no cost allocation to the Company or the Funds.
172
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
March 31, 2008
Deutsche Bank AG New York Branch, provides the Company with a cash facility to cover its operational expenses and to deposit management fees received from the DB Exchange Traded Funds. This cash management program is non interest bearing and there is no expiration date. As of March 31, 2008, and December 31, 2007, the Company had a net receivable from affiliate of $3,715,830 and $2,867,336, respectively.
The Company has received from Deutsche Bank AG a letter of support that provides to the Company the funds and support to allow the Company to meet all of its current and currently foreseeable obligations for a year and a day from December 31, 2007.
(4) | Investments in DB Exchange Traded Funds |
Investments in DB Exchange Traded Funds as of March 31, 2008 consist of the following:
| | | |
PowerShares DB Commodity Index Tracking Fund | | $ | 1,436 |
DB Commodity Index Tracking Master Fund | | | 1,436 |
PowerShares DB G10 Currency Harvest Fund | | | 1,028 |
DB G10 Currency Harvest Master Fund | | | 1,028 |
PowerShares DB Energy Fund | | | 1,559 |
DB Energy Master Fund | | | 1,559 |
PowerShares DB Oil Fund | | | 1,495 |
DB Oil Master Fund | | | 1,495 |
PowerShares DB Precious Metals Fund | | | 1,357 |
DB Precious Metals Master Fund | | | 1,357 |
PowerShares DB Gold Fund | | | 1,371 |
DB Gold Master Fund | | | 1,371 |
PowerShares DB Silver Fund | | | 1,274 |
DB Silver Master Fund | | | 1,274 |
PowerShares DB Base Metals Fund | | | 1,014 |
DB Base Metals Master Fund | | | 1,014 |
PowerShares DB Agriculture Fund | | | 1,459 |
DB Agriculture Master Fund | | | 1,459 |
PowerShares DB US Dollar Index Bullish Fund | | | 895 |
DB US Dollar Index Bullish Master Fund | | | 895 |
PowerShares DB US Dollar Index Bearish Fund | | | 1,179 |
DB US Dollar Index Bearish Master Fund | | | 1,179 |
| | | |
| | $ | 28,134 |
| | | |
The Company’s ownership in each of the above DB Exchange Traded Funds represents less than 1.0%.
Accrued expenses as of March 31, 2008 and December 31, 2007 consist of the following:
| | | | | |
| | | 2008 | | 2007 |
Audit fees and tax services | | $ | 4,769,671 | | 5,346,247 |
Marketing fees | | | 1,539,006 | | 817,335 |
Administrator and trustees fees | | | 981,453 | | 484,118 |
Legal fees | | | 1,064,933 | | 318,520 |
Printing services | | | 640,400 | | 166,950 |
Other | | | 148,659 | | 93,666 |
| | | | | |
| | $ | 9,144,122 | | 7,226,836 |
| | | | | |
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DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
March 31, 2008
Under the trust agreement of the Funds, Wilmington Trust Company (the “Trustee” of the Funds) has delegated to the Company the exclusive management and control of all aspects of the business of the Funds.
Trustee fees are paid on behalf of the Funds by the Company.
| (b) | Administration Agreement |
The Company, in its capacity as the managing owner and on behalf of each of the Funds and Master Funds, has appointed The Bank of New York as the administrator (the Administrator), custodian and transfer agent of the Funds and have entered into separate administrative, custodian, transfer agency and service agreements (collectively referred to as the Administration Agreement). The Administrator performs or supervises the performance of services necessary for the operation and administration of each of the Funds (other than making investment decisions), including receiving and processing orders to create and redeem shares of the Funds, net asset value calculations, accounting, and other fund administrative services.
The Administrator’s monthly fees are paid on behalf of the Funds by the Company.
| (c) | Distribution Services Agreement |
ALPS Distributors, Inc. (the Distributor) provides certain distribution services to the Funds. Pursuant to the Distribution Services Agreement between the Company in its capacity as managing owner of the Funds and the Distributor, the Distributor assists the Company and the Administrator with certain functions and duties relating to distribution and marketing including reviewing and approving marketing material.
The Distribution Services Agreement is effective for two years and thereafter will continue automatically for successive annual periods, provided that such continuance is specifically approved at least annually by the Company or otherwise as provided under the Distribution Services Agreement. The Distribution Services Agreement is terminable without penalty on sixty days’ written notice by the Company or by the Distributor. The Distribution Services Agreement will automatically terminate in the event of its assignment.
Under the License Agreement among Invesco PowerShares Capital Management LLC (formerly known as PowerShares Capital Management LLC) (the Licensor), and the Company in its own capacity, and in its capacity as the managing owner and on behalf of the Funds, the Licensor granted to the Funds a non-exclusive license to use the PowerShares® trademark (the “Trademark”) anywhere in the world, solely in connection with the marketing and promotion of the Funds and to use or refer to the Trademark in connection with the issuance and trading of the Funds’ shares as necessary.
License fees are paid on behalf of the Funds by the Company.
Pursuant to a marketing agreement between Invesco Aim Distributors, Inc. (formerly known as AIM Distributors, Inc), (an affiliate of the Licensor) and the Company in its capacity as the managing owner and on behalf of the Funds, Invesco Aim Distributors, Inc. assists the Company and the Administrator with certain functions and duties such as providing various educational and marketing activities regarding each of the Funds, primarily in the secondary trading market. Activities include, but are not limited to, communicating each of the Funds’ names,
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DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
March 31, 2008
characteristics, uses, benefits, and risks, consistent with the prospectus, engagement in public seminars, road shows, conferences, media interviews, fielding incoming telephone “800” number calls, and distributing sales literature and other communications (including electronic media) regarding each of the Funds. Invesco Aim Distributors, Inc will not open customer accounts or handle orders for the Funds.
Marketing fees are paid on behalf of the Funds by the Company.
(7) | Commitments and Contingencies |
The Company has entered into various service agreements on behalf of the Funds that contain a variety of representations, or provide indemnification provisions related to certain risks service providers undertake in performing services that are in the best interests of the Funds. While the Company’s exposure under such indemnification provisions cannot be estimated until a claim arises, these general business indemnifications are not expected to have a material impact on the Company’s financial position.
(8) | Business and Credit Concentration |
The Company’s business is to serve as the managing owner, commodity pool operator, and commodity trading advisor to the DB Exchange Traded Funds. The basis for the management fee calculation is the Funds’ net asset value. Accordingly, factors that may have the effect of causing a decline in the Funds’ net asset value will affect the Company’s income from management fees.
(9) | Recently Adopted Accounting Standards |
In September 2006, the Financial Accounting Standard Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 157, Fair Value Measurement (Statement 157). Statement 157 defines fair value, establishes framework for the measurement of fair value, and enhances disclosures about fair value measurements. The Statement is effective for fair value measures already required or permitted by other standards for fiscal years beginning after November 15, 2007. The Company adopted Statement 157 on January 1, 2008, and management has determined that the application of this Statement did not have a material impact on the Company’s financial statements.
(10) | Recently Issued Accounting Standards |
In December 2007, the Financial Accounting Standards Board released FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment to ARB No. 51 (Statement 160). Statement 160 requires noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with noncontrolling interest holders. Statement 160 is effective for periods beginning on or after December 15, 2008 and earlier adoption is prohibited. Statement 160 will be applied prospectively to all noncontrolling interests including any that arose before the effective date and presentation and disclosure requirements shall be applied retrospectively for all periods presented. At this time, management is evaluating the implications of this Statement and its impact on the financial statements has not yet been determined.
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PART TWO
STATEMENT OF ADDITIONAL INFORMATION
POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
PowerShares DB Energy Fund
PowerShares DB Oil Fund
PowerShares DB Precious Metals Fund
PowerShares DB Gold Fund
PowerShares DB Silver Fund
PowerShares DB Base Metals Fund
PowerShares DB Agriculture Fund
Shares of Beneficial Interest
The Shares are speculative securities which involve the risk of loss.
Past performance is not necessarily indicative of future results.
See “The Risks You Face” beginning at page 2318 in Part One.
THIS PROSPECTUS IS IN TWO PARTS: A DISCLOSURE DOCUMENT
DOCUMENT AND A STATEMENT OF ADDITIONAL INFORMATION. THESE
INFORMATION. THESE PARTS ARE BOUND
TOGETHER, AND BOTH CONTAIN
IMPORTANT INFORMATION. YOU MUST READ THE
STATEMENT OF ADDITIONAL INFORMATION
IN CONJUNCTION WITH THE
DISCLOSURE DOCUMENT,
DATED [], 2008 [ ], 2014.
[ ] [ ], 2014
DB Commodity Services LLC
Managing Owner
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PART TWO
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
177
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GENERAL INFORMATION RELATING TO DEUTSCHE BANK AG
Deutsche Bank AG is a banking company with limited liability incorporated under the laws of the Federal Republic of Germany under registration number HRB 30 000. Deutsche Bank AG has its registered office at Taunusanlage 12, D-60325Theodor-Heuss-Allee 70, 60486 Frankfurt am Main.Main, Germany. Deutsche Bank AG originated from the reunification of Norddeutsche Bank Aktiengesellschaft, Hamburg, Deutsche Bank Aktiengesellschaft West, Düsseldorf, and Süddeutsche Bank Aktiengesellschaft, Munich; pursuant to the Law on the Regional Scope of Credit Institutions, these had been disincorporated in 1952 from Deutsche Bank, founded in 1870. The merger and the name were entered in the Commercial Register of the District Court in Frankfurt am Main on May 2, 1957.
Deutsche Bank AG is the parent company of the Deutsche Bank Group, consisting of banks, capital market companies, fund management companies and a property finance company, installment financing companies, research and consultancy companies and other domestic and foreign companies. The Deutsche Bank Group has over 1,500 branches and offices100,000 employees in 74 countries engaged in banking business and other financial businesses worldwide.
The objectives of Deutsche Bank AG, as set forth in its Articles of Association, include the transaction of all kinds of banking businesses, the provision of financial and other services and the promotion of international economic relations. Deutsche Bank AG may realize these objectives itself or through subsidiaries and affiliated companies. To the extent permitted by law, Deutsche Bank AG is entitled to transact all business and to take all steps which appear likely to promote the objectives of Deutsche Bank AG, in particular, to acquire and dispose of real estate, to establish branches at home and abroad, to acquire, administer and dispose of participations in other enterprises, and to conclude enterprise agreements.
The activities of the Deutsche Bank Group include traditional deposit-taking and lending business for private clients, corporate and public sector entities, including mortgage lending, payment transactions, securities brokerage for customers, asset management, investment banking, project finance,
structured finance, foreign trade finance, money and foreign exchange dealing, building savings business (Bauspargeschäft), as well as cash management, payment and securities settlement, and payment cards and point-of-sale services.
As of December 31, 2007,2012, the issued share capital of Deutsche Bank AG amounted to euro 1.362.37 billion, consisting of 530.4929.50 million ordinary registered shares without par value. These shares are fully paid up and in registered form. The shares are listed for trading and official quotation on all the German stock exchanges. They are also listed on the stock exchanges in Amsterdam, Brussels, London, Luxembourg, New York, Paris, Tokyo and Vienna and on the Swiss Exchange.a number of other global stock exchanges.
As of December 31, 2007, the Deutsche Bank Group had total assets of euro 2,020 billion, total liabilities of euro 1,982 billion and shareholders’ equity of euro 37.0 billion. Please refer to Deutsche Bank AG’s Annual Report on Form 20-F which is incorporated by reference herein, for additional financial information and financial statements.
Deutsche Bank AG London is the London branch of Deutsche Bank AG. Deutsche Bank AG, New York branch, is the New York branch of Deutsche Bank AG and operates pursuant to a license issued by the Superintendent of Banks of the State of New York on July 14, 1978.
THE FUTURES MARKETS
Futures Contracts
Futures contracts are standardized contracts made on United States or foreign exchanges that call for the future delivery of specified quantities of various agricultural and tropical commodities, industrial commodities, currencies, financial instruments or metals at a specified time and place. The contractual obligations, depending upon whether one is a buyer or a seller, may be satisfied either by taking or making, as the case may be, physical delivery of an approved grade of commodity or by making an offsetting sale or purchase of an equivalent but opposite futures contract on the same, or mutually off-setting, exchange prior to the designated date of delivery. As an example of an offsetting transaction where the physical commodity is not delivered, the contractual obligation arising from the sale of one contract of December 20082014 wheat on a commodity exchange may be fulfilled at any time before delivery of the commodity is required by the purchase of one contract of December 20082014 wheat on the same exchange. The difference
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between the price at which the futures contract is sold or purchased and the price paid for the offsetting purchase or sale, after allowance for brokerage commissions, constitutes the profit or loss to the trader. Certain futures contracts, such as those for stock or other financial or economic indices approved by the CFTC or Eurodollar contracts, settle in cash
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(irrespective (irrespective of whether any attempt is made to offset such contracts) rather than delivery of any physical commodity.
Hedgers and Speculators
The two broad classes of persons who trade futures interest contracts are “hedgers” and “speculators.” Commercial interests, including farmers, that market or process commodities, and financial institutions that market or deal in commodities, including interest rate sensitive instruments, foreign currencies and stocks, and which are exposed to currency, interest rate and stock market risks, may use the futures markets for hedging. Hedging is a protective procedure designed to minimize losses that may occur because of price fluctuations occurring, for example, between the time a processor makes a contract to buy or sell a raw or processed commodity at a certain price and the time he must perform the contract. The futures markets enable the hedger to shift the risk of price fluctuations to the speculator. The speculator risks his capital with the hope of making profits from price fluctuations in futures interests contracts. Speculators rarely take delivery of commodities, but rather close out their positions by entering into offsetting purchases or sales of futures interests contracts. Since the speculator may take either a long or short position in the futures markets, it is possible for him to make profits or incur losses regardless of whether prices go up or down. Trading by the Master FundsFund will be for speculative rather than for hedging purposes.
Futures Exchanges
Futures exchanges provide centralized market facilities for trading futures contracts and options (but not forward contracts). Members of, and trades executed on, a particular exchange are subject to the rules of that exchange. Among the principal exchanges in the United States are the Chicago Board of Trade, the Chicago Mercantile Exchange, the New York Mercantile Exchange, and the New York Board of Trade.ICE Futures U.S.
Each futures exchange in the United States has an associated “clearing house.” Once trades between members of an exchange have been confirmed, the clearing house becomes substituted for each buyer and each seller of contracts traded on the exchange and, in effect, becomes the other party to each trader’s open position in the market. Thereafter, each party to a trade looks only to the clearing house for performance. The clearing house generally establishes some sort of security or guarantee fund to which all clearing members of the exchange mustcontribute;must contribute; this fund acts as an emergency buffer that enables the clearing house, at least to a large degree, to meet its obligations with regard to the “other side” of an insolvent clearing member’s contracts. Furthermore, clearing houses require margin deposits and continuously mark positions to market to provide some assurance that their members will be able to fulfill their contractual obligations. Thus, a central function of the clearing houses is to ensure the integrity of trades, and members effecting futures transactions on an organized exchange need not worry about the solvency of the party on the opposite side of the trade; their only remaining concerns are the respective solvencies of their commodity broker and the clearing house. The clearing house “guarantee” of performance on open positions does not run to customers. If a member firm goes bankrupt, customers could lose money.
Foreign futures exchanges differ in certain respects from their U.S. counterparts. In contrast to U.S. exchanges, certain foreign exchanges are “principals’ markets,” where trades remain the liability of the traders involved, and the exchange clearing house does not become substituted for any party.
Daily Limits
Most U.S. futures exchanges (but generally not foreign exchanges or banks or dealers in the case of forward contracts) limit the amount of fluctuation in futures interests contract prices during a single trading day by regulation. These regulations specify what are referred to as “daily price fluctuation limits” or more commonly “daily limits.” The daily limits establish the maximum amount that the price of a futures interests contract may vary either up or down from the previous day’s settlement price. Once the daily limit has been reached in a particular futures interest, no trades may be made at a price beyond the
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limit. See “The Risks You Face –- (34) The Net Asset Value Calculation of the Master FundsFund May Be Overstated or Understated Due to the Valuation Method Employed When a Settlement Price is not Available on the Date of Net Asset Value Calculation.”
Regulations
Futures exchanges in the United States are subject to regulation under the Commodity Exchange Act, or CEAct, by the CFTC, the governmental agency having responsibility for regulation of futures exchanges and trading on those exchanges. (Investors should be aware that no governmental U.S. agency regulates the OTC foreign exchange markets.)
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The CEAct and the CFTC also regulate the activities of “commodity trading advisors” and “commodity pool operators” and the CFTC has adopted regulations with respect to certain of such persons’ activities. Pursuant to its authority, the CFTC requires a commodity pool operator (such as the Managing Owner) to keep accurate, current and orderly records with respect to each pool it operates. The CFTC may suspend the registration of a commodity pool operator if the CFTC finds that the operator has violated the CEAct or regulations thereunder and in certain other circumstances. Suspension, restriction or termination of the Managing Owner’s registration as a commodity pool operator would prevent it, until such time (if any) as such registration were to be reinstated, from managing, and might result in the termination of, the Trust and the Master Trust. The CEAct gives the CFTC similar authority with respect to the activities of commodity trading advisors, such as the Managing Owner. If the registration of a Managing Owner as a commodity trading advisor were to be terminated, restricted or suspended, the Managing Owner would be unable, until such time (if any) as such registration were to be reinstated, to render trading advice to the Fund and the Master Fund. The Funds and the Master Funds themselves areFund is not registered with the CFTC in any capacity.
The CEAct requires all “futures commission merchants,” such as the Commodity Broker, to meet and maintain specified fitness and financial requirements, segregate customer funds from proprietary funds and account separately for all customers’ funds and positions, and to maintain specified book and records open to inspection by the staff of the CFTC.
The CEAct also gives the states certain powers to enforce its provisions and the regulations of the CFTC.
Shareholders are afforded certain rights for reparations under the CEAct. Shareholders may also be able to maintain a private right of action for certain violations of the CEAct. The CFTC has adopted rules implementing the reparation provisions of the CEAct which provide that any person may file a complaint for a reparations award with the CFTC for violation of the CEAct against a floor broker, futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, and their respective associated persons.
Pursuant to authority in the CEAct, the NFA has been formed and registered with the CFTC as a “registered futures association.” At the present time, the NFA is the only non-exchange self-regulatoryorganizationself-regulatory organization for commodities professionals. NFA members are subject to NFA standards relating to fair trade practices, financial condition, and consumer protection. As the self-regulatory body of the commodities industry, the NFA promulgates rules governing the conduct of commodity professionals and disciplines those professionals who do not comply with such standards. The CFTC has delegated to the NFA responsibility for the registration of commodity trading advisors, commodity pool operators, futures commission merchants, introducing brokers and their respective associated persons and floor brokers. The Commodity Broker and the Managing Owner are members of the NFA (the Funds and the Master Funds themselves areFund is not required to become membersa member of the NFA).
The CFTC has no authority to regulate trading on foreign commodity exchanges and markets.
Margin
“Initial” or “original” margin is the minimum amount of funds that must be deposited by a futures trader with his commodity broker in order to initiate futures trading or to maintain an open position in futures contracts. “Maintenance” margin is the amount (generally less than initial margin) to which a trader’s account may decline before he must deliver additional margin. A margin deposit is like a cash performance bond. It helps assure the futures trader’s performance of the futures interests which contracts
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he purchases or sells. Futures interests are customarily bought and sold on margins that represent a very small percentage (ranging upward from less than 2%) of the purchase price of the underlying commodity being traded. Because of such low margins, price fluctuations occurring in the futures markets may create profits and losses that are greater, in relation to the amount invested, than are customary in other forms of investment or speculation. The minimum amount of margin required in connection with a particular futures interests contract is set from time-to-time by the exchange on which such contract is traded, and may be modified from time-to-time by the exchange during the term of the contract.
Brokerage firms carrying accounts for traders in futures interests contracts may not accept lower, and generally require higher, amounts of margin as a matter of policy in order to afford further protection for themselves.
Margin requirements are computed each day by a commodity broker. When the market value of a particular open futures interests contract position
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changes to a point where the margin on deposit does not satisfy maintenance margin requirements, a margin call is made by the commodity broker. If the margin call is not met within a reasonable time, the broker may close out a Master Funds’the Fund’s position. With respect to the Managing Owner’s trading, only the Managing Owner, and not athe Fund or its Shareholders personally, will be subject to margin calls.
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OVERVIEW OF THE INDEX COMMODITIES AND RELATED FUTURES CONTRACTS
Unless otherwise stated, all information contained herein regarding the Index Commodities, related futures contracts and the exchanges on which they trade is derived from publicly available sources and is provided for informational purposes only. For the most updated and complete information with respect to each Index Commodity futures contract, please refer to the web address that has been provided at the end of the description of each Index Commodity.
General
Due to its highly competitive nature, the futures market has become an important economic tool to determine prices based on today’s and tomorrow’s estimated amount of supply and demand. Commodity futures contracts establish a price today either to buy or sell at a future date a defined quantity and quality of a certain commodity along with delivery terms and specifications. The prices of commodity futures contracts depend on a continuous flow of information from around the world and thus require a high amount of transparency. Factors such as weather, war, debt default, refugee displacement, land reclamation and deforestation can all have a major effect on supply and demand and, as a result, the present and future price of a commodity and its related futures contract. These types of information and the way people absorb it constantly changes the price of a commodity.
The commodity futures markets may be characterized as being in “backwardation” or in “contango.”
Backwardation is a market condition in which futures prices are progressively lower in the distant delivery months. For instance, if the expected future supplies of wheat greatly exceed current supplies because last year’s wheat harvest was poor and this year’s wheat harvest is expected to be excellent, the futures prices of wheat may be lower than spot prices. Backwardation may also result from a greater amount of short-term demand than long term demand. While light, sweet crude oil and heating oil have historically exhibited consistent periods ofbackwardation, backwardation will likely not exist in these markets at all times. The absence of backwardation in light, sweet crude oil and heating oil may adversely affect the value of your Shares.
In contrast to backwardation, contango is a market condition in which prices in succeeding delivery months are progressively higher than in the nearest delivery month. In other words, futures prices for physical commodities are typically higher than spot prices in a contangoed market. Higher futures prices (relative to spot prices) are due to, in part, carrying costs, such as increasing storage costs, financing costs and insurance costs covering the underlying commodities. Aluminum, gold, corn and wheat historically exhibit “contango” markets rather than backwardation. Although aluminum, gold, corn and wheat have historically exhibited consistent periods of contango, contango will likely not exist in these markets at all times. Contango in aluminum, gold, corn and wheat will adversely affect the value of your Shares.
In the oil and energy markets, generally, the prevailing market condition (i.e., either contango or backwardated) may reflect the immediate supply and demand condition. If the crude oil or energy market is in contango, it may indicate immediately available supply. Backwardation may indicate an immediate shortage. Any factor that threatens the steady flow of oil or energy around the world, such as imminent war, tends to drive the oil and energy markets into backwardation.
Index Commodities
Light, Sweet Crude Oil
Light, sweet crude oil is a type of petroleum which contains small amounts of wax, hydrogen sulfide, carbon dioxide and generally contains less than 0.5% sulfur. light, sweet crude oil is preferred by refiners because of the relatively low sulfur content and high yields of high-value products such as gasoline, diesel fuel, heating oil and jet fuel.
The price of light, sweet crude oil is volatile with fluctuations expected to affect the value of the Energy Fund Shares and the Oil Fund Shares. The level of global industrial activity influences the demand for light, sweet crude oil. In addition, various other factors can affect the demand for light, sweet crude oil, such as weather, political events and labor activity. The supply of sweet light crude oil can be affected by many events, in particular, the meetings of the Organization of Petroleum Exporting Countries. Market expectations about events that will influence either demand or supply can cause
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prices for Light, Sweet crude oil to fluctuate greatly. A significant amount of the world oil production capacity is controlled by a relatively small number of producers. Any large change in production by one of these producers could have a substantial effect on the price of light, sweet crude oil.
Light, sweet crude oil is the world’s most actively traded commodity. The light, sweet crude oil futures contract traded on the New York Mercantile Exchange (“NYMEX”) is the world’s most liquid forum for crude oil trading as well as the world’s most liquid futures contract on a physical commodity. Due to the excellent liquidity and price transparency of the futures contract, it is used as a principal international pricing benchmark.
The light, sweet crude oil futures contract trades in units of 1,000 barrels based on delivery in Cushing, Oklahoma. The contract provides for delivery of several grades of domestic and internationally traded foreign crudes, and serves the diverse needs of the physical market.
Additional information regarding light, sweet crude oil futures contracts (symbol: CL) traded on the NYMEX is available athttp://www.nymex.com
Heating Oil
Heating oil, also known in the United States as No. 2 fuel oil and elsewhere as “red diesel,” is a low viscosity, flammable liquid petroleum product used to fuel furnaces or boilers in residential, commercial and municipal buildings. Heating oil is less commonly used as an industrial fuel or for power generation. Heating oil accounts for about 25% of the yield of a barrel of crude oil, the second largest “cut” from oil after gasoline.
The price of heating oil is volatile with fluctuations expected to affect the value of the Oil Fund Shares. The level of global industrial activity influences the demand for heating oil. In addition, the seasonal temperatures in countries throughout the world can also heavily influence the demand for heating oil. Heating oil is derived from crude oil and as such, any factors that influence the supply of crude oil may also influence the supply of heating oil.
The heating oil futures contract, listed and traded at the NYMEX, trades in units of 42,000 gallons (1,000 barrels) and is based on delivery in New York harbor, the principal cash market center. The heating oil futures contract is also used to hedge diesel fuel and jet fuel, both of which trade in the cash market at an often stable premium to the heating oil futures contract.
Additional information regarding heating oil futures contracts (symbol: HO) traded on the NYMEX is available athttp://www.nymex.com.
Brent Crude Oil
Brent crude oil is one of the major classifications of oil and is sourced primarily by the United Kingdom, Norway, Denmark, the Netherlands and Germany. Brent crude oil is not as light or as sweet as its counterpart, light, sweet crude oil (West Texas Intermediate oil).
The price of Brent crude oil is volatile with fluctuations expected to affect the value of the Oil Fund Shares. The price of Brent crude oil is influenced by may factors, including, but not limited to, amount of output by oil producing nations, worldwide supply/stockpiles, weather, various geopolitical factors that causes supply disruptions (e.g., war, terrorism), global demand (particularly from emerging nations), currency fluctuations, and activities of market participants such as hedgers and speculators.
The Brent crude oil futures contract is listed and traded at the IntercontinentalExchange, Inc. (the “ICE”), an electronic marketplace for energy trading and price discovery. In Europe, Brent crude oil is the standard for futures contracts traded on the ICE. Brent crude oil is the price reference for two-thirds of the world’s traded oil.
The futures contract trades in units of 1,000 barrels. The futures contract is a deliverable contract based on EFP delivery with an option to cash settle (i.e. the IPE Brent Index price for the day following the last trading day of the futures contract).
Additional information regarding Brent crude oil futures contracts (symbol: LCO) traded on the ICE is available athttps://www.theice.com.
RBOB Gasoline
Gasoline is the largest single volume refined product sold in the United States and accounts for almost half of national oil consumption. It is a highly diverse market, with hundreds of wholesale distributors and thousands of retail outlets, making it subject to intense competition and price volatility.
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The price of RBOB Gasoline is volatile with fluctuations expected to affect the value of the Oil Fund Shares. The level of global industrial activity influences the demand for RBOB Gasoline. In addition, the demand has seasonal variations, which occur during “driving seasons” usually considered the summer months in North America and Europe. RBOB Gasoline is derived from crude oil and as such, any factors that influence the supply of crude oil may also influence the supply of RBOB Gasoline.
The RBOB Gasoline futures contract is listed and traded at the NYMEX. The NYMEX Division New York harbor reformulated gasoline blendstock for oxygen blending (RBOB) futures contract trades in units of 42,000 gallons (1,000 barrels). It is based on delivery at petroleum products terminals in New York harbor, the major East Coast trading center for imports and domestic shipments from refineries in the New York harbor area or from the Gulf Coast refining centers. RBOB conforms to industry standards for reformulated regular gasoline blendstock for blending with 10% denatured fuel ethanol (92% purity) as listed by the Colonial Pipeline for fungible F grade for sales in New York and New Jersey. RBOB is a wholesale non-oxygenated blendstock traded in the New York Harbor barge market that is ready for the addition of 10% ethanol at the truck rack.
Additional information regarding RBOB Gasoline futures contracts (symbol: XB) traded on the NYMEX is available athttp://www.nymex.com.
Natural Gas
Natural gas is used primarily for residential and commercial heating and in the production of electricity. The greatest natural gas reserves are in the former Soviet Union countries and the Middle East. The greatest producers of natural gas are the United States, Canada and the former Soviet Union countries. Natural gas accounts for almost a quarter of U.S. energy consumption.
The price of natural gas is volatile with fluctuations expected to affect the value of the Oil Fund Shares. The level of global industrial activity influences the demand for natural gas. In addition to the seasonal temperatures in countries throughout the world, any fluctuations may also heavily influence the demand for natural gas.
The natural gas futures contract is listed and traded at the NYMEX. The NYMEX natural gas futures contracts trade in units of 10,000 million British Thermal Units and are based on delivery at the Henry Hub (which is a point on the natural gaspipeline system in Erath, Louisiana). Henry Hub is the nexus of 16 intra- and inter-state natural gas pipeline systems that draw supplies from the region’s prolific gas deposits. These pipelines serve markets throughout the U.S. East Coast, the Gulf Coast, the Midwest and up to the Canadian border. Henry Hub is the pricing point for natural gas futures contracts traded on the NYMEX. Future prices set at Henry Hub generally serve as the benchmark price of natural gas in the North American market.
Additional information regarding Natural Gas futures contracts (symbol: NG) traded on the NYMEX is available athttp://www.nymex.com.
Gold
Gold is a vital industrial commodity. It is an excellent conductor of electricity, is resistant to corrosion, and is one of the most chemically stable of the elements, making it important in electronics and other high-tech applications. The principal gold producing countries include South Africa, the United States, Australia, Canada, China, Indonesia, and Russia.
The price of gold is volatile with fluctuations expected to affect the value of the Gold Fund Shares and the Precious Metals Fund Shares. Gold prices float freely in accordance with supply and demand. The price movement of gold may be influenced by a variety of factors, including announcements from central banks regarding reserve gold holdings, agreements among central banks, purchases and sales of gold by central banks other governmental agencies that hold large supplies of gold, political uncertainties, economic concerns such as an increase or decrease in confidence in the global monetary system, the relative strength of the U.S. dollar, interest rates and numerous other factors. Gold prices may also be affected by industry factors such as industrial and jewelry demand.
The COMEX Division of the NYMEX commenced the trading of gold futures contracts on December 31, 1974. The trading unit of COMEX gold futures contracts is 100 troy ounces. Gold bars tendered for delivery can be cast in the form of either one bar or three one-kilogram bars. In either form, the gross weight of the bar or bars tendered for each contract must be within a five percent tolerance of the 100 oz. contract and the bars must assay at not less than 995 fineness,i.e. 99.5% pure gold.
Additional information regarding Gold futures contracts (symbol: GC) traded on the NYMEX is available athttp://www.nymex.com.
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Silver
The largest industrial users of silver are the photographic, jewelry, and electronic industries. Newly mined metal (which contains silver) provides most of the needed supply of silver. Mexico, the United States and Peru are the primary producers of silver. Secondary silver sources include coin melt, scrap recovery, and countries where export is restricted.
The price of silver is volatile with fluctuations expected to affect the value of the Silver Fund Shares and the Precious Metals Fund Shares. The largest industrial users of silver (e.g., photographic, jewelry, and electronic industries) may influence its price. A change in economic conditions, such as a recession, can adversely affect industries which are dependent upon the use of silver. In turn, such a negative economic impact may decrease demand for silver, and, consequently, its price. Worldwide speculation and hedging activity by silver producers may also impact its price.
The trading unit of COMEX silver futures contracts is 5,000 troy ounces. Silver bars tendered for delivery can be cast in the form of either 1,000 or 1,100 troy ounce cast bars. In either form, the gross weight of the bar or bars tendered for each contract must be within a six percent tolerance of the 5,000 troy ounce contract and the bars must assay at not less than .999 fineness,i.e. 99.9% pure silver.
Additional information regarding Silver futures contracts (symbol: SI) traded on the NYMEX is available athttp://www.nymex.com.
Aluminum
Aluminum is the most heavily produced and consumed non-ferrous metal in the world. Its low density and malleability are characteristics that provide the flexibility necessary for many uses in the industrial world. Aluminum is extremely light, pliable, has high conductivity and is resistant to rust. Aluminum has many diverse applications ranging from beverage cans to cars. In 2001, world primary refined production of aluminum totaled over 24 million tons. Despite being the most prolific metal on earth, aluminum only began to be used extensively once an inexpensive method for distilling it by means of electrolytic reduction was discovered in the mid 19th century. World production of aluminum is as follows: (1) Europe – 33%; (2) United States – 29%; (3) Asia – 24%; (4) Oceania – 9% and (5) Africa – 5%. Industry consumption of aluminum is as follows: (1) Transportation – 26%; (2) packaging – 22%; (3) construction – 22%; (4) machinery – 8%;(5) electrical – 8%; (6) consumer durables – 7% and (7) others – 7%.
Changes in the price of aluminum are expected to affect the value of the Base Metals Fund Shares. The price movement of aluminum may be influenced by a variety of factors, including the level of global industrial activity and demands, especially relating to the transportation, packaging and building sectors, each of which significantly influences the demand, and in turn, the price of aluminum. Prices for aluminum are influenced by a number of factors including the level of economic activity in large aluminum consuming markets, political uncertainties, economic concerns and the rate of supply of new metal from producers. The production of aluminum is a power intensive process that requires large amounts of inexpensive power. Disruptions in the amount of energy available to aluminum producers could affect the supply of aluminum.
LME introduced the aluminum futures contract in 1978. The aluminum futures contract is the largest futures contract traded on the LME. Additionally, the LME has the most liquid aluminum contracts in the world. The total turnover for LME primary aluminum futures and options in 2001 was over 25 million lots or 625 million tons.
Because trading is to be conducted on a commodity exchange outside the United States, such trading is not regulated by any United States governmental agency and may involve certain risks not applicable to trading on United States exchanges, including different or diminished investor protections. In trading contracts denominated in currencies other than U.S. dollars, Shares are subject to the risk of adverse exchange-rate movements between the dollar and the functional currencies of such contracts. Investors could incur substantial losses from trading on foreign exchanges which such Investors would not have otherwise been subject had the trading been limited to U.S. markets.
The futures contract trades in units of 25 tons. The futures contract provides for delivery of aluminum that is at least 99.7% pure.
Additional information regarding aluminum futures contracts (symbol: MAL) traded on the LME is available athttp://www.lme.com.
Zinc
Zinc is commonly mined as a co-product with standard lead and both metals have growing core markets for their consumption. The main market for zinc is galvanizing, which accounts for almost half its
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modern-day demand. Zinc’s electropositive nature enables metals to be readily galvanized, which gives added protection against corrosion to building structures, vehicles, machinery and household equipment. The worldwide supply of zinc concentrate (raw material) comes mainly from North America, Russia and Australia.
Changes in the price of zinc are expected to affect the value of the Base Metals Fund Shares. The closing price of zinc is determined by reference to the official U.S. dollar cash settlement price per ton of the zinc futures contract traded on the LME. The price of zinc is primarily affected by the global demand for and supply of zinc. Demand for zinc is significantly influenced by the level of global industrial economic activity. The galvanized steel industrial sector is particularly important given that the use of zinc in the manufacture of galvanized steel accounts for approximately 50% of world-wide zinc demand. The galvanized steel sector is in turn heavily dependent on the automobile and construction sectors. A relatively widespread increase in the demand for zinc by the galvanized steel sector, particularly in China and the United States, has been the primary cause of the recent rise in zinc prices. An additional, but highly volatile component of demand, is adjustments to inventory in response to changes in economic activity and/or pricing levels. The supply of zinc concentrate (the raw material) is dominated by China, Australia, North America and Latin America. The supply of zinc is also affected by current and previous price levels, which will influence investment decisions in new mines and smelters. It is not possible to predict the aggregate effect of all or any combination of these factors.
Because trading is to be conducted on a commodity exchange outside the United States, such trading is not regulated by any United States governmental agency and may involve certain risks not applicable to trading on United States exchanges, including different or diminished investor protections. In trading contracts denominated in currencies other than U.S. dollars, Shares are subject to the risk of adverse exchange-rate movements between the dollar and the functional currencies of such contracts. Investors could incur substantial losses from trading on foreign exchanges which such Investors would not have otherwise been subject had the trading been limited to U.S. markets.
The futures contract trades in units of 25 tons. The futures contract provides for delivery of zinc that is at least 99.995% pure.
Additional information regarding zinc futures contracts (symbol: MZN) traded on the LME is available athttp://www.lme.com.
Copper
Copper was the first mineral that man extracted from the earth and along with tin gave rise to the Bronze Age. As the ages and technology progressed the uses for copper increased. With the increased demand, exploration for the metal was extended throughout the world laying down the foundations for the industry as we know it today. Copper is an excellent conductor of electricity, as such one of its main industrial usage is for the production of cable, wire and electrical products for both the electrical and building industries. The construction industry also accounts for copper’s second largest usage in such areas as pipes for plumbing, heating and ventilating as well as building wire and sheet metal facings.
The price of copper is volatile with fluctuations expected to affect the value of the Base Metals Fund Shares. The price of copper is primarily affected by the global demand for and supply of copper. Demand for copper is significantly influenced by the level of global industrial economic activity. Industrial sectors which are particularly important include the electrical and construction sectors. In recent years demand has been supported by strong consumption from newly industrializing countries, which continue to be in a copper-intensive period of economic growth as they develop their infrastructure (such as China). An additional, but highly volatile, component of demand is adjustments to inventory in response to changes in economic activity and/or pricing levels. Apart from the United States, Canada and Australia, the majority of copper concentrate supply (the raw material) comes from outside the Organization for Economic Cooperation and Development countries. Chile is the largest producer of copper concentrate. In previous years, copper supply has been affected by strikes, financial problems and terrorist activity. Output has fallen particularly sharply in the “African Copperbelt” and in Bougainville, Papua New Guinea. Any political turmoil in these countries may cause copper supply to fall.
The closing price of copper is determined by reference to the official U.S. dollar cash settlement price per ton of the copper futures contract traded on the LME.
Because trading is to be conducted on a commodity exchange outside the United States, such trading is not regulated by any United States
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governmental agency and may involve certain risks not applicable to trading on United States exchanges, including different or diminished investor protections. In trading contracts denominated in currencies other than U.S. dollars, Shares are subject to the risk of adverse exchange-rate movements between the dollar and the functional currencies of such contracts. Investors could incur substantial losses from trading on foreign exchanges which such Investors would not have otherwise been subject had the trading been limited to U.S. markets.
The futures contract trades in units of 25 tons. The futures contract provides for delivery of Grade A Copper.
Additional information regarding the Copper Grade A futures contracts (symbol: MCU) traded on the LME is available athttp://www.lme.com.
Corn
Corn is the largest feed grain domestically and globally. Corn accounts for over 85% of total U.S. feed grain production. The U.S. is the largest corn producer in the world.
The price of corn is expected to fluctuate over time affecting the value of the Agriculture Fund Shares. The price movement of corn may be influenced by three primary supply factors: farmer planting decisions, climate, and government agricultural policies and three major market demand factors: livestock feeding, shortages or surpluses of world grain supplies, and domestic and foreign government policies and trade agreements. Additionally, the price movement of corn may be influenced by a variety of other factors, including weather conditions, disease, transportation costs, political uncertainties and economic concerns.
Corn futures are traded on the Chicago Board of Trade (“CBOT”) with a unit of trading of 5,000 bushels. The futures contract provides for delivery of No. 2 Yellow at par, No. 1 yellow at 1 1/2 cents per bushel over contract price, No. 3 yellow at 1 1/2 cents per bushel under contract price.
Additional information regarding the corn futures contracts (symbol: C) traded on the CBOT is available athttp://www.cbot.com.
Wheat
Wheat is the principal food grain domestically and globally. The U.S. is the third largest wheat producer in the world.
The price of wheat is expected to fluctuate over time affecting the value of the Agriculture Fund Shares. The price movement of wheat may be influenced by three primary supply factors: farmer planting decisions, climate, and government agricultural policies and three major market demand factors: food, shortages or surpluses of world grain supplies, and domestic and foreign government policies and trade agreements. Additionally, the price movement of wheat may be influenced by a variety of other factors, including weather conditions, disease, transportation costs, political uncertainties and economic concerns.
Wheat futures are traded on the CBOT with a unit of trading of 5,000 bushels. The futures contract provides for delivery of No. 2 Soft Red Winter, No. 2 Hard Red Winter, No. 2 Dark Northern Spring, and No. 2 Northern Spring at par; No. 1 Soft Red Winter, No. 1 Hard Red Winter, No. 1 Dark Northern Spring and No. 1 Northern Spring at 3 cents per bushel over contract price.
Additional information regarding the wheat futures contracts (symbol: W) traded on the CBOT is available athttp://www.cbot.com.
Soybeans
Soybean production is concentrated in the central United States, Brazil, China and Argentina. In the 2005 harvest season, the United States produced approximately 3.09 billion bushels of soybeans or approximately 37% of estimated world production. The industry’s trade associations and the USDA estimate that approximately 55% of United States produced soybeans are processed domestically, 15% are exported as whole soybeans, and 30% are retained for seed and residual use. The soybean industry has worked diligently to introduce soy products as bio-based substitutes for various petroleum-based products. Such products include biodiesel, soy ink, lubricants, candles and plastics. Demand for biodiesel, in particular, is expected to expand, in part due to new federal incentives and supports. Biodiesel is a substitute for standard, petroleum-based diesel fuel that is made from approximately 90% vegetable oil (such as soybean oil) or animal fat and 10% alcohol (methanol). The chemical reaction resulting from the combination of these components produces biodiesel and glycerin. Although the long-term average price differential of biodiesel is currently about $1 per gallon higher than standard diesel fuel, the 2004 Jobs Creation Act, which took effect on January 1, 2005, establishes a blender’s tax credit that equates to about $1 per gallon of biodiesel. This new tax credit, along with some earlier, less significant production incentives,
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have essentially closed the price gap between standard diesel fuel and biodiesel, considerably increasing the feasibility of large-scale biodiesel production.
The price of soybeans is expected to fluctuate over time affecting the value of the Agriculture Fund Shares. The price movement of soybeans may be influenced by a variety of factors, including demand, weather conditions, disease, crop production, transportation costs, political uncertainties and economic concerns.
Soybean futures are traded on the CBOT with a unit of trading of 5,000 bushels. The futures contract provides for delivery of No. 2 Yellow at par, No. 1 yellow at 6 cents per bushel over contract price and No. 3 yellow at 6 cents per bushel under contract price, provided, however, No. 3 Yellow Soybeans are only deliverable when all factors equal U.S. No. 2 or better except foreign material.
Additional information regarding the soybean futures contracts (symbol: S) traded on the CBOT is available athttps://www.theice.com/productguide/productDetails.do?productId=582&productTypeId= 2909&display=.
Sugar
The price of sugar is expected to fluctuate over time affecting the value of the Agriculture Fund Shares. The price movement of sugar may be influenced by a variety of factors, including demand, weather conditions, disease, crop production, transportation costs, political uncertainties and economic concerns.
Sugar futures are traded on the ICE Futures U.S. (formerly known as the New York Board of Trade or NYBOT®) (“ICE” with a unit of trading of 112,000 lbs. The futures contract provides for delivery of sugar from Argentina, Australia, Barbados, Belize, Brazil, Colombia, Costa Rica, Dominican Republic, El Salvador, Ecuador, Fiji Islands, French Antilles, Guatemala, Honduras, India, Jamaica, Malawi, Mauritius, Mexico, Mozambique (beginning with the March 2007 contract), Nicaragua, Peru, Republic of the Philippines, South Africa, Swaziland, Taiwan, Thailand, Trinidad, United States, and Zimbabwe.
Additional information regarding the sugar futures contracts (symbol: SB) traded on the ICE is available athttps://www.theice.com.
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EXHIBIT A
PRIVACY NOTICE
The importance of protecting the investors’ privacy is recognized by PowerShares DB Multi-Sector Commodity Trust, (the “Trust”)or the Trust, and DB Commodity Services LLC, (the “Managing Owner”).or the Managing Owner. The Trust and the Managing Owner protect personal information they collect about you by maintaining physical, electronic and procedural safeguards to maintain the confidentiality and security of such information.
Categories Of Information Collected.In the normal course of business, the Trust and the Managing Owner may collect the following types of information concerning investors in the FundsFund who are natural persons:
Information provided in the Participant Agreements and other forms (including name, address, social security number, income and other financial-related information); and
Data about investor transactions (such as the types of investments the investors have made and their account status).
How the Collected Information is Used.Any and all nonpublic personal information received by the FundsFund or the Managing Owner with respect to the investors who are natural persons, including the information provided to the FundsFund by such an investor in a Participant Agreement, will not be shared with nonaffiliated third parties which are not service providers to the Trust or the Managing Owner without prior notice to such investors. Such service providers include but are not limited to the Selling Agents,Authorized Participants, the Commodity Broker, administrators, auditors and the legal advisers of the Trust. Additionally, the Trust and/or the Managing Owner may disclose such nonpublic personal information as required by applicable laws, statutes, rules and regulations of any government, governmental agency or self-regulatory organization or a court order. The same privacy policy will also apply to the Shareholders who have fully redeemed.
For questions about the privacy policy, please contact the Trust.
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PART II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution.
| Item 13. | Other Expenses of Issuance and Distribution. |
The following expenses reflect the estimated amounts required to prepare and file this Registration Statement and complete the offering of the Shares (other than selling commissions).
| | | | Approximate
Amount | | Approximate
Amount | |
Securities and Exchange Commission Registration Fee | | | 184,218.15 | |
The Financial Industry Regulatory Authority Filing Fee | | | 75,500.00 | |
Securities and Exchange Commission Registration Fee* | | | $ | 72,293 | |
The Financial Industry Regulatory Authority, Inc. Filing Fee | | | | 0 | |
Printing Expenses | | | 250,000.00 | | | 125,000 | |
Fees of Certified Public Accountants | | | 18,500.00 | | | 21,500 | |
Fees of Counsel | | | 50,000.00 | | | 75,000 | |
| | | | | |
Total | | $ | 578,218.15 | | $ | 293,793 | |
| | | | | |
Item 14. Indemnification of Directors and Officers.
| * | Already paid in connection with the filing of Form S-3 (333-184947). |
| Item 14. | Indemnification of Directors and Officers. |
Section 4.7 of the Fourth Amended and Restated Declaration of Trust and Trust Agreement of each of the Trust and the Master Trust filedincorporated by reference as exhibitsan exhibit to this Registration Statement and, as amended from time-to-time, provides for the indemnification of the Managing Owner. The Managing Owner (including Covered Persons as provided under eachthe Fourth Amended and Restated Declaration of Trust and Trust Agreement) shall be indemnified by the Master Trust (or, any Masterin furtherance of Section 3.7 of the Fourth Amended and Restated Declaration of Trust and Trust Agreement, the Fund separately to the extent the matter in question relates to a single Masterthe Fund or is otherwise disproportionate), against any losses, judgments, liabilities, expenses and amounts paid in settlement of any claims sustained by it in connection with its activities for the Master Trust, provided that (i) the Managing Owner was acting on behalf of or performing services for the Master Trust and has determined, in good faith, that such course of conduct was in the best interests of the Master TrustFund, and such liability or loss was not the result of negligence, misconduct, or a breach of the Fourth Amended and Restated Declaration of Trust and Trust Agreement on the part of the Managing Owner and (ii) any such indemnification will only be recoverable from the applicable Trust Estate or Trust Estates (as such term is defined in the Fourth Amended and Restated Declaration of Trust and Trust Agreement). All rights to indemnification permitted therein and payment of associated expenses shall not be affected by the dissolution or other cessation to exist of the Managing Owner, or the withdrawal, adjudication of bankruptcy or insolvency of the Managing Owner, or the filing of a voluntary or involuntary petition in bankruptcy under Title 11 of the U.S. Code by or against the Managing Owner. The source of payments made in respect of indemnification under the Fourth Amended and Restated Declaration of Trust and Trust Agreement shall be from assets of the Fund.
| Item 15. | Recent Sales of Unregistered Securities. |
None.
Item 15. Recent Sales of Unregistered Securities.II-1
| Item 16. | Exhibits and Financial Statement Schedules. |
None.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits. The following documents (unless otherwise indicated) are filed herewith and made a part of this Registration Statement:
(a) Exhibits. The following exhibits are filed herewith:
| | | | |
Exhibit
Number | | | Description of Document |
| 1.1 | | | Form of Initial Purchaser Agreement1 |
| |
1.1 | 3.1 | | | Form of Initial Purchaser Agreement* |
| |
4.1 | | Form ofFourth Amended and Restated Declaration of Trust and Trust Agreement of the Registrant* |
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| | Registrant2 |
| |
4.2 | 4.1 | | | Form of Amended and Restated Declaration of Trust and TrustParticipant Agreement of the Co-Registrant*3 |
| |
4.2.1 | 4.2 | | Form of Amendment No. 1 to the Amended and Restated Declaration of Trust and Trust Agreement of the Co-Registrant** |
| |
4.3 | | Form of Participant Agreement*
|
| |
4.4 | | Form of Privacy Notice (annexed to the Prospectus as Exhibit A) |
| |
| 5.1 | | �� | Opinion of Richards, Layton & Finger as to legality |
| |
| 8.1 | | | Opinion of Sidley AustinLLP llp as to income tax matters |
| |
| 10.1 | | | Form of Customer Agreement*Agreement3 |
| |
| 10.2 | | | Form of Administration Agreement*Agreement3 |
| |
| 10.3 | | | Form of Global Custody Agreement*Agreement3 |
| |
| 10.4 | | | Form of Transfer Agency and Service Agreement*Agreement3 |
| |
| 10.5 | | | Form of Distribution Services Agreement*Agreement3 |
| |
| 10.6 | | | Form of Marketing Agreement*Agreement3 |
| |
| 23.1 | | | Consent of Sidley AustinLLP is included as part of Registration Statement |
| |
| 23.2 | | | Consent of Richards, Layton & Finger is included as part of Exhibit 5.1 |
| |
| 23.3 | | | Consent of Sidley AustinLLP as tax counsel is included as part of Registration StatementExhibit 8.1 |
| |
| 23.4 | | | Consent of KPMG LLP, Independent Registered Public Accounting Firm is included as part of Registration Statement |
| |
| 101.INS | | | XBRL Instance document4 |
| |
| 101.SCH | | | XBRL Taxonomy Extention Schema Document4 |
| |
| 101.CAL | | | XBRL Taxonomy Extention Calclation Linkbase Document4 |
| |
| 101.DEF | | | XBRL Taxonomy Extention Definition Linkbase Document4 |
| |
| 101.LAB | | | XBRL Taxonomy Extention Label Linkbase Document4 |
| |
| 101.PRE | | | XBRL Taxonomy Extention Presentation Linkbase Document4 |
*1 | Previously filed as an exhibit to Pre-Effective Amendment No. 2 to Form S-1 on December 14, 2006, and incorporated herein by reference. |
**2 | Previously filed as an exhibit to Registration StatementForm 10-K on Form S-1 on January 11, 2008March 1, 2013 and incorporated herein by reference. |
| 3 | Previously filed as an exhibit to Pre-Effective Amendment No. 2 to Form S-1 on December 14, 2006 and incorporated herein by reference. |
| 4 | To be filed by amendment. |
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(b) The following financial statements are included in the Prospectus:*
(1) PowerShares DB Silver Fund
(i) Report of Independent Registered Public Accounting Firm
(ii) Statement of Financial Condition as of December 31, 2013
(iii) Notes to Statement of Financial Condition
(2) DB Commodity Services LLC*
(i) Independent Auditor’s Report
(ii) Statements of Financial Condition as of December 31, 2013 and 2012
(iii) Statements of Income and Expenses for the Years Ended December 31, 2013 and 2012
(iv) Statements of Changes in Member’s Capital (Deficit) for the Years Ended December 31, 2013 and December 31, 2012
(v) Statements of Cash Flows for the Years Ended December 31, 2013 and 2012
(vi) Notes to Financial Statements
| * | (1) | The financial statements of each Fund are incorporatedTo be filed by reference as described under “Incorporation by Reference of Certain Documents.” |
| (2) | DB Commodity Services LLC |
| (i) | Report of Independent Registered Public Accounting Firm |
| (ii) | Statements of Financial Condition for the Year Ended December 31, 2007 and 2006 |
| (iii) | Statements of Income and Expenses for the Year Ended December 31, 2007 and 2006 |
| (iv) | Statements of Changes in Member’s Deficit for the Years Ended December 31, 2007 and 2006 |
| (v) | Statements of Cash Flows for the Years Ended December 31, 2007 and 2006 |
| (vi) | Notes to Financial Statements |
| (vii) | Statement of Financial Condition as of March 31, 2008 (unaudited) and December 31, 2007 |
| (viii) | Unaudited Statements of Income and Expenses For the Three Months Ended March 31, 2008 and 2007 |
| (ix) | Unaudited Statement of Changes in Member’s Capital For the Three Months Ended March 31, 2008 and 2007 |
| (x) | Unaudited Statement of Cash Flows For the Three Months Ended March 31, 2008 and 2007 |
| (xi) | Notes to Unaudited Financial Statementsamendment. |
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement;
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement, provided however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
statement;
Provided, however, that:
That:
(A) Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S–8,S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement; and
(B) Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S–3S-3 or Form F–3F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the
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registrant pursuant to section 13 or section 15(d) of the Securities Exchange
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Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be thebona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B:
(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initialbona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:
(a) The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
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(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
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(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that:
(b)(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to officers, directors or controlling persons of the registrant pursuant to the foregoing provisions described in Item 14 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by an officer, director, or controlling person of the registrant in the successful defense of any such action, suit or proceeding) is asserted by such officer, director or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Managing Owner of the Registrant and eachthe Co-Registrant has duly caused this Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 to be signed on their behalf by the undersigned, thereunto duly authorized, in the cityCity of New York, State of New York, on the 257th day of June, 2008.January, 2014.
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| PowerShares DB Multi-Sector Commodity Trust |
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By: | | DB Commodity Services LLC, its Managing Owner
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By: | | /s/ Kevin Rich |
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan |
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
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PowerShares DB Energy Fund, a series of PowerShares DB Multi-Sector Commodity Trust |
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
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By: | | /s/ Kevin Rich |
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan |
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
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PowerShares DB Oil Fund, a series of PowerShares DB Multi-Sector Commodity Trust |
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
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By: | | /s/ Kevin Rich |
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan |
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
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PowerShares DB Precious Metals Fund, a series of PowerShares DB Multi-Sector Commodity Trust |
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
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By: | | /s/ Kevin Rich |
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan |
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
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PowerShares DB Gold Fund, a series of PowerShares DB Multi-Sector Commodity Trust |
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By:
| | DB Commodity Services LLC,
its Managing Owner |
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By: | | /s/ Kevin RichS/ MARTIN KREMENSTEIN |
| | Name: Kevin Rich Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael GilliganMartin Kremenstein
|
| | Name: Michael Gilligan
Title: Principal FinancialChief Executive Officer, Chief Investment Officer and Director |
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PowerShares DB Silver Fund, a series of PowerShares DB Multi-Sector Commodity Trust |
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By: | | DB Commodity Services LLC,
its Managing Owner/S/ MICHAEL GILLIGAN
|
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By: | | /s/ Kevin Rich
|
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan
|
| | Name: Michael Gilligan Title: Principal Financial Officer
|
|
PowerShares DB Base Metals Fund, a series of PowerShares DB Multi-Sector Commodity Trust |
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
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By: | | /s/ Kevin Rich
|
| | Name: Kevin Rich
Title: DirectorChief Financial Officer and Chief Executive OfficerDirector |
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By: | | /s/ Michael Gilligan
|
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
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PowerShares DB AgricultureSilver Fund, a series of
PowerShares DB Multi-Sector Commodity Trust |
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
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By: | | /s/ Kevin Rich
|
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan
|
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
|
DB Multi-Sector Commodity Master Trust |
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
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By: | | /s/ Kevin Rich
|
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan
|
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
|
DB Energy Master Fund, a series of
DB Multi-Sector Commodity Master Trust
|
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By: | | DB Commodity Services LLC, |
| | its Managing Owner |
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By: | | /s/ Kevin RichS/ MARTIN KREMENSTEIN |
| | Name: Kevin Rich Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael GilliganMartin Kremenstein
|
| | Name: Michael Gilligan
Title: Principal FinancialChief Executive Officer, |
|
DB Oil Master Fund, a series of
DB Multi-Sector Commodity Master Trust Chief Investment Officer and Director
|
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By: | | DB Commodity Services LLC,
its Managing Owner/S/ MICHAEL GILLIGAN
|
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By: | | /s/ Kevin Rich
|
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan
|
| | Name: Michael Gilligan Title: Principal Financial Officer
|
II-8
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DB Precious Metals Master Fund, a series of
DB Multi-Sector Commodity Master Trust
|
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
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By: | | /s/ Kevin Rich
|
| | Name: Kevin Rich
Title: Director and Chief Executive Officer |
| |
By: | | /s/ Michael Gilligan
|
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
|
DB Gold Master Fund, a series of
DB Multi-Sector Commodity Master Trust
|
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
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By: | | /s/ Kevin Rich
|
| | Name: Kevin Rich
Title: and Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan
|
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
|
DB Silver Master Fund, a series of
DB Multi-Sector Commodity Master Trust
|
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
| |
By: | | /s/ Kevin Rich
|
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan
|
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
|
DB Base Metals Master Fund, a series of
DB Multi-Sector Commodity Master Trust
|
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
| |
By: | | /s/ Kevin Rich
|
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan
|
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
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DB Agriculture Master Fund, a series of
DB Multi-Sector Commodity Master Trust
|
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By:
| | DB Commodity Services LLC,
its Managing Owner
|
| |
By: | | /s/ Kevin Rich
|
| | Name: Kevin Rich
Title: Director and Chief Executive Officer
|
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By: | | /s/ Michael Gilligan
|
| | Name: Michael Gilligan
Title: Principal Financial Officer
|
II-10
Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective Amendment No. 1 to the Registration Statement on FormS-1 has been signed by the following persons on behalf of the Managing Owner of the Registrant and the Co-Registrant in the capacities and on the date indicated.
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DB Commodity Services LLC, Managing Owner Of Registrant and Co-Registrant | | | | |
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/s/ Kevin Rich Name: Kevin Rich
| | Director and Chief Executive Officer
(Principal Executive Officer)MARTIN KREMENSTEIN | | June 25, 2008 |
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/s/ Michael Gilligan
Name: Michael Gilligan
| | Principal Financial Officer | | June 25, 2008 |
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/s/ Martin Kremenstein
Name: Martin Kremenstein | | Chief OperatingExecutive Officer,
Chief Chief Investment Officer and Vice PresidentDirector
(Principal Executive Officer) | | June 25, 2008January 7, 2014 |
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/s/ MICHAEL GILLIGAN Name: Michael Gilligan | | Chief Financial Officer and Director (Principal Financial Officer) | | January 7, 2014 |
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/s/ ALEX DEPETRIS Name: Alex Depetris | | Chief Operating Officer and Director | | January 7, 2014 |
(Being principal executive officer, the principal financial and accounting officer and all of the managers of the Board of Managers of DB Commodity Services LLC)
| | | | |
DB Commodity Services LLC, Managing Owner Of Registrant and Co-Registrant
| | | | |
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/s/ Kevin Rich Name: Kevin Rich
| | Director and Chief Executive Officer
(Principal Executive Officer)MARTIN KREMENSTEIN | | June 25, 2008 |
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/s/ Martin Kremenstein
Name: Martin Kremenstein | | Chief OperatingExecutive Officer,
Chief Chief Investment Officer and Vice PresidentDirector
(Principal Executive Officer) | | June 25, 2008January 7, 2014 |
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/s/ Hans EphraimsonMICHAEL GILLIGAN Name: Hans EphraimsonMichael Gilligan | | Chief Financial Officer and Director (Principal Financial Officer) | | June 25, 2008January 7, 2014 |
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/s/ ALEX DEPETRIS Name: Alex Depetris | | Chief Operating Officer and Director | | January 7, 2014 |
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