AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 2017.
No. 333-138490
No. 811-21977
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION
STATEMENT
UNDER
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THE SECURITIES ACT OF 1933
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Pre-Effective Amendment No.
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Post-Effective Amendment No. 612
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and/or
REGISTRATION
STATEMENT
UNDER
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THE INVESTMENT COMPANY ACT OF 1940
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Amendment No. 613
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POWERSHARES EXCHANGE-TRADED FUND TRUST II
(Exact Name of Registrant as Specified in Charter)
3500 Lacey
Road, Suite 700, Downers Grove, Illinois 60515
(Address of Principal Executive Office)
Registrant’s Telephone Number, including Area Code: (800) 983-0903
Anna Paglia, Esquire
3500 Lacey Road, Suite 700, Downers Grove, Illinois 60515
With Copies to:
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Alan P. Goldberg
Stradley Ronon Stevens & Young LLP
191 North Wacker Drive, Suite 1601
Chicago, Illinois 60606
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Eric S. Purple
Stradley Ronon Stevens & Young LLP
1250 Connecticut Ave, NW, Suite 500
Washington, DC 20036
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APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
It is proposed that this filing will become effective (check appropriate box)
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immediately upon filing pursuant to paragraph (b)
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on (July 5, 2017) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)
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on (date) pursuant to paragraph (a)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of rule 485
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If appropriate, check the
following box:
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This post-effective amendment designates a new effective date for a previously filed post-effective amendment.
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PowerShares Exchange-Traded Fund Trust II
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USEQ
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PowerShares Russell 1000 Enhanced Equal Weight Portfolio
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Bats BZX Exchange, Inc.
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The U.S. Securities and
Exchange Commission (“SEC”) has not approved or disapproved these securities or passed upon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense.
Table of Contents
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USEQ
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PowerShares Russell 1000 Enhanced Equal Weight Portfolio
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Summary Information
Investment Objective
The PowerShares Russell 1000
Enhanced Equal Weight Portfolio (the “Fund”) seeks to track the investment results (before fees and expenses) of the Russell 1000
®
Enhanced Value Equal Weight Index (the “Underlying Index”).
Fund Fees and Expenses
This table describes the fees and expenses that you may
pay if you buy and hold shares of the Fund (“Shares”). Investors may pay brokerage commissions on their purchases and sales of Shares, which are not reflected in the table or the example below.
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Annual Fund Operating Expenses
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(expenses that you pay each year as a percentage of the value of your investment)
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Management Fees
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0.29%
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Other Expenses
(1)
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0.00%
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Total Annual Fund Operating Expenses
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0.29%
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(1)
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“Other Expenses” are based on estimated amounts for the current fiscal year.
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Example
This example is
intended to help you compare the cost of investing in the Fund with the cost of investing in other funds.
This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the
same. This example does not include the brokerage commissions that investors may pay to buy and sell Shares. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate will cause the Fund to incur
additional transaction costs and may result in higher taxes when Shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. At the
date of this Prospectus, the Fund has not yet commenced operations and portfolio turnover data therefore is not available.
Principal
Investment Strategies
The Fund generally will invest at least 90% of its total assets in securities that
comprise the Underlying Index. Frank Russell Company (“Russell” or the “Index Provider”) compiles, maintains and calculates the Underlying Index, which is composed of securities in the Russell 1000
®
Index (the “Russell 1000”) exhibiting upward price momentum and fair valuations. The Underlying
Index is a subset of the Russell 1000, which measures the performance of the large-cap segment of the U.S. equity universe.
Strictly in
accordance with its guidelines and mandated procedures, the Index Provider selects constituent securities for the Underlying Index using a three-step screening
process. First, Russell excludes securities with zero or negative earnings over the past 12 months. Second, Russell screens for value stocks. A “value stock” tends to trade at a lower
price than the price at which such stock would be expected to trade given the fundamentals of its company (e.g., dividends, earnings and sales), and thus may be considered undervalued by investors. Russell assigns a valuation score to each eligible
security, which represents the average of three financial metrics of a company: (i) cash flow yield; (ii) earnings yield; and (iii) sales-to-price ratio. Russell excludes stocks with valuation scores in the bottom 10% of all eligible
stocks. Third, Russell screens for securities with greater positive price “momentum.” In general, momentum is the tendency of recent changes in a stock’s price to persist for some time into the future. The trend in the change of a
stock’s price may be upward (“positive momentum”) or downward (“negative momentum”). A positive “momentum style” of investing emphasizes investing in stocks that have had better recent performance compared to other
stocks, on the expectation that such a positive trend will continue because of the stock’s momentum in the market. Russell defines momentum as the cumulative total return of a stock, measured over the last 12 months, excluding the most recent
month. Stocks are ranked from highest returns to lowest returns over that period within each of 10 industries, and stocks with returns ranking in the bottom 10% of each industry are excluded. The remaining securities are included in the Underlying
Index.
Constituent securities in the Underlying Index are equally weighted. The Underlying Index also may include securities of small-
and mid-cap issuers. Therefore, due to the equal weighting methodology of the Underlying Index, the Fund may have greater exposure to small- or mid-cap issuers than would be the case if the Underlying Index used a traditional capitalization-weighted
methodology.
The Fund generally invests in all of the components of the Underlying Index in proportion to their weightings in the
Underlying Index. The Fund is “non-diversified” and therefore is not required to meet certain diversification requirements under the Investment Company of 1940, as amended (the “1940 Act”).
Concentration Policy.
The Fund will concentrate its investments (i.e., invest more than 25% of the value of its net assets) in securities of
issuers in any one industry or group of industries only to the extent that the Underlying Index reflects a concentration in that industry or group of industries. The Fund will not otherwise concentrate its investments in securities of issuers in any
one industry or group of industries.
Principal Risks of Investing in the Fund
The following summarizes the principal risks of the Fund.
The Shares will change in value, and you could lose money by investing in the Fund. The Fund may not achieve its investment objective.
Equity Risk.
Equity risk is the risk that the value of equity securities, including common stocks, may fall due to both changes in general economic conditions that impact the market as a
whole, as well as factors that directly relate to a specific company or its industry. Such general economic conditions include changes in
interest rates, periods of market turbulence or instability, or general and prolonged periods of economic decline and cyclical change. It is possible that a drop in the stock market may depress
the price of most or all of the common stocks that the Fund holds. In addition, equity risk includes the risk that investor sentiment toward particular industries will become negative. The value of a company’s common stock may fall solely
because of factors, such as an increase in production costs, that negatively impact other companies in the same region, industry or sector of the market. A company’s common stock also may decline significantly in price over a short period of
time due to factors specific to that company, including decisions made by its management or lower demand for the company’s products or services. For example, an adverse event, such as an unfavorable earnings report or the failure to make
anticipated dividend payments, may depress the value of common stock.
Value Risk.
“Value” securities are subject to the
risk that valuations never improve or that the returns on “value” securities are less than returns on other styles of investing or the overall stock market. Thus, the value of the Fund’s investments will vary and at times may be lower
or higher than that of other types of investments.
Momentum Investing Risk.
The momentum style of investing is subject to the
risk that the securities may be more volatile than the market as a whole, or that the returns on securities that previously have exhibited price momentum are less than returns on other styles of investing. Momentum can turn quickly, and stocks that
previously have exhibited high positive momentum may not experience continued positive momentum. In addition, there may be periods when the momentum style of investing is out of favor and therefore, the investment performance of the Fund may suffer.
Industry Concentration Risk.
In following its methodology, the Underlying Index from time to time may be concentrated to a
significant degree in securities of issuers located in a single industry or sector. To the extent that the Underlying Index concentrates in the securities of issuers in a particular industry or sector, the Fund will also concentrate its investments
to approximately the same extent. By concentrating its investments in an industry or sector, the Fund may face more risks than if it were diversified broadly over numerous industries or sectors. Such industry-based risks, any of which may adversely
affect the companies in which the Fund invests, may include, but are not limited to, the following: general economic conditions or cyclical market patterns that could negatively affect supply and demand in a particular industry; competition for
resources, adverse labor relations, political or world events; obsolescence of technologies; and increased competition or new product introductions that may affect the profitability or viability of companies in an industry. In addition, at times,
such industry or sector may be out of favor and underperform other industries or the market as a whole.
Non-Correlation Risk.
The
Fund’s return may not match the return of the Underlying Index for a number of reasons. For example, the Fund incurs operating expenses not applicable to the Underlying Index and incurs costs in buying and selling securities, especially when
rebalancing the Fund’s securities holdings to reflect changes
in the composition of the Underlying Index. In addition, the performance of the Fund and the Underlying Index may vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or liquidity constraints.
Non-Diversified Fund Risk.
Because the Fund is non-diversified and can invest a greater portion of its assets in securities of individual issuers than a diversified fund, changes in the market value of a single investment could cause greater fluctuations in Share price than
would occur in a diversified fund. This may increase the Fund’s volatility and cause the performance of a relatively small number of issuers to have a greater impact on the Fund’s performance.
Market Risk.
Securities in the Underlying Index are subject to market fluctuations. You should anticipate that the value of the Shares will
decline, more or less, to the same extent as any decline in value of the securities in the Underlying Index.
Market Trading Risk.
The Fund faces numerous market trading risks, including the potential lack of an active market for the Shares, losses from trading in secondary markets, and disruption in the creation/redemption process of the Fund. Any of these factors may lead to
the Shares trading at a premium or discount to the Fund’s net asset value (“NAV”).
Small- and Mid-Capitalization
Company Risk.
Investing in securities of small- and mid-capitalization companies involves greater risk than customarily is associated with investing in larger, more established companies. These companies’ securities may be more volatile and
less liquid than those of more established companies. These securities may have returns that vary, sometimes significantly, from the overall securities market. Often small- and mid-capitalization companies and the industries in which they focus are
still evolving and, as a result, they may be more sensitive to changing market conditions.
Authorized Participant Concentration
Risk.
Only an authorized participant (“AP”) may engage in creation or redemption transactions directly with the Fund. The Fund has a limited number of institutions that may act as APs on an agency basis (i.e., on behalf of other market
participants). Such market makers have no obligation to submit creation or redemption orders; consequently, there is no assurance that market makers will establish or maintain an active trading market for the Shares. In addition, to extent that APs
exit the business or are unable to proceed with creation and/or redemption orders with respect to the Fund and no other AP is able to step forward to create or redeem Creation Units (as defined below), the Shares may be more likely to trade at a
premium or discount to NAV and possibly face trading halts and/or delisting.
Index Risk.
Unlike many investment companies, the
Fund does not utilize an investing strategy that seeks returns in excess of its Underlying Index. Therefore, it would not necessarily buy or sell a security unless that security is added or removed, respectively, from the Underlying Index, even if
that security generally is underperforming.
Issuer-Specific Changes.
The value of an individual security or particular type of security
may be more volatile than the market as a whole and may perform differently from the value of the market as a whole.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once
available, the Fund’s performance information will be accessible on the Fund’s website at www.powershares.com and will provide some indication of the risks of investing in the Fund.
Management of the Fund
Investment Adviser.
Invesco PowerShares Capital
Management LLC (the “Adviser”).
Portfolio Managers.
The following individuals are responsible jointly and primarily for
the day-to-day management of the Fund’s portfolio:
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Name
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Title with Adviser/Trust
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Date Began
Managing
the Fund
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Peter Hubbard
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Director of Portfolio Management of the Adviser and Vice President of the Trust
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Since July 2017
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Michael Jeanette
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Senior Portfolio Manager of the Adviser
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Since July 2017
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Jonathan Nixon
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Portfolio Manager of the Adviser
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Since July 2017
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Tony Seisser
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Portfolio Manager of the Adviser
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Since July 2017
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Purchase and Sale of Shares
The Fund will issue and redeem Shares at NAV only with APs and only in large blocks of 50,000 Shares (each block of Shares is called a “Creation Unit”), or multiples thereof
(“Creation Unit Aggregations”), in exchange for the deposit or delivery of a basket of securities. However, the Fund also reserves the right to permit or require Creation Units to be issued in exchange for cash. Except when aggregated in
Creation Units, the Shares are not redeemable securities of the Fund.
Individual Shares may be purchased and sold only on a national
securities exchange through brokers. Shares will be listed for trading on the Bats BZX Exchange, Inc. (“BATS”) and because the Shares will trade at market prices rather than NAV, Shares may trade at prices greater than NAV (at a premium),
at NAV, or less than NAV (at a discount).
Tax Information
The Fund’s distributions will generally be taxable, typically as either ordinary income or long-term capital gain, unless you are invested through a tax-deferred arrangement, such as a 401(k)
plan or an individual retirement account; in such cases, taxation will be deferred until assets are withdrawn from the plan. A sale of Shares may result in short- or long-term capital gain or loss.
Additional Information About the Fund’s Strategies and Risks
Principal Investment Strategies
The Fund generally will invest at least 90% of
its total assets in components of the Underlying Index. The Fund operates as an index fund and will not be actively managed. The Fund uses an “indexing” investment approach to attempt to correspond, before fees and expenses, to the
performance of the Underlying Index. The Adviser seeks correlation over time of 0.95 or better between the Fund’s performance and the performance of the Underlying Index; a figure of 1.00 would represent perfect correlation. Another means of
evaluating the relationship between the returns of the Fund and the Underlying Index is to assess the “tracking error” between the two. Tracking error means the variation between the Fund’s annual return and the return of the
Underlying Index, expressed in terms of standard deviation. The Fund seeks to have a tracking error of less than 5%, measured on a monthly basis over a one-year period by taking the standard deviation of the difference in the Fund’s returns
versus the Underlying Index’s returns. Because the Fund uses an “indexing” approach to try to achieve its investment objective, the Fund will not take temporary defensive positions during periods of adverse market, economic or other
conditions.
The Fund employs a “full replication” methodology in seeking to track its Underlying Index, meaning that it
generally will invest in all of the securities comprising the Underlying Index in proportion to their weightings in the Underlying Index. However, under various circumstances, it may not be possible or practicable to purchase all of those securities
in those same weightings. In those circumstances, the Fund may purchase a sample of securities in the Underlying Index. A “sampling” methodology means that the Adviser uses quantitative analysis to select securities from the Underlying
Index universe to obtain a representative sample of securities that have, in the aggregate, investment characteristics similar to the Underlying Index in terms of key risk factors, performance attributes and other characteristics. These include
industry weightings, market capitalization, return variability, earnings valuation, yield and other financial characteristics of securities. When employing a sampling methodology, the Adviser bases the quantity of holdings in the Fund on a number of
factors, including asset size of the Fund, and generally expects the Fund to hold less than the total number of securities in the Underlying Index. However, the Adviser reserves the right to invest the Fund in as many securities as it believes
necessary to achieve the Fund’s investment objective.
There also may be instances in which the Adviser may choose to
(i) overweight a component of the Underlying Index, (ii) purchase securities not contained in the Underlying Index that the Adviser believes are appropriate to substitute for certain components of the Underlying Index, or
(iii) utilize various combinations of other available investment techniques in seeking to track the Underlying Index. The Fund may sell securities included in the Underlying Index in anticipation of their removal from the Underlying Index, or
purchase securities not included in the Underlying Index in anticipation of their addition to the Underlying Index.
Additional information about the construction of the Underlying Index is set forth below.
Russell 1000
®
Enhanced Value Equal Weight
Index
Constituent securities in the Underlying Index are equally weighted. The Underlying Index also may include securities
of small- and mid-cap issuers. Therefore, due to the equal weighting methodology of the Underlying Index, the Fund may have greater exposure to small- or mid-cap issuers than would be the case if the Underlying Index used a traditional
capitalization-weighted methodology.
The Russell 1000
®
Enhanced Value Equal Weight Index (the “Underlying Index”) is composed of stocks in the Russell 1000 exhibiting good relative valuation and positive price
momentum. The Underlying Index is a subset of the Russell 1000, which measures the performance of the large-cap segment of the U.S. equity universe and represents 92% of the equity U.S. market. Unlike the Russell 1000, which uses a traditional
capitalization-weighted methodology (meaning that stocks of companies with larger capitalizations receive proportionally greater weights in the index), the Underlying Index equally weights all of its constituents.
Strictly in accordance with its guidelines and mandated procedures, the Index Provider selects constituent securities for the Underlying Index using
a three-step screening process. First, Russell excludes securities with zero or negative earnings over the past 12 months. Second, Russell screens for stocks with good relative valuation. A value stock tends to trade at a lower price than the price
at which such stock would be expected to trade given the fundamentals of its company and thus may be considered undervalued by investors. Russell assigns a valuation score to each eligible security, which represents the average of three financial
metrics of a company: (i) cash flow yield; (ii) earnings yield; and (iii) sales-to-price ratio. After ranking stocks based on their valuation scores, Russell excludes stocks with valuation scores in the bottom 10% of all eligible
stocks. Third, Russell screens for securities with greater positive price momentum, which the Index Provider defines as the cumulative total return of a stock, as measured over the last 12 months, excluding the most recent month. Stocks are ranked
from highest returns to lowest returns over that period within each of 10 industries (as defined using the Industry Classification Benchmark): oil and gas, basic materials, industrials, consumer goods, health care, consumer services,
telecommunications, utilities, financials and technology. Stocks with returns ranking in the bottom 10% of each industry are excluded. The remaining securities are included in the Underlying Index.
Securities selected by Russell for inclusion into the Underlying Index will be equally weighted. The Underlying Index is
rebalanced twice a year. Russell will add or remove securities from the Underlying Index only at the time of the semi-annual rebalancing. However, if a constituent security is removed from the Russell 1000, Russell will remove the security
simultaneously from the Underlying Index. The Fund is rebalanced in accordance with the Underlying Index.
Principal Risks of
Investing in the Fund
The following provides additional information regarding certain of the principal risks identified under
“Principal Risks of Investing in the Fund” in the Fund’s “Summary Information” section.
Equity Risk
Equity risk is the risk that the value of equity securities, including common stocks, will fall. The value of an equity security may fall due to changes in general economic conditions that impact
the market as a whole and that are relatively unrelated to an issuer or its industry. These conditions include changes in interest rates, specific periods of overall market turbulence or instability, or general and prolonged periods of economic
decline and cyclical change. An issuer’s common stock in particular may be especially sensitive to, and more adversely affected by, these general movements in the stock market; it is possible that a drop in the stock market may depress the
price of most or all of the common stocks that the Fund holds.
In addition, equity risk includes the risk that investor sentiment
toward, and perceptions regarding, particular industries or economic sectors will become negative. Price changes of equity securities may occur in a particular region, industry, or sector of the market, and as a result, the value of an issuer’s
common stock may fall solely because of factors, such as increases in production costs, that negatively impact other companies in the same industry or in a number of different industries.
Equity risk also includes the financial risks of a specific company, including that the value of the company’s securities may fall as a result of factors directly relating to that company, such
as decisions made by its management or lower demand for the company’s products or services. In particular, the common stock of a company may decline significantly in price over short periods of time. For example, an adverse event, such as an
unfavorable earnings report, may depress the value of common stock; similarly, the common stock of an issuer may decline in price if the issuer fails to make anticipated dividend payments because, among other reasons, the issuer experiences a
decline in its financial condition.
Value Risk
A value style of investing focuses on undervalued companies with characteristics for improved valuations. “Value” securities are subject to the risk that valuations never improve or that
the returns on “value” securities are less than returns on other styles of investing or the overall stock market. Thus, the value of the Fund’s investments will vary and at times may be lower or higher than that of other types of
investments. Historically, value investments have performed best during periods of economic recovery. Therefore, the value investing style may over time go in and out of favor. Value stocks also may decline in price, even though in theory they are
already underpriced.
Momentum Investing Risk
The momentum style of investing is subject to the risk that the securities may be more volatile than the market as a whole, or that the returns on securities that previously have exhibited price
momentum are less than returns on other styles of investing. Momentum can turn quickly, and stocks that previously have exhibited high positive momentum may not experience continued positive momentum. In addition, there may be periods when the
momentum style of investing is out of favor and therefore, the investment performance of the Fund using this investment style may suffer.
Industry Concentration Risk
In following its methodology, the Underlying Index from time to time may be concentrated to a significant degree in securities of issuers located in a single industry or a sector. To the extent that
the Underlying Index concentrates in the securities of issuers in a particular industry or sector, the Fund also will concentrate its investments to approximately the same extent. By concentrating its investments in an industry or sector, the Fund
may face more risks than if it were diversified broadly over numerous industries or sectors. Such industry-based risks, any of which may adversely affect the companies in which the Fund invests, may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively affect supply and demand in a particular industry; competition for resources, adverse labor relations, political or world events; obsolescence of technologies; and
increased competition or new product introductions that may affect the profitability or viability of companies in an industry. In addition, at times, such industry or sector may be out of favor and underperform other industries or the market as a
whole. Information about the Fund’s exposure to a particular industry will be available in the Fund’s Annual and Semi-Annual Reports to Shareholders, as well as on its Forms N-Q as filed with the SEC.
Market Risk
Securities in the Underlying Index are subject to market fluctuations, and the Fund could lose money due to short-term market movements and over
longer periods during market downturns. You should anticipate that the value of the Shares will decline, more or less, in correlation with any decline in value of the securities in the Underlying Index. The value of a security may decline due to
general market conditions, economic trends or events that are not specifically related to the issuer of the security or due to factors that affect a particular industry or group of industries. During a general downturn in the securities markets,
multiple asset classes may be negatively affected.
Market Trading Risk
The Fund faces numerous market trading risks, including the potential lack of an active market for the Shares, losses from trading in secondary
markets, periods of high volatility, and disruption in the creation/redemption process of the Fund (such as from the Fund’s failure to meet the requirements for continued listing on BATS). Although the Shares are listed for trading on a
securities exchange, there can be no assurance that an active trading market for the Shares will develop or be maintained by market makers or APs, that the Shares will continue to trade on any such exchange or that the Shares will continue to meet
the requirements for listing on an exchange. Any of these factors, among others, may lead to the Shares trading at a premium or discount to the Fund’s NAV. As a result, an investor could lose money over short or long periods. Additionally, in
stressed market conditions, the market for the Shares may become less liquid in response to deteriorating liquidity in the markets for the Fund’s portfolio holdings, which may cause a variance in the market price of the Shares and their
underlying value.
Small- and Mid-Capitalization Company Risk
Investing in securities of small- and mid-capitalization companies involves greater risk than customarily is associated with investing in larger,
more established companies. These companies’ securities may be more volatile and less liquid than those of more established companies. These securities may have returns that vary, sometimes significantly, from the overall securities market.
Often small and medium capitalization companies and the industries in which they focus are still evolving and, as a result, they may be more sensitive to changing market conditions.
Authorized Participant Concentration Risk
Only APs may engage in
creation or redemption transactions directly with the Fund. The Fund has a limited number of institutions that may act as APs on an agency basis (
i.e.,
on behalf of other market participants). Such market makers have no obligation to submit
creation or redemption orders; consequently, there is no assurance that market makers will establish or maintain an active trading market for the Shares. In addition, to extent that APs exit the business or are unable to proceed with creation and/or
redemption orders with respect to the Fund and no other AP is able to step forward to create or redeem Creation Units, the Shares may be more likely to trade at a premium or discount to NAV and possibly face trading halts and/or delisting.
Non-Correlation Risk
The Fund’s return may not match the return of the Underlying Index (that is, it may experience tracking error) for a number of reasons. For example, the Fund incurs operating expenses not
applicable to the Underlying Index and incurs costs in buying and selling securities, especially when rebalancing the Fund’s securities holdings to reflect changes in the composition of the Underlying Index. The Fund has just commenced
operations and therefore has a relatively small amount of assets; therefore, those transaction costs could have a proportionally greater impact on the Fund. Additionally, if the Fund used a sampling approach may, it may result in returns that are
not as well-correlated with the return of its Underlying Index as would be the case if the Fund purchased all of the securities in the Underlying Index in the proportions represented in the Underlying Index.
The performance of the Fund and the Underlying Index may vary due to asset valuation differences and differences between the Fund’s portfolio
and the Underlying Index resulting from legal restrictions, cost or liquidity restraints. The Fund may fair value certain of the securities it holds. To the extent the Fund calculates its NAV based on fair value prices, the Fund’s ability to
track the Underlying Index may be adversely affected. Since the Underlying Index is not subject to the tax diversification requirements to which the Fund must adhere, the Fund may be required to deviate its investments from the securities contained
in, and relative weightings of, the Underlying Index. The Fund may not invest in certain securities included in the Underlying Index due to liquidity constraints. Liquidity constraints also may delay the Fund’s purchase or sale of securities
included in the Underlying Index. For tax efficiency purposes, the Fund may sell certain securities to realize losses, causing it to deviate from the Underlying Index.
The Fund attempts to remain fully invested in those securities included in the Underlying Index.
However, the Adviser may not fully invest the Fund at times, either as a result of cash flows into the Fund, to retain a reserve of cash to meet redemptions and expenses, or because of low assets (particularly when the Fund is new and has operated
only for a short period).
The investment activities of one or more of the Adviser’s affiliates, including other subsidiaries of the
Adviser’s parent company, Invesco Ltd., for their proprietary accounts and for client accounts also may adversely impact the Fund’s ability to track the Underlying Index. For example, in regulated industries and corporate and regulatory
ownership definitions, there may be limits on the aggregate amount of investment by affiliated investors that may not be exceeded, or that may not be exceeded without the grant of a license or other regulatory or corporate consent or, if exceeded,
may cause the Adviser, the Fund or other client accounts to suffer disadvantages or business restrictions. As a result, the Fund may be restricted in its ability to acquire particular securities due to positions held by the Adviser’s
affiliates.
Index Risk
Unlike many investment companies that are “actively managed,” the Fund is a “passive” investor and therefore does not utilize investing strategies that seeks returns in excess of
its Underlying Index. Therefore, the Fund would not necessarily buy or sell a security unless that security is added or removed, respectively, from its respective Underlying Index, even if that stock generally is underperforming. If a specific
security is removed from the Underlying Index, the Fund may be forced to sell such security at an inopportune time or for a price lower than the security’s current market value. The Underlying Index may not contain the appropriate mix of
securities for any particular economic cycle. Unlike with an actively managed fund, the Adviser does not use defensive strategies designed to lessen the impact of periods of market volatility or market decline. This means that, based on certain
market and economic conditions, the Fund’s performance could be lower than other types of mutual funds with investment advisers that actively manage their portfolio assets to take advantage of market opportunities.
Non-Diversified Fund Risk
Because the Fund is non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund, changes in the market value of a single investment could
cause greater fluctuations in Share price than would occur in a diversified fund. This may increase the Fund’s volatility and cause the performance of a relatively small number of issuers to have a greater impact on the Fund’s performance.
Issuer-Specific Changes
The performance of the Fund depends on the performance of individual securities to which the Fund has exposure. The value of an individual security or particular type of security may be more
volatile than the market as a whole and may perform worse than the market as a whole, causing the value of its securities to decline. Poor performance may be caused by poor management decisions, competitive pressures, changes in technology,
expiration of patent protection, disruptions in supply, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. Issuers may, in times of distress or at
their own discretion, decide to reduce or eliminate dividends, which may also cause their stock prices to decline.
Non-Principal
Investment Strategies
The Fund, after investing at least 90% of its total assets in common stocks that comprise the Underlying
Index, may invest its remaining assets in securities not included in the Underlying Index and in money market instruments, including repurchase agreements or other funds that invest exclusively in money market instruments (subject to applicable
limitations under the Investment Company of 1940, as amended (the “1940 Act”), or exemptions therefrom), convertible securities and structured notes (notes on which the amount of principal repayment and interest payments is based on the
movement of one or more specified factors, such as the movement of a particular security or securities index). Convertible securities and structured notes may be used by the Fund in seeking performance that corresponds to the Underlying Index and in
managing cash flows. The Adviser anticipates that it may take approximately three business days (a business day is any day that the New York Stock Exchange (“NYSE”) is open) for the Adviser to reflect fully any additions to, or deletions
from, the composition of the Underlying Index in the portfolio of the Fund.
Each of the investment policies described herein, including
the Fund’s investment objective, constitutes a non-fundamental policy that the Board of Trustees (the “Board”) of PowerShares Exchange-Traded Fund Trust II (the “Trust”) may change without shareholder approval, upon 60
days’ prior written notice to shareholders. The fundamental and non-fundamental policies of the Fund are set forth in the Fund’s Statement of Additional Information (“SAI”) under the section “Investment Restrictions.”
Borrowing Money
The Fund may borrow money to the extent permitted by (i) the 1940 Act, (ii) the rules and regulations promulgated by the Securities and Exchange Commission (“SEC”) under the 1940
Act, or (iii) an exemption or other relief applicable to the Fund from the provisions of the 1940 Act.
Additional Risks of
Investing in the Fund
The following section provides additional risk information regarding investing in the Fund.
Trading Issues
Investors buying or selling Shares in the secondary market may pay brokerage commissions or other charges, which may be a significant proportional
cost for investors seeking to buy or sell relatively small amounts of Shares. Moreover, trading in Shares on BATS may be halted due to market conditions or for reasons that, in the view of BATS, make trading in Shares inadvisable. In addition,
trading in Shares on BATS is subject to trading halts caused by extraordinary market volatility pursuant to BATS “circuit breaker” rules. There can be no assurance that the requirements of BATS necessary to maintain the listing of the Fund
will continue to be met or will remain unchanged.
Index Provider Risk
The Fund seeks to achieve returns that generally correspond, before fees and expenses, to the performance of the Underlying Index, as published by the Index Provider. There is no assurance that the
Index Provider will compile the Underlying Index accurately, or that the Underlying Index will be determined, composed or calculated accurately. While the Index Provider gives descriptions of what the Underlying Index is designed to achieve, the
Index Provider generally does not provide any warranty or accept any liability in relation to the quality, accuracy or completeness of data in such indices, and it generally does not guarantee that the Underlying Index will be in line with its
methodology. Errors made by the Index Provider with respect to the quality, accuracy and completeness of the data within the Underlying Index may occur from time to time and may not be identified and corrected by the Index Provider for a period of
time, if at all. Therefore, gains, losses or costs associated with Index Provider errors will generally be borne by the Fund and its shareholders.
Index Rebalancing Risk
Pursuant to the methodology that the Index
Provider uses to calculate and maintain the Underlying Index, a security may be removed from the Underlying Index in the event that it does not comply with the eligibility requirements of the Underlying Index. As a result, the Fund may be forced to
sell securities at inopportune times or for prices other than at current market values or may elect not to sell such securities on the day that they are removed from the Underlying Index, due to market conditions or otherwise. Due to these factors,
the variation between the Fund’s annual return and the return of the Underlying Index may increase significantly.
Apart from
scheduled rebalances, the Index Provider may carry out additional ad hoc rebalances to the Underlying Index to, for example, correct an error in the selection of constituents. When the Fund in turn rebalances its portfolio, any transaction costs and
market exposure arising from such portfolio rebalancing will be borne by the Fund and its shareholders. Unscheduled rebalances also expose the Fund to additional tracking error risk. Therefore, errors and additional ad hoc rebalances carried out by
the Index Provider may increase the Fund’s costs and market exposure.
Shares May Trade at Prices Different than NAV
The NAV of the Shares generally will fluctuate with changes in the market value of the Fund’s holdings. The market prices
of Shares generally will fluctuate in accordance with changes in NAV, as well as the relative supply of and demand for Shares on BATS. The Adviser cannot predict whether the Shares will trade below, at or above the Fund’s NAV. Price differences
may be due largely to the fact that supply and demand forces at work in the secondary trading market for the Shares will be related, but not identical, to the same forces influencing the prices of the components of the Fund’s Underlying Index
trading individually or in the aggregate at any point in time. In addition, disruptions to creations and redemptions or the existence of extreme market volatility may result in trading prices that differ significantly from NAV. If a shareholder
purchases at a time when the market price is at a premium to the NAV or sells at a time when the market price is at a discount to the NAV, the shareholder may sustain losses.
Money Market Funds Risk
Money market funds are subject to management fees and other expenses, and the Fund’s investments in money market funds will cause it to bear proportionately the costs incurred by the money
market funds’ operations while simultaneously paying its own management fees and expenses. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency; it is
possible to lose money by investing in a money market fund. To the extent that the Fund invests in money market funds, the Fund will be subject to the same risks that investors experience when investing in money market funds. These risks may include
the impact of significant fluctuations in assets as a result of the cash sweep program or purchase and redemption activity in those funds.
Money market funds are open-end registered investment companies that historically have traded at a stable $1.00 per share price. However, under
recent amendments to money market fund regulations under the 1940 Act, money market funds that do not meet the definition of a “retail money market fund” or “government money market fund” are required to transact at a floating
NAV per share (i.e., in a manner similar to how all other non-money market mutual funds transact), instead of at a $1.00 stable share price. Those rule amendments also permit money market funds to impose liquidity fees and redemption gates for use
in times of market stress. If the Fund invested in a money market fund with a floating NAV, the impact on the trading and value of the money market instrument as a result of the rule amendments may negatively affect the Fund’s return potential.
Repurchase Agreements Risk
Repurchase agreements are agreements pursuant to which the Fund acquires securities from a third party with the understanding that the seller will repurchase them at a fixed price on an agreed date.
Repurchase agreements may be characterized as loans secured by the underlying securities. If the seller of securities under a repurchase agreement defaults on its obligation to repurchase the underlying securities, as a result of its bankruptcy or
otherwise, the Fund will seek to dispose of such securities, which action could involve costs or delays. If the seller becomes insolvent and subject to liquidation or reorganization under applicable bankruptcy or other laws, the Fund’s ability
to dispose of the underlying securities may be restricted. If the seller fails to repurchase the securities, the Fund may suffer a loss to the extent proceeds from the sale of the underlying securities are less than the repurchase prices.
Convertible Securities Risk
A convertible security generally is a preferred stock that may be converted within a specified period of time into common stock. Convertible securities nevertheless remain subject to the risks of
both debt securities and equity securities. As with other equity securities, the value of a convertible security tends to increase as the price of the underlying stock goes up, and to decrease as the price of the underlying stock goes down.
Declining common stock values therefore also may cause the value of the Fund’s investments to decline. Like a debt security, a convertible security provides a fixed income stream and also tends to decrease in
value when interest rates rise. Moreover, many convertible securities have credit ratings that are below investment grade and are subject to the same risks as lower-rated debt securities.
Structured Notes Risk
Investments in structured notes involve risks including interest rate risk, credit risk and market risk. Depending on the factors used, changes in interest rates and movement of such factors may
cause significant price fluctuations. Structured notes may be less liquid than other types of securities and more volatile than the reference factor underlying the note. This means that the Fund may lose money if the issuer of the note defaults, as
the Fund may not be able to readily close out its investment in such notes without incurring losses.
Tax-Advantaged
Structure of ETFs
Unlike interests in conventional mutual funds, which typically are bought and sold only at their closing NAV, the
Shares are traded throughout the day in the secondary market on a national securities exchange, and are created and redeemed principally in-kind in Creation Units at each day’s next calculated NAV. These in-kind arrangements are designed to
protect shareholders from the adverse effects on the portfolio of the Fund that could arise from frequent cash redemption transactions. In a conventional mutual fund, redemptions can have an adverse tax impact on taxable shareholders because of the
mutual fund’s need to sell portfolio securities to obtain cash to meet fund redemptions. These sales may generate taxable gains that must be distributed to the shareholders of the mutual fund, whereas the Shares’ in-kind redemption
mechanism generally will not lead to such taxable events for the Fund or its shareholders.
The Fund may recognize gains as a result of
rebalancing its securities holdings to reflect changes in the Fund’s Underlying Index. The Fund also may be required to distribute any such gains to its shareholders to avoid adverse federal income tax consequences. For information concerning
the tax consequences of distributions, see the section entitled “Dividends, Other Distributions and Taxes” in this Prospectus.
Portfolio
Holdings
A description of the Trust’s policies and procedures with respect to the disclosure of the Fund’s portfolio holdings
is available in the Fund’s SAI, which is available at www.powershares.com.
Management of the
Fund
Invesco PowerShares Capital Management LLC is a registered investment adviser with its offices at 3500 Lacey Road, Suite 700,
Downers Grove, Illinois 60515. The Adviser serves as the investment adviser to the Trust, PowerShares Exchange-Traded Fund Trust, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust and PowerShares
Actively Managed Exchange-Traded Commodity Fund Trust, a family of ETFs with combined assets under management of approximately $65.2 billion as of January 31, 2017.
As the Fund’s investment adviser, the Adviser has overall responsibility for selecting and
continuously monitoring the Fund’s investments, managing the Fund’s business affairs and providing certain clerical, bookkeeping and other administrative services for the Trust.
Portfolio Managers
The Adviser uses a team of portfolio managers, investment
strategists and other investment specialists in managing the Fund. This team approach brings together many disciplines and leverages the Adviser’s extensive resources.
Peter Hubbard, Vice President of the Trust, oversees all research, portfolio management and trading operations of the Fund. In this capacity, Mr. Hubbard oversees a team of portfolio managers
(collectively, with Mr. Hubbard, the “Portfolio Managers”) who are responsible for the day-to-day management of the Fund. In managing the Fund, Mr. Hubbard receives management assistance from Michael Jeanette, Jonathan Nixon and
Tony Seisser. Each Portfolio Manager is responsible for various functions related to portfolio management, including investing cash flows, coordinating with other team members to focus on certain asset classes, implementing investment strategy and
researching and reviewing investment strategy. Each Portfolio Manager has limitations on his authority for risk management and compliance purposes that the Adviser believes to be appropriate.
Peter Hubbard, Vice President and Director of Portfolio Management of the Adviser, has been one of the Portfolio Managers primarily responsible for
the day-to-day management of the Fund since its inception in July 2017. Mr. Hubbard has been a Portfolio Manager of the Adviser since June 2007 and has been associated with the Adviser since 2005.
Michael Jeanette, Vice President and Senior Portfolio Manager of the Adviser, has been one of the Portfolio Managers primarily responsible for the
day-to-day management of the Fund since its inception in July 2017. Mr. Jeanette has been associated with the Adviser since 2008.
Jonathan Nixon, Vice President and Portfolio Manager of the Adviser, has been one of the Portfolio Managers primarily responsible for the day-to-day
management of the Fund since its inception in July 2017. Mr. Nixon has been a portfolio manager at the Adviser since August 2013 and has been associated with the Adviser since 2011.
Tony Seisser, Vice President and Portfolio Manager of the Adviser, has been one of the Portfolio Managers primarily responsible for the day-to-day management of the Fund since its inception in July
2017. Mr. Seisser has been associated with the Adviser since 2013. From 2010 to 2013, he was employed by Guggenheim Funds Distributors, Inc.
The Fund’s SAI provides additional information about the Portfolio Managers’ compensation structure, other accounts that the Portfolio Managers manage and the Portfolio Managers’
ownership of Shares.
Advisory Fee
Pursuant to an investment advisory agreement between the Adviser and the Trust (the “Investment Advisory Agreement”),
the Fund pays the Adviser an annual unitary management fee equal to 0.29% of its average daily net assets. Out of the unitary management fee, the Adviser pays substantially all expenses of the
Fund, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except for advisory fees, distribution fees, if any, brokerage expenses, taxes, Acquired Fund Fees and Expenses, if any, interest, litigation
expenses and other extraordinary expenses.
The Fund may invest in money market funds that are managed by affiliates of the Adviser. The
indirect portion of the management fee that the Fund incurs through such investments is in addition to the Adviser’s unitary management fee. Therefore, the Adviser has agreed to waive the management fees that it receives in an amount equal to
the indirect management fees that the Fund incurs through its investments in affiliated money market funds through August 31, 2018. There is no guarantee that the Adviser will extend the waiver of the fees past that date.
A discussion regarding the basis for the Board’s approval of the Trust’s Investment Advisory Agreement with respect to the Fund will be
available in the Trust’s Annual Report to shareholders for the fiscal year ending October 31, 2017.
How to Buy and
Sell Shares
The Fund issues or redeems its Shares at NAV per Share only in Creation Units or Creation Unit Aggregations.
Most investors will buy and sell Shares in secondary market transactions through brokers. Shares will be listed for trading on the secondary market
on BATS, under the symbol “USEQ”. Shares can be bought and sold throughout the trading day like other publicly traded shares. There is no minimum investment required. Although Shares generally are purchased and sold in “round
lots” of 100 Shares, brokerage firms typically permit investors to purchase or sell Shares in smaller “odd-lots,” at no per share price differential. When buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the bid and the offered price in the secondary market on each leg of a round trip (purchase and sale) transaction.
Share prices are reported in dollars and cents per Share.
APs may acquire Shares directly from the Fund, and APs may tender their Shares for redemption directly to the Fund, at NAV per Share only in Creation Units or Creation Unit Aggregations, and in
accordance with the procedures described in the SAI.
Under normal circumstances, the Fund will pay out redemption proceeds to a
redeeming AP within two days after the AP’s redemption request is received, in accordance with the process set forth in the Fund’s SAI and in the agreement between the AP and the Fund’s distributor. However, the Fund reserves the
right, including under stressed market conditions, to take up to seven days after the receipt of a redemption request (as discussed above) to pay an AP, all as permitted by the 1940 Act. The Fund anticipates regularly meeting redemption requests
primarily through in-kind redemptions. However, the Fund reserves the
right to pay redemption proceeds to an AP in cash, consistent with the Trust’s exemptive relief. Cash used for redemptions will be raised from the sale of portfolio assets or may come from
existing holdings of cash or cash equivalents.
The Fund may liquidate and terminate at any time without shareholder approval.
Book Entry
Shares are held in book-entry form, which means that no stock certificates are issued. The Depository Trust Company (“DTC”) or its nominee
is the record owner of all outstanding Shares and is recognized as the owner of all Shares for all purposes.
Investors owning Shares are
beneficial owners as shown on the records of DTC or its participants. DTC serves as the securities depository for all Shares. Participants in DTC include securities brokers and dealers, banks, trust companies, clearing corporations and other
institutions that directly or indirectly maintain a custodial relationship with DTC. As a beneficial owner of Shares, you are not entitled to receive physical delivery of stock certificates or to have Shares registered in your name, and you are not
considered a registered owner of Shares. Therefore, to exercise any right as an owner of Shares, you must rely upon the procedures of DTC and its participants. These procedures are the same as those that apply to any other securities that you hold
in book entry or “street name” form.
Share Trading Prices
The trading prices of Shares on BATS may differ from the Fund’s daily NAV. Market forces of supply and demand, economic conditions and other factors may affect the trading prices of Shares.
The approximate value of Shares, an amount representing on a per share basis the sum of the current market price of the securities
accepted by the Fund in exchange for Shares and an estimated cash component will be disseminated every 15 seconds throughout the trading day through the facilities of the Consolidated Tape Association. This approximate value should not be viewed as
a “real-time” update of the NAV per Share because the approximate value will not be calculated in the same manner as the NAV, which is computed once a day, generally at the end of the business day. The Fund is not involved in, or
responsible for, the calculation or dissemination of the approximate value of the Shares and the Fund does not make any warranty as to the accuracy of the approximate value.
Frequent Purchases and Redemptions of Shares
Shares may be
purchased and redeemed directly from the Fund only in Creation Units by APs. The vast majority of trading in Shares occurs on the secondary market and does not involve the Fund directly. In-kind purchases and redemptions of Creation Units by APs and
cash trades on the secondary market are unlikely to cause many of the harmful effects of frequent purchases or redemptions of Shares. Cash purchases or redemptions of Creation Units, however, can result in increased tracking error,
disruption of portfolio management, dilution to the Fund and increased transaction costs, which could negatively impact the Fund’s ability to achieve its investment objective, and may lead
to the realization of capital gains. These consequences may increase as the frequency of cash purchases and redemptions of Creation Units by APs increases. However, direct trading by APs is critical to ensuring that Shares trade at or close to NAV.
To minimize these potential consequences of frequent purchases and redemptions of Shares, the Fund imposes transaction fees on purchases
and redemptions of Creation Units to cover the custodial and other costs the Fund incurs in effecting trades. In addition, the Adviser monitors trades by APs for patterns of abusive trading, and the Fund reserves the right to not accept orders from
APs that the Adviser has determined may be disruptive to the management of the Fund or otherwise are not in the best interests of the Fund. For these reasons, the Board has not adopted policies and procedures with respect to frequent purchases and
redemptions of Shares.
Dividends, Other Distributions and Taxes
Dividends and Other Distributions
Ordinarily, dividends from net investment
income, if any, are declared and paid quarterly by the Fund. The Fund also intends to distribute its net realized capital gains, if any, to shareholders annually. Dividends and other distributions may be declared and paid more frequently to
comply with the distribution requirements of Subchapter M of the Internal Revenue Code of 1986, as amended, and to avoid a federal excise tax imposed on regulated investment companies.
Distributions in cash may be reinvested automatically in additional whole Shares only if the broker through which you purchased Shares makes such option available.
Taxes
As with any
investment, you should consider how your investment in Shares will be taxed. The tax information in this Prospectus is provided as general information. You should consult your own tax professional about the tax consequences of an investment in
Shares.
Unless your investment in Shares is made through a tax-exempt entity or tax-deferred retirement account, such as an individual
retirement account, you need to be aware of the possible tax consequences when:
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The Fund makes distributions,
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You sell your Shares (including when you exchange Shares for shares of another ETF), and
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You purchase or redeem Creation Units.
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Taxes on Distributions
As stated above, dividends from net investment income,
if any, ordinarily are declared and paid quarterly. The Fund also may pay a special distribution at the end of a calendar year to comply with federal tax requirements and/or to minimize or eliminate federal tax liability. In general, your
distributions are subject to federal
income tax when they are paid, whether you take them in cash or Shares (if reinvestment is available from the broker through which you purchased your Shares).
Dividends paid to you out of the Fund’s net investment income and net realized short-term capital gains, if any, are taxable as ordinary
income. Although (1) the Fund’s dividends attributable to its “qualified dividend income” generally will be subject to federal income tax for individual and certain other non-corporate shareholders (each, an “individual
shareholder”) who satisfy certain restrictions with respect to their Shares at the lower maximum rates for long-term capital gains described in the next paragraph and (2) a portion of the Fund’s dividends also may be eligible for the
dividends-received deduction allowed to corporations, the Fund does not expect to distribute a significant amount of dividends eligible for those lower rates or deduction.
Distributions to you of net long-term capital gains, if any, in excess of net short-term capital losses are taxable as long-term capital gains, regardless of how long you have held the Shares. Those
gains of individual shareholders generally are subject to federal income tax at the maximum rates of 15% (20% for certain high income taxpayers).
Distributions to you in excess of the Fund’s current and accumulated earnings and profits, if any, are treated as a tax-free return of capital to the extent of your basis in your Shares and as
capital gain thereafter. A distribution will reduce the Fund’s NAV per Share and may be taxable to you (as ordinary income or long-term capital gain) even though, from an investment standpoint, the distribution constitutes a partial return of
capital.
By law, the Fund is required to withhold 28% of distributions otherwise payable to you if you are an individual shareholder and
have not provided a correct social security number or other taxpayer identification number or otherwise are subject to backup withholding.
Taxes on Share Sales
Any
capital gain or loss you realize upon a sale of Shares generally is treated as long-term capital gain or loss if you held the Shares for more than one year and as short-term capital gain or loss if you held the Shares for one year or less. Your
ability to deduct capital losses realized on a sale of Shares may be limited.
Taxes on Purchase and Redemption of Creation Units
An AP that exchanges securities for a Creation Unit generally will recognize a capital gain or loss equal to the difference between
the market value of the Creation Unit and the sum of the AP’s aggregate basis in the securities surrendered plus any cash component paid. An AP that redeems a Creation Unit in exchange for securities generally will recognize a capital gain or
loss equal to the difference between the AP’s basis in the Creation Unit and the aggregate market value of the securities received plus or minus an amount, if any, equal to the difference between the NAV of the redeemed Shares, as next
determined after receipt of a request in proper form, and the value of those securities. The Internal Revenue Service, however, may assert that a loss realized upon an exchange of securities for a Creation Unit, or of a Creation Unit for securities,
cannot be deducted currently under the rules
governing “wash sales,” or on the ground that there has been no significant change in the AP’s economic position. An AP exchanging securities should consult its own tax advisor(s)
with respect to whether wash sale rules apply and when a loss otherwise might not be deductible.
Any capital gain or loss realized upon
redemption of a Creation Unit generally is treated as long-term capital gain or loss if the Shares have been held for more than one year and as short-term capital gain or loss if the Shares have been held for one year or less.
If you purchase or redeem one or more Creation Units, you will be sent a confirmation statement showing how many Shares you purchased or sold and at
the price thereof.
The foregoing discussion summarizes some of the more important possible consequences under current federal, state and
local tax law of an investment in the Fund. It is not a substitute for personal tax advice. You also may be subject to state, local, and/or foreign tax on Fund distributions and sales and/or redemptions of Shares. Consult your personal tax
advisor(s) about the potential tax consequences of an investment in Shares under all applicable tax laws.
Distributor
Invesco Distributors, Inc. (the “Distributor”) serves as the distributor of Creation Units for the Fund on an agency basis.
The Distributor does not maintain a secondary market in Shares. The Distributor is an affiliate of the Adviser.
Net Asset Value
The Bank of New York Mellon (“BNYM”) calculates the Fund’s NAV at the close of regular trading (normally 4:00 p.m.,
Eastern time) every day that the NYSE is open. The NAV for the Fund will be calculated and disseminated daily on each day that the NYSE is open. NAV is calculated by deducting all of the Fund’s liabilities from the total value of its assets and
dividing the result by the number of Shares outstanding, rounding to the nearest cent. Generally, the portfolio securities are recorded in the NAV no later than trade date plus one day. All valuations are subject to review by the Trust’s Board
or its delegate.
In determining NAV, expenses are accrued and applied daily, and securities and other assets for which market quotations
are readily available are valued at market value. Securities listed or traded on an exchange generally are valued at the last sales price or official closing price that day as of the close of the exchange where the security primarily is traded.
Investment companies are valued using such company’s NAV per share, unless the shares are exchange-traded, in which case they will be valued at the last sale or official closing price on the exchanges on which they primarily trade. Deposits,
other obligations of U.S. and non-U.S. banks and financial institutions, and cash equivalents are valued at their daily account value. If a security’s market price is not readily available, the security will be valued using pricing provided
from independent pricing services or by another method in accordance
with the Trust’s valuation policies and procedures approved by the Board.
Even when market quotations are available for portfolio securities, they may be stale or unreliable because the security is not traded frequently,
trading on the security ceased before the close of the trading market or issuer-specific events occurred after the security ceased trading. Events that may cause the last market quotation to be unreliable include a merger or insolvency, events which
affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where the Adviser
determines that the closing price of the security is unreliable, the Adviser will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing involves subjective judgments and it is possible that a fair
value determination for a security is materially different than the value that could be realized upon the sale of the security. In addition, fair value pricing could result in a difference between the prices used to calculate the Fund’s NAV and
the prices used by the Fund’s Underlying Index. This may adversely affect the Fund’s ability to track the Underlying Index.
Fund Service
Providers
BNYM, 101 Barclay Street, New York, New York 10286, is the administrator, custodian, transfer agent and fund accounting agent
for the Fund.
Stradley Ronon Stevens & Young, LLP, 191 North Wacker Drive, Suite 1601, Chicago, Illinois 60606, and 1250
Connecticut Avenue, N.W., Suite 500, Washington, D.C. 20036, serves as legal counsel to the Trust.
PricewaterhouseCoopers LLP, One
North Wacker Drive, Chicago, Illinois 60606, serves as the Fund’s independent registered public accounting firm. PricewaterhouseCoopers LLP is responsible for auditing the annual financial statements of the Fund and performs other related audit
services.
Financial Highlights
The Fund is new and has no
performance history as of the date of this Prospectus. Financial information therefore is not available.
Index Provider
No entity that creates, compiles, sponsors or maintains the Underlying Index is or will be an affiliated person, as defined in
Section 2(a)(3) of the 1940 Act, or an affiliated person of an affiliated person, of the Trust, the Adviser, the Distributor or a promoter of the Fund.
Neither the Adviser nor any affiliate of the Adviser has any rights to influence the selection of the securities in the Underlying Index.
Frank Russell Company (“Russell”) is the index provider for the Underlying Index. The Index Provider is not affiliated with the
Trust, the Adviser or the Distributor. The Underlying Index is a trademark of the Index Provider and has been licensed for use for certain purposes by the Adviser. The Fund is entitled to use the
Underlying Index pursuant to a sub-licensing agreement with the Adviser.
Russell is the source and owner of the
trademarks, service marks and copyrights related to the Russell Indexes. Russell
®
is a trademark of Frank
Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or
underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication.
Disclaimers
The Fund is not
sponsored, endorsed, sold or promoted by Frank Russell Company (“Russell”). Russell makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly or the ability of the Russell 1000
®
Enhanced Value Equal
Weight Index to track general stock market performance or a segment of the same. Russell’s publication of the Russell 1000
®
Enhanced Value Equal Weight Index in no way suggests or implies an opinion by Russell as to the advisability of investment in any or all of the securities upon which
the Russell 1000
®
Enhanced Value Equal Weight Index is based. Russell’s only relationship to the
Adviser is the licensing of certain trademarks and trade names of Russell and of the Russell 1000
®
Enhanced Value Equal Weight Index which is determined, composed and calculated by Russell without regard to the Adviser or the Fund. Russell is not responsible for and has not reviewed the Fund nor any associated literature or publications and
Russell makes no representation or warranty express or implied as to their accuracy or completeness, or otherwise. Russell reserves the right, at any time and without notice, to alter, amend, terminate or in any way change the Russell 1000
®
Equal Weight Index. Russell has no obligation or liability in connection with the administration, marketing or
trading of the Fund.
The Russell 1000
®
Enhanced Value Equal Weight Index is a trademark of Russell and has been licensed for use by the Adviser. The PowerShares Russell 1000 Enhanced Equal Weight Portfolio
is not in any way sponsored, endorsed, sold or promoted by Russell or the London Stock Exchange Group companies (“LSEG”) (together the “Licensor Parties”) and none of the Licensor Parties make any claim, prediction, warranty or
representation whatsoever, expressly or impliedly, either as to (i) the results to be obtained from the use of the Underlying Index (upon which the Fund is based), (ii) the figure at which the Underlying Index is said to stand at any
particular time on any particular day or otherwise, or (iii) the suitability of the Underlying Index for the purpose to which it is being put in connection with the Fund. None of the Licensor Parties have provided or will provide any financial
or investment advice or recommendation in relation to the
Underlying Index to the Adviser or to its clients. The Underlying Index is calculated by Russell or its agent. None of the Licensor Parties shall be (a) liable (whether in negligence or
otherwise) to any person for any error in the Underlying Index or (b) under any obligation to advise any person of any error therein.
LICENSOR PARTIES DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE RUSSELL 1000
®
ENHANCED VALUE EQUAL WEIGHT INDEX OR ANY DATA INCLUDED THEREIN AND LICENSOR PARTIES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN.
LICENSOR PARTIES MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, INVESTORS, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RUSSELL
1000
®
ENHANCED VALUE EQUAL WEIGHT INDEX OR ANY DATA INCLUDED THEREIN. LICENSOR PARTIES MAKE NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE RUSSELL 1000
®
ENHANCED VALUE EQUAL WEIGHT INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR PARTIES HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The Adviser does not guarantee the accuracy and/or the completeness of the Underlying Index or any data included therein, and the Adviser shall have
no liability for any errors, omissions, restatements, re-calculations or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by the Fund, owners of the Shares or any other person or entity from the
use of the Underlying Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose with respect to the Underlying Index or any
data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits) arising out of matters relating to the use
of the Underlying Index even if notified of the possibility of such damages.
Premium/Discount
Information
Information on the daily NAV per Share, once available, will be found at www.powershares.com. Additionally, information
regarding how often the Shares traded on BATS at a price above (at a premium) or below (at a discount) the NAV of the Fund during the prior calendar year and subsequent quarters, when available, will be found at www.powershares.com.
Other Information
Section 12(d)(1) of the 1940 Act
restricts investments by investment companies (and companies relying on Section 3(c)(1) or 3(c)(7) of the 1940 Act) in the securities of other investment
companies. However, registered investment companies are permitted to invest in the Fund beyond the limits set forth in Section 12(d)(1) subject to certain terms and conditions set forth in
an SEC exemptive order issued to the Trust, including that such investment companies enter into an agreement with the Trust on behalf of the Fund prior to exceeding the limits imposed by Section 12(d)(1). Additionally, the Fund is permitted to
invest in other registered investment companies beyond the limits set forth in Section 12(d)(1) subject to certain terms and conditions set forth in another exemptive order that the SEC has issued to the Trust. If the Fund relies on this
exemptive relief, however, other investment companies may not invest in the Fund beyond the statutory provisions of Section 12(d)(1).
Continuous Offering
The
method by which Creation Unit Aggregations of Shares are created and traded may raise certain issues under applicable securities laws. Because new Creation Unit Aggregations of Shares are issued and sold by the Fund on an ongoing basis, a
“distribution,” as such term is used in the Securities Act of 1933, as amended (the “Securities Act”), may occur at any point. Broker-dealers and other persons are cautioned that some activities on their part may, depending on
the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus delivery requirement and liability provisions of the Securities Act.
For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Unit Aggregations after
placing an order with the Distributor, breaks them down into constituent Shares and sells such Shares directly to 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 Shares. A determination of whether one is an underwriter for purposes of the Securities Act 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 could lead to a characterization as an underwriter.
Broker-dealer firms also should note that dealers who are not “underwriters” but are effecting transactions in Shares, whether or not participating in the distribution of Shares, generally
are required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(a)(3)(C) of the Securities Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. As a result,
broker-dealer firms should note that dealers who are not “underwriters” but are participating in a distribution (as contrasted with engaging in ordinary secondary market transactions), and thus dealing with the Shares that are part of an
overallotment within the meaning of Section 4(a)(3)(C) of the Securities Act, will be unable to take advantage of the prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act. For delivery of prospectuses to exchange
members, the prospectus delivery mechanism of Rule 153 under the Securities Act only is available with respect to transactions on a national exchange.
Delivery of Shareholder Documents—Householding
Householding is an option available to certain investors of the Fund. Householding is a method of delivery, based on the preference of the
individual investor, in which a single copy of certain shareholder documents can be delivered to investors who share the same address, even if their accounts are registered under different names. Householding for the Fund is available through
certain broker-dealers. If you are interested in enrolling in householding and receiving a single copy of the Prospectus and other shareholder documents, please contact your broker-dealer. If you currently are enrolled in householding and wish to
change your householding status, please contact your broker-dealer.
For More Information
For more detailed information on the Fund and Shares, you may request a copy of the Fund’s SAI. The SAI provides detailed information about the
Fund and is incorporated by reference into this Prospectus. This means that the SAI legally is a part of this Prospectus. Additional information about the Fund’s investments also will appear in the Fund’s Annual and Semi-Annual Reports to
Shareholders, when available. In the Fund’s Annual Report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its most recent fiscal year. If you have
questions about the Fund or Shares or you wish to obtain the SAI, Annual Report and/or Semi-Annual Report, when available, free of charge, or to make shareholder inquiries, please:
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Call:
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Invesco Distributors, Inc. at 1-800-983-0903
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Monday through Friday
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8:00 a.m. to 5:00 p.m. Central Time
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Write:
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PowerShares Exchange-Traded Fund Trust II
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c/o Invesco Distributors, Inc.
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11 Greenway Plaza, Suite 1000
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Houston, Texas 77046-1173
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Visit:
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www.powershares.com
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Information about the Fund (including the SAI) can be reviewed and copied at the SEC’s Public Reference Room,
100 F Street NE, Washington, D.C. 20549, and information on the operation of the Public Reference Room may be obtained by calling the SEC at
1-202-551-8090.
Reports and other information about the Fund are
available on the EDGAR Database on the SEC’s Internet site at www.sec.gov, and copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing
the SEC’s Public Reference Section, Washington, D.C. 20549-1520.
No person is authorized to give any information or to make any
representations about the Fund and its Shares not contained in this Prospectus, and you should not rely on any other information. Read and keep this Prospectus for future reference.
Dealers effecting transactions in the Shares, whether or not participating in this distribution, generally are required to deliver a Prospectus. This is in addition to any obligation of dealers
to deliver a Prospectus when acting as underwriters.
The Trust’s registration number under the 1940 Act is
811-21977.
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P-USEQ-PRO-1
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PowerShares Exchange-Traded Fund Trust II
3500 Lacey Road, Suite 700
Downers Grove, IL 60515
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www.powershares.com 800.983.0903
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@PowerShares
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Investment Company Act File No. 811-21977
PowerShares Exchange-Traded Fund Trust II
STATEMENT OF
ADDITIONAL INFORMATION
Dated July 5, 2017
This Statement of Additional Information (“SAI”) is not a prospectus. It should be read in conjunction with the Prospectus
dated July 5, 2017, for the PowerShares Exchange-Traded Fund Trust II (the “Trust”), relating to the series of the Trust listed below, as it may be revised from time to time (the “Prospectus”).
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Fund
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Principal U.S. Listing Exchange
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Ticker
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PowerShares Russell 1000 Enhanced Value Equal Weight Portfolio
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Bats BZX Exchange, Inc.
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USEQ
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Capitalized terms used herein that are not defined have the same meaning as in the Prospectus, unless
otherwise noted. A copy of the Prospectus may be obtained without charge by writing to the Trust’s Distributor, Invesco Distributors, Inc. (the “Distributor”), 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173,
or by calling toll free 1-800-983-0903.
TABLE OF CONTENTS
GENERAL DESCRIPTION OF THE TRUST AND THE FUND
The Trust was organized as a Massachusetts business trust on October 10, 2006 and is authorized to have multiple series or portfolios.
The Trust is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust currently consists of 82 funds. This SAI relates to one series of the Trust, PowerShares
Russell 1000 Enhanced Equal Weight Portfolio (the “Fund”). The Fund is “non-diversified,” and as such, the Fund’s investments are not required to meet certain diversification requirements under the 1940 Act. The shares of
the Fund are referred to in this SAI as “Shares.”
The investment objective of the Fund is to seek to track the investment
results (before fees and expenses) of the Russell 1000
®
Enhanced Value Equal Weight Index (the “Underlying Index”). Invesco PowerShares Capital Management LLC (the
“Adviser”), an indirect, wholly-owned subsidiary of Invesco Ltd., manages the Fund.
The Fund issues and redeems Shares at
net asset value (“NAV”) only in aggregations of 50,000 Shares (each a “Creation Unit” or a “Creation Unit Aggregation”). The Fund issues and redeems Creation Units principally in exchange for a basket of securities
included in the Underlying Index (the “Deposit Securities”), together with the deposit of a specified cash payment (the “Cash Component”), plus certain transaction fees. However, the Fund also reserves the right to permit or
require Creation Units to be issued in exchange for cash.
The Fund is expected to be approved for listing, subject to notice of issuance,
on Bats BZX Exchange, Inc. (“BATS” or the “Exchange”). Shares will trade throughout the day on the Exchange at market prices that may be below, at, or above NAV. In the event of the liquidation of the Fund, the Trust may decrease
the number of Shares in a Creation Unit.
The Fund may issue Shares in advance of receipt of Deposit Securities subject to various
conditions, including a requirement to maintain on deposit with the Trust cash at least equal to 105% of the market value of the missing Deposit Securities. See the “Creation and Redemption of Creation Unit Aggregations” section. In each
instance of permitting or requiring Creation Units to be exchanged for cash, the Fund may impose transaction fees that will be higher than the transaction fees associated with in-kind creations or redemptions.
EXCHANGE LISTING AND TRADING
There can be no assurance that the Fund, once listed, will continue to meet the requirements of the Exchange necessary to maintain the listing
of its Shares. The Exchange may, but is not required to, remove the Shares from listing if: (i) following the initial 12-month period beginning at the commencement of trading of the Fund, there are fewer than 50 beneficial owners of the Shares
for 30 or more consecutive trading days; (ii) the value of the Fund’s Underlying Index no longer is calculated or available; or (iii) such other event shall occur or condition shall exist that, in the opinion of the Exchange, makes
further dealings on such Exchange inadvisable. The Exchange will remove the Shares from listing and trading upon termination of the Fund.
As in the case of other stocks traded on the Exchange, brokers’ commissions on transactions will be based on negotiated commission rates
at customary levels.
The Trust reserves the right to adjust the price levels of the Shares in the future to help maintain convenient
trading ranges for investors. Any adjustments would be accomplished through stock splits or reverse stock splits, which would have no effect on the net assets of the Fund.
In order to provide additional information regarding the indicative value of Shares, the Exchange or a market data vendor will disseminate
every 15 seconds through the facilities of the Consolidated Tape Association or other widely disseminated means, an updated “intraday indicative value” (“IIV”) for the Fund, as calculated by an information provider or market
data vendor. The Trust is not involved in, or responsible for any aspect of, the calculation or dissemination of the IIVs and makes no representation or warranty as to the accuracy of the IIVs.
Shares of the Fund are not sponsored, endorsed, or promoted by the Exchange. The Exchange makes no representation or warranty, express or
implied, to the owners of the shares of the Fund or any member of the public regarding the ability of the Fund to track the total return performance of the Index or the ability of the Underlying Index to track stock market performance. The Exchange
is not responsible for, nor has it participated in, the determination of the compilation or the calculation of the Underlying Index, nor in the determination of the timing of, prices of, or quantities of the shares of the Fund to be issued, nor in
the determination or calculation of the equation by which the shares are redeemable. The Exchange has no obligation or liability to owners of the shares of the Fund in connection with the administration, marketing, or trading of the shares of the
Fund.
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The Exchange does not guarantee the accuracy and/or the completeness of the Underlying Index or
the data included therein. The Exchange makes no warranty, express or implied, as to results to be obtained by the Trust on behalf of the Fund, owners of the shares, or any other person or entity from the use of the Underlying Index or the data
included therein. The Exchange makes no express or implied warranties, and hereby expressly disclaims all warranties of merchantability or fitness for a particular purpose with respect to the Underlying Index or the data included therein. Without
limiting any of the foregoing, in no event shall the Exchange have any liability for any lost profits or indirect, punitive, special, or consequential damages even if notified of the possibility thereof.
INVESTMENT RESTRICTIONS
The Board of Trustees of the Trust (the “Board”) has adopted as fundamental policies the investment restrictions numbered
(1) through (7) below. Except as otherwise noted below, the Fund, as a fundamental policy, may not:
(1) Invest
more than 25% of the value of its net assets in securities of issuers in any one industry or group of industries, except to the extent that the underlying index that the Fund replicates concentrates in an industry or group of industries. This
restriction does not apply to obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
(2) Borrow money, except the Fund may borrow money to the extent permitted by (i) the 1940 Act, (ii) the rules and
regulations promulgated by the Securities and Exchange Commission (“SEC”) under the 1940 Act, or (iii) an exemption or other relief applicable to the Fund from the provisions of the 1940 Act.
(3) Act as an underwriter of another issuer’s securities, except to the extent that the Fund may be deemed to be an
underwriter within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) in connection with the purchase and sale of portfolio securities.
(4) Make loans to other persons, except through (i) the purchase of debt securities permissible under the Fund’s
investment policies, (ii) repurchase agreements or (iii) the lending of portfolio securities, provided that no such repurchase agreements or loan of portfolio securities may be made by the Fund if, as a result, the aggregate of such
repurchase agreements and loans would exceed 33
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% of the value of the Fund’s total assets.
(5) Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this
shall not prevent the Fund (i) from purchasing or selling options, futures contracts or other derivative instruments, or (ii) from investing in securities or other instruments backed by physical commodities).
(6) Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall
not prohibit the Fund from purchasing or selling securities or other instruments backed by real estate or of issuers engaged in real estate activities).
(7) Issue senior securities, except as permitted under the 1940 Act.
Except for restrictions (2), (4)(ii) and (iii), and (7), if the Fund adheres to a percentage restriction at the time of investment, a
later increase in percentage resulting from a change in market value of the investment or the total assets, or the sale of a security out of its portfolio, will not constitute a violation of that restriction. With respect to restrictions (2),
(4)(ii) and (iii), and (7), in the event that the Fund’s borrowings, repurchase agreements and loans of portfolio securities at any time exceed 33
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% of the value of the Fund’s total assets (including the amount borrowed and the collateral received) less the Fund’s liabilities (other than borrowings or loans) due to subsequent
changes in the value of the Fund’s assets or otherwise, within three days (excluding Sundays and holidays), the Fund will take corrective action to reduce the amount of its borrowings, repurchase agreements and loans of portfolio securities to
an extent that such borrowings, repurchase agreements and loans will not exceed 33
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% of the value of the Fund’s total assets
(including the amount borrowed and the collateral received) less the Fund’s liabilities (other than borrowings or loans).
The
foregoing fundamental investment policies cannot be changed without approval by holders of a “majority of the Fund’s outstanding voting securities.” As defined in the 1940 Act, this means the vote of (i) 67% or more of the Shares
present at a meeting, if the holders of more than 50% of the Shares are present or represented by proxy, or (ii) more than 50% of the Shares, whichever is less.
In addition to the foregoing fundamental investment policies, the Fund also is subject to the following non-fundamental investment
restrictions and policies, which may be changed by the Board without shareholder approval. The Fund may not:
(1) Sell
securities short, unless the Fund owns or has the right to obtain securities equivalent in kind and amount to the securities sold short at no added cost, and provided that transactions in options, futures contracts, options on futures contracts or
other derivative instruments are not deemed to constitute selling securities short.
(2) Purchase securities on margin,
except that the Fund may obtain such short-term credits as are necessary for the clearance of transactions; and provided that margin deposits in connection with futures contracts, options on futures contracts or other derivative instruments shall
not constitute purchasing securities on margin.
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(3) Purchase securities of open-end or closed-end investment companies except in
compliance with the 1940 Act, although the Fund may not acquire any securities of registered open-end investment companies or registered unit investment trusts in reliance on Sections 12(d)(1)(F) and 12(d)(1)(G) of the 1940 Act.
(4) Invest in direct interests in oil, gas or other mineral exploration programs or leases; however, the Fund may invest in the
securities of issuers that engage in these activities.
(5) Invest in illiquid securities if, as a result of such
investment, more than 15% of the Fund’s net assets would be invested in illiquid securities.
The Fund’s investment objective is
a non-fundamental policy that the Board can change without approval by shareholders upon 60 days’ written notice to shareholders.
INVESTMENT STRATEGIES AND RISKS
Investment Strategies
The Fund’s investment objective is to seek to track the investment results (before fees and expenses) of the Underlying Index. The Fund
seeks to achieve its investment objective by investing primarily in securities that comprise its Underlying Index. The Fund operates as an index fund and will not be actively managed. The Fund generally invests in all of the securities comprising
the Underlying Index in proportion to the weightings of the securities in the Underlying Index, although the Fund may use sampling techniques for the purpose of complying with regulatory or investment restrictions or when sampling is deemed
appropriate to track the Underlying Index.
Investment Risks
A discussion of the principal risks associated with an investment in the Fund is contained in the Fund’s Prospectus in the “Summary
Information—Principal Risks of Investing in the Fund,” “Additional Information About the Fund’s Strategies and Risks—Principal Risks of Investing in the Fund” and “—Additional Risks of Investing in the
Fund” sections. The discussion below supplements, and should be read in conjunction with, these sections.
An investment in the Fund
should be made with an understanding that the value of the Fund’s portfolio holdings may fluctuate in accordance with changes in the financial condition of an issuer of the portfolio securities, the value of securities in general and other
factors that affect the market.
An investment in the Fund also should be made with an understanding of the risks inherent in an
investment in securities, including the risk that the financial condition of the issuers may become impaired or that the general condition of the securities market may deteriorate (either of which may cause a decrease in the value of the portfolio
holdings and thus in the value of Shares). The Fund’s portfolio holdings are susceptible to general securities market fluctuations and to volatile increases and decreases in value as market confidence and perceptions of the companies issuing
the securities change. These investor perceptions are based on various and unpredictable factors, including expectations regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction,
and global or regional political, economic or banking crises.
The Fund is not actively managed, and therefore the adverse financial
condition of any one issuer will not result in the elimination of its securities from the Fund’s portfolio unless the index provider removes the securities from the Underlying Index.
Correlation and Tracking Error.
Correlation measures the degree of association between the returns of the Fund and the Underlying
Index. The Fund seeks a correlation over time of 0.95 or better between the Fund’s performance and the performance of the Underlying Index; a figure of 1.00 would indicate perfect correlation. Correlation is calculated at the Fund’s fiscal
year-end by comparing the Fund’s average monthly total returns, before fees and expenses, to the Underlying Index’s average monthly total returns over the prior one-year period or since inception if the Fund has been in existence for less
than one year. Another means of evaluating the degree of correlation between the returns of the Fund and the Underlying Index is to assess the “tracking error” between the two. Tracking error means the variation between the Fund’s
annual return and the return of the Underlying Index, expressed in terms of standard deviation. The Fund seeks to have a tracking error of less than 5%, measured on a monthly basis over a one-year period by taking the standard deviation of the
difference in the Fund’s returns versus the Underlying Index’s returns.
An investment in the Fund also should be made with an
understanding that the Fund will not be able to replicate exactly the performance of the Underlying Index, because the total return that the securities generate will be reduced by transaction costs incurred in adjusting the actual balance of the
securities and other Fund expenses, whereas such transaction costs and expenses are not included in the calculation of the Underlying Index. In addition, the use of a representative sampling approach (which may arise for a number
4
of reasons, including a large number of securities within the Underlying Index, or the limited assets of the Fund) may cause the Fund not to be as well correlated with the return of the
Underlying Index as would be the case if the Fund purchased all of the securities in the Underlying Index in the proportions represented in the Underlying Index. It also is possible that, for short periods of time, the Fund’s performance
may not correlate well to the performance of the Underlying Index due to the temporary unavailability of certain Underlying Index securities in the secondary market or due to other extraordinary circumstances. Such events are unlikely to continue
for an extended period of time because the Fund is required to correct such imbalances by means of adjusting the composition of its portfolio holdings. It also is possible that the composition of the Fund may not replicate exactly the composition of
the Underlying Index if the Fund has to adjust its portfolio holdings to continue to qualify as a “regulated investment company” (a “RIC”) under Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986,
as amended (the “Internal Revenue Code”).
Common Stocks and Other Equity Securities.
Holders of common stocks incur more
risk than holders of preferred stock and debt obligations because common stockholders, as owners of the issuer, generally have inferior rights to receive payments from the issuer in comparison with the rights of creditors, or holders of debt
obligations or preferred stocks. Unlike debt securities, which typically have a stated principal amount payable at maturity (whose value, however, is subject to market fluctuations prior thereto), or preferred stocks, which typically have a
liquidation preference and which may have stated optional or mandatory redemption provisions, equity securities have neither a fixed principal amount nor a maturity.
Money Market Instruments.
The Fund may invest a portion of its assets in high-quality money market instruments on an ongoing basis
to provide liquidity. The instruments in which the Fund may invest include: (i) short-term obligations issued by the U.S. Government; (ii) negotiable certificates of deposit (“CDs”), fixed time deposits and bankers’
acceptances of U.S. and foreign banks and similar institutions; (iii) commercial paper rated at the date of purchase “Prime-1” by Moody’s or “A-1+” or “A-1” by S&P, or, if unrated, of comparable quality,
as the Adviser determines; (iv) repurchase agreements; and (v) money market mutual funds, including affiliated money market funds. CDs are short-term negotiable obligations of commercial banks. Time deposits are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated interest rates. Banker’s acceptances are time drafts drawn on commercial banks by borrowers, usually in connection with international transactions.
Repurchase Agreements.
The Fund may enter into repurchase agreements, which are agreements pursuant to which the Fund acquires
securities from a third party with the understanding that the seller will repurchase them at a fixed price on an agreed date. These agreements may be made with respect to any of the portfolio securities in which the Fund is authorized to invest.
Repurchase agreements may be characterized as loans secured by the underlying securities. The Fund may enter into repurchase agreements with (i) member banks of the Federal Reserve System having total assets in excess of $500 million and
(ii) securities dealers (“Qualified Institutions”). The Adviser will monitor the continued creditworthiness of Qualified Institutions.
The use of repurchase agreements involves certain risks. For example, if the seller of securities under a repurchase agreement defaults on its
obligation to repurchase the underlying securities, as a result of its bankruptcy or otherwise, the Fund will seek to dispose of such securities, which action could involve costs or delays. If the seller becomes insolvent and subject to liquidation
or reorganization under applicable bankruptcy or other laws, the Fund’s ability to dispose of the underlying securities may be restricted. Finally, it is possible that the Fund may not be able to substantiate its interest in the underlying
securities. To minimize this risk, the custodian will hold the securities underlying the repurchase agreement at all times in an amount at least equal to the repurchase price, including accrued interest. If the seller fails to repurchase the
securities, the Fund may suffer a loss to the extent proceeds from the sale of the underlying securities are less than the repurchase prices.
The resale price reflects the purchase price plus an agreed upon market rate of interest. The collateral is marked-to-market daily.
Reverse Repurchase Agreements
. The Fund may enter into reverse repurchase agreements, which involve the sale of securities with an
agreement to repurchase the securities at an agreed-upon price, date and interest payment and have the characteristics of borrowing. The securities purchased with the funds obtained from the agreement and securities collateralizing the agreement
will have maturity dates no later than the repayment date. Generally, the effect of such transactions is that the Fund can recover all or most of the cash invested in the portfolio securities involved during the term of the reverse repurchase
agreement, while in many cases the Fund is able to keep some of the interest income associated with those securities. Such transactions are only advantageous if the Fund has an opportunity to earn a greater rate of return on the cash derived
from these transactions than the interest cost of obtaining the same amount of cash. Opportunities to realize earnings from the use of the proceeds equal to or greater than the interest required to be paid may not always be available and the Fund
intends to use the reverse repurchase technique only when the Adviser believes it will be advantageous to do so. The use of reverse repurchase agreements may exaggerate any interim increase or decrease in the value of the Fund’s assets. The
custodian bank will maintain a separate account for the Fund with securities having a value equal to or greater than such commitments. Under the 1940 Act, reverse repurchase agreements are considered borrowings.
U.S. Government Obligations.
The Fund may invest in short-term U.S. government obligations. Short-term obligations issued or
guaranteed by the U.S. Government, its agencies and instrumentalities include bills, notes and bonds issued by the U.S. Treasury, as well as “stripped” or “zero coupon” U.S. Treasury obligations representing future interest or
principal payments on U.S. Treasury
5
notes or bonds. Stripped securities are sold at a discount to their “face value,” and may exhibit greater price volatility than interest-bearing securities because investors receive no
payment until maturity. Short-term obligations of certain agencies and instrumentalities of the U.S. Government, such as the Government National Mortgage Association (“GNMA”), are supported by the full faith and credit of the U.S.
Treasury; others, such as those of the Federal National Mortgage Association (“FNMA”), are supported by the right of the issuer to borrow from the U.S. Treasury; others, such as those of the former Student Loan Marketing Association
(“SLMA”), are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations; still others, although issued by an instrumentality chartered by the U.S. Government, like the Federal Farm
Credit Bureau (“FFCB”), are supported only by the credit of the instrumentality. In 2008, the Federal Housing Finance Agency (“FHFA”) placed Fannie Mae and Freddie Mac into conservatorship.
Since that time, Fannie Mae and Freddie Mac have received significant capital support through U.S. Treasury preferred stock purchases as well
as U.S. Treasury and Federal Reserve purchases of their mortgage backed securities. While the purchase programs for mortgage-backed securities ended in 2010, the U.S. Treasury continued its support for the entities’ capital as necessary to
prevent a negative net worth, no assurance can be given that the Federal Reserve, U.S. Treasury, or FHFA initiatives discussed above will ensure that Fannie Mae and Freddie Mac will remain successful in meeting their obligations with respect to the
debt and mortgage-backed securities they issue. In addition, Fannie Mae and Freddie Mac also are the subject of several continuing class action lawsuits and investigations by federal regulators, which (along with any resulting financial
restatements) may adversely affect the guaranteeing entities. Importantly, the future of the entities is in serious question as the U.S. Government is considering multiple options, ranging from significant reform, nationalization, privatization,
consolidation, or abolishment of the entities.
The FHFA and the U.S. Treasury (through its agreements to purchase preferred stock of
Fannie Mae and Freddie Mac) also have imposed strict limits on the size of the mortgage portfolios of Fannie Mae and Freddie Mac. In August 2012, the U.S. Treasury amended its preferred stock purchase agreements to provide that the portfolios of
Fannie Mae and Freddie Mac will be wound down at an annual rate of 15 percent (up from the previously agreed annual rate of 10 percent), requiring Fannie Mae and Freddie Mac to reach the $250 billion target four years earlier than previously
planned. Further, when a ratings agency downgraded long-term U.S. Government debt in August 2011, the agency also downgraded the bond ratings of Fannie Mae and Freddie Mac, from AAA to AA+, based on their direct reliance on the U.S. Government
(although that rating did not directly relate to their mortgage-backed securities). The U.S. Government’s commitment to ensure that Fannie Mae and Freddie Mac have sufficient capital to meet their obligations was, however, unaffected by the
downgrade.
The U.S. Treasury has put in place a set of financing agreements to help ensure that these entities continue to meet their
obligations to holders of bonds they have issued or guaranteed. The U.S. Government may choose not to provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not legally obligated to do so, in which case, if the
issuer were to default, the Fund holding securities of such issuer might not be able to recover their investment from the U.S. Government.
Convertible Securities.
A convertible security is a bond, debenture, note, preferred stock, right, warrant or other security that
may be converted into or exchanged for a prescribed amount of common stock or other security of the same or a different issuer or into cash within a particular period of time at a specified price or formula. A convertible security generally entitles
the holder to receive interest paid or accrued on debt securities or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities generally have
characteristics similar to both debt and equity securities. As with other equity securities, the value of a convertible security tends to increase as the price of the underlying stock goes up, and to decrease as the price of the underlying
stock goes down. Declining common stock values therefore also may cause the value of the Fund’s investments to decline. Like a debt security, a convertible security provides a fixed income stream with generally higher yields than those of
common stock of the same or similar issuers, which tends to decrease in value when interest rates rise.
Convertible securities generally
rank senior to common stock in a corporation’s capital structure but are usually subordinated to comparable nonconvertible securities. Convertible securities generally do not participate directly in any dividend increases or decreases of
the underlying securities although the market prices of convertible securities may be affected by any dividend changes or other changes in the underlying securities. Many convertible securities have credit ratings that are below investment grade and
are subject to the same risks as lower-rated debt securities.
Structured Notes.
A structured note is a derivative security
for which the amount of principal repayment and/or interest payments is based on the movement of one or more “factors.” These factors include, but are not limited to, currency exchange rates, interest rates (such as the prime lending
rate or LIBOR), referenced bonds and stock indices. Some of these factors may or may not correlate to the total rate of return on one or more underlying instruments referenced in such notes. Investments in structured notes involve risks including
interest rate risk, credit risk and market risk. Depending on the factor(s) used and the use of multipliers or deflators, changes in interest rates and movement of such factor(s) may cause significant price fluctuations. Structured notes may be
less liquid than other types of securities and more volatile than the reference factor underlying the note. This means that the Fund may lose money if the issuer of the note defaults, as the Fund may not be able to readily close out its investment
in such notes without incurring losses.
6
Other Investment Companies.
The Fund may invest in the securities of other investment
companies, including money market funds, ETFs, non-exchange traded U.S. registered open-end investment companies (mutual funds), closed-end investment companies, or non-U.S. investment companies traded on foreign exchanges beyond the limits
permitted under the 1940 Act, subject to certain terms and conditions set forth in an SEC exemptive order issued to the Trust in 2012 pursuant to Section 12(d)(1)(J) of the 1940 Act (the “2012 Order”). Absent such exemptive relief,
the Fund’s investments in investment companies would be limited to, subject to certain exceptions, (i) 3% of the total outstanding voting stock of any one investment company, (ii) 5% of the Fund’s total assets with respect to any
one investment company and (iii) 10% of the Fund’s total assets of investment companies in the aggregate. However, as a non-fundamental restriction, the Fund may not acquire any securities of registered open-end investment companies or
registered unit investment trusts in reliance on Sections 12(d)(1)(F) and 12(d)(1)(G) of the 1940 Act.
Under the pertinent terms of the
2012 Order, the Fund may invest in registered investment companies in excess of the limitations imposed by Sections 12(d)(1)(A) and 12(d)(1)(C) of the 1940 Act. The total amount of securities held by the Fund, both individually and when
aggregated with all other shares of the acquired fund held by other registered investment companies or private investment pools advised by the Adviser or its affiliates (as well as shares held by the Adviser and its affiliates) cannot exceed 25% of
the outstanding voting securities of the acquired investment company, and the none of these entities (including the Fund) may individually or collectively exert a controlling influence over the acquired investment company. The Fund may not rely on
the 2012 Order to acquire an investment company that itself has ownership of investment company shares in excess of the limitations contained in Section 12(d)(1)(A) of the 1940 Act. To the extent necessary to comply with the provisions of
the 1940 Act or the 2012 Order, on any matter upon which an underlying investment company’s shareholders are solicited to vote, the Adviser will vote the underlying investment company shares in the same general proportion as shares held by
other shareholders of the underlying investment company.
In addition, the Trust previously obtained exemptive relief in 2007 that allows
other investment companies to acquire shares of the Trust in excess of the limitations imposed by Section 12(d)(1)(A) (the “2007 Order”). This relief is conditioned on those acquiring funds obtaining a participation agreement
signed by both the acquiring fund and the fund that it wishes to acquire in excess of the 12(d)(1)(A) limitations. If the Fund relies on the 2012 Order, it will not enter into a participation agreement pursuant to the 2007 Order, and if the
Fund has a signed participation agreement in effect pursuant to the 2007 Order, it will not rely on the 2012 Order.
Illiquid
Securities.
The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid securities (calculated at the time of investment). Illiquid securities include securities subject to contractual or other restrictions on resale
and other instruments that lack readily available markets. The Fund will monitor its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained, and will
consider taking appropriate steps in order to maintain adequate liquidity if, through a change in values, net assets, or other circumstances, more than 15% of the Fund’s net assets are held in illiquid securities or other illiquid assets. The
existence of a liquid trading market for certain securities may depend on whether dealers will make a market in such securities. There can be no assurance that dealers will make or maintain a market or that any such market will be or remain liquid.
The price at which securities may be sold and the value of the Shares will be adversely affected if trading markets for the Fund’s portfolio securities are limited or absent, or if bid/ask spreads are wide.
Borrowing.
The Fund may borrow money from a bank or another person up to the limits set forth in the section “Investment
Restrictions” to meet shareholder redemptions, for temporary or emergency purposes and for other lawful purposes. Borrowed money will cost the Fund interest expense and/or other fees. The costs of borrowing may reduce the Fund’s return.
Borrowing also may cause the Fund to liquidate positions when it may not be advantageous to do so to satisfy its obligations to repay borrowed monies. To the extent that the Fund has outstanding borrowings, it will be leveraged. Leveraging generally
exaggerates the effect on NAV of any increase or decrease in the market value of the Fund’s portfolio securities.
Cybersecurity
Risk.
The Fund, like all companies, may be susceptible to operational and information security risks. Cybersecurity failures or breaches of the Fund or its service providers or the issuers of securities in which the Fund invests, have the
ability to cause disruptions and impact business operations, potentially resulting in financial losses, the inability of shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational
damage, reimbursement or other compensation costs, and/or additional compliance costs. The Fund and its shareholders could be negatively impacted as a result.
PORTFOLIO TURNOVER
The Fund calculates its portfolio turnover rate by dividing the value of the lesser of purchases or sales of portfolio securities for the
fiscal period by the monthly average of the value of portfolio securities owned by the Fund during the fiscal period. A 100% portfolio turnover rate would occur, for example, if all of the portfolio securities (other than short-term securities) were
replaced once during the fiscal period. Portfolio turnover rates will vary from year to year, depending on market conditions. At the date of this SAI, the Fund is new and has no operating history, and therefore portfolio turnover information is not
yet available.
7
DISCLOSURE OF PORTFOLIO HOLDINGS
Quarterly Portfolio Schedule.
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule
of the Fund’s portfolio holdings with the SEC on Form N-Q. The Trust also discloses a complete schedule of the Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth fiscal quarters.
The Trust’s Forms N-Q and Forms N-CSR on behalf of the Fund will be available on the SEC’s website at http://www.sec.gov. The
Trust’s Forms N-Q and Forms N-CSR also may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C., and information on the operation of the Public Reference Room may be obtained by calling
1-202-551-8090. The Trust’s Forms N-Q and Forms N-CSR will be available without charge, upon request, by calling 1-630-933-9600 or 1-800-983-0903 or by writing to PowerShares Exchange-Traded Fund Trust II at 3500 Lacey Road,
Suite 700, Downers Grove, Illinois 60515.
Portfolio Holdings Policy.
The Trust has adopted a policy regarding the
disclosure of information about the Trust’s portfolio holdings. The Board must approve all material amendments to this policy.
The
Fund’s portfolio holdings are disseminated publicly each day that the Fund is open for business through financial reporting and news services, including publicly accessible Internet websites. In addition, for in-kind creations, a basket
composition file, which includes the security names and share quantities to deliver in exchange for Shares, together with estimates and actual cash components, is disseminated publicly each day prior to the opening of the Exchange via the National
Securities Clearing Corporation (“NSCC”). The basket represents one Creation Unit of the Fund. The Trust, the Adviser and The Bank of New York Mellon (“BNYM” or the “Administrator”) will not disseminate non-public
information concerning the Trust.
Access to information concerning the Fund’s portfolio holdings may be permitted at other times to
personnel of third-party service providers, including the Fund’s custodian, transfer agent, auditors and counsel, as may be necessary to conduct business in the ordinary course in a manner consistent with such service providers’ agreements
with the Trust on behalf of the Fund.
MANAGEMENT
The primary responsibility of the Board is to represent the interests of the Fund and to provide oversight of the management of the Fund. The
Trust currently has eight Trustees. Six Trustees have no affiliation or business connection with the Adviser or any of its affiliated persons and do not own any stock or other securities issued by the Adviser. These are the
“non-interested” (as such term is defined under the 1940 Act) or “independent” Trustees (“Independent Trustees”). One Trustee (the “Unaffiliated Trustee”) is an officer of a company that has engaged in
securities transactions with clients advised by a sub-adviser to one or more PowerShares ETFs (which clients do not include the Fund), but is not an affiliated person of the Adviser. The remaining Trustee (the “Interested Trustee”) is
affiliated with the Adviser.
8
The Independent Trustees of the Trust, their term of office and length of time served, their
principal business occupations during at least the past five years, the number of portfolios in the Fund Complex (defined below) that they oversee and other directorships, if any, that they hold are shown below. The “Fund Complex” includes
all open and closed-end funds (including all of their portfolios) advised by the Adviser and any funds that have an investment adviser that is an affiliated person of the Adviser. As of the date of this SAI, the “Fund Family” consists of
the Trust and four other exchange-traded fund trusts advised by the Adviser.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name, Address and Year of Birth
of Independent
Trustees
|
|
Position(s) Held
with Trust
|
|
Term of
Office and
Length of
Time Served*
|
|
Principal Occupation(s)
During At Least the Past 5 Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen by
Independent
Trustees
|
|
Other Directorships
Held by
Independent Trustee
During the Past 5 Years
|
|
Ronn R. Bagge — 1958
c/o Invesco PowerShares Capital Management LLC
3500 Lacey
Road,
Suite 700
Downers Grove, IL 60515
|
|
Chairman of the Nominating and Governance Committee and Trustee
|
|
Chairman of the Nominating and Governance Committee and Trustee since 2007
|
|
Founder and Principal, YQA Capital Management LLC (1998-Present); formerly Owner/CEO of Electronic Dynamic Balancing Co., Inc. (high-speed rotating equipment service provider).
|
|
154
|
|
None
|
|
|
|
|
|
|
|
|
Todd J. Barre — 1957
c/o Invesco
PowerShares Capital Management LLC
3500 Lacey Road,
Suite
700
Downers Grove, IL 60515
|
|
Trustee
|
|
Since 2010
|
|
Assistant Professor of Business, Trinity Christian College (2010-2016); formerly Vice President and Senior Investment Strategist (2001-2008), Director of Open Architecture and Trading (2007-2008), Head of Fundamental
Research (2004-2007) and Vice President and Senior Fixed Income Strategist (1994-2001), BMO Financial Group/Harris Private Bank.
|
|
154
|
|
None
|
|
|
|
|
|
|
|
|
Marc M. Kole — 1960
c/o Invesco
PowerShares Capital Management LLC
3500 Lacey Road,
Suite
700
Downers Grove, IL 60515
|
|
Chairman of the Audit Committee and Trustee
|
|
Chairman of the Audit Committee since 2008; Trustee since 2007
|
|
Senior Director of Finance, By The Hand Club for Kids (2015-Present); formerly: Chief Financial Officer, Hope Network (social services) (2008-2012); Assistant Vice President and Controller, Priority Health (health insurance)
(2005-2008); Senior Vice President of Finance, United Healthcare (2004-2005); Chief Accounting Officer, Senior Vice President of Finance, Oxford Health Plans (2000-2004); Audit Partner, Arthur Andersen LLP (1996-2000).
|
|
154
|
|
None
|
|
|
|
|
|
|
|
|
Yung Bong Lim — 1964
c/o Invesco
PowerShares Capital Management LLC
3500 Lacey Road,
Suite
700
Downers Grove, IL 60515
|
|
Chairman of the Investment Oversight Committee and Trustee
|
|
Chairman of the Investment Oversight Committee since 2014; Trustee
since 2013
|
|
Managing Partner, Residential Dynamics Group LLC (2008-Present); formerly, Managing Director, Citadel Investment Group, L.L.C. (1999-2007).
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154
|
|
None
|
9
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|
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|
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|
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|
|
Name, Address and Year of Birth of
Independent Trustees
|
|
Position(s) Held
with Trust
|
|
Term of
Office and
Length of
Time Served*
|
|
Principal Occupation(s)
During At Least the Past 5 Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen by
Independent
Trustees
|
|
Other Directorships
Held by Independent
Trustee
During the Past 5 Years
|
|
Gary R. Wicker — 1961
c/o Invesco
PowerShares Capital Management LLC
3500 Lacey Road,
Suite
700
Downers Grove, IL 60515
|
|
Trustee
|
|
Since 2013
|
|
Senior Vice President of Global Finance and Chief Financial Officer at RBC Ministries (publishing company) (2013-Present); formerly, Executive Vice President and Chief Financial Officer, Zondervan Publishing (a division of Harper
Collins/NewsCorp) (2007-2012); Senior Vice President and Group Controller (2005-2006), Senior Vice President and Chief Financial Officer (2003-2004), Chief Financial Officer (2001-2003), Vice President, Finance and Controller (1999-2001) and
Assistant Controller (1997-1999), divisions of The Thomson Corporation (information services provider).
|
|
154
|
|
None
|
|
|
|
|
|
|
|
|
Donald H. Wilson — 1959
c/o Invesco
PowerShares Capital Management LLC
3500 Lacey Road,
Suite
700
Downers Grove, IL 60515
|
|
Chairman of the Board and Trustee
|
|
Chairman since 2012; Trustee since 2007
|
|
Chairman and Chief Executive Officer, Stone Pillar Advisors, Ltd. (2010-Present); President and Chief Executive Officer, Stone Pillar Investments, Ltd. (2016-Present); formerly, Chairman, President and Chief Executive Officer,
Community Financial Shares, Inc. and Community Bank—Wheaton/Glen Ellyn (subsidiary) (2013-2015); Chief Operating Officer, AMCORE Financial, Inc. (bank holding company) (2007-2009); Executive Vice President and Chief Financial Officer, AMCORE
Financial, Inc. (2006-2007); Senior Vice President and Treasurer, Marshall & Ilsley Corp. (bank holding company) (1995-2006).
|
|
154
|
|
None
|
|
*
|
This is the date the Independent Trustee began serving the Trust. He serves an indefinite term, until his successor is elected.
|
The Unaffiliated Trustee, his term of office and length of time served, his principal business occupations during at least the past five
years, the number of portfolios in the Fund Complex overseen by the Unaffiliated Trustee and the other directorships, if any, held by the Unaffiliated Trustee, are shown below.
|
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|
|
|
|
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|
Name, Address and Year of Birth
of Unaffiliated Trustee
|
|
Position(s)
Held
with
Trust
|
|
Term of
Office and
Length of
Time Served*
|
|
Principal Occupation(s)
During At Least the Past 5 Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen by
Unaffiliated
Trustees
|
|
Other Directorships
Held by
Unaffiliated Trustee
During the Past 5 Years
|
|
Philip M. Nussbaum—1961
c/o
Invesco PowerShares Capital Management LLC
3500 Lacey Road,
Suite 700
Downers Grove, IL 60515
|
|
Trustee**
|
|
Since 2007
|
|
Chairman, Performance Trust Capital Partners (2004-Present).
|
|
154
|
|
None
|
|
*
|
This is the date the Unaffiliated Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected.
|
|
**
|
Effective May 18, 2016, Mr. Nussbaum became an Unaffiliated Trustee.
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10
The Interested Trustee and the executive officers of the Trust, their term of office and length
of time served, their principal business occupations during at least the past five years, the number of portfolios in the Fund Complex overseen by the Interested Trustee and the other directorships, if any, held by the Interested Trustee, are shown
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Name, Address and Year of Birth of
Interested Trustee
|
|
Position(s) Held
with Trust
|
|
Term of
Office and
Length of
Time Served*
|
|
Principal Occupation(s)
During At Least the Past 5 Years
|
|
Number of
Portfolios in
Fund
Complex
Overseen by
Interested
Trustees
|
|
Other Directorships
Held by Interested
Trustee
During the Past 5 Years
|
|
Kevin M. Carome — 1956
Invesco
Ltd.
Two Peachtree Pointe
1555 Peachtree St., N.E.,
Suite 1800
Atlanta, GA 30309
|
|
Trustee
|
|
Since 2010
|
|
Senior Managing Director, Secretary and General Counsel, Invesco Ltd. (2007-Present); Director, Invesco Advisers, Inc. (2009-Present); Director, Invesco Finance PLC, and Invesco Holding Company Limited; Director and Executive Vice
President, Invesco Holding Company (US), Inc., Invesco Finance, Inc., Invesco Group Services, Inc., Invesco North American Holdings, Inc. and INVESCO Asset Management (Bermuda) Ltd.; Executive Vice President, Invesco Investments (Bermuda) Ltd.,
Manager, Horizon Flight Works LLC; Director and Secretary, Invesco Services (Bahamas) Private Limited; formerly, Director and Chairman, INVESCO Funds Group, Inc., Senior Vice President, Secretary and General Counsel, Invesco Advisers, Inc.
(2003-2006); Director, Invesco Investments (Bermuda) Ltd. (2008-2016); Senior Vice President and General Counsel, Liberty Financial Companies, Inc. (2000-2001); General Counsel of certain investment management subsidiaries of Liberty Financial
Companies, Inc. (1998-2000); Associate General Counsel, Liberty Financial Companies, Inc. (1993-1998); Associate, Ropes & Gray LLP.
|
|
154
|
|
None
|
|
*
|
This is the date the Interested Trustee began serving the Trust. He serves an indefinite term, until his successor is elected.
|
11
|
|
|
|
|
|
|
|
|
Name, Address and Year of Birth
of Executive Officer
|
|
Position(s) Held
with Trust
|
|
Term of
Office and
Length
of
Time Served*
|
|
Principal Occupation(s) During At Least Past 5 Years
|
|
Daniel E. Draper — 1968
Invesco
PowerShares Capital Management LLC 3500 Lacey Road,
Suite 700
Downers Grove, IL 60515
|
|
President and Principal
Executive
Officer
|
|
Since
2015
|
|
President and Principal Executive Officer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust and
PowerShares Actively Managed Exchange-Traded Commodity Fund Trust (2015-Present); Chief Executive Officer and Principal Executive Officer (2016-Present) and Managing Director (2013-Present), Invesco PowerShares Capital Management LLC; Senior Vice
President, Invesco Distributors, Inc. (2014-Present); formerly, Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed
Exchange-Traded Fund Trust (2013-2015) and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust (2014-2015); Managing Director, Credit Suisse Asset Management (2010-2013) and Lyxor Asset Management/Societe Generale
(2007-2010).
|
|
|
|
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|
|
Adam Henkel — 1980
Invesco PowerShares
Capital Management LLC 3500 Lacey Road, Suite 700
Downers Grove, IL 60515
|
|
Chief Compliance
Officer
|
|
Since 2017
|
|
Chief Compliance Officer of Invesco PowerShares Capital Management LLC (2017-Present); Chief Compliance Officer of PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded
Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust (2017-Present); formerly, Senior Counsel, Invesco, Ltd. (2013-2017); and Assistant Vice President, U.S. Bancorp
Fund Services, LLC (2010-2013).
|
|
|
|
|
|
|
Steven M. Hill — 1964
Invesco PowerShares
Capital
Management LLC
3500 Lacey Road,
Suite 700
Downers Grove, IL 60515
|
|
Vice President
and Treasurer
|
|
Since 2013
|
|
Vice President and Treasurer, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust (2013-Present)
and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust (2014-Present); Head of Global ETF Administration, Invesco PowerShares Capital Management LLC (2011-Present); Principal Financial and Accounting Officer – Investment Pools,
Invesco PowerShares Capital Management LLC (2015-Present); formerly, Senior Managing Director and Chief Financial Officer, Destra Capital Management LLC and its subsidiaries (2010-2011); Chief Financial Officer, Destra Investment Trust and Destra
Investment Trust II (2010-2011); Senior Managing Director, Claymore Securities, Inc. (2003-2010); and Chief Financial Officer, Claymore sponsored mutual funds (2003-2010).
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12
|
|
|
|
|
|
|
|
|
Name, Address and Year of
Birth of
Executive Officer
|
|
Position(s) Held
with Trust
|
|
Term of
Office and
Length of
Time Served*
|
|
Principal Occupation(s)
During
At Least Past 5 Years
|
|
Peter Hubbard — 1981
Invesco PowerShares
Capital Management LLC
3500 Lacey Road,
Suite
700
Downers Grove, IL 60515
|
|
Vice President
|
|
Since 2009
|
|
Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust (2009-Present) and
PowerShares Actively Managed Exchange-Traded Commodity Fund Trust (2014-Present); Vice President and Director of Portfolio Management, Invesco PowerShares Capital Management LLC (2010-Present); formerly, Vice President of Portfolio Management,
Invesco PowerShares Capital Management LLC (2008-2010); Portfolio Manager, Invesco PowerShares Capital Management LLC (2007-2008); Research Analyst, Invesco PowerShares Capital Management LLC (2005-2007); Research Analyst and Trader, Ritchie
Capital, a hedge fund operator (2003-2005).
|
|
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|
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|
|
Sheri Morris — 1964
Invesco Management
Group, Inc.
11 Greenway Plaza,
Suite 1000
Houston, TX 77046
|
|
Vice President
|
|
Since 2012
|
|
President and Principal Executive Officer, The Invesco Funds (2016-Present); Treasurer, The Invesco Funds (2008-Present); Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered
investment adviser) (2009-Present) and Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust
(2012-Present) and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust (2014-Present); formerly, Vice President and Principal Financial Officer, The Invesco Funds (2008-2016); Treasurer, PowerShares Exchange-Traded Fund Trust,
PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Fund Trust (2011-2013); Vice President, Invesco Aim Advisers, Inc., Invesco Aim Capital Management, Inc. and
Invesco Aim Private Asset Management, Inc.; Assistant Vice President and Assistant Treasurer, The Invesco Funds and Assistant Vice President, Invesco Advisers, Inc., Invesco Aim Capital Management, Inc. and Invesco Aim Private Asset Management,
Inc.
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Anna Paglia — 1974
Invesco PowerShares
Capital
Management LLC
3500 Lacey Road,
Suite 700
Downers Grove, IL 60515
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Secretary
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Since 2011
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Secretary, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust (2011-Present) and PowerShares
Actively Managed Exchange-Traded Commodity Fund Trust (2014-Present); Head of Legal (2010-Present) and Secretary (2015-Present), Invesco PowerShares Capital Management LLC (2010-Present); formerly, Partner, K&L Gates LLP (formerly, Bell
Boyd & Lloyd LLP) (2007-2010); Associate Counsel at Barclays Global Investors Ltd. (2004-2006).
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13
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Name, Address and Year of Birth of
Executive Officer
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Position(s) Held
with Trust
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|
Term of
Office and
Length of
Time Served*
|
|
Principal Occupation(s) During
At Least Past 5 Years
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|
Rudolf E. Reitmann — 1971
Invesco
PowerShares Capital Management LLC
3500 Lacey Road,
Suite 700
Downers Grove, IL 60515
|
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Vice President
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|
Since 2013
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|
Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust (2013-Present) and PowerShares
Actively Managed Exchange-Traded Commodity Fund Trust (2014-Present); Head of Global Exchange Traded Funds Services, Invesco PowerShares Capital Management LLC (2013-Present).
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David Warren — 1957
Invesco Canada Ltd.
5140 Yonge Street,
Suite 800
Toronto, Ontario M2N
6X7
|
|
Vice President
|
|
Since 2009
|
|
Vice President, PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, and PowerShares Actively Managed Exchange-Traded Fund Trust (2009-Present) and
PowerShares Actively Managed Exchange-Traded Commodity Fund Trust (2014-Present); Managing Director—Chief Administrative Officer, Americas, Invesco PowerShares Capital Management LLC; Senior Vice President, Invesco Advisers, Inc.
(2009-Present); Director, Invesco Inc. (2009-Present); Senior Vice President, Invesco Management Group, Inc. (2007-Present); Director, Executive Vice President and Chief Financial Officer, Invesco Canada Ltd. (formerly, Invesco Trimark Ltd.); Chief
Administrative Officer, North American Retail, Invesco Ltd. (2007-Present); Director, Invesco Corporate Class Inc. (2014-Present); Director, Invesco Global Direct Real Estate Feeder GP Ltd. (2015-Present); Director, Invesco Canada Holdings Inc.
(2002-Present); Director, Invesco Financial Services Ltd. / Services Financiers Invesco Ltée and Trimark Investments Ltd./Placements Trimark Ltée (2014-Present); Director, Invesco IP Holdings (Canada) Ltd. (2016-Present); Director,
Invesco Global Direct Real Estate GP Ltd. (2015-Present); formerly, Executive Vice President and Chief Financial Officer, Invesco Inc. (2009-2015); Director, Executive Vice President and Chief Financial Officer, Invesco Canada Ltd. (formerly,
Invesco Trimark Ltd.) (2000-2011).
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*
|
This is the date the officer began serving the Trust. Each officer serves an indefinite term, until his or her successor is elected.
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14
The Fund is newly established. As of the date of this SAI, none of the Trustees held equity
securities in the Fund. As of December 31, 2016, each Trustee held in the aggregate over $100,000 in equity securities in all of the registered investment companies overseen by the Trustees. The Share information for Messrs. Bagge, Lim and
Nussbaum include Shares of certain funds in which each of Mr. Bagge, Mr. Lim and Mr. Nussbaum is deemed to be invested pursuant to the Trust’s deferred compensation plan (“DC Plan”), which is described below.
As of the date of this SAI, as to each Independent Trustee and Unaffiliated Trustee and his immediate family members, no person owned
beneficially or of record securities in an investment adviser or principal underwriter of the Fund, or a person (other than a registered investment company) directly or indirectly controlling, controlled by or under common control with an investment
adviser or principal underwriter of the Fund.
Board and Committee Structure.
As noted above, the Board is responsible for
oversight of the Fund, including oversight of the duties performed by the Adviser for the Fund under the investment advisory agreement (the “Investment Advisory Agreement”). The Board generally meets in regularly scheduled meetings five
times a year, and may meet more often as required. During the Trust’s fiscal year ended October 31, 2016, the Board held six meetings.
The Board has three standing committees, the Audit Committee, the Investment Oversight Committee and the Nominating and Governance Committee,
and has delegated certain responsibilities to those Committees.
Messrs. Kole (Chair), Wicker and Wilson currently serve as members
of the Audit Committee. The Audit Committee has the responsibility, among other things, to: (i) approve and recommend to the Board the selection of the Trust’s independent registered public accounting firm, (ii) review the scope of
the independent registered public accounting firm’s audit activity, (iii) review the audited financial statements and (iv) review with such independent registered public accounting firm the adequacy and the effectiveness of the
Trust’s internal controls over financial reporting. During the Trust’s fiscal year ended October 31, 2016, the Audit Committee held eleven meetings.
Messrs. Bagge (Chair), Barre, Kole, Lim, Nussbaum, Wicker and Wilson currently serve as members of the Nominating and Governance
Committee. The Nominating and Governance Committee has the responsibility, among other things, to identify and recommend individuals for Board membership and evaluate candidates for Board membership. The Board will consider recommendations for
trustees from shareholders. Nominations from shareholders should be in writing and sent to the Secretary of the Trust to the attention of the Chairman of the Nominating and Governance Committee, as described below under the caption “Shareholder
Communications.” During the Trust’s fiscal year ended October 31, 2016, the Nominating and Governance Committee held four meetings.
Messrs. Bagge, Barre, Lim (Chair) and Nussbaum currently serve as members of the Investment Oversight Committee. The Investment Oversight
Committee has the responsibility, among other things, (i) to review the investment performance of funds, including their tracking error and correlation to their respective underlying index, (ii) to review any proposed changes to a
fund’s investment policies, comparative benchmark indices or underlying index, and (iii) to review each fund’s market trading activities and portfolio transactions. During the Trust’s fiscal year ended October 31, 2016, the
Investment Oversight Committee held four meetings.
Mr. Wilson, one of the Independent Trustees, serves as the chairman of the Board
(the “Independent Chair”). The Independent Chair, among other things, chairs the Board meetings, participates in the preparation of the Board agendas and serves as a liaison between, and facilitates communication among, the other
Independent Trustees, the full Board, the Adviser and other service providers with respect to Board matters. The Chairs of each Committee also serve as liaisons between the Adviser and other service providers and the other Independent Trustees for
matters pertaining to the respective Committee. The Board believes that its current leadership structure is appropriate taking into account the assets and number of funds overseen by the Trustees, the size of the Board and the nature of the
funds’ business, as the Interested Trustee and officers of the Trust provide the Board with insight as to the daily management of the funds while the Independent Chair promotes independent oversight of the funds by the Board.
Risk Oversight.
The Fund is subject to a number of risks, including operational, investment and compliance risks. The Board,
directly and through its Committees, as part of its oversight responsibilities, oversees the services provided by the Adviser and the Trust’s other service providers in connection with the management and operations of the Fund, as well as their
associated risks. Under the oversight of the Board, the Trust, the Adviser and other service providers have adopted policies, procedures and controls to address these risks. The Board, directly and through its Committees, receives and reviews
information from the Adviser, other service providers, the Trust’s independent registered public accounting firm, Trust counsel and counsel to the Independent Trustees to assist it in its oversight responsibilities. This information includes,
but is not limited to, reports regarding the Fund’s investments, including Fund performance and investment practices, valuation of Fund portfolio securities, and compliance. The Board also reviews, and must approve any proposed changes to, the
Fund’s investment objective, policies and restrictions, and reviews any areas of non-compliance
15
with the Fund’s investment policies and restrictions. The Audit Committee monitors the Trust’s accounting policies, financial reporting and internal control system and reviews any
internal audit reports impacting the Trust. As part of its compliance oversight, the Board reviews the annual compliance report issued by the Trust’s Chief Compliance Officer on the policies and procedures of the Trust and its service
providers, proposed changes to those policies and procedures and quarterly reports on any material compliance issues that arose during the period.
Experience, Qualifications and Attributes.
As noted above, the Nominating and Governance Committee is responsible for identifying,
evaluating and recommending trustee candidates. The Nominating and Governance Committee reviews the background and the educational, business and professional experience of trustee candidates and the candidates’ expected contributions to the
Board. Trustees selected to serve on the Board are expected to possess relevant skills and experience, time availability and the ability to work well with the other Trustees. In addition to these qualities and based on each Trustee’s
experience, qualifications and attributes and the Trustees’ combined contributions to the Board, following is a brief summary of the information that led to the conclusion that each Board member should serve as a Trustee.
Mr. Bagge has served as a trustee and Chairman of the Nominating and Governance Committee with the Fund Family since 2003. He founded YQA
Capital Management, LLC in 1998 and has since served as a principal. Previously, Mr. Bagge was the owner and CEO of Electronic Dynamic Balancing Company from 1988 to 2001. He began his career as a securities analyst for institutional investors,
including CT&T Asset Management and J.C. Bradford & Co. The Board considered that Mr. Bagge has served as a board member or advisor for several privately held businesses and charitable organizations and the executive,
investment and operations experience that Mr. Bagge has gained over the course of his career and through his financial industry experience.
Mr. Barre has served as a trustee with the Fund Family since 2010. He served as Assistant Professor of Business at Trinity Christian
College from 2010 to 2016. Previously, he served in various positions with BMO Financial Group/Harris Private Bank, including Vice President and Senior Investment Strategist (2001-2008), Director of Open Architecture and Trading (2007-2008), Head of
Fundamental Research (2004-2007) and Vice President and Senior Fixed Income Strategist (1994-2001). From 1983 to 1994, Mr. Barre was with the Office of the Manager of Investments at Commonwealth Edison Co. He also was a staff accountant at Peat
Marwick Mitchell & Co. from 1981 to 1983. The Board considered the executive, financial and investment experience that Mr. Barre has gained over the course of his career and through his financial industry experience.
Mr. Carome has served as a trustee with the Fund Family since 2010. He has served as the Senior Managing Director and General Counsel of
Invesco Ltd. since 2006, and has held various senior executive positions with Invesco Ltd. since 2003. Previously, he served in various positions with Liberty Financial Companies, Inc., including Senior Vice President and General Counsel
(2000-2001), General Counsel of certain investment management subsidiaries (1998-2000) and Associate General Counsel (1993-1998). Prior to his employment with Liberty Financial Companies, Inc., Mr. Carome was an associate with
Ropes & Gray LLP. The Board considered Mr. Carome’s senior executive position with Invesco Ltd.
Mr. Kole has
served as a trustee with the Fund Family since 2006 and Chairman of the Audit Committee since 2008. He has been the Senior Director of Finance of By The Hand Club for Kids since 2015. Previously, he was the Chief Financial Officer of Hope Network
from 2008 to 2012. He also was the Assistant Vice President and Controller at Priority Health from 2005 to 2008, Senior Vice President of Finance of United Healthcare from 2004 to 2005, Chief Accounting Officer and Senior Vice President of
Finance of Oxford Health Plans from 2000 to 2004 and Audit Partner, Arthur Andersen LLP from 1996-2000. The Board of the Trust has determined that Mr. Kole is an “audit committee financial expert” as defined by the SEC. The Board
considered the executive, financial and operations experience that Mr. Kole has gained over the course of his career and through his financial industry experience.
Mr. Lim has served as a trustee with the Fund Family since 2013 and Chairman of the Investment Oversight Committee since 2014. He has
been a Managing Partner of Residential Dynamics Group LLC since 2008. Previously, he was a Managing Director and the Head of the Securitized Products Group of Citadel Investment Group, L.L.C. (1999-2007). Prior to his employment with Citadel
Investment Group, L.L.C., he was a Managing Director with Salomon Smith Barney. The Board considered the executive, financial and operations experience that Mr. Lim has gained over the course of his career and through his financial industry
experience.
Mr. Nussbaum has served as a trustee with the Fund Family since 2003. He has served as the Chairman of Performance Trust
Capital Partners since 2004 and was the Executive Vice President of Finance from 1994 to 1999. Mr. Nussbaum also served as Managing Director of the Communication Institute from 2002 to 2003. Prior to joining Performance Trust Capital Partners
in 1994, he was a Vice President at Clayton Brown & Associates. Before that, he was a senior examiner with the Financial Markets Unit of the Federal Reserve Bank of Chicago. The Board considered the executive, financial, investment and
operations experience that Mr. Nussbaum has gained over the course of his career and through his financial industry experience.
Mr. Wicker has served as a trustee with the Fund Family since 2013. He has served as Senior Vice President of Global Finance and Chief
Financial Officer at RBC Ministries since 2013. Previously, he was the Executive Vice President and Chief Financial
16
Officer of Zondervan Publishing from 2007 to 2012. Previously, he held various positions with divisions of The Thomson Corporation, including Senior Vice President and Group Controller
(2005-2006), Senior Vice President and Chief Financial Officer (2003-2004), Chief Financial Officer (2001-2003), Vice President, Finance and Controller (1999-2001) and Assistant Controller (1997-1999). Prior to that, Mr. Wicker was Senior
Manager in the Audit and Business Advisory Services Group of Price Waterhouse (1985-1996). The Board of the Trust has determined that Mr. Wicker is an “audit committee financial expert” as defined by the SEC. The Board considered the
executive, financial and operations experience that Mr. Wicker has gained over the course of his career and through his financial industry experience.
Mr. Wilson has served as a trustee with the Fund Family since 2006 and as the Independent Chair since 2012. He also served as lead
Independent Trustee in 2011. He has served as the Chairman and Chief Executive Officer of Stone Pillar Advisors, Ltd. since 2010 and as President and Chief Executive Officer of Stone Pillar Investments, Ltd. since 2016. Previously, he was the
Chairman, President and Chief Executive Officer of Community Financial Shares, Inc. and its subsidiary, Community Bank—Wheaton/Glen Ellyn (2013-2015), and was the Chief Operating Officer (2007-2009) and Executive Vice President and Chief
Financial Officer (2006-2007) of AMCORE Financial, Inc. Mr. Wilson also served as Senior Vice President and Treasurer of Marshall & Ilsley Corp. from 1995 to 2006. He started his career with the Federal Reserve Bank of Chicago,
serving in several roles in the bank examination division and the economic research division. The Board of the Trust has determined that Mr. Wilson is an “audit committee financial expert” as defined by the SEC. The Board considered
the executive, financial and operations experience that Mr. Wilson has gained over the course of his career and through his financial industry experience.
This disclosure is not intended to hold out any Trustee as having any special expertise and shall not impose greater duties, obligations or
liabilities on the Trustees. The Trustees’ principal occupations during at least the past five years are shown in the above tables.
For his services as a Trustee of the Trust and other trusts in the Fund Family, each Independent Trustee and Unaffiliated Trustee receives an
annual retainer of $290,000 (the “Retainer”). The Retainer is allocated half pro rata among all the funds in the Fund Family and the other half is allocated among all of the funds in the Fund Family based on average net assets.
Mr. Wilson receives an additional $100,000 per year for his service as the Independent Chair, allocated in the same manner as the Retainer. The chair of the Audit Committee receives an additional fee of $28,000 per year and the chairs of the
Nominating and Governance Committee and the Investment Oversight Committee each receive an additional fee of $17,000 per year, all allocated in the same manner as the Retainer. Prior to January 1, 2017, the Retainer was $250,000, and the
additional fee for the Independent Chair was $78,000. Each Trustee also is reimbursed for travel and other out-of-pocket expenses incurred in attending Board and committee meetings.
The Trust’s DC Plan allows each Independent Trustee to defer payment of all, or a portion, of the fees that the Trustee receives for
serving on the Board throughout the year. Each eligible Trustee generally may elect to have deferred amounts credited with a return equal to the total return of one or more registered investment companies within the Fund Family that are offered
as investment options under the DC Plan. At the Trustee’s election, distributions are either in one lump sum payment, or in the form of equal annual installments over a period of years designated by the Trustee. The rights of an eligible
Trustee and the beneficiaries to the amounts held under the DC Plan are unsecured, and such amounts are subject to the claims of the creditors of the Fund. The Independent Trustees are not eligible for any pension or profit sharing plan in their
capacity as Trustees.
The following sets forth the fees paid to each Trustee for the fiscal year ended October 31, 2016.
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|
|
|
|
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|
|
|
|
|
|
|
Name of Trustee
|
|
Aggregate
Compensation From
Trust (1)
|
|
|
Pension or Retirement
Benefits accrued as part of
Fund Expenses
|
|
|
Total Compensation Paid
From Fund Complex (2)
|
|
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Independent Trustees
|
|
|
|
|
|
|
|
|
|
|
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|
|
Ronn R. Bagge
|
|
$
|
147,903
|
|
|
|
N/A
|
|
|
$
|
262,500
|
|
|
Todd J. Barre
|
|
$
|
138,509
|
|
|
|
N/A
|
|
|
$
|
245,833
|
|
|
Marc M. Kole
|
|
$
|
154,006
|
|
|
|
N/A
|
|
|
$
|
273,334
|
|
|
Yung Bong Lim
|
|
$
|
147,903
|
|
|
|
N/A
|
|
|
$
|
262,500
|
|
|
Gary R. Wicker
|
|
$
|
138,509
|
|
|
|
N/A
|
|
|
$
|
245,833
|
|
|
Donald H. Wilson
|
|
$
|
181,707
|
|
|
|
N/A
|
|
|
$
|
322,500
|
|
|
Unaffiliated Trustee
|
|
|
|
|
|
|
|
|
|
|
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|
|
Philip M. Nussbaum (3)
|
|
$
|
138,509
|
|
|
|
N/A
|
|
|
$
|
245,833
|
|
|
Interested Trustee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin M. Carome
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
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(1)
|
Because the Fund had not commenced operations as of October 31, 2016, the Fund did not pay any portion of the amounts shown in this table.
|
17
|
(2)
|
The amounts shown in this column represent the aggregate compensation paid by all funds of the trusts in the Fund Family (except as noted in the prior footnote) for the fiscal year ended October 31, 2016 before
deferral by the Trustees under the DC Plan. During the fiscal year ended October 31, 2016, both Mr. Lim and Mr. Nussbaum deferred 100% of their compensation, and Mr. Bagge deferred 10% of his compensation from November 1,
2015 to December 31, 2015.
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|
(3)
|
Mr. Nussbaum became an Unaffiliated Trustee on May 18, 2016, but prior to that he was an Independent Trustee.
|
As of the date of this SAI, the Trustees and officers, as a group, owned none of the Fund’s outstanding Shares.
Principal Holders and Control Persons.
The Fund is new and, as of the date of this SAI, no person owned of record more than 5% of
the outstanding Shares.
Shareholder Communications.
Shareholders may send communications to the Trust’s Board by
addressing the communications directly to the Board (or individual Board members) and/or otherwise clearly indicating in the salutation that the communication is for the Board (or individual Board members). The shareholder may send the communication
to either the Trust’s office or directly to such Board members at the address specified for each Trustee. Management will review and generally respond to other shareholder communications the Trust receives that are not directly addressed and
sent to the Board. Such communications will be forwarded to the Board at management’s discretion based on the matters contained therein.
Investment Adviser.
The Adviser provides investment tools and portfolios for advisers and investors. The Adviser is committed to
theoretically sound portfolio construction and empirically verifiable investment management approaches. Its asset management philosophy and investment discipline is rooted deeply in the application of intuitive factor analysis and model
implementation to enhance investment decisions.
The Adviser acts as investment adviser for, and manages the investment and reinvestment
of, the assets of the Fund. The Adviser also administers the Trust’s business affairs, provides office facilities and equipment and certain clerical, bookkeeping and administrative services, and permits any of its officers or employees to serve
without compensation as Trustees or officers of the Trust if elected to such positions.
Invesco PowerShares Capital Management LLC,
organized February 7, 2003, is located at 3500 Lacey Road, Suite 700, Downers Grove, Illinois 60515. Invesco Ltd. is the parent company of Invesco PowerShares Capital Management LLC and is located at Two Peachtree Pointe, 1555 Peachtree Street,
N.E., Atlanta, Georgia 30309. Invesco Ltd. and its subsidiaries are an independent global investment management group.
Portfolio
Managers.
The Adviser uses a team of portfolio managers (the “Portfolio Managers”), investment strategists and other investment specialists. This team approach brings together many disciplines and leverages the Adviser’s
extensive resources. Peter Hubbard oversees all research, portfolio management and trading operations of the Adviser. In this capacity, he oversees a team of the Portfolio Managers responsible for the day-to-day management of the Fund.
The following individuals are responsible jointly and primarily for the day-to-day management of the Fund’s portfolio:
|
|
|
|
|
|
|
Name
|
|
Title with Adviser/Trust
|
|
Date Began Managing the Fund
|
|
Peter Hubbard
|
|
Director of Portfolio Management of the
Adviser and Vice President of the Trust
|
|
Since July 2017
|
|
|
|
|
|
Michael Jeanette
|
|
Senior Portfolio Manager of the Adviser
|
|
Since July 2017
|
|
|
|
|
|
Jonathan Nixon
|
|
Portfolio Manager of the Adviser
|
|
Since July 2017
|
|
|
|
|
|
Tony Seisser
|
|
Portfolio Manager of the Adviser
|
|
Since July 2017
|
As of October 31, 2016, Mr. Hubbard managed 125 registered investment companies with a
total of approximately $59.9 billion in assets, 67 other pooled investment vehicles with approximately $51.1 billion in assets and no other accounts.
As of October 31, 2016, Mr. Jeanette managed 106 registered investment companies with a total of approximately $37.1 billion in
assets, 25 other pooled investment vehicles with approximately $43.2 billion in assets and no other accounts.
As of October 31,
2016, Mr. Nixon managed 104 registered investment companies with a total of approximately $37.0 billion in assets, 24 other pooled investment vehicles with approximately $43.2 billion in assets and no other accounts.
18
As of October 31, 2016, Mr. Seisser managed 106 registered investment companies
with a total of approximately $37.1 billion in assets, 24 other pooled investment vehicles with approximately $43.2 billion in assets and no other accounts.
Although the other funds that the Portfolio Managers manage may have different investment strategies, the Adviser does not believe that
management of these different funds presents a material conflict of interest for the Portfolio Managers or the Adviser.
Description of
Compensation Structure.
The Portfolio Managers are compensated with a fixed salary amount by the Adviser. The Portfolio Managers are eligible, along with other senior employees of the Adviser, to participate in a year-end discretionary
bonus pool. The Compensation Committee of the Adviser will review management bonuses and, depending upon the size, the Compensation Committee may approve the bonus in advance. There is no policy regarding, or agreement with, the Portfolio Managers
or any other senior executive of the Adviser to receive bonuses or any other compensation in connection with the performance of any of the accounts managed by the Portfolio Managers.
Portfolio Holdings.
As of the date of this SAI, the Fund has not yet commenced investment operations, and none of the Portfolio
Managers beneficially own any Shares.
Investment Advisory Agreement.
Pursuant to the Investment Advisory Agreement between
the Adviser and the Trust, the Fund has agreed to pay an annual unitary management fee equal to 0.29% of its average daily net assets (the “Advisory Fee”) for the Adviser’s services. Out of the unitary management fee, the Adviser
pays for substantially all of the expenses of the Fund, including the costs of transfer agency, custody, fund administration, legal, audit and other services, except for the advisory fees, distribution fees, if any, brokerage expenses, taxes,
Acquired Fund Fees and Expenses, if any, interest, litigation expenses and other extraordinary expenses.
The Fund may invest in money
market funds that are managed by affiliates of the Adviser. The indirect portion of the management fee that the Fund incurs through such investments is in addition to the Adviser’s management fee. Therefore, the Adviser has agreed to waive the
management fees that it receives under the management fee in an amount equal to the indirect management fees that the Fund incurs through its investments in affiliated money market funds through August 31, 2018. There is no guarantee that the
Adviser will extend the waiver of these fees past that date.
Under the Investment Advisory Agreement, the Adviser will not be liable
for any error of judgment or mistake of law or for any loss suffered by the Fund in connection with the performance of the Investment Advisory Agreement, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of
the Adviser in the performance of its duties or from reckless disregard of its duties and obligations thereunder. The Investment Advisory Agreement continues in effect only if approved annually by the Board, including a majority of the Independent
Trustees. The Investment Advisory Agreement terminates automatically upon assignment and is terminable at any time without penalty as to the Fund by the Board, including a majority of the Independent Trustees, or by vote of the holders of a majority
of the Fund’s outstanding voting securities on 60 days’ written notice to the Adviser, or by the Adviser on 60 days’ written notice to the Fund.
Payments to Financial Intermediaries.
The Adviser may pay certain broker-dealers, banks and other financial intermediaries for
participating in activities that are designed to make registered representatives and other professionals more knowledgeable about exchange traded products, including the Fund, or for other activities, such as participation in marketing activities
and presentations, educational training programs, conferences, the development of technology platforms and reporting systems. As of the date of this SAI, the Adviser had arrangements to make payments, other than for the educational programs and
marketing activities described above, only to Charles Schwab & Co., Inc. (“Schwab”). Pursuant to the arrangement with Schwab, Schwab has agreed to promote select exchange-traded funds advised by the Adviser to Schwab’s customers
and not to charge certain of its customers any commissions when those customers purchase or sell shares of those funds. Payments to a broker-dealer or intermediary may create potential conflicts of interest between the broker-dealer or intermediary
and its clients. These amounts are paid by the Adviser from its own resources and not from the assets of the Fund.
19
Administrator.
BNYM serves as administrator for the Fund. Its principal
address is 101 Barclay Street, New York, New York 10286.
BNYM serves as Administrator pursuant to a fund administration and
accounting agreement (the “Administrative Services Agreement”) with the Trust. Under the Administrative Services Agreement, BNYM is obligated, on a continuous basis, to provide such administrative services as the Board reasonably deems
necessary for the proper administration of the Trust and the Fund. BNYM generally will assist in many aspects of the Trust’s and the Fund’s operations, including accounting, bookkeeping and record keeping services (including, without
limitation, the maintenance of such books and records as are required under the 1940 Act and the rules thereunder, except as maintained by other service providers), assisting in preparing reports to shareholders or investors; assist in the
preparation and filing of tax returns; supply financial information and supporting data for reports to and filings with the SEC; and supply supporting documentation for meetings of the Board.
Pursuant to the Administrative Services Agreement, the Trust has agreed to indemnify the Administrator for certain liabilities, including
certain liabilities arising under the federal securities laws, unless such loss or liability results from negligence or willful misconduct in the performance of its duties.
Custodian, Transfer Agent and Fund Accounting Agent.
BNYM, (the “Custodian” or “Transfer Agent”), located at
101 Barclay Street, New York, New York 10286, also serves as custodian for the Fund pursuant to a custodian agreement (the “Custodian Agreement”). As Custodian, BNYM holds the Fund’s assets, calculates the NAV of Shares and calculates
net income and realized capital gains or losses. BNYM also serves as transfer agent for the Fund pursuant to a transfer agency agreement (the “Transfer Agency Agreement”). Further, BNYM serves as Fund accounting agent pursuant to the fund
accounting agreement (the “Fund Accounting Agreement”). As compensation for the foregoing services, BNYM may be reimbursed for its out-of-pocket expenses, and it also receives transaction fees and asset-based fees. Such reimbursements and
fees are accrued daily and paid monthly by the Adviser out of the assets that it receives from the Fund pursuant to its unitary management fee; under that fee agreement, the Adviser is responsible for custodian and transfer agent fees.
Distributor.
Invesco Distributors, Inc. (previously defined as the “Distributor”) is the distributor of the Shares. The
Distributor’s principal address is 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173. The Distributor has entered into a distribution agreement (the “Distribution Agreement”) with the Trust pursuant to which it distributes
the Shares. The Fund continuously offers Shares for sale through the Distributor only in Creation Unit Aggregations, as described in the Prospectus and below under the heading “Creation and Redemption of Creation Unit Aggregations.”
20
The Distribution Agreement for the Fund provides that it may be terminated as to the Fund at any
time, without the payment of any penalty, on at least 60 days’ written notice by the Trust to the Distributor (i) by vote of a majority of the Independent Trustees or (ii) by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund. The Distribution Agreement will terminate automatically in the event of its assignment (as defined in the 1940 Act).
Aggregations.
The Distributor does not distribute Shares in less than Creation Unit Aggregations. The Distributor will deliver a
Prospectus (or a Summary Prospectus) and, upon request, this SAI to persons purchasing Creation Unit Aggregations and will maintain records of both orders placed with it and confirmations of acceptance furnished by it. The Distributor is a
broker-dealer registered under the Securities Exchange Act of 1934, as amended, and a member of the Financial Industry Regulatory Authority (“FINRA”).
The Distributor also may enter into agreements with securities dealers (“Soliciting Dealers”) who will solicit purchases of Creation
Unit Aggregations of the Shares. Such Soliciting Dealers also may be Participating Parties (as defined in “Procedures for Creation of Creation Unit Aggregations” below) and DTC Participants (as defined in “DTC Acts as Securities
Depository for Fund Shares” below).
Index Provider.
No entity that creates, compiles, sponsors or maintains the Underlying
Index is or will be an affiliated person, as defined in Section 2(a)(3) of the 1940 Act, or an affiliated person of an affiliated person, of the Trust, the Adviser, the Distributor or a promoter of the Fund.
Neither the Adviser nor any affiliate of the Adviser has any rights to influence the selection of the securities in the Underlying Index.
Set forth below is the Underlying Index upon which the Fund is based.
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Fund
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Underlying Index
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PowerShares Russell 1000 Enhanced Value Equal Weight Portfolio
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Russell 1000
®
Enhanced Value Equal Weight Index
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BROKERAGE TRANSACTIONS
The policy of the Adviser regarding purchases and sales of securities is to give primary consideration to obtaining the most favorable prices
and efficient executions of transactions under the circumstances. Consistent with this policy, when securities transactions are effected on a stock exchange, the Adviser’s policy is to pay commissions that are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in all circumstances. In seeking to determine the reasonableness of brokerage commissions paid in any transaction, the Adviser relies upon its experience and knowledge
regarding commissions various brokers generally charge. The sale of Shares by a broker-dealer is not a factor in the selection of broker-dealers.
In seeking to implement its policies, the Adviser effects transactions with those brokers and dealers that the Adviser believes provide the
most favorable prices and are capable of providing efficient executions. The Adviser and its affiliates currently do not participate in soft dollar transactions.
The Adviser assumes general supervision over placing orders on behalf of the Fund for the purchase or sale of portfolio securities. If
purchases or sales of portfolio securities by the Fund and one or more other investment companies or clients supervised by the Adviser are considered at or about the same time, the Adviser allocates transactions in such securities among the Fund,
the several investment companies and clients in a manner deemed equitable to all. In some cases, this procedure could have a detrimental effect on the price or volume of the security as far as the Fund is concerned. However, in other cases, it is
possible that the ability to participate in volume transactions and to negotiate lower brokerage commissions will be beneficial to the Fund. The primary consideration is prompt execution of orders at the most favorable net price under the
circumstances.
Affiliated Transactions
.
The Adviser may place trades with Invesco Capital Markets, Inc. (“ICMI”)
a broker-dealer with whom it is affiliated, provided the Adviser determines that ICMI’s trade execution abilities and costs are at least comparable to those of non-affiliated brokerage firms with which the Adviser could otherwise place similar
trades. ICMI receives brokerage commissions in connection with effecting trades for the Fund and, therefore, use of ICMI presents a conflict of interest for the Adviser. Trades placed through ICMI, including the brokerage commissions paid
to ICMI, are subject to procedures adopted by the Board.
ADDITIONAL INFORMATION CONCERNING THE TRUST
The Trust is an open-end management investment company registered under the 1940 Act. The Trust was organized as a Massachusetts
business trust on October 10, 2006 pursuant to a Declaration of Trust (the “Declaration”).
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The Trust is authorized to issue an unlimited number of shares in one or more series or
“funds.” The Trust currently offers shares of 82 funds. The Board has the right to establish additional series in the future, to determine the preferences, voting powers, rights and privileges thereof and to modify such preferences, voting
powers, rights and privileges, without shareholder approval.
Each Share issued by the Fund has a pro rata interest in the assets of
the Fund. Shares have no preemptive, exchange, subscription or conversion rights and are freely transferable. Each Share is entitled to participate equally in dividends and distributions declared by the Board with respect to the Fund and in the net
distributable assets of the Fund on liquidation.
Shareholders are entitled to vote on any matter as required by the 1940 Act or other
applicable laws, but otherwise the Trustees are permitted to take any action without seeking the consent of shareholders. The Trustees, without shareholder approval, may amend the Declaration in any respect or authorize the merger or consolidation
of the Trust or any fund into another trust or entity, reorganize the Trust or the Fund into another trust or entity or a series or class of another entity, sell all or substantially all of the assets of the Trust or the Fund to another entity, or a
series or class of another entity, or terminate the Trust or any fund.
The Trust is not required, and does not intend, to hold an annual
meeting of shareholders, but will call special meetings of shareholders whenever required by the 1940 Act or by the terms of the Declaration.
Each Share has one vote with respect to matters upon which a shareholder vote is required consistent with the requirements of the 1940 Act and
the rules promulgated thereunder. Shares of all funds of the Trust vote together as a single class except as otherwise required by the 1940 Act, or if the matter being voted on affects only a particular fund, and, if a matter affects a
particular fund differently from other funds, the shares of that fund will vote separately on such matter.
The Declaration provides that
by becoming a shareholder of the Fund, each shareholder shall be held expressly to have agreed to be bound by the provisions of the Declaration. The holders of Shares are required to disclose information on direct or indirect ownership of Shares as
may be required to comply with various laws applicable to the Fund or as otherwise determined by the Trustees, and ownership of Shares may be disclosed by the Fund if so required by law or regulation or as the Trustees may otherwise determine.
Under Massachusetts law applicable to Massachusetts business trusts, shareholders of such a trust may, under certain circumstances, be held
personally liable as partners for its obligations. However, the Declaration contains an express disclaimer of shareholder liability for acts or obligations of the Trust and requires that notice of this disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Trust or the Trustees. The Declaration further provides for indemnification out of the assets and property of the Trust for all losses and expenses of any shareholder held personally liable
for the obligations of the Trust. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which both inadequate insurance existed and the Trust or Fund itself was unable to meet its
obligations. The Trust believes the likelihood of the occurrence of these circumstances is remote.
The Trust’s Declaration also
provides that a Trustee acting in his or her capacity of trustee is not liable personally to any person other than the Trust or its shareholders for any act, omission, or obligation of the Trust. The Declaration further provides that a Trustee or
officer is liable to the Trust or its shareholders only for his or her bad faith, willful misfeasance, gross negligence or reckless disregard of his or her duties, and shall not be liable for errors of judgment or mistakes of fact or law. The
Declaration requires the Trust to indemnify any persons who are or who have been Trustees, officers or employees of the Trust for any liability for actions or failure to act except to the extent prohibited by applicable federal law. In making any
determination as to whether any person is entitled to the advancement of expenses in connection with a claim for which indemnification is sought, such person is entitled to a rebuttable presumption that he or she did not engage in conduct for which
indemnification is not available.
The Declaration provides that any Trustee who serves as chair of the Board or of a committee of the
Board, lead independent Trustee, or audit committee financial expert, or in any other similar capacity will not be subject to any greater standard of care or liability because of such position.
The Declaration provides a detailed process for the bringing of derivative actions by shareholders in order to permit legitimate inquiries and
claims while avoiding the time, expense, distraction, and other harm that can be caused to the Fund or its shareholders as a result of spurious shareholder demands and derivative actions. Prior to bringing a derivative action, a demand by the
complaining shareholder must first be made on the Trustees. The Declaration details various information, certifications, undertakings and acknowledgements that must be included in the demand. Following receipt of the demand, the Trustees have a
period of 90 days, which may be extended by an additional 60 days, to consider the demand. If a majority of the Trustees who are considered independent for the purposes of considering the demand determine that maintaining the suit would not be in
the best interests of the Fund, the Trustees are required to reject the demand and the complaining shareholder may not proceed with the derivative action unless the shareholder is able to sustain the burden of proof to a court that the decision of
the Trustees not to pursue the requested
22
action was not a good faith exercise of their business judgment on behalf of the Fund. Trustees are not considered to have a personal financial interest by virtue of being compensated for their
services as Trustees.
If a demand is rejected, the complaining shareholder will be responsible for the costs and expenses (including
attorneys’ fees) incurred by the Fund in connection with the consideration of the demand, if a court determines that the demand was made without reasonable cause or for an improper purpose. If a derivative action is brought in violation of the
Trust’s Declaration, the shareholders bringing the action may be responsible for the Fund’s costs, including attorneys’ fees.
The Declaration further provides that the Fund shall be responsible for payment of attorneys’ fees and legal expenses incurred by a
complaining shareholder only if required by law, and any attorneys’ fees that the Fund is obligated to pay on the basis of hourly rates shall be calculated using reasonable hourly rates. The Declaration also requires that actions by
shareholders against the Fund be brought only in a certain federal court in Illinois, or if not permitted to be brought in federal court, then in an Illinois state court, and that the right to jury trial be waived to the full extent permitted by
law.
The Trust does not have information concerning the beneficial ownership of Shares held by DTC Participants (as defined below).
Shareholders may make inquiries by writing to the Trust, c/o the Distributor, Invesco Distributors, Inc., 11 Greenway Plaza,
Suite 1000, Houston, Texas 77046-1173.
Book Entry Only System.
The following information supplements and should be read
in conjunction with the section in the Prospectus entitled “Book Entry.”
DTC Acts as Securities Depository for Fund
Shares.
Shares are represented by securities registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC.
DTC, a limited purpose trust company, was created to hold securities of its participants (the “DTC Participants”) and to facilitate
the clearance and settlement of securities transactions among the DTC Participants in such securities through electronic book entry changes in accounts of the DTC Participants, thereby eliminating 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. More specifically, DTC is owned by a number of
its DTC Participants and by the New York Stock Exchange (“NYSE”) and FINRA. Access to the DTC system also is 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 (the “Indirect Participants”).
Beneficial ownership of Shares is limited
to DTC Participants, Indirect Participants and persons holding interests through DTC Participants and Indirect Participants. Ownership of beneficial interests in Shares (owners of such beneficial interests are referred to herein as
“Beneficial Owners”) is shown on, and the transfer of ownership is effected only through, records DTC maintains (with respect to DTC Participants) and on the records of DTC Participants (with respect to Indirect Participants and Beneficial
Owners that are not DTC Participants). Beneficial Owners will receive from or through the DTC Participant a written confirmation relating to their purchase and sale of Shares.
Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary
Agreement between the Trust and DTC, DTC is required to make available to the Trust upon request and for a fee to be charged to the Trust a listing of the Shares held by each DTC Participant. The Trust shall inquire of each such DTC Participant as
to the number of Beneficial Owners holding Shares, directly or indirectly, through such DTC Participant. The Trust shall provide each such DTC Participant with copies of such notice, statement or other communication, in such form, number and at such
place as such DTC Participant may reasonably request, in order that such DTC Participant may transmit such notice, statement or communication, directly or indirectly, to such Beneficial Owners. In addition, the Trust shall pay to each such DTC
Participant a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements.
Fund distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all Shares. DTC or its nominee, upon
receipt of any such distributions, shall immediately credit DTC Participants’ accounts with payments in amounts proportionate to their respective beneficial interests in Shares as shown on the records of DTC or its nominee. Payments by DTC
Participants to Indirect Participants and Beneficial Owners of Shares held through such DTC Participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in
bearer form or registered in a “street name,” and will be the responsibility of such DTC Participants.
The Trust has no
responsibility or liability for any aspect of the records relating to or notices to Beneficial Owners, or payments made on account of beneficial ownership interests in such Shares, or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests, or for any other aspect of the relationship between DTC and the DTC Participants or the
23
relationship between such DTC Participants and the Indirect Participants and Beneficial Owners owning through such DTC Participants.
DTC may decide to discontinue providing its service with respect to Shares at any time by giving reasonable notice to the Trust and
discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Trust shall take action to find a replacement for DTC to perform its functions at a comparable cost.
Proxy Voting.
The Board has delegated responsibility for decisions regarding proxy voting for securities the Fund holds to the
Adviser. The Adviser will vote such proxies in accordance with its proxy policies and procedures, which are summarized in Appendix A to this SAI. The Board periodically will review the Fund’s proxy voting record.
The Trust is required to disclose annually the Fund’s complete proxy voting record on Form N-PX covering the period July 1
through June 30 and file it with the SEC no later than August 31. Form N-PX for the Fund also will be available at no charge upon request by calling 1-800-983-0903 or by writing to PowerShares Exchange-Traded Fund Trust II at 3500
Lacey Road, Suite 700, Downers Grove, Illinois 60515. The Trust’s Form N-PX will also be available on the SEC’s website at www.sec.gov.
Codes of Ethics.
Pursuant to Rule 17j-1 under the 1940 Act, the Board has adopted a Code of Ethics for the Trust and approved
Codes of Ethics adopted by the Adviser and the Distributor (collectively the “Ethics Codes”). The Ethics Codes are intended to ensure that the interests of shareholders and other clients are placed ahead of any personal interest, that no
undue personal benefit is obtained from the person’s employment activities and that actual and potential conflicts of interest are avoided.
The Ethics Codes apply to the personal investing activities of Trustees and officers of the Trust, the Adviser and the Distributor
(“Access Persons”). Rule 17j-1 and the Ethics Codes are designed to prevent unlawful practices in connection with the purchase or sale of securities by Access Persons. Under the Ethics Codes, Access Persons may engage in personal
securities transactions, but must report their personal securities transactions for monitoring purposes. The Ethics Codes permit personnel subject to the Ethics Codes to invest in securities subject to certain limitations, including securities that
the Fund may purchase or sell. In addition, certain Access Persons must obtain approval before investing in initial public offerings or private placements. The Ethics Codes are on file with the SEC and are available to the public at the SEC’s
Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 942-8090. The Ethics Codes are also available on the EDGAR Database on the SEC’s Internet site
at
www.sec.gov
. The Ethics Codes may be obtained, after paying a duplicating fee, by e-mail at publicinfo@sec.gov or by writing the SEC’s Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549-0102.
CREATION AND REDEMPTION OF CREATION UNIT AGGREGATIONS
Creation.
The Trust issues Shares only in Creation Unit Aggregations on a continuous basis through the Distributor, without a
sales load, at its NAV next determined after receipt, on any Business Day (as defined below), of an order in proper form. A “Business Day” is any day on which the NYSE is open for business. As of the date of this SAI, the NYSE observes the
following holidays: New Year’s Day, Martin Luther King, Jr. Day, Washington’s Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Deposit of Securities and Delivery of Cash Component.
The consideration for purchase of Creation Unit Aggregations of the Fund
consists of the in-kind deposit of the Deposit Securities per each Creation Unit Aggregation constituting a substantial replication of the securities included in the Underlying Index (“Fund Securities”) and the Cash Component computed as
described below, plus a fixed and a variable transaction fee, as discussed below. Together, the Deposit Securities and the Cash Component constitute the “Fund Deposit,” which represents the minimum initial and subsequent investment amount
for a Creation Unit Aggregation of the Fund. However, the Fund also reserves the right to permit or require Creation Units to be issued in exchange for cash (see “Cash Purchase Method” below).
The Cash Component also is sometimes called the “Balancing Amount.” The Cash Component serves the function of compensating for any
differences between the NAV per Creation Unit Aggregation and the Deposit Amount (as defined below). The Cash Component is an amount equal to the difference between the NAV of the Shares (per Creation Unit Aggregation) and the “Deposit
Amount”—an amount equal to the market value of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit Aggregation exceeds the Deposit Amount), the creator will deliver the Cash Component. If the
Cash Component is a negative number (i.e., the NAV per Creation Unit Aggregation is less than the Deposit Amount), the creator will receive the Cash Component.
The Custodian, through the NSCC, makes available on each Business Day, prior to the opening of business on the Exchange (currently
9:30 a.m., Eastern time), the list of the names and the required number of shares of each Deposit Security to be included in the current Fund Deposit (based on information at the end of the previous Business Day) for the Fund. Such Fund Deposit
is
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applicable, subject to any adjustments as described below, to effect creations of Creation Unit Aggregations of the Fund until such time as the next-announced composition of the Deposit
Securities is made available.
The identity and number of shares of the Deposit Securities required for the Fund Deposit for the Fund
changes as rebalancing adjustments and corporate action events are reflected within the Fund from time to time by the Adviser, with a view to the investment objective of the Fund. The composition of the Deposit Securities also may change in response
to adjustments to the weighting or composition of the securities of the Fund’s Underlying Index. In addition, the Trust reserves the right to permit or require the substitution of an amount of cash—i.e., a “cash in lieu”
amount—to be added to the Cash Component to replace any Deposit Security that: (i) may not be available in sufficient quantity for delivery, (ii) may not be eligible for transfer through the systems of DTC or the Clearing Process
(discussed below), (iii) might not be eligible for trading by an AP (as defined below) or the investor for which it is acting, or (iv) another relevant reason. Brokerage commissions incurred in connection with the acquisition of Deposit
Securities not eligible for transfer through the systems of DTC, and hence not eligible for transfer through the Clearing Process (discussed below), will be at the expense of the Fund and will affect the value of all Shares; but the Adviser may
adjust the transaction fee (as discussed below) to protect ongoing shareholders. These adjustments will reflect changes known to the Adviser on the date of announcement to be in effect by the time of delivery of the Fund Deposit, in the composition
of the Underlying Index or resulting from certain corporate actions.
In addition to the list of names and numbers of securities
constituting the current Deposit Securities of the Fund Deposit, the Custodian, through the NSCC, also makes available on each Business Day, the estimated Cash Component, effective through and including the previous Business Day, per outstanding
Creation Unit Aggregation of the Fund.
Cash Purchase Method.
Although the Fund does not ordinarily permit Creation Unit
Aggregations to be issued in exchange partially or primarily for cash, during periods when partial or full cash purchases of Creation Units are permitted, such purchases will be effected in essentially the same manner as in-kind purchases. In the
case of a partial or full cash purchase, an AP (as defined below) must pay the cash equivalent of the Deposit Securities it would otherwise be required to provide through an in-kind purchase, plus the same Cash Component required to be paid by an
in-kind purchaser. Such cash equivalent is referred to as the “Deposit Cash.”
Procedures for Creation of Creation Unit
Aggregations.
To be eligible to place orders with the Distributor and to create a Creation Unit Aggregation of the Fund, an entity must be (i) a “Participating Party,” i.e., a broker-dealer or other participant in the
clearing process through the Continuous Net Settlement System of the NSCC (the “Clearing Process”), a clearing agency that is registered with the SEC; or (ii) a DTC Participant (see the “Book Entry Only System” section),
and, in each case, must have executed an agreement with the Distributor, with respect to creations and redemptions of Creation Unit Aggregations (“Participant Agreement”) (discussed below). A Participating Party and DTC Participant are
collectively referred to as an “AP.” Investors should contact the Distributor for the names of APs that have signed a Participant Agreement. All Shares, however created, will be entered on the records of DTC in the name of Cede &
Co. for the account of a DTC Participant.
The Distributor must receive all orders to create Creation Unit Aggregations no later than the
closing time of the regular trading session on the NYSE (“Closing Time”) (ordinarily 4:00 p.m., Eastern time) in each case on the date such order is placed in order for creation of Creation Unit Aggregations to be effected based on
the NAV of Shares as next determined on such date after receipt of the order in proper form. In the case of custom orders, the Distributor must receive the order no later than 3:00 p.m., Eastern time on the trade date. With respect to in-kind
creations, an AP may place a custom order where cash replaces any Deposit Security which may not be available in sufficient quantity for delivery or which may not be eligible for trading by such AP or the investor for which it is acting or other
relevant reason. The date on which an order to create Creation Unit Aggregations (or an order to redeem Creation Unit Aggregations, as discussed below) is placed is referred to as the “Transmittal Date.” Orders must be transmitted by an AP
by telephone or other transmission method acceptable to the Distributor pursuant to procedures set forth in the Participant Agreement, as described below (see the “—Placement of Creation Orders Using Clearing Process” and the
“—Placement of Creation Orders Outside Clearing Process” sections). Severe economic or market disruptions or changes, or telephone or other communication failure may impede the ability to reach the Distributor or an AP.
All orders from investors who are not APs to create Creation Unit Aggregations shall be placed with an AP in the form required by such AP. In
addition, the AP may request the investor to make certain representations or enter into agreements with respect to the order, e.g., to provide for payments of cash, when required. Investors should be aware that their particular broker may not have
executed a Participant Agreement and that, therefore, orders to create Creation Unit Aggregations of the Fund have to be placed by the investor’s broker through an AP that has executed a Participant Agreement. In such cases there may be
additional charges to such investor. At any given time, there may be only a limited number of broker-dealers that have executed a Participant Agreement. Those placing orders for Creation Unit Aggregations through the Clearing Process should afford
sufficient time to permit proper submission of the order to the Distributor prior to the Closing Time on the Transmittal Date. Orders for Creation Unit Aggregations that are effected outside the Clearing Process are likely to require transmittal by
the DTC Participant earlier on the Transmittal Date than orders effected using the Clearing Process. Those persons placing orders outside the Clearing Process should ascertain the deadlines
25
applicable to DTC and the Federal Reserve Bank wire system by contacting the operations department of the broker or depository institution effectuating such transfer of Deposit Securities and
Cash Component.
Generally, orders to create Creation Units of the Fund will be placed through the Clearing Process utilizing procedures
described below (see “—Placement of Creation Orders Using Clearing Process”). However, at times, orders to create Creation Units of the Fund may be placed outside the Clearing Process using different procedures (see
“—Placement of Creation Orders Outside Clearing Process”).
Placement of Creation Orders Using Clearing
Process.
The Clearing Process is the process of creating or redeeming Creation Unit Aggregations through the Continuous Net Settlement System of the NSCC. Fund Deposits made through the Clearing Process must be delivered through a
Participating Party that has executed a Participant Agreement. The Participant Agreement authorizes the Distributor to transmit through the Custodian to NSCC, on behalf of the Participating Party, such trade instructions as are necessary to effect
the Participating Party’s creation order. Pursuant to such trade instructions to NSCC, the Participating Party agrees to deliver the requisite Deposit Securities and the Cash Component to the Trust, together with such additional information as
may be required by the Distributor. An order to create Creation Unit Aggregations through the Clearing Process is deemed received by the Distributor on the Transmittal Date if (i) such order is received by the Distributor not later than the
Closing Time on the Transmittal Date and (ii) all other procedures set forth in the Participant Agreement are properly followed.
Placement of Creation Orders Outside Clearing Process.
Fund Deposits made outside the Clearing Process must be delivered through a
DTC Participant that has executed a Participant Agreement pre-approved by the Adviser and the Distributor. A DTC Participant who wishes to place an order creating Creation Unit Aggregations to be effected outside the Clearing Process does not need
to be a Participating Party, but such orders must state that the DTC Participant is not using the Clearing Process and that the creation of Creation Unit Aggregations will instead be effected through a transfer of securities and cash directly
through DTC. The Fund Deposit transfer must be ordered by the DTC Participant on the Transmittal Date in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities through DTC to the account of the Fund by
11:00 a.m., Eastern time, by the “regular way” settlement date.
All questions as to the number of Deposit Securities to be
delivered, and the validity, form and eligibility (including time of receipt) for the deposit of any tendered securities, will be determined by the Trust, whose determination shall be final and binding. The amount of cash equal to the Cash Component
must be transferred directly to the Custodian through the Federal Reserve Bank wire transfer system in a timely manner so as to be received by the Custodian no later than 2:00 p.m., Eastern time, by the “regular way” settlement date.
An order to create Creation Unit Aggregations outside the Clearing Process is deemed received by the Distributor on the Transmittal Date if (i) such order is received by the Distributor no later than the Closing Time on such Transmittal Date;
and (ii) all other procedures set forth in the Participant Agreement are properly followed. However, if the Custodian does not receive both the required Deposit Securities and the Cash Component by 11:00 a.m. and 2:00 p.m., Eastern
time, respectively, by the “regular way” settlement date, such order will be canceled. Upon written notice to the Distributor, such canceled order may be resubmitted the following Business Day using a Fund Deposit as newly constituted to
reflect the then current Deposit Securities and Cash Component. The delivery of Creation Unit Aggregations so created will occur no later than the third Business Day following the day on which the purchase order is deemed received by the
Distributor.
In accordance with the Fund’s Participant Agreement, Creation Unit Aggregations will be issued to an AP,
notwithstanding the fact that the corresponding Fund Deposits have not been received in part or in whole, in reliance on the undertaking of the AP to deliver the missing Deposit Securities as soon as possible, which undertaking shall be secured by
the AP’s delivery and maintenance of collateral consisting of cash in the form of U.S. dollars in immediately available funds having a value (marked-to-market daily) at least equal to 105%, which the Adviser may change from time to time, of the
value of the missing Deposit Securities.
Additional transaction fees may be imposed with respect to transactions made in connection with
the creation or redemption of Creation Units. (See “—Creation and Redemption Transaction Fees” below.)
Acceptance of
Orders for Creation Unit Aggregations.
The Trust reserves the absolute right to reject a creation order transmitted to it by the Distributor in respect of the Fund if: (i) the order is not in proper form; (ii) the investor(s),
upon obtaining the Shares ordered, would own 80% or more of the currently outstanding Shares; (iii) the Deposit Securities delivered are not as designated for that date by the Custodian, as described above; (iv) acceptance of the Deposit
Securities would have certain adverse tax consequences to the Fund; (v) acceptance of the Fund Deposit would, in the opinion of counsel, be unlawful; (vi) acceptance of the Fund Deposit would otherwise, in the discretion of the Trust or
the Adviser, have an adverse effect on the Trust or the Adviser, or on the rights of Beneficial Owners; or (vii) in the event that circumstances outside the control of the Trust, the Custodian, the Distributor or the Adviser make it for all
practical purposes impossible to process creation orders. Examples of such circumstances include acts of God; public service or utility problems such as fires, floods, extreme weather conditions and power outages resulting in telephone, telecopy and
computer failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting the Trust, the Adviser, the Distributor, DTC, NSCC, the Federal Reserve, the transfer agent, the
Custodian or sub-
26
custodian or any other participant in the creation process, and similar extraordinary events. The Distributor shall notify a prospective creator of a Creation Unit Aggregation and/or the AP
acting on behalf of such prospective creator of its rejection of the order of such person. The Trust, the Transfer Agent, the Custodian, any sub-custodian and the Distributor are under no duty, however, to give notification of any defects or
irregularities in the delivery of Fund Deposits nor shall any of them incur any liability for the failure to give any such notification.
A confirmation of acceptance of an order to create Creation Unit Aggregations will be delivered to the AP within 15 minutes of the receipt of
a submission received in good form. A creation order is deemed to be irrevocable upon the delivery of the confirmation of acceptance.
All
questions as to the number of shares of each security in the Deposit Securities and the validity, form, eligibility, and acceptance for deposit of any securities to be delivered shall be determined by the Trust, and the Trust’s determination
shall be final and binding.
Creation and Redemption Transaction Fees.
APs may be required to pay an administrative fee and a
variable transaction fee for purchasing or redeeming Creation Units. Creation and redemption transactions for the Fund are subject to an administrative fee of $500, payable to BNYM, irrespective of the size of the order. The administrative fee has a
fixed base amount; however, BNYM may increase the administrative fee to up to four times the base amount (i.e., to $2,000) for administration and settlement of non-standard orders requiring additional administrative processing by BNYM.
Additionally, for creations or redemptions effected principally for cash, the Adviser may charge additional variable fees up to the maximum discussed above. To the extent that the Fund permits or requires APs to substitute cash in lieu of Deposit
Securities, the Adviser may also set additional “cash-in-lieu fees.” The variable fees and cash-in-lieu fees will be negotiated between the Adviser and the AP and are charged to offset the transaction cost to the Fund of buying (or
selling) Deposit Securities, to cover spreads and slippage costs and to protect existing shareholders against sudden movements in the prices of the portfolio investments due to market events. The variable fees and cash-in-lieu fees are payable to
the Fund and will not exceed 2% of the value of the Creation Unit. From time to time, the Adviser, in its sole discretion, may adjust the Fund’s variable transaction fees or reimburse APs for all or a portion of the creation or redemption
transaction fees.
Procedures for Redemption of Creation Unit Aggregations.
Shares may be redeemed only in Creation Unit
Aggregations at their NAV next determined after receipt of a redemption request in proper form by the Fund through the Custodian and only on a Business Day. The Fund will not redeem Shares in amounts less than Creation Unit Aggregations. Beneficial
Owners must accumulate enough Shares in the secondary market to constitute a Creation Unit Aggregation in order to have such Shares redeemed by the Trust. There can be no assurance, however, that there will be sufficient liquidity in the public
trading market at any time to permit assembly of a Creation Unit Aggregation. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of Shares to constitute a redeemable Creation Unit
Aggregation.
The Custodian, through the NSCC, makes available prior to the opening of business on the Exchange (currently 9:30 a.m.,
Eastern time) on each Business Day, the identity of the Fund Securities that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form (as described below) on that day. Fund Securities received
on redemption may not be identical to Deposit Securities that are applicable to creations of Creation Unit Aggregations, and may be comprised of a non-typical basket of Fund Securities, including in certain circumstances, a basket comprised of one
or more Fund Securities.
Unless cash redemptions are permitted or required for the Fund (see “—Cash Redemption Method”
below), the redemption proceeds for a Creation Unit Aggregation generally consist of Fund Securities—as announced on the Business Day of the request for redemption received in proper form—plus or minus cash in an amount equal to the
difference between the NAV of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Fund Securities (the “Redemption Cash Component”), less a redemption transaction fee as discussed
above (see “—Creation and Redemption Transaction Fees” above). In the event that the Fund Securities have a value greater than the NAV of the Shares, a payment of a Cash Component equal to the difference is required to be made by or
through an AP by the redeeming shareholder to the Fund as compensation.
Redemptions of Shares for Fund Securities will be subject to
compliance with applicable U.S. federal and state securities laws, and the Fund reserves the right to redeem Creation Unit Aggregations for cash to the extent that the Trust could not lawfully deliver specific Fund Securities upon redemptions or
could not do so without first registering the Fund Securities under such laws.
An AP or an investor for which it is acting subject to a
legal restriction with respect to a particular security included in the Fund Securities applicable to the redemption of a Creation Unit Aggregation may be paid an equivalent amount of cash. This would specifically prohibit delivery of Fund
Securities that are not registered in reliance upon Rule 144A under the Securities Act to a redeeming investor that is not a “qualified institutional buyer,” as such term is defined in Rule 144A under the Securities Act. The AP may request
the redeeming beneficial owner of the Shares to complete an order form or to enter into agreements with respect to such matters as compensating cash payment, beneficial ownership of Shares or delivery instructions.
27
The right of redemption may be suspended or the date of payment postponed (i) for any period
during which the NYSE is closed (other than customary weekend and holiday closings); (ii) for any period during which trading on the NYSE is suspended or restricted; (iii) for any period during which an emergency exists as a result of
which disposal of the Shares or determination of the Fund’s NAV is not reasonably practicable; or (iv) in such other circumstances as is permitted by the SEC.
Generally, orders to redeem Creation Units of the Fund will be placed through the Clearing Process utilizing procedures described below (see
“—Placement of Redemption Orders Using Clearing Process”). However, at times, orders to redeem Creation Units of the Fund may be placed outside the Clearing Process using different procedures (see “—Placement of Redemption
Orders Outside Clearing Process”).
Cash Redemption Method.
Although the Trust does not ordinarily permit Creation Units
to be redeemed in exchange partially or primarily for cash, during periods when partial or full cash redemptions of Creation Units are permitted, such redemptions will be effected in essentially the same manner as in-kind redemptions. In the case of
partial or full cash redemption, an AP receives the cash equivalent of the Fund Securities it would otherwise receive through an in-kind redemption, plus the same cash amount to be paid to an in-kind redeemer (minus any redemption transaction fees
imposed, as specified above) (the “Cash Redemption Amount”).
Placement of Redemption Orders Using Clearing
Process.
Orders to redeem Creation Unit Aggregations must be delivered through an AP that has executed a Participant Agreement. Investors other than APs are responsible for making arrangements for an order to redeem to be made through an
AP. An order to redeem Creation Unit Aggregations is deemed received by the Trust on the Transmittal Date if: (i) such order is received by the Custodian not later than the Closing Time on the Transmittal Date; and (ii) all other
procedures set forth in the Participant Agreement are properly followed.
An order to redeem Creation Unit Aggregations using the Clearing
Process made in proper form but received by the Trust after 4:00 p.m., Eastern Time, will be deemed received on the next Business Day immediately following the Transmittal Date and will be effected at the NAV next determined on such next
Business Day. The requisite Fund Securities and any Cash Redemption Amount (or, if cash redemptions are permitted, the Cash Redemption Amount) will be transferred by the third NSCC Business Day following the date on which such request for redemption
is deemed received (“T+3”).
Placement of Redemption Orders Outside Clearing Process.
Orders to redeem Creation Unit
Aggregations outside the Clearing Process must be delivered through a DTC Participant that has executed the Participant Agreement. A DTC Participant who wishes to place an order for redemption of Creation Unit Aggregations to be effected outside the
Clearing Process does not need to be a Participating Party, but such orders must state that the DTC Participant is not using the Clearing Process and that redemption of Creation Unit Aggregations will instead be effected through transfer of Shares
directly through DTC. An order to redeem Creation Unit Aggregations outside the Clearing Process is deemed received by the Trust on the Transmittal Date if (i) such order is received by the Transfer Agent not later than 4:00 p.m., Eastern time
on such Transmittal Date; (ii) such order is accompanied or followed by the requisite number of Shares, which delivery must be made through DTC to the Custodian no later than 11:00 a.m., Eastern time, on the next Business Day immediately
following such Transmittal Date (the “DTC Cut-Off Time”); and 2:00 p.m., Eastern time, for a Cash Component, if any owed to the Fund; and (iii) all other procedures set forth in the Participant Agreement are properly followed. After
the Transfer Agent has deemed an order for redemption outside the Clearing Process received, it will send an acceptance of the redemption order to the AP within 15 minutes of the receipt of the submission received in good form. A redemption
order is deemed to be irrevocable upon the delivery of the confirmation of acceptance. The Transfer Agent will then initiate procedures to transfer the requisite Fund Securities (and the Redemption Cash Component, if any, owed to the redeeming
Beneficial Owner) to the AP on behalf of the redeeming Beneficial Owner by T+3.
In the case of custom redemptions, the order must be
received by the Distributor no later than 3:00 p.m., Eastern Time on the Transmittal Date. Arrangements satisfactory to the Trust must be in place for the Participating Party to transfer the Creation Units through DTC on or before the settlement
date.
In the event that the number of Shares is insufficient on the contractual settlement date, the Trust may deliver the Deposit
Securities notwithstanding such deficiency in reliance on the undertaking of the AP to deliver the missing Shares as soon as possible. This undertaking shall be secured by such the AP’s delivery on the contractual settlement date and subsequent
maintenance of collateral consisting of cash having a value at least equal to 105% of the value of the missing Shares. The AP’s agreement permits the Trust, acting in good faith, to purchase the missing Shares at any time and the AP will be
subject to liability for any shortfall between the cost to the Trust of purchasing such shares and the value of the collateral, which may be sold by the Trust at such time, and in such manner, as the Trust may determine in its sole discretion.
The calculation of the value of the Fund Securities and the Redemption Cash Component to be delivered/received upon redemption will be made by
the Custodian according to the procedures set forth under “Determination of NAV” computed on the Business Day on which a redemption order is deemed received. Therefore, if a redemption order in proper form is submitted to the Transfer
Agent by a DTC Participant no later than Closing Time on the Transmittal Date, and the requisite number of Shares of the
28
Fund are delivered to the Custodian prior to the DTC Cut-Off Time, then the value of the Fund Securities and the Redemption Cash Component to be delivered/received will be determined by the
Custodian on such Transmittal Date. If, however, a redemption order is submitted to the Custodian by a DTC Participant no later than the Closing Time on the Transmittal Date, but either (i) the requisite number of Shares of the relevant Fund
are not delivered by the DTC Cut-Off Time, as described above, or (ii) the redemption order is not submitted in proper form, then the redemption order will not be deemed received as of the Transmittal Date. In such case, the value of the Fund
Securities and the Redemption Cash Component to be delivered/received will be computed on the Business Day that the order is deemed received by the Transfer Agent, (i.e., the Business Day on which Fund Shares of the relevant Fund are delivered
through DTC to the Custodian by the DTC Cut-Off Time on such Business Day pursuant to a properly submitted redemption order).
Upon
receipt of a redemption order in good form, the Transfer Agent delivers acknowledgement of receipt within 15 minutes. A redemption order is deemed to be irrevocable upon the delivery of the acknowledgement of receipt of an order.
If it is not possible to effect deliveries of the Fund Securities, the Trust may in its discretion exercise its option to redeem such Fund
Shares in cash, and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash that the Fund may, in its sole discretion, permit. In either case, the investor
will receive a payment equal to the NAV of its Fund Shares based on the NAV of Shares of the Fund next determined after the redemption request is received in proper form (minus a redemption transaction fee and additional charge for requested cash
redemptions specified above, to offset the Fund’s brokerage and other transaction costs associated with the disposition of Fund Securities) (the “Cash Redemption Amount”). The Fund also, in its sole discretion, upon request of a
shareholder, may provide such redeemer a portfolio of securities that differs from the exact composition of the Fund Securities, or cash in lieu of some securities added to the Cash Redemptions Amount, but in no event will the total value of the
securities delivered and the cash transmitted differ from the NAV.
On days when the Exchange closes earlier than normal (such as the day
before a holiday), the Fund may require orders to redeem Creation Unit Aggregations to be placed earlier in the day.
29
The chart below describes in further detail the placement of creation and redemption orders
through the NSCC and outside the Clearing Process, presuming a creation or redemption settling no later than T+3.
|
|
|
|
|
|
|
|
|
|
|
|
|
Transmittal Date (T)
|
|
Next Business Day (T+1)
|
|
Second Business Day (T+2)
|
|
Third Business Day (T+3)
|
|
Creation through NSCC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard Orders
|
|
4:00 p.m. (ET)
Order must be received
by the Distributor.
Orders received after
4:00 p.m. (ET)
will be
deemed received on
the next business day
(T+1).
|
|
No action.
|
|
No action.
|
|
Creation Unit Aggregations
will be delivered.
|
|
|
|
|
|
|
|
Custom Orders (for in-kind creations)
|
|
3:00 p.m. (ET)
Order must be received
by the Distributor.
Orders received after
3:00 p.m. (ET) require
portfolio manager
approvals before
acceptance. Orders
may be subject to
additional
fees.
|
|
No action.
|
|
No action.
|
|
Creation Unit Aggregations
will be delivered.
|
|
|
|
|
|
|
|
Creation Outside NSCC
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Standard Orders
|
|
4:00 p.m. (ET)
Order in proper form
must be received by
the
Distributor.
|
|
11:00 a.m. (ET)
Deposit
Securities
must be
received
by
the Fund’s
account
through
DTC.
For
cash
creations:
Deposit
Cash must
be received
by the
Custodian.
2:00 p.m. (ET)
Cash
Component
must be
received by
the
Custodian.
|
|
No action.
|
|
Creation Unit Aggregations
will be delivered.
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
Transmittal Date (T)
|
|
Next Business Day (T+1)
|
|
Second Business Day (T+2)
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|
Third Business Day (T+3)
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|
|
|
|
|
|
|
Standard Orders created in advance of receipt by the Trust of all or a portion of the Deposit
Securities (for in-kind creations)
|
|
4:00 p.m. (ET)
Order in proper form
must be received by
the Distributor.
|
|
11:00 a.m. (ET)
Available Deposit
Securities must
be
received.
Cash in an amount equal
to the sum of (i) the
Cash
Component, plus
(ii) 105% of the market
value of the undelivered
Deposit Securities must be
received.
|
|
No action.
|
|
Missing Deposit Securities
are due to the Trust or the
Trust may use cash on
deposit to purchase
missing Deposit
Securities.
Creation Unit
Aggregations will be
delivered.
|
|
|
|
|
|
|
|
Custom Orders (for in-kind creations)
|
|
3:00 p.m. (ET)
Order in proper form
must be received
by
the Distributor.
Orders received
after 3:00 p.m. (ET)
require
portfolio
manager approvals
before acceptance.
Orders may be
subject to additional
fees.
|
|
11:00 a.m. (ET)
Deposit Securities must be
received by the Fund’s
account through DTC.
2:00 p.m. (ET)
Cash Component must be
received by the Custodian.
|
|
No action.
|
|
Creation Unit
Aggregations will be
delivered.
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
Transmittal Date (T)
|
|
Next Business Day (T+1)
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|
Second Business Day (T+2)
|
|
Third Business Day (T+3)
|
|
Redemption Through NSCC
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|
|
Standard Orders
|
|
4:00 p.m. (ET)
Order must be received by the Transfer Agent.
Orders received after 4:00 p.m. (ET) will be deemed received on the next business day (T+1).
|
|
No action.
|
|
No action.
|
|
Fund Securities and Redemption Cash Component will be transferred to beneficial owner (for cash redemptions, Cash Redemption Amount will be transferred).
|
|
|
|
|
|
|
|
Custom Orders (for in-kind transfers)
|
|
3:00 p.m. (ET)
Order must be received by the Transfer Agent.
Orders received after 3:00 p.m. (ET) will be treated as standard redemption orders through NSCC.
|
|
No action.
|
|
No action.
|
|
Fund Securities and Cash Redemption Cash Component will be transferred to beneficial owner.
|
|
|
|
|
|
|
|
Redemption Outside of NSCC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard Orders
|
|
4:00 p.m. (ET)
Order must be received by the Transfer Agent.
Orders received after 4:00 p.m. (ET) will be deemed received on the next business day (T+1)
|
|
11:00 a.m. (ET)
Shares must be delivered through DTC to the Custodian.
2:00 p.m. (ET)
Redemption Cash Component, if any, is due.
*If the order is not in proper form or the Shares are not delivered, then the order will not be deemed received as of T.
|
|
No action.
|
|
Fund Securities and Redemption Cash Component are delivered to the redeeming beneficial owner (for cash redemptions, Cash Redemption Amount is delivered to the redeeming beneficial owner).
|
|
|
|
|
|
|
|
Custom Orders (for in-kind redemptions)
|
|
3:00 p.m. (ET)
Order must be received by the Transfer Agent.
Orders received after 3:00 p.m. (ET) require portfolio manager approvals before acceptance. Orders may be subject to additional fees.
|
|
11:00 a.m. (ET)
Shares must be delivered through DTC to the Custodian.
2:00 p.m. (ET)
Redemption Cash Component, if any, is due.
*If the order is not in proper form or the Shares are not delivered, then the order will not be deemed received as of T.
|
|
No action.
|
|
Fund Securities and Redemption Cash Component is delivered to the redeeming beneficial owner.
|
32
TAXES
The following is a summary of certain additional tax considerations generally affecting the Fund and its shareholders that are not described
in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Fund or its shareholders, and the discussion here and in the Prospectus is not intended as a substitute for careful tax planning.
The following is provided as general information only and is not tax advice. All investors should consult their own tax advisors as to the
federal, state, local and foreign tax provisions applicable to them.
General; Qualification as a RIC.
The Fund is treated
as a separate corporation for federal tax purposes and, therefore, is considered to be a separate entity in determining its treatment under the rules for RICs described herein and in the Prospectus. Losses in the Fund do not offset gains in another
series of the Trust, and the requirements (other than a certain organizational requirement that the Trust satisfies) for qualifying for RIC status are determined at the Fund level rather than the Trust level.
The Fund has elected and intends to qualify each taxable year to be treated as a RIC. If the Fund satisfies the requirements referred to in
the next sentence, it will not be subject to federal income tax on the portion of its net investment income and net realized capital gains that it distributes to its shareholders. To qualify for that treatment, the Fund annually must distribute to
its shareholders at least 90% of its investment company taxable income (which includes dividends, interest, the excess of net short-term capital gain over net long-term capital loss (“net short-term gain”), and net gains and losses from
certain foreign currency transactions, if any, all determined without regard to any deduction for dividends paid) (“Distribution Requirement”) and must meet several other requirements, including those described below, relating to the
nature of its gross income and the diversification of its assets.
Income Requirement.
The Fund must derive at least 90% of its
gross income from (1) dividends, interest, certain payments with respect to securities loans, and gains from the sale or other disposition of stock, securities, or foreign currencies, or other income (including gains from options, futures, or
forward contracts) derived from its business of investing in stock, securities, or such currencies and (2) net income derived from qualified publicly traded partnerships (“QPTPs”).
Asset Diversification Requirements.
The Fund must satisfy the following asset diversification requirements at the close of each
quarter of its taxable year: (1) at least 50% of the value of the Fund’s assets must consist of cash and cash items, Government securities, securities of other RICs, and securities of any other issuer (as to which (a) not more than 5%
of the value of the Fund’s total assets is in securities of the issuer and (b) the Fund does not hold more than 10% of the outstanding voting securities of the issuer); and (2) no more than 25% of the value of the Fund’s total
assets may be invested in the securities of any one issuer (other than Government securities or securities of other RICs) or of two or more issuers that the Fund controls and are engaged in the same, similar, or related trades or businesses, or,
collectively, in the securities of QPTPs.
If the Fund failed to qualify for any taxable year for treatment as a RIC—either
(1) by failing to satisfy the Distribution Requirement or (2) by failing to satisfy one or more of the Income and Asset Diversification Requirements and is unable, or determines not to, avail itself of Internal Revenue Code provisions that
enable a RIC to cure a failure to satisfy any of those requirements as long as the failure “is due to reasonable cause and not due to willful neglect” and the RIC pays a deductible tax calculated in accordance with those provisions and
meets certain other requirements—all of its taxable income would be subject to tax at regular federal corporate income tax rates without any deduction for distributions to shareholders. In addition, for federal income tax purposes (a) the
Fund’s shareholders would treat all those distributions, including distributions of net capital gain (
i.e.
, the excess of net long-term capital gain over net short-term capital loss), as dividends to the extent of the Fund’s current
and accumulated earnings and profits, taxable as ordinary income, except that, for individual and certain other non-corporate shareholders (each, an “individual shareholder”), the part thereof that is “qualified dividend income”
(“QDI”) would be subject to federal income tax at the rates for net capital gain—a maximum of 15% (20% for certain high income individual shareholders)—and (b) all or part of those distributions might be eligible for the
dividends-received deduction in the case of corporate shareholders that meet certain holding period and other requirements regarding their Shares. Furthermore, the Fund could be required to recognize unrealized gains, pay substantial taxes and
interest, and make substantial distributions before requalifying for RIC treatment.
The Fund will be subject to a nondeductible 4%
federal excise tax (“Excise Tax”) to the extent it fails to distribute to its shareholders by the end of any calendar year substantially all of its ordinary (taxable) income for the calendar year and capital gain net income for the twelve
months ended October 31 of such year, plus certain other amounts. For these purposes, the Fund may defer into the next taxable year any capital loss incurred between November 1 and the end of the current taxable year as well as
certain “late-year ordinary losses” incurred between January 1 and the end of the current taxable year. Generally, it is the Fund’s policy to pay sufficient dividends and make other sufficient distributions each year to avoid the
imposition of the Excise Tax, but the Fund can give no assurance that all or a portion of such liability will be avoided.
The Trust has
the right to reject an order to purchase Shares if the purchaser (or group of purchasers) would, on obtaining the ordered Shares, own 80% or more of the Fund’s outstanding Shares and if, pursuant to sections 351 and 362 of the Internal
Revenue
33
Code, the Fund would have a basis in the Deposit Securities to be received in exchange for the ordered Shares different from their market value on the date of deposit. The Trust also has the
right to require information necessary to determine beneficial Share ownership for purposes of the 80% determination.
Taxation of
Shareholders.
Distributions from the Fund’s net investment income and net short-term gain, if any, are generally taxable as ordinary income (except for QDI, as described below). Distributions that a shareholder reinvests in additional
Shares through the means of a dividend reinvestment service will be taxable to the shareholder to the same extent as if the distributions had been received in cash. Distributions to a shareholder of net capital gain, if any, are taxable as long-term
capital gains, regardless of how long the shareholder has held his or her Shares. Distributions of ordinary income and capital gains may also be subject to state and local taxes.
Distributions that the Fund declares in October, November, or December and pays to shareholders of record in one of those months during the
following January are treated as having been received by the shareholders on December 31 of the year the distributions were declared.
If, for any taxable year, the total distributions that the Fund makes exceed its current and accumulated earnings and profits, the excess
will, for federal income tax purposes, be treated as a return of capital up to the amount of a shareholder’s basis in his or her Shares and thereafter as gain from the sale of those Shares. The amount so treated as a return of capital will
reduce the shareholder’s adjusted basis in his or her Shares, thereby increasing his or her potential gain or reducing his or her potential loss on the subsequent sale of those Shares.
The sale or redemption (“disposition”) of Shares may give rise to a capital gain or loss, which generally will be treated as
long-term capital gain or loss if the Shares have been held for more than one year and otherwise as short-term capital gain or loss. Long-term capital gains of individual shareholders generally are subject to federal income tax at the 15%/20%
maximum rates noted above. In addition, the Fund’s distributions to such a shareholder of QDI will qualify for federal income taxation at those rates, provided that certain holding period and other requirements are met by the Fund and the
shareholder. The Fund will report to shareholders annually the amount of any distributions taxable as ordinary income (from net investment income and net short-term gain), the amount of any distributions from net capital gain, and the portion, if
any, of dividends that may qualify as QDI.
A loss realized on a disposition of Shares may be disallowed if other Shares are acquired
(whether through the automatic reinvestment of distributions, if available, or otherwise) within a 61-day period beginning 30 days before and ending 30 days after the date that the Shares are disposed of. In such a case, the basis in the acquired
Shares will be adjusted to reflect the disallowed loss. In addition, any loss on a shareholder’s disposition of Shares held for six months or less will be treated as long-term capital loss to the extent of any distribution of net capital gain
received by the shareholder with respect to such Shares.
An individual is required to pay a 3.8% federal tax on the lesser of
(1) the individual’s “net investment income,” which generally will include distributions the Fund pays and gains recognized from the disposition of Shares, or (2) the excess of the individual’s “modified adjusted
gross income” over $200,000 for single taxpayers ($250,000 for married persons filing jointly). This tax is in addition to any other taxes due on that income. A similar tax applies to estates and trusts. Shareholders should consult their own
tax advisors regarding the effect, if any, that this provision may have on their investment in Shares.
A shareholder who wants to use the
average basis method for determining his or her basis in Shares must elect to do so in writing (which may be electronic) with the broker through which he or she purchased the Shares. A shareholder who wishes to use a different Internal Revenue
Service (“IRS”)-acceptable method for basis determination (
e.g.
, a specific identification method) may elect to do so. Shareholders are urged to consult with their brokers regarding the application of the basis determination rules
to them.
If more than 50% of the value of the Fund’s total assets at the close of any taxable year consists of securities of foreign
corporations, it will be eligible to, and may, file an election for that year with the IRS that would enable it to pass through to its shareholders to benefit from any foreign tax credits or deductions available with respect to foreign taxes it
pays. Pursuant to the election, the Fund would treat those taxes as dividends paid to its shareholders and each shareholder (1) would be required to include in gross income, and treat as paid by the shareholder, the shareholder’s
proportionate share of those taxes, (2) would be required to treat that share of those taxes and of any dividend the Fund paid that represents income from foreign sources or U.S. possessions (“foreign-source income”) as the
shareholder’s own income from those sources, and (3) could either use the foregoing information in calculating the foreign tax credit against the shareholder’s federal income tax or, alternatively, deduct the foreign taxes deemed paid
by the shareholder in computing taxable income. If the Fund makes this election for a taxable year, it will report to its shareholders shortly after that year their respective shares of the foreign taxes it paid and its foreign-source income for
that year.
Individual shareholders of the Fund described in the preceding paragraph who have no more than $300 ($600 for married persons
filing jointly) of creditable foreign taxes included on IRS Forms 1099 and all of whose foreign source income is “qualified passive income” may elect each taxable year to be exempt from the foreign tax credit limitation for federal income
tax purposes (about
34
which shareholders may wish to consult their tax advisors), in which event they would be able to claim a foreign tax credit without having to file the detailed IRS Form 1116 that otherwise is
required. A shareholder will not be entitled to credit or deduct its allocable portion of foreign taxes the Fund paid if the shareholder has not held the Fund’s shares for at least 16 days during the 31-day period beginning 15 days before the
ex-distribution date for those shares. The minimum holding period will be extended if the shareholder’s risk of loss with respect to those shares is reduced by reason of holding an offsetting position. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions. A nonresident alien individual, foreign corporation or partnership, or foreign trust or estate holding shares of the Fund (a “foreign shareholder”) may not deduct or claim a credit
for foreign taxes in determining its U.S. federal income tax liability unless the Fund dividends paid to it are effectively connected with the foreign shareholder’s conduct of a trade or business within the United States (“effectively
connected”).
Distributions of ordinary income paid to a foreign shareholder that are not effectively connected generally will be
subject to a 30% U.S. withholding tax (unless a reduced rate of withholding or a withholding exemption is provided under an applicable treaty). However, a foreign shareholder generally will not be subject to withholding or income tax on gains
realized on the sale of Shares or on net capital gain distributions unless (1) the gain or distribution is effectively connected or (2) in the case of an individual, the shareholder is present in the United States for a period or periods
aggregating 183 days or more during the year of the sale or distribution and certain other conditions are met. In those cases, such gains and distributions generally will be subject to federal income taxation at regular income tax rates. Foreign
shareholders are urged to consult their own tax advisors concerning the applicability of the federal withholding tax. Nonresident alien individuals also may be subject to federal estate tax.
The Fund must withhold and remit to the U.S. Treasury Department (“U.S. Treasury”) 28% of distributions of ordinary income, capital
gains, and any cash received on redemption of Creation Units (regardless of the extent to which gain or loss may be realized) otherwise payable to any individual shareholder who fails to certify that the taxpayer identification number furnished to
the Fund is correct or who furnishes an incorrect number (together with the withholding described in the next sentence, “backup withholding”). Withholding at that rate also is required from the Fund’s dividends and capital gain
distributions otherwise payable to such a shareholder who is subject to backup withholding for any other reason. Backup withholding is not an additional tax, and any amounts so withheld may be credited against a shareholder’s federal income tax
liability or refunded. When establishing an account, an investor must certify under penalty of perjury that such number is correct and that the investor is not otherwise subject to backup withholding.
Foreign Account Tax Compliance Act (“FATCA”).
Under FATCA, “foreign financial institutions” (“FFIs”)
or “non-financial foreign entities” (“NFFEs”) that are shareholders in the Fund may be subject to a generally nonrefundable 30% withholding tax on (a) income dividends, and (b) certain capital gain distributions and the
proceeds of a sale (or redemption) of Shares paid after December 31, 2018. As discussed in more detail below, the FATCA withholding tax generally can be avoided (1) by an FFI, if it reports certain information regarding direct and indirect
ownership of financial accounts held by U.S. persons with the FFI and (2) by an NFFE, if it has no substantial U.S. persons as owners and, in certain circumstances, also certified that (i) it has no substantial U.S. persons as owners or
(ii) it does have any such owners and reports information relating to them to the withholding agent (which may be the Fund). The U.S. Treasury has negotiated intergovernmental agreements (“IGAs”) with certain countries and is in
various stages of negotiations with a number of other foreign countries with respect to one or more alternative approaches to implement FATCA; an entity in one of those countries may be required to comply with the terms of an IGA instead of U.S.
Treasury regulations.
An FFI can avoid FATCA withholding by becoming a “participating FFI,” which requires the FFI to enter
into a tax compliance agreement with the IRS under the Internal Revenue Code. Under such an agreement, a participating FFI agrees to (1) verify and document whether it has U.S. accountholders, (2) report certain information regarding their
accounts to the IRS, and (3) meet certain other specified requirements.
An FFI resident in a country that has entered into a Model I
IGA with the United States must report to the government of that country (pursuant to the terms of the applicable IGA and applicable law), which will, in turn, report to the IRS. An FFI resident in a Model II IGA country generally must comply with
U.S. regulatory requirements, with certain exceptions, including the treatment of recalcitrant accountholders. An FFI resident in one of those countries that complies with whichever of the foregoing applies will be exempt from FATCA withholding.
An NFFE that is the beneficial owner of a payment from the Fund can avoid FATCA withholding generally by certifying that it does not have
any substantial U.S. owners or by providing the name, address and taxpayer identification number of each such owner. The NFFE will report to the Fund or other applicable withholding agent, which will, in turn, report information to the IRS.
Those foreign shareholders also may fall into certain exempt, excepted, or deemed compliant categories established by U.S. Treasury
regulations, IGAs, and other guidance regarding FATCA. An FFI or NFFE that invests in the Fund will need to provide the Fund with documentation properly certifying the entity’s status under FATCA in order to avoid FATCA withholding. The
requirements imposed by FATCA are different from, and in addition to, the tax certification rules to avoid backup withholding
35
described above. Shareholders are urged to consult their tax advisors regarding the application of these requirements to their own situation and the impact thereof on their investment in the
Fund.
Taxation of Fund Investments.
The Fund may make investments that are subject to special federal income tax rules. Those
rules can, among other things, affect the timing of the recognition of income or gain, the treatment of income as capital or ordinary, and the treatment of capital gain or loss as long-term or short-term. The application of those special rules would
therefore also affect the amount, timing and character of distributions that the Fund makes and could require the Fund to borrow money or dispose of some of its investments earlier than anticipated in order to meet its distribution requirements.
Investment income received, and gains realized, by the Fund from sources within foreign countries may be subject to foreign income tax
withheld at the source, and the amount of tax withheld generally will be treated as an expense of the Fund. The United States has entered into tax treaties with many foreign countries that entitle the Fund to a reduced rate of, or exemption from,
tax on such income. Some countries require the filing of a tax reclaim or other form(s) to receive the benefit of the reduced tax rate; whether or when the Fund will receive a tax reclaim is within the control of the individual country. Information
required on those forms may not be available, such as shareholder information; therefore, the Fund may not receive one or more reduced treaty rates or potential reclaims. Other countries have conflicting and changing instructions and restrictive
timing requirements that also may cause the Fund to not receive one or more reduced treaty rates or potential reclaims. Other countries may subject capital gains realized by the Fund on the sale or other disposition of securities of that country to
taxation. It is impossible to determine the effective rate of foreign tax in advance, since the amount of the Fund’s assets to be invested in various countries is not known.
* * * * *
The foregoing
discussion is a summary only and is not intended as a substitute for careful tax planning. Purchasers of Shares should consult their own tax advisors as to the tax consequences of investing in such Shares, including under federal, state, local and
other tax laws. Finally, the foregoing discussion is based on applicable provisions of the Internal Revenue Code, regulations, judicial authority and administrative interpretations in effect on the date hereof, all of which are subject to change,
which change may be retroactive. Changes in applicable authority could materially affect the conclusions discussed above, and such changes often occur.
DETERMINATION OF NAV
The following information should be read in conjunction with the section in the Prospectus entitled “Net Asset Value.” Additional
information regarding the current NAV per share of the Fund can be found at www.powershares.com.
The Custodian calculates and determines
the NAV per Share as of the close of the regular trading session on NYSE (ordinarily 4:00 p.m., Eastern time) on each day that such exchange is open. NAV is calculated by deducting all of the Fund’s liabilities from the total value of its
assets and dividing the result by the number of Shares outstanding, rounding to the nearest cent. All valuations are subject to review by the Trust’s Board or its delegate. In determining NAV, expenses are accrued and applied daily, and
securities and other assets for which market quotations are available are valued at market value. Securities listed or traded on an exchange generally are valued at the last sales price or official closing price of the exchange where the security
primarily is traded. Investment companies are valued using such company’s NAV per share, unless the shares are exchange-traded, in which case they will be valued at the last sale or official closing price on the exchanges on which they
primarily trade. Debt and securities not listed on an exchange normally are valued on the basis of prices provided by independent pricing services. The Adviser may use various pricing services or discontinue the use of any pricing service at any
time. When price quotes are not readily available, securities will be valued using pricing provided from independent pricing services or by another method in accordance with the Trust’s valuation policies and procedures approved by the Board.
Even when market quotations are available for portfolio securities, they may be stale or unreliable because the security is not traded
frequently, trading on the security ceased before the close of the trading market or issuer specific events occurred after the security ceased trading. Events that may cause the last market quotation to be unreliable include a merger or insolvency,
events which affect a geographical area or an industry segment, such as political events or natural disasters, or market events, such as a significant movement in the U.S. market. Where market quotations are not readily available, including where
the Adviser determines that the closing price of the security is unreliable, the Adviser will value the security at fair value in good faith using procedures approved by the Board. Fair value pricing involves subjective judgments, and it is possible
that a fair value determination for a security is materially different than the value that could be realized upon the sale of that security.
Intraday Indicative Value.
The trading prices of the Shares in the secondary market generally differ from the Fund’s daily NAV and
are affected by market forces such as the supply of and demand for ETF shares and underlying securities held by the Fund, economic conditions and other factors. Information regarding the IIV of the Shares is disseminated every 15 seconds throughout
each trading day by the Exchange or by market data vendors or other information providers. However, the IIV should not be viewed as a
36
“real-time” update of the Fund’s NAV. The IIV is based on the current market value of the published basket of portfolio securities and/or cash required to be deposited in exchange
for a Creation Unit and does not necessarily reflect the precise composition of the Fund’s actual portfolio at a particular point in time. Moreover, the IIV is generally determined by using current market quotations and/or price quotations
obtained from broker-dealers and other market intermediaries and valuations based on current market rates. The IIV may not be calculated in the same manner as the NAV, which (i) is computed only once a day, (ii) unlike the calculation of
the IIV, takes into account Fund expenses, and (iii) may be subject, in accordance with the requirements of the 1940 Act, to fair valuation at different prices than those used in the calculations of the IIV. Therefore, the IIV may not reflect
the best possible valuation of the Fund’s current portfolio. Additionally, the quotations and/or valuations of certain of the Fund’s holdings may not be updated during U.S. trading hours if such holdings do not trade in the United States,
which could affect premiums and discounts between the IIV and the market price of the Shares. The Fund, the Adviser and their affiliates are not involved in, or responsible for, any aspect of the calculation or dissemination of the IIV, and the
Fund, the Adviser and their affiliates do not make any warranty as to the accuracy of these calculations.
DIVIDENDS AND OTHER DISTRIBUTIONS
The following information supplements and should be read in conjunction with the section in the Prospectus entitled “Dividends, Other
Distributions and Taxes.”
General Policies.
Ordinarily, dividends from net investment income, if any, are declared and
paid quarterly for the Fund.
Distributions of net realized securities gains, if any, generally are declared and paid once a year, but the
Trust may make distributions on a more frequent basis. The Trust reserves the right to declare special distributions if, in its reasonable discretion, such action is necessary or advisable to preserve the status of the Fund as a RIC or to avoid
imposition of income tax or Excise Tax on undistributed income.
Dividends and other distributions on Shares are distributed, as described
below, on a pro rata basis to Beneficial Owners of the Shares. Dividend payments are made through DTC Participants and Indirect Participants to Beneficial Owners then of record with proceeds received from the Fund.
Dividend Reinvestment Service.
No reinvestment service is provided by the Trust. Broker-dealers may make available the DTC
book-entry Dividend Reinvestment Service for use by Beneficial Owners of Shares for reinvestment of their distributions. Beneficial Owners should contact their broker to determine the availability and costs of the service and the details of
participation therein. Brokers may require Beneficial Owners to adhere to specific procedures and timetables.
MISCELLANEOUS INFORMATION
Counsel.
Stradley Ronon Stevens & Young, LLP, located at 191 North Wacker Drive, Suite 1601, Chicago, Illinois
60606, and 1250 Connecticut Avenue, N.W., Suite 500, Washington, D.C. 20036, serves as legal counsel to the Trust.
Independent
Registered Public Accounting Firm.
PricewaterhouseCoopers LLP (“PwC”), located at One North Wacker Drive, Chicago, Illinois 60606, serves as the Fund’s independent registered public accounting firm. PwC has been retained to audit
the Fund’s annual financial statements and performs other related audit services. The Fund entered into an engagement letter with PwC. The terms of the engagement letter required by PwC, and agreed to by the Audit Committee of the Board of the
Trust (the “Audit Committee”), include a provision mandating the use of mediation and arbitration to resolve any controversy or claim between the parties arising out of or relating to the engagement letter or the services provided
thereunder.
FINANCIAL STATEMENTS
The Fund is new and has no performance history as of the date of this SAI. Financial information therefore is not yet available. The audited
financial statements for the Fund will appear in the Trust’s Annual Report to shareholders when available. You may request a copy of the Trust’s Annual Report at no charge by calling 1-800-983-0903 during normal business hours.
PwC informed the Audit Committee that it has identified an issue related to its independence under Rule 2-01(c)(1)(ii)(A) of Regulation S-X
(referred to as the “Loan Rule”). The Loan Rule prohibits accounting firms, such as PwC, from being deemed independent if they have certain financial relationships with their audit clients or certain affiliates of those clients. The Trust
is required under various securities laws to have its financial statements audited by an independent accounting firm.
37
The Loan Rule specifically provides that an accounting firm would not be independent if it
receives, or certain of its affiliates or covered persons receive, a loan from a lender that is a record or beneficial owner of more than ten percent of an audit client’s equity securities (referred to as a “more than ten percent
owner”). For purposes of the Loan Rule, audit clients include the Fund as well as all registered investment companies advised by the Adviser and its affiliates, including other subsidiaries of the Adviser’s parent company, Invesco Ltd.
(collectively, the Invesco Fund Complex). PwC informed the Audit Committee that it has, and that certain of its affiliates or covered persons have, relationships with lenders who hold, as record owner, more than ten percent of the shares of certain
funds within the Invesco Fund Complex. These relationships call into question PwC’s independence under the Loan Rule with respect to those funds, as well as all other funds in the Invesco Fund Complex, which may implicate the Loan Rule.
On June 20, 2016, the SEC Staff issued a “no-action” letter to another mutual fund complex (see Fidelity Management &
Research Company et al., No-Action Letter) related to the audit independence issue described above. In that letter, the SEC confirmed that it would not recommend enforcement action against a fund that relied on audit services performed by an audit
firm that was not in compliance with the Loan Rule in certain specified circumstances.
In an August 18, 2016 letter, and in
subsequent communications, PwC affirmed to the Audit Committee that, as of the date of the letter and the subsequent communications, respectively, PwC is an independent accountant with respect to the Trust, within the meaning of PCAOB Rule 3520. In
its letter and in its subsequent communications, PwC also informed the Audit Committee that, after evaluating the facts and circumstances and the applicable independence rules, PwC has concluded that with regard to its compliance with the
independence criteria set forth in the rules and regulations of the SEC related to the Loan Rule, it believes that it remains objective and impartial despite matters that may ultimately be determined to be inconsistent with these criteria and
therefore it can continue to serve as the Trust’s registered public accounting firm. PwC has advised the Audit Committee that this conclusion is based in part on the following considerations: (1) the lenders to PwC have no influence over
any Fund, or other entity within the Invesco Fund Complex, or its investment adviser; (2) none of the officers or trustees of the Invesco Fund Complex whose shares are owned by PwC lenders are associated with those lenders; (3) PwC
understands that the shares held by PwC lenders are held for the benefit of and on behalf of its policy owners/end investors; (4) investments in funds such as the Invesco Fund Complex funds are passive; (5) the PwC lenders are part of
various syndicates of unrelated lenders; (6) there have been no changes to the loans in question since the origination of each respective note; (7) the debts are in good standing and no lender has the right to take action against PwC, as
borrower, in connection with the financings; (8) the debt balances with each lender are immaterial to PwC and to each lender; and (9) the PwC audit engagement team has no involvement in PwC’s treasury function and PwC’s treasury
function has no oversight of or ability to influence the PwC audit engagement team. In addition, PwC has communicated that the lending relationships appear to be consistent with the lending relationships described in the no-action letter and that
they are not aware of other relationships that would be implicated by the Loan Rule. In addition to relying on PwC’s August 18, 2016 letter and subsequent communications regarding its independence, the Trust intends to rely upon the
no-action letter.
If in the future the independence of PwC is called into question under the Loan Rule by circumstances that are not
addressed in the SEC’s no-action letter, the Fund may need to take other action in order for the Fund’s filings with the SEC containing financial statements to be deemed compliant with applicable securities laws. Such additional actions
could result in additional costs, impair the ability of the Fund to issue new shares or have other material adverse effects on the Fund. In addition, the SEC has indicated that the no-action relief will expire 18 months from its issuance after which
the Trust will no longer be able to rely on the letter unless its term is extended or made permanent by the SEC Staff.
38
APPENDIX A
Proxy Voting Guidelines
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Applicable to the Funds
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PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares India Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Fund Trust and PowerShares Actively Managed
Exchange-Traded Commodity Fund Trust (collectively “the Trusts”)
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Risk Addressed by Policy
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Breach of fiduciary duty to client under the Investment Advisers Act of 1940 by placing Invesco personal interests ahead of clients best interest in voting proxies
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Relevant Law
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Investment Advisers Act of 1940
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Approved/Adopted Date
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March 7, 2017
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Last reviewed by Compliance for Accuracy
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September 10, 2015.
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Invesco PowerShares Capital Management LLC (“Invesco PowerShares” or the “Adviser”) has adopted proxy
voting policies with respect to securities owned by series of the PowerShares Exchange-Traded Fund Trust, the PowerShares Exchange-Traded Fund Trust II, the PowerShares Actively Managed Exchange-Traded Fund Trust, the PowerShares India
Exchange-Traded Fund Trust and the PowerShares Actively Managed Exchange-Traded Commodity Fund Trust (collectively, the “Funds”) for which it serves as investment adviser and has been delegated the authority to vote proxies. Invesco
PowerShares’ proxy voting policies are designed to provide that proxies are voted in the best interests of shareholders.
Invesco Ltd, the parent to
the Adviser, has adopted a global policy statement on corporate governance and proxy voting (the “Global Invesco Policy”) (see exhibit A), which details Invesco’s views on governance matters and describes the proxy administration and
governance approach. The Adviser votes proxies by utilizing the procedures and mechanisms outlined in the Global Invesco Policy, while maintaining the Fund-specific guidelines described below:
1. Overlapping Securities
In instances where both a Fund and a fund advised by an Invesco Ltd entity both hold an equity security (“Overlapping Securities”),
the Adviser will vote proxies in accordance with the recommendation of an Invesco Ltd adviser based on the comprehensive proxy review and under the Global Invesco Policy. The Global Invesco Policy is overseen by the Invesco Proxy Advisory Committee
(“IPAC”), which also orchestrates the review and analysis of the top twenty-five proxy voting matters, measured by overall size of holdings by funds within the Invesco family. The Adviser consults with the IPAC on specific proxy votes and
general proxy voting matters as it deems necessary. In addition, as part of the Global Invesco Proxy Voting Process, the IPAC oversees instances when possible conflicts of interest arise among funds. (Please see the global policy for the detailed
conflict of interest approach).
Approved June 24, 2014
Amended: March 7, 2017
Effective: March 7, 2017
A-1
In instances where the Global proxy administration team does not receive a recommendation in a
timely manner, the proxy administration team will automatically vote such ballots in accordance with the Invesco’s custom guidelines established on Invesco’s global proxy voting policy and US guidelines.
2. Non-Overlapping Securities
In instances where securities are held only by a Fund, and not also by an Invesco Ltd active equity entity fund, the Adviser will instruct the
proxy administration team to vote proxies in accordance with said Invesco custom guidelines implemented by ISS, Invesco’s vote execution agent.
Under this Policy, the Adviser retains the power to vote contrary to the recommendation of the Invesco Voting Process (for Overlapping Securities) or
Invesco’s custom guidelines for Non-Overlapping Securities) at its discretion, so long as the reasons for doing so are well documented.
Proxy
Constraints
The adviser will approach proxy constraints according to the Invesco Global statement on corporate governance and proxy voting.
Special Policy
Certain Funds pursue their investment
objectives by investing in other registered investment companies pursuant to an exemptive order granted by the Securities and Exchange Commission. The relief granted by that order is conditioned upon complying with a number of undertakings, some of
which require a Fund to vote its shares in an acquired investment company in the same proportion as other holders of the acquired fund’s shares. In instances in which a Fund is required to vote in this manner to rely on the exemptive order, the
Adviser will vote shares of these acquired investment companies in compliance with the voting mechanism required by the order.
Resolving Potential
Conflicts of Interest
Voting of Proxies Related to Invesco Ltd.
The adviser will approach conflicts of interest in accordance with Invesco’s Global policy statement on corporate governance and proxy voting.)
Approved June 24, 2014
Amended: March 7, 2017
Effective: March 7, 2017
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Exhibit A to Appendix A
Invesco’s Policy Statement on Global Corporate Governance and Proxy Voting
I. Guiding Principles and Philosophy
Public companies
hold shareholder meetings, attended by the company’s executives, directors, and shareholders, during which important issues, such as appointments to the company’s board of directors, executive compensation, and auditors, are addressed and
where applicable, voted on. Proxy voting gives shareholders the opportunity to vote on issues that impact the company’s operations and policies without being present at the meetings.
Invesco views proxy voting as an integral part of its investment management responsibilities and believes that the right to vote proxies should be managed
with the same high standards of care and fiduciary duty to its clients as all other elements of the investment process. Invesco’s proxy voting philosophy, governance structure and process are designed to ensure that proxy votes are cast in
accordance with clients’ best interests, which Invesco interprets to mean clients’ best economic interests, this Policy and the operating guidelines and procedures of Invesco’s regional investment centers.
Invesco investment teams vote proxies on behalf of Invesco-sponsored funds and non-fund advisory clients that have explicitly granted Invesco authority in
writing to vote proxies on their behalf.
The proxy voting process at Invesco, which is driven by investment professionals, focuses on maximizing
long-term value for our clients, protecting clients’ rights and promoting governance structures and practices that reinforce the accountability of corporate management and boards of directors to shareholders. Invesco takes a nuanced approach to
voting and, therefore, many matters to be voted upon are reviewed on a case by case basis.
Votes in favor of board or management proposals should not be
interpreted as an indication of insufficient consideration by Invesco fund managers. Such votes may reflect the outcome of past or ongoing engagement and active ownership by Invesco with representatives of the companies in which we invest.
II. Applicability of this Policy
This Policy sets forth
the framework of Invesco’s corporate governance approach, broad philosophy and guiding principles that inform the proxy voting practices of Invesco’s investment teams around the world. Given the different nature of these teams and their
respective investment processes, as well as the significant differences in regulatory regimes and market practices across jurisdictions, not all aspects of this Policy may apply to all Invesco investment teams at all times. In the case of a conflict
between this Policy and the operating guidelines and procedures of a regional investment center the latter will control.
III. Proxy Voting for Certain
Fixed Income, Money Market Accounts and Index
For proxies held by certain client accounts managed in accordance with fixed income, money market and
index strategies (including exchange traded funds), Invesco will typically vote in line with the majority holder of the active-equity shares held by Invesco outside of those strategies (“Majority Voting”). In this manner Invesco seeks to
leverage the active-equity expertise and comprehensive proxy voting reviews conducted by teams employing active-equity strategies, which typically incorporate analysis of proxy issues as a core component of the investment process. Portfolio managers
for accounts employing Majority Voting still retain full discretion to override Majority Voting and to vote the shares as they determine to be in the best interest of those accounts, absent certain types of conflicts of interest, which are discussed
elsewhere in this Policy.
IV. Conflicts of Interest
There may be occasions where voting proxies may present a real or perceived conflict of interest between Invesco, as investment manager, and one or more of
Invesco’s clients or vendors. Under Invesco’s Code of Conduct, Invesco entities and individuals are strictly prohibited from putting personal benefit, whether tangible or intangible, before the interests of clients. “Personal
benefit” includes any intended benefit for Invesco, oneself or any other individual, company, group or organization of any kind whatsoever, except a benefit for the relevant Invesco client.
A-3
Firm-level Conflicts of Interest
A conflict of interest may exist if Invesco has a material business relationship with, or is actively soliciting business from, either the company soliciting a
proxy or a third party that has a material interest in the outcome of a proxy vote or that is actively lobbying for a particular outcome of a proxy vote (
e.g.
, issuers that are distributors of Invesco’s products, or issuers that employ
Invesco to manage portions of their retirement plans or treasury accounts). Invesco’s proxy governance team maintains a list of all such issuers for which a conflict of interest exists.
If the proposal that gives rise to the potential conflict is specifically addressed by this Policy or the operating guidelines and procedures of the relevant
regional investment center, Invesco generally will vote the proxy in accordance therewith. Otherwise, based on a majority vote of its members, the Global IPAC (as described below) will vote the proxy.
Because this Policy and the operating guidelines and procedures of each regional investment center are pre-determined and crafted to be in the best economic
interest of clients, applying them to vote client proxies should, in most instances, adequately resolve any potential conflict of interest. As an additional safeguard, persons from Invesco’s marketing, distribution and other customer-facing
functions may not serve on the Global IPAC. For the avoidance of doubt, Invesco may not consider Invesco Ltd.’s pecuniary interest when voting proxies on behalf of clients.
Personal Conflicts of Interest
A conflict also may exist
where an Invesco employee has a known personal relationship with other proponents of proxy proposals, participants in proxy contests, corporate directors, or candidates for directorships.
All Invesco personnel with proxy voting responsibilities are required to report any known personal conflicts of interest regarding proxy issues with which
they are involved. In such instances, the individual(s) with the conflict will be excluded from the decision-making process relating to such issues.
Other Conflicts of Interest
In order to avoid any
appearance of a conflict of interest, Invesco will not vote proxies issued by, or related to matters involving, Invesco Ltd. that may be held in client accounts from time to time.
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Shares of
an Invesco-sponsored fund held by other Invesco funds will be voted in the same proportion as the votes of external shareholders of the underlying fund.
V. Use of Third-Party Proxy Advisory Services
Invesco
may supplement its internal research with information from third-parties, such as proxy advisory firms. However, Invesco generally retains full and independent discretion with respect to proxy voting decisions.
As part of its fiduciary obligation to clients, Invesco performs extensive initial and ongoing due diligence on the proxy advisory firms it engages. This
includes reviews of information regarding the capabilities of their research staffs and internal controls, policies and procedures, including those relating to possible conflicts of interest. In addition, Invesco regularly monitors and communicates
with these firms and monitors their compliance with Invesco’s performance and policy standards.
Generally speaking, Invesco does not invest for its
clients in the shares of Invesco Ltd., however, limited exceptions apply in the case of funds or accounts designed to track an index that includes Invesco Ltd. as a component.
VI. Global Proxy Voting Platform and Administration
Guided by its philosophy that investment teams should manage proxy voting, Invesco has created the Global Invesco Proxy Advisory Committee (“Global
IPAC”). The Global IPAC is a global investments-driven committee comprised of representatives from various investment management teams and Invesco’s Global Head of Proxy Governance and Responsible Investment (“Head of Proxy
Governance”). The Global IPAC provides a forum for investment teams to monitor, understand and discuss key proxy issues and voting trends within the Invesco complex. Absent a conflict of interest, the Global IPAC representatives, in
consultation with the respective investment team, are responsible for voting proxies for the securities the team manages (unless such responsibility is explicitly delegated to the portfolio managers of the securities in question) In addition to the
Global IPAC, for some clients, third parties (
e.g.
, U.S. mutual fund boards) provide oversight of the proxy process. The Global IPAC and Invesco’s proxy administration and governance team, compliance and legal teams regularly
communicate and review this Policy and the operating guidelines and procedures of each regional investment center to ensure that they remain consistent with clients’ best interests, regulatory requirements, governance trends and industry best
practices.
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Invesco maintains a proprietary global proxy administration platform, known as the “fund manager
portal” and supported by the Head of Proxy Governance and a dedicated team of internal proxy specialists. The platform streamlines the proxy voting and ballot reconciliation processes, as well as related functions, such as share blocking and
managing conflicts of interest issuers. Managing these processes internally, as opposed to relying on third parties, gives Invesco greater quality control, oversight and independence in the proxy administration process.
The platform also includes advanced global reporting and record-keeping capabilities regarding proxy matters that enable Invesco to satisfy client, regulatory
and management requirements. Historical proxy voting information, including commentary by investment professionals regarding the votes they cast, where applicable, is stored to build institutional knowledge across the Invesco complex with
respect to individual companies and proxy issues. Certain investment teams also use the platform to access third-party proxy research.
VII.
Non-Votes
In the great majority of instances, Invesco is able to vote proxies successfully. However, in certain circumstances Invesco may refrain
from voting where the economic or other opportunity costs of voting exceeds any anticipated benefits of that proxy proposal. In addition, there may be instances in which Invesco is unable to vote all of its clients’ proxies despite using
commercially reasonable efforts to do so. For example:
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Invesco may not receive proxy materials from the relevant fund or client custodian with sufficient time and information to make an informed independent voting decision. In such cases, Invesco may choose not to
vote, to abstain from voting, to vote in line with management or to vote in accordance with proxy advisor recommendations. These matters are left to the discretion of the fund manager.
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If the security in question is on loan as part of a securities lending program, Invesco may determine that the benefit to the client of voting a particular proxy is outweighed by the revenue that would be lost by
terminating the loan and recalling the securities.
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In some countries the exercise of voting rights imposes temporary transfer restrictions on the related securities (“share blocking”). Invesco generally refrains from voting proxies in share-blocking countries
unless Invesco determines that the benefit to the client(s) of voting a specific proxy outweighs the client’s temporary inability to sell the security.
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Some companies require a representative to attend meetings in person in order to vote a proxy. In such cases, Invesco may determine that the costs of sending a representative or signing a power-of-attorney outweigh the
benefit of voting a particular proxy.
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VIII. Proxy Voting Guidelines
The following guidelines describe Invesco’s general positions on various common proxy voting issues. This list is not intended to be exhaustive or
prescriptive. As noted above, Invesco’s proxy process is investor-driven, and each fund manager retains ultimate discretion to vote proxies in the manner they deem most appropriate, consistent with Invesco’s proxy voting principles
and philosophy discussed in Sections I through IV. Individual proxy votes therefore will differ from these guidelines from time to time.
A.
Shareholder Access and Treatment of Shareholder Proposals
Invesco reviews on a case by case basis but generally votes in favor of proposals that would
increase shareholders’ opportunities to express their views to boards of directors, proposals that would lower barriers to shareholder action, and proposals to promote the adoption of generally accepted best practices in corporate governance,
provided that such proposals would not require a disproportionate amount of management attention or corporate resources or otherwise that may inappropriately disrupt the company’s business and main purpose, usually set out in their reporting
disclosures and business model. Likewise, Invesco reviews on a case by case basis but generally votes for shareholder proposals that are designed to protect shareholder rights if a company’s corporate governance standards indicate that such
additional protections are warranted (for example, where minority shareholders’ rights are not adequately protected).
B. Environmental, Social
and Corporate Responsibility Issues
Invesco believes that a company’s long-term response to environmental, social and corporate responsibility
issues can significantly affect its long-term shareholder value. We recognize that to manage a corporation effectively, directors and management may consider not only the interests of shareholders, but also the interests of employees, customers,
suppliers, creditors and the local community, among others. While Invesco generally affords management discretion with respect to the operation of a company’s business, Invesco will evaluate such proposals on a case by case basis and will vote
proposals relating to these issues in a manner intended to maximize long-term shareholder value.
A-5
C. Capitalization Structure Issues
i.
Stock Issuances
Invesco generally
supports a board’s decisions about the need for additional capital stock to meet ongoing corporate needs, except where the request could adversely affect Invesco clients’ ownership stakes or voting rights. Some capitalization proposals,
such as those to authorize common or preferred stock with special voting rights or to issue additional stock in connection with an acquisition, may require additional analysis. Invesco generally opposes proposals to authorize classes of preferred
stock with unspecified voting, conversion, dividend or other rights (“blank check” stock) when they appear to be intended as an anti-takeover mechanism; such issuances may be supported when used for general financing purposes.
ii.
Stock Splits
Invesco generally
supports a board’s proposal to increase common share authorization for a stock split, provided that the increase in authorized shares would not result in excessive dilution given the company’s industry and performance in terms of
shareholder returns.
iii.
Share Repurchases
Invesco generally supports a board’s proposal to institute open-market share repurchase plans only if all shareholders participate on an equal basis.
D. Corporate Governance Issues
i.
Board of Directors
1. Director Nominees in Uncontested Elections
Subject to the other considerations described below, in an uncontested director election for a company without a controlling shareholder, Invesco generally
votes in favor of the director slate if it is comprised of at least a majority of independent directors and if the board’s key committees are fully independent, effective and balanced. Key committees include the audit, compensation/remuneration
and governance/nominating committees. Invesco’s standard of independence excludes directors who, in addition to the directorship, have any material business or family relationships with the companies they serve.
2. Director Nominees in Contested Elections
Invesco recognizes that short-term investment sentiments influence the corporate governance landscape and may influence companies in Invesco clients’
portfolios and more broadly across the market. Invesco recognizes that short-term investment sentiment may conflict with long-term value creation and as such looks at each proxy contest matter on a case by case basis, considering factors such as:
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Long-term financial performance of the company relative to its industry,
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Management’s track record,
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Background to the proxy contest,
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Qualifications of director nominees (both slates),
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Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met, and
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Stock ownership positions in the company.
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3. Director Accountability
Invesco generally withholds votes from directors who exhibit a lack of accountability to shareholders. Examples include, without limitation, poor attendance
(less than 75%, absent extenuating circumstances) at meetings, failing to implement shareholder proposals that have received a majority of votes and/or by adopting or approving egregious corporate-governance or other policies. In cases of material
financial restatements, accounting fraud, habitually late filings, adopting shareholder rights plan (“poison pills”) without shareholder approval, or other areas of poor performance, Invesco may withhold votes from some or all of a
company’s directors. In situations where directors’ performance is a concern, Invesco may also support shareholder proposals to take corrective actions such as so-called “clawback” provisions.
A-6
4. Director Independence
Invesco generally supports proposals to require a majority of directors to be independent unless particular circumstances make this not feasible or in the best
interests of shareholders. We generally vote for proposals that would require the board’s audit, compensation/remuneration, and/or governance/nominating committees to be composed exclusively of independent directors since this minimizes the
potential for conflicts of interest.
5. Director Indemnification
Invesco recognizes that individuals may be reluctant to serve as corporate directors if they are personally liable for all related lawsuits and legal costs. As
a result, reasonable limitations on directors’ liability can benefit a company and its shareholders by helping to attract and retain qualified directors while preserving recourse for shareholders in the event of misconduct by directors.
Invesco, therefore, generally supports proposals to limit directors’ liability and provide indemnification and/or exculpation, provided that the arrangements are limited to the director acting honestly and in good faith with a view to the best
interests of the company and, in criminal matters, are limited to the director having reasonable grounds for believing the conduct was lawful.
6. Separate Chairperson and CEO
Invesco
evaluates these proposals on a case by case basis, recognizing that good governance requires either an independent chair or a qualified, proactive, and lead independent director.
Voting decisions may take into account, among other factors, the presence or absence of:
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a designated lead director, appointed from the ranks of the independent board members, with an established term of office and clearly delineated powers and duties;
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a majority of independent directors;
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completely independent key committees;
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committee chairpersons nominated by the independent directors;
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CEO performance reviewed annually by a committee of independent directors; and
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established governance guidelines.
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7. Majority/Supermajority/Cumulative Voting for
Directors
The right to elect directors is the single most important mechanism shareholders have to promote accountability. Invesco generally
votes in favor of proposals to elect directors by a majority vote. Except in cases where required by law in the jurisdiction of incorporation or when a company has adopted formal governance principles that present a meaningful alternative to the
majority voting standard, Invesco generally votes against actions that would impose any supermajority voting requirement, and generally supports actions to dismantle existing supermajority requirements.
The practice of cumulative voting can enable minority shareholders to have representation on a company’s board. Invesco generally opposes such proposals
as unnecessary where the company has adopted a majority voting standard. However, Invesco generally supports proposals to institute the practice of cumulative voting at companies whose overall corporate-governance standards indicate a
particular need to protect the interests of minority shareholders.
8. Staggered Boards/Annual Election of Directors
Invesco generally supports proposals to elect each director annually rather than electing directors to staggered multi-year terms because annual elections
increase a board’s level of accountability to its shareholders.
9. Board Size
Invesco believes that the number of directors is an important factor to consider when evaluating the board’s ability to maximize long-term shareholder
value. Invesco approaches proxies relating to board size on a case by case basis but generally will defer to the board with respect to determining the optimal number of board members, provided that the proposed board size is sufficiently large to
represent shareholder interests and sufficiently limited to remain effective.
A-7
10. Term Limits for Directors
Invesco believes it is important for a board of directors to examine its membership regularly with a view to ensuring that the company continues to benefit
from a diversity of director viewpoints and experience. We generally believe that an individual board’s nominating committee is best positioned to determine whether director term limits would be an appropriate measure to help achieve these
goals and, if so, the nature of such limits.
ii. Audit Committees and Auditors
1. Qualifications of Audit Committee and Auditors
Invesco believes a company’s Audit Committee has a high degree of responsibility to shareholders in matters of financial disclosure, integrity of the
financial statements and effectiveness of a company’s internal controls. Independence, experience and financial expertise are critical elements of a well-functioning Audit Committee. When electing directors who are members of a company’s
Audit Committee, or when ratifying a company’s auditors, Invesco considers the past performance of the Audit Committee and holds its members accountable for the quality of the company’s financial statements and reports.
2. Auditor Indemnifications
A
company’s independent auditors play a critical role in ensuring and attesting to the integrity of the company’s financial statements. It is therefore essential that they perform their work in accordance with the highest standards. Invesco
generally opposes proposals that would limit the liability of or indemnify auditors because doing so could serve to undermine this obligation.
3. Adequate Disclosure of Auditor Fees
Understanding the fees earned by the auditors is important for assessing auditor independence. Invesco’s support for the re-appointment of the
auditors will take into consideration the availability of adequate disclosure concerning the amount and nature of audit versus non-audit fees. Invesco generally will support proposals that call for this disclosure if it is not already being
made.
E. Remuneration and Incentives
Invesco
believes properly constructed compensation plans that include equity ownership are effective in creating incentives that induce management and employees of portfolio companies to create greater shareholder wealth. Invesco generally supports equity
compensation plans that promote the proper alignment of incentives with shareholders’ long-term interests, and generally votes against plans that are overly dilutive to existing shareholders, plans that contain objectionable structural
features, and plans that appear likely to reduce the value of the client’s investment.
i.
Independent Compensation/Remuneration
Committee
Invesco believes that an independent, experienced and well-informed compensation/remuneration committee is critical to ensuring that a
company’s remuneration practices align with shareholders’ interests and, therefore, generally supports proposals calling for a compensation/remuneration committee to be comprised solely of independent directors.
ii.
Advisory Votes on Executive Compensation
Invesco believes that an independent compensation/remuneration committee of the board, with input from management, is generally best positioned to determine
the appropriate components and levels of executive compensation, as well as the appropriate frequency of related shareholder advisory votes. This is particularly the case where shareholders have the ability to express their views on remuneration
matters through annual votes for or against the election of the individual directors who comprise the compensation/remuneration committee. Invesco, therefore, generally will support management’s recommendations with regard to the
components and levels of executive compensation and the frequency of shareholder advisory votes on executive compensation. However, Invesco will vote against such recommendations where Invesco determines that a company’s executive remuneration
policies are not properly aligned with shareholder interests or may create inappropriate incentives for management.
iii.
Equity
Based Compensation Plans
Invesco generally votes against plans that contain structural features that would impair the alignment of incentives between
shareholders and management. Such features include, without limitation, the ability to reprice or reload options without shareholder approval, the ability to issue options below the stock’s current market price, or the ability to replenish
shares automatically without shareholder approval.
A-8
iv.
Severance Arrangements
Invesco considers proposed severance arrangements (sometimes known as “golden parachute” arrangements) on a case-by-case basis due to the wide
variety among their terms. Invesco acknowledges that in some cases such arrangements, if reasonable, may be in shareholders’ best interests as a method of attracting and retaining high quality executive talent. Invesco generally votes in
favor of proposals requiring advisory shareholder ratification of senior executives’ severance agreements while generally opposing proposals that require such agreements to be ratified by shareholders in advance of their adoption.
v.
“Claw Back” Provisions
Invesco generally supports so called “claw back” policies intended to recoup remuneration paid to senior executives based upon materially inaccurate
financial reporting (as evidenced by later restatements) or fraudulent accounting or business practices.
vi.
Employee Stock
Purchase Plans
Invesco generally supports employee stock purchase plans that are reasonably designed to provide proper incentives to a broad base of
employees, provided that the price at which employees may acquire stock represents a reasonable discount from the market price.
F. Anti-Takeover
Defenses; Reincorporation
Measures designed to protect a company from unsolicited bids can adversely affect shareholder value and voting rights, and
they have the potential to create conflicts of interests among directors, management and shareholders. Such measures include adopting or renewing shareholder rights plans (“poison pills”), requiring supermajority voting on certain
corporate actions, classifying the election of directors instead of electing each director to an annual term, or creating separate classes of common or preferred stock with special voting rights. In determining whether to support a proposal to add,
eliminate or restrict anti-takeover measures, Invesco will examine the particular elements of the proposal to assess the degree to which it would adversely affect shareholder rights of adopted. Invesco generally supports shareholder proposals
directing companies to subject their anti-takeover provisions to a shareholder vote. Invesco generally opposes payments by companies to minority shareholders intended to dissuade such shareholders from pursuing a takeover or other changes
(sometimes known as “greenmail”) because these payments result in preferential treatment of some shareholders over others.
Reincorporation
involves re-establishing the company in a different legal jurisdiction. Invesco generally will vote for proposals to reincorporate a company provided that the board and management have demonstrated sound financial or business reasons for the move.
Invesco generally will oppose proposals to reincorporate if they are solely part of an anti-takeover defense or intended to limit directors’ liability.
A-9
POWERSHARES EXCHANGE-TRADED FUND TRUST II
PART C. OTHER INFORMATION
Item 28. Exhibits.
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Exhibit
Number
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Description
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(a)
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Amended and Restated Declaration of Trust of the Registrant. (1)
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(b)
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Amended and Restated By-laws of the Registrant. (11)
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(c)
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Not applicable.
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(d)
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1.
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Amended and Restated Investment Advisory Agreement between the Registrant and Invesco PowerShares Capital Management LLC and Form of Schedule. (*)
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2.
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Investment Sub-Advisory Agreement by and among Invesco PowerShares Capital Management LLC and the Sub-Advisers. (7)
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(a) Acknowledgement and Waiver of Notice of Termination of Investment Sub-Advisory Agreement between Invesco PowerShares Capital Management LLC and Invesco Australia Limited dated January 14, 2015. (8)
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3.
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Management Fee Waiver Agreement and Form of Schedule. (4)
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4.
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Management Services Agreement between the Registrant and Invesco PowerShares Capital Management LLC and Form of Schedule. (6)
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5.
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Amended and Restated Memorandum of Agreement between the Registrant Invesco PowerShares Capital Management LLC and Form of Schedule. (*)
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(e)
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Amended and Restated Master Distribution Agreement between the Registrant and Invesco Distributors, Inc and Form of Schedule. (*)
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(f)
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Not applicable.
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(g)
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1.
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Amended and Restated Custody Agreement between Registrant and The Bank of New York Mellon and Form of Schedule. (*)
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2.
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Foreign Custody Manager Agreement between Registrant and The Bank of New York. (3)
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(h)
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1.
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Amended and Restated Fund Administration and Accounting Agreement between Registrant and The Bank of New York and Form of Schedule. (*)
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2.
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Amended and Restated Transfer Agency and Service Agreement between Registrant and The Bank of New York and Form of Schedule. (*)
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3.
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Form of Participant Agreement between Invesco Distributors, Inc., and the Participant. (*)
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4.
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Form of Sublicense Agreement between the Registrant and Invesco PowerShares Capital Management LLC. (*)
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(i)
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Opinion and Consent of Counsel. (*)
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(j)
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Not applicable.
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(k)
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Not applicable.
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(l)
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Not applicable.
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(m)
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Not applicable.
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(n)
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Not applicable.
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(o)
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Not applicable.
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(p)
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1.
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Code of Ethics of the Registrant (10)
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2.
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Code of Ethics of Invesco PowerShares Capital Management LLC (10)
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3.
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Code of Ethics of Invesco Advisers, Inc. and Invesco Distributors, Inc. (9)
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Exhibit
Number
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Description
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4.
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Code of Ethics of Invesco Senior Secured Management, Inc. (8)
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(q)
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1.
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Powers of Attorney for Messrs. Bagge, Barre, Carome, Kole, Nussbaum and Wilson. (2)
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2.
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Powers of Attorney for Messrs. Lim and Wicker. (5)
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(1)
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Incorporated by reference to Post-Effective Amendment No. 7, filed on September 18, 2007.
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(2)
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Incorporated by reference to Post-Effective Amendment No. 227, filed on July 7, 2011.
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(3)
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Incorporated by reference to Post-Effective Amendment No. 390, filed on February 27, 2013.
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(4)
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Incorporated by reference to Post-Effective Amendment No. 415, filed on June 7, 2013.
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(5)
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Incorporated by reference to Post-Effective Amendment No. 423, filed on September 30, 2013.
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(6)
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Incorporated by reference to Post-Effective Amendment No. 425, filed on October 25, 2013.
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(7)
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Incorporated by reference to Post-Effective Amendment No. 459, filed on August 1, 2014.
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(8)
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Incorporated by reference to Post-Effective Amendment No. 475, filed on February 26, 2015.
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(9)
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Incorporated by reference to Post-Effective Amendment No. 586, filed on February 23, 2017.
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(10)
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Incorporated by reference to Post-Effective Amendment No. 611, filed on June 16, 2017.
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Item 29.
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Persons Controlled by or Under Common Control with the Fund.
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None.
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Item 30.
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Indemnification.
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Reference is made to Article IX of the Registrant’s Declaration of Trust:
The Registrant (also, the “Trust”) is organized as a Massachusetts business trust and is operated pursuant to a Declaration of
Trust, dated October 10, 2006 and Amended and Restated as of September 17, 2007 (the “Declaration of Trust”), which permits the Registrant to indemnify every person who is, or has been, a Trustee, officer, employee or agent of
the Trust, including persons who serve at the request of the Trust as directors, trustees, officers, employees or agents of another organization in which the Trust has an interest as a shareholder, creditor or otherwise (hereinafter referred to as a
“Covered Person”), to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been such a Trustee, director, officer, employee or agent and against amounts paid or incurred by him in settlement thereof.
No indemnification shall be provided hereunder to a Covered Person to the extent such indemnification is prohibited by applicable federal law.
The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Covered Person may now or hereafter be entitled, shall continue as to a person who has ceased to be such a Covered Person and shall inure to the benefit of the heirs, executors and administrators of such a
person.
Subject to applicable federal law, expenses of preparation and presentation of a defense to any claim, action, suit or proceeding
subject to a claim for indemnification under this Section 9.5 shall be advanced by the Trust prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined
that he is not entitled to indemnification under this Section 9.5.
To the extent that any determination is required to be made as to
whether a Covered Person engaged in conduct for which indemnification is not provided as described herein, or as to whether there is reason to believe
that a Covered Person ultimately will be found entitled to indemnification, the Person or Persons making the determination shall afford the Covered Person a rebuttable presumption that the
Covered Person has not engaged in such conduct and that there is reason to believe that the Covered Person ultimately will be found entitled to indemnification.
As used in this Section 9.5, the words “claim,” “action,” “suit” or “proceeding” shall apply to
all claims, demands, actions, suits, investigations, regulatory inquiries, proceedings or any other occurrence of a similar nature, whether actual or threatened and whether civil, criminal, administrative or other, including appeals, and the words
“liability” and “expenses” shall include without limitation, attorneys’ fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities.
Further Indemnification.
Nothing contained herein shall affect any rights to indemnification to which any Covered Person or
other Person may be entitled by contract or otherwise under law or prevent the Trust from entering into any contract to provide indemnification to any Covered Person or other Person. Without limiting the foregoing, the Trust may, in connection
with the acquisition of assets subject to liabilities pursuant to Section 4.2 hereof or a reorganization or consolidation pursuant to Section 10.2 hereof, assume the obligation to indemnify any Person including a Covered Person or
otherwise contract to provide such indemnification, and such indemnification shall not be subject to the terms of this Article IX.
Amendments and Modifications.
Without limiting the provisions of Section 11.1(b) hereof, in no event will any
amendment, modification or change to the provisions of this Declaration or the By-laws adversely affect in any manner the rights of any Covered Person to (a) indemnification under Section 9.5 hereof in connection with any proceeding in
which such Covered Person becomes involved as a party or otherwise by virtue of being or having been a Trustee, officer or employee of the Trust or (b) any insurance payments under policies maintained by the Trust, in either case with respect
to any act or omission of such Covered Person that occurred or is alleged to have occurred prior to the time such amendment, modification or change to this Declaration or the By-laws.
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Item 31.
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Business and Other Connections of the Investment Adviser.
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Reference is made to the
caption “Management of the Fund” in the Prospectus constituting Part A, which is included in this Registration Statement, and “Management” in the Statement of Additional Information constituting Part B, which is
included in this Registration Statement.
The information as to the directors and executive officers of Invesco PowerShares Capital
Management LLC is set forth in Invesco PowerShares Capital Management LLC’s Form ADV filed with the Securities and Exchange Commission on March 30, 2017 (and as amended through the date hereof) is incorporated herein by reference.
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Item 32.
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Principal Underwriters.
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(a) Invesco Distributors, Inc. is the Registrant’s
sole principal underwriter, as well as serves as the principal underwriter for the following other investment companies registered under the Investment Company Act of 1940, as amended:
AIM Counselor Series Trust (Invesco Counselor Series Trust)
Invesco American Franchise Fund
Invesco California Tax-Free Income Fund
Invesco Core Plus Bond Fund
Invesco Equally-Weighted S&P 500 Fund
Invesco Equity and Income Fund
Invesco Floating Rate Fund
Invesco Global Real Estate Income Fund
Invesco Growth and Income Fund
Invesco Low Volatility Equity Yield Fund
Invesco Pennsylvania Tax Free Income Fund
Invesco S&P 500 Index Fund
Invesco Small Cap Discovery Fund
Invesco Short Duration High Yield Municipal Fund
Invesco Strategic Real Return Fund
AIM Equity Funds (Invesco Equity Funds)
Invesco Charter Fund
Invesco Diversified Dividend Fund
Invesco Summit Fund
AIM Funds Group (Invesco Funds Group)
Invesco European Small Company Fund
Invesco Global Core
Equity Fund
Invesco International Small Company Fund
Invesco Small Cap Equity Fund
AIM Growth
Series (Invesco Growth Series)
Invesco Alternative Strategies Fund
Invesco Balanced-Risk Retirement Now Fund
Invesco Balanced-Risk
Retirement 2020 Fund
Invesco Balanced-Risk Retirement 2030 Fund
Invesco Balanced-Risk Retirement 2040 Fund
Invesco Balanced-Risk
Retirement 2050 Fund
Invesco Conservative Allocation Fund
Invesco Convertible Securities Fund
Invesco Global Low
Volatility Equity Yield Fund
Invesco Growth Allocation Fund
Invesco Income Allocation Fund
Invesco International Allocation
Fund
Invesco Mid Cap Core Equity Fund
Invesco Moderate
Allocation Fund
Invesco Multi-Asset Inflation Fund
Invesco
Quality Income Fund
Invesco Small Cap Growth Fund
AIM
International Mutual Funds (Invesco International Mutual Funds)
Invesco Asia Pacific Growth Fund
Invesco European Growth Fund
Invesco Global Growth Fund
Invesco Global Opportunities Fund
Invesco Global
Small & Mid Cap Growth Fund
Invesco Global Responsibility Equity Fund
Invesco International Companies Fund
Invesco International Core
Equity Fund
Invesco International Growth Fund
Invesco
Select Opportunities Fund
AIM Investment Funds (Invesco Investment Funds)
Invesco All Cap Market Neutral Fund
Invesco Balanced-Risk
Allocation Fund
Invesco Balanced-Risk Commodities Strategy Fund
Invesco Developing Markets Fund
Invesco Emerging Markets
Flexible Bond Fund
Invesco Emerging Markets Equity Fund
Invesco Endeavor Fund
Invesco Global Health Care Fund
Invesco Global Infrastructure Fund
Invesco Global Market Neutral
Fund
Invesco Global Targeted Returns Fund
Invesco Greater
China Fund
Invesco Long/Short Equity Fund
Invesco Low Volatility Emerging Markets Fund
Invesco Macro Allocation Strategy Fund
Invesco MLP Fund
Invesco
Multi-Asset Income Fund
Invesco Pacific Growth Fund
Invesco Select Companies Fund
Invesco World Bond Fund
AIM Investment
Securities Funds (Invesco Investment Securities Funds)
Invesco Corporate Bond Fund
Invesco Global Real Estate Fund
Invesco Government Money Market Fund
Invesco High Yield Fund
Invesco
Real Estate Fund
Invesco Short Duration Inflation Protected Fund
Invesco Short Term Bond Fund
Invesco U.S. Government Fund
AIM Sector
Funds (Invesco Sector Funds)
Invesco American Value Fund
Invesco Comstock Fund
Invesco
Dividend Income Fund
Invesco Energy Fund
Invesco Gold & Precious Metals Fund
Invesco Mid Cap Growth Fund
Invesco Small Cap Value Fund
Invesco Technology Fund
Invesco
Technology Sector Fund
Invesco Value Opportunities Fund
AIM Tax-Exempt Funds (Invesco Tax-Exempt Funds)
Invesco High Yield Municipal Fund
Invesco Intermediate Term Municipal Income Fund
Invesco Limited Term Municipal Income Fund
Invesco Municipal Income Fund
Invesco New York Tax Free Income Fund
Invesco Tax-Exempt Cash Fund
AIM
Treasurer’s Series Trust (Invesco Treasurer’s Series Trust)
Premier Portfolio
Premier Tax-Exempt Portfolio
Premier U.S. Government Money Portfolio
AIM
Variable Insurance Funds (Invesco Variable Insurance Funds)
Invesco V.I. American Franchise Fund
Invesco V.I. American Value Fund
Invesco V.I. Balanced-Risk Allocation Fund
Invesco V.I. Comstock Fund
Invesco V.I. Core Equity Fund
Invesco V.I. Core Plus Bond Fund
Invesco V.I. Diversified Dividend Fund
Invesco V.I. Equally-Weighted S&P 500 Fund
Invesco V.I. Equity and Income Fund
Invesco V.I. Global Core Equity Fund
Invesco V.I. Global Health Care Fund
Invesco V.I. Global Real Estate Fund
Invesco V.I. Government Money Market Fund
Invesco V.I. Government Securities Fund
Invesco V.I. Growth and Income Fund
Invesco V.I. High Yield Fund
Invesco V.I. International Growth Fund
Invesco V.I. Managed Volatility Fund
Invesco V.I. Mid Cap Core Equity Fund
Invesco V.I. Mid Cap Growth Fund
Invesco V.I. S&P 500 Index Fund
Invesco V.I. Small Cap Equity Fund
Invesco V.I. Technology Fund
Invesco V.I. Value Opportunities Fund
Invesco
Senior Loan Fund
Invesco Management Trust
Invesco Conservative Income Fund
Short-Term
Investments Trust
Government & Agency Portfolio
Liquid Assets Portfolio
STIC
Prime Portfolio
Tax-Free Cash Reserve Portfolio
Treasury Obligations Portfolio
Treasury Portfolio
PowerShares Actively
Managed Exchange-Traded Fund Trust
PowerShares Actively Managed Exchange-Traded Commodity Fund Trust
PowerShares Exchange-Traded Fund Trust
PowerShares
India Exchange-Traded Fund Trust
|
**
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Please note that PowerShares Exchange-Traded Fund Trust II is also distributed by Invesco Distributors, Inc., but is not included in this list because it is the registrant filing the N-1A.
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(b)
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NAME AND PRINCIPAL
BUSINESS ADDRESS*
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POSITIONS AND OFFICES
WITH REGISTRANT
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|
POSITIONS AND OFFICES
WITH UNDERWRITER
|
|
Peter S. Gallagher
|
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None
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Director & President
|
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Eric P. Johnson
|
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None
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Executive Vice President
|
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Ben Utt
|
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None
|
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Executive Vice President
|
|
Dan Draper
|
|
President and Principal Executive Officer
|
|
Senior Vice President
|
|
Eliot Honaker
|
|
None
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|
Senior Vice President
|
|
Greg J. Murphy
|
|
None
|
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Senior Vice President
|
|
David J. Nardecchia
|
|
None
|
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Senior Vice President, Director of Marketing Communications
|
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Miranda O’Keefe
|
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None
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Senior Vice President & Chief Compliance Officer
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Gary K. Wendler
|
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None
|
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Senior Vice President, Director of Marketing Research & Analysis
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John M. Zerr
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Chief Legal Officer
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Senior Vice President & Secretary
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Annette J. Lege
|
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None
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Treasurer
|
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Mark W. Gregson
|
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None
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Chief Financial Officer
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Crissie M. Wisdom
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Anti-Money Laundering Compliance Officer
|
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Anti-Money Laundering Compliance Officer
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*
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The principal business address for all directors and executive officers is Invesco Distributors, Inc., 11 Greenway Plaza, Suite 1000, Houston, Texas 77046-1173.
|
(c) Not applicable.
|
Item 33.
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Location of Accounts and Records.
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All accounts, books and other documents required to
be maintained by Section 31(a) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder, are held in physical possession at the offices, as applicable, of: (1) the Registrant, (2) the
Registrant’s investment adviser, (3) the Registrant’s custodian, and (4) the Registrant’s administrator.
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1.
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PowerShares Exchange-Traded Fund Trust II
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|
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3500 Lacey Road, Suite 700
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Downers Grove, Illinois 60515
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2.
|
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Invesco PowerShares Capital Management LLC
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3500 Lacey Road, Suite 700
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Downers Grove, Illinois 60515
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3.
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The Bank of New York
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101 Barclay Street
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New York, New York 10286
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4.
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The Bank of New York
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101 Barclay Street
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New York, New York 10286
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Item 34.
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Management Services.
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Not applicable.
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all of the requirements for effectiveness of this Registration Statement under Rule 485(b) under the Securities Act of 1933, as amended, and has duly caused this Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Downers Grove and State of Illinois, on the 30th day of June, 2017.
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PowerShares Exchange-Traded Fund Trust II
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By:
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/s/ Daniel Draper
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Daniel Draper
|
|
Title:
|
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President
|
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has
been signed below by the following persons in the capacities indicated on the dates indicated.
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|
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SIGNATURE
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TITLE
|
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DATE
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/s/ Daniel Draper
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President
|
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June 30, 2017
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Daniel Draper
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/s/ Steven M. Hill
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Treasurer
|
|
June 30, 2017
|
|
Steven M. Hill
|
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/s/ Anna Paglia
|
|
Secretary
|
|
June 30, 2017
|
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Anna Paglia
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|
|
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|
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*/s/ Ronn R. Bagge
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Trustee
|
|
June 30, 2017
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|
Ronn R. Bagge
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|
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*/s/ Todd J. Barre
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Trustee
|
|
June 30, 2017
|
|
Todd J. Barre
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|
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|
|
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*/s/ Kevin M. Carome
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Trustee
|
|
June 30, 2017
|
|
Kevin M. Carome
|
|
|
|
|
|
|
|
|
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*/s/ Marc M. Kole
|
|
Trustee
|
|
June 30, 2017
|
|
Marc M. Kole
|
|
|
|
|
|
|
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*/s/ Yung Bong Lim
|
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Trustee
|
|
June 30, 2017
|
|
Yung Bong Lim
|
|
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|
|
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*/s/ Philip M. Nussbaum
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Trustee
|
|
June 30, 2017
|
|
Philip M. Nussbaum
|
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*/s/ Gary R. Wicker
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|
Trustee
|
|
June 30, 2017
|
|
Gary R. Wicker
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*/s/ Donald H. Wilson
|
|
Chairman and Trustee
|
|
June 30, 2017
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Donald H. Wilson
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*By: /s/ Anna Paglia
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June 30, 2017
|
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Anna Paglia
|
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Attorney-In-Fact
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*
|
Anna Paglia signs pursuant to powers of attorney filed with Post-Effective Amendment Nos. 227 and 423 to the Trust’s Registration Statement and incorporated by reference herein.
|
Exhibit List
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|
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(d)(1)
|
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Amended and Restated Investment Advisory Agreement between the Registrant and Invesco PowerShares Capital Management LLC and Form of Schedule.
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(d)(5)
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Amended and Restated Memorandum of Agreement between Adviser and Invesco PowerShares Capital Management LLC and Registrant and Form of Schedule.
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(e)
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Amended and Restated Master Distribution Agreement between the Registrant and Invesco Distributors, Inc. and Form of Schedule.
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(g)(1)
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Amended and Restated Custody Agreement between Registrant and The Bank of New York Mellon and Form of Schedule.
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(h)(1)
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Amended and Restated Fund Administration and Accounting Agreement between Registrant and The Bank of New York and Form of Schedule.
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(h)(2)
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Amended and Restated Transfer Agency and Service Agreement between Registrant and The Bank of New York and Form of Schedule.
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(h)(3)
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Form of Participant Agreement between Invesco Distributors, Inc., and the Participant.
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(h)(4)
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Form of Sublicense Agreement between the Registrant and Invesco PowerShares Capital Management LLC.
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(i)
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Opinion and Consent of Counsel.
|
Exhibit (d)(1)
AMENDED AND RESTATED INVESTMENT ADVISORY AGREEMENT
Amended and Restated Investment Advisory Agreement made as of April 20, 2009 between POWERSHARES EXCHANGE-TRADED FUND TRUST II, formerly
PowerShares Global Exchange-Traded Fund Trust, a Massachusetts business trust (“
Trust
”), and INVESCO POWERSHARES CAPITAL MANAGEMENT LLC, formerly known as PowerShares Capital Management LLC (“
Invesco PowerShares Capital
Management
” or the “
Adviser
”), a Delaware limited liability company registered as an investment adviser under the Investment Advisers Act of 1940, as amended (“
Advisers Act
”).
WHEREAS, the Trust is registered under the Investment Company Act of 1940, as amended (“
1940 Act
”), as an open-end management
investment company; and
WHEREAS, the Trust entered into an Investment Advisory Agreement with Invesco PowerShares Capital Management
dated April 20, 2007, and subsequently amended thereto, to provide investment advisory services; and
WHEREAS, as of April 20,
2009, the Investment Advisory Agreement was amended and restated (this “
Agreement
”) to make ministerial changes designed to facilitate the administration of this Agreement; and
WHEREAS, the Trust is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Trust intends to initially offer shares of the series as listed on Schedule A hereto, and
may issue shares in any other series as to which this Agreement may hereafter be made applicable and as may be added to Schedule A hereto (each such series being herein referred to as a “
Fund
”, and collectively as the
“
Funds
”); and
WHEREAS, the Trust desires to retain Invesco PowerShares Capital Management as investment adviser, to
furnish certain investment advisory and portfolio management services to the Trust with respect to the Funds, and Invesco PowerShares Capital Management is willing to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, it is agreed between the parties hereto as follows:
1.
Appointment
. The Trust hereby appoints Invesco PowerShares Capital Management as investment adviser of the Trust and each Fund
for the period and on the terms set forth in this Agreement. Invesco PowerShares Capital Management accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided.
2.
Duties as Investment Adviser
.
(a) Subject to the supervision and direction of the Trust’s Board of Trustees (“
Board
”), Invesco PowerShares Capital
Management will provide a continuous investment program for each Fund, including investment research and management with respect to all securities and investments and cash equivalents in the Fund. Invesco PowerShares Capital Management will
determine, from time to time, what securities and other investments will be purchased, retained or sold by the Fund. Invesco PowerShares Capital Management shall initially determine and make such modifications to the identity and number of shares of
the securities to be accepted pursuant to such Fund’s benchmark index in exchange for creation units for each Fund and the securities that will be applicable that day to redemption requests received for such Fund as may be necessary as a result
of rebalancing adjustments and corporate action events (and may give directions to the Trust’s custodian with respect to such designations).
(b) Invesco PowerShares Capital Management agrees that, in placing orders with brokers, it will
attempt to obtain the best net result in terms of price and execution; provided that, on behalf of any Fund, Invesco PowerShares Capital Management may, in its discretion, use brokers who provide Invesco PowerShares Capital Management with research,
analysis, advice and similar services, and Invesco PowerShares Capital Management may cause a Fund to pay to those brokers in return for brokerage and research services a higher commission than may be charged by other brokers, subject to Invesco
PowerShares Capital Management’s determining in good faith that such commission is reasonable in relation to the research and execution services received. In no instance will portfolio securities be purchased from or sold to Invesco PowerShares
Capital Management, or any affiliated person thereof, except in accordance with the federal securities laws and the rules and regulations thereunder, or any applicable exemptive orders. Invesco PowerShares Capital Management may aggregate sales and
purchase orders with respect to the assets of the Funds with similar orders being made simultaneously for other accounts advised by Invesco PowerShares Capital Management or its affiliates. Whenever Invesco PowerShares Capital Management
simultaneously places orders to purchase or sell the same security on behalf of a Fund and one or more other accounts advised by Invesco PowerShares Capital Management, such orders will be allocated as to price and amount among all such accounts in
a manner believed to be equitable, over time, to each account. The Trust recognizes that in some cases this procedure may adversely affect the results obtained for the Funds.
(c) Invesco PowerShares Capital Management will oversee the maintenance of all books and records with respect to the securities transactions
of each Fund, and will furnish the Board with such periodic and special reports as the Board reasonably may request. In compliance with the requirements of Rule 31a-3 under the 1940 Act, Invesco PowerShares Capital Management hereby agrees that all
records which it maintains for the Funds are the property of the Trust, agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act any records which it maintains for the Trust and which are required to be maintained by Rule
31a-l
under the 1940 Act, and further agrees to surrender promptly to the Trust any records which it maintains for the Funds upon request by the Trust.
(d) Invesco PowerShares Capital Management will oversee the computation of the net asset value and the net income of each Fund as described in
the currently effective registration statement of the Trust under the Securities Act of 1933, as amended, and the 1940 Act, and any amendments or supplements thereto (“
Registration Statement
”) or as more frequently requested by the
Board.
(e) The Trust hereby authorizes Invesco PowerShares Capital Management and any entity or person associated with Invesco
PowerShares Capital Management which is a member of a national securities exchange to effect any transaction on such exchange for the account of any Fund, which transaction is permitted by Section 11(a) of the Securities Exchange Act of 1934
and the rules thereunder, and the Trust hereby consents to the retention of compensation by Invesco PowerShares Capital Management or any person or entity associated with Invesco PowerShares Capital Management for such transaction.
3.
Use of Name
. The Trust may use the name “PowerShares” or any variant thereof in connection with the name of the Trust or
any of the Funds, only for so long as this Agreement or any extension, renewal or amendment hereof remains in effect. At such time as this Agreement shall no longer be in effect, the Trust shall cease to use such a name or any other similar name.
In no event shall the Trust use the name “PowerShares” or any variant thereof if Invesco PowerShares Capital Management’s
functions are transferred or assigned to a company over which Invesco PowerShares Capital Management does not have control or with which it is not affiliated. In the event that this Agreement shall no longer be in effect or Invesco PowerShares
Capital Management’s functions are transferred or assigned to a company over which Invesco PowerShares Capital Management does not have control or with which it is not affiliated, the Trust shall use its best efforts to legally change its name
by filing the required documentation with appropriate state and federal agencies.
4.
Further Duties
. In all matters relating to the performance of this Agreement, Invesco
PowerShares Capital Management will act in conformity with the Declaration of Trust,
By-Laws,
and Registration Statement of the Trust and with the instructions and directions of the Board and will comply with
the requirements of the 1940 Act, the rules thereunder, and all other applicable federal and state laws and regulations applicable to the Trust and the Funds.
5.
Services Not Exclusive
. The services furnished by Invesco PowerShares Capital Management hereunder are not to be deemed exclusive
and Invesco PowerShares Capital Management shall be free to furnish similar services to others so long as its services under this Agreement are not impaired thereby or unless otherwise agreed to by the parties hereunder in writing. Nothing in this
Agreement shall limit or restrict the right of any director, officer or employee of Invesco PowerShares Capital Management, who may also be a Trustee (“
Board member
”), officer or employee of the Trust, to engage in any other
business or to devote his or her time and attention in part to the management or other aspects of any other business, whether of a similar nature or a dissimilar nature.
6.
Expenses
. During the term of this Agreement, the Adviser shall pay all of the expenses of each Fund of the Trust, except for the fee
payment under this Agreement, payments under each Fund’s 12b-1 plan, if any, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
7.
Compensation
. For the services to be provided by Invesco PowerShares Capital Management hereunder with respect to each Fund listed
on Schedule A attached hereto, as it may be amended from time to time, the Trust shall pay to Invesco PowerShares Capital Management a fee in an amount set forth in Schedule A to this Agreement, so long as the Adviser has not waived all or a portion
of such compensation.
8.
Engagement of Sub-Advisers
. Subject to the prior approval of a majority of the members of the
Trust’s Board, including a majority of the Trustees who are not “interested persons,” as defined in the 1940 Act (“
Independent Board Members
”), Invesco PowerShares Capital Management may, through a sub-advisory
agreement or other arrangement, delegate to any other company under Invesco PowerShares Capital Management’s control, or under common control with Invesco PowerShares Capital Management, or to specified employees of any such companies, or to
more than one such company, to the extent permitted by applicable law, certain of Invesco PowerShares Capital Management’s duties enumerated in section 2 hereof; provided, that Invesco PowerShares Capital Management shall continue to
supervise and oversee the services provided by such company or employees and any such delegation shall not relieve Invesco PowerShares Capital Management of any of its obligations hereunder.
Subject to the prior approval of a majority of the members of the Trust’s Board of Trustees, including a majority of the Independent
Board Members, Invesco PowerShares Capital Management may, through a sub-advisory agreement, delegate to any other company that is not an “affiliated person” (as defined in the 1940 Act) of Invesco PowerShares Capital Management or of the
Trust (other than by reason of serving as an investment adviser to the Trust) (each a “sub-adviser”), to the extent permitted by applicable law, certain of the duties enumerated in section 2 hereof; provided, that Invesco PowerShares
Capital Management shall continue to supervise and oversee the services provided by such sub-adviser and any such delegation shall not relieve Invesco PowerShares Capital Management of any of its obligations hereunder.
Subject to the provisions of this Agreement, the duties of any sub-adviser or delegate, the portion of portfolio assets of the Trust that the
sub-adviser or delegate shall manage and the fees to be paid to the sub-adviser or delegate by Invesco PowerShares Capital Management under and pursuant to any sub-advisory agreement or other arrangement entered into in accordance with this
Agreement may be adjusted from time to time by Invesco PowerShares Capital Management, subject to the prior approval of a majority of the Independent Board Members.
9.
Limitation of Liability
.
(a) Invesco PowerShares Capital Management shall not be liable for any error of judgment or mistake of law or for any loss suffered by any
Fund, the Trust or any of its shareholders, in connection with the matters to which this Agreement relates, except to the extent that such a loss results from willful misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this Agreement. Any person, even though also an officer, director, employee, or agent of Invesco PowerShares Capital Management, who may be or become an officer, Board
member, employee or agent of the Trust shall be deemed, when rendering services to any Fund or the Trust or acting with respect to any business of such Fund or the Trust, to be rendering such service to or acting solely for the Fund or the Trust and
not as an officer, director, employee, or agent or one under the control or direction of Invesco PowerShares Capital Management even though paid by it.
(b) Invesco PowerShares Capital Management is expressly put on notice of, and hereby acknowledges and agrees to, the limitation of shareholder
liability as set forth in the Declaration of Trust of the Trust and agrees that the obligations assumed by the Trust under this contract shall be limited in all cases to the Trust and its assets. Invesco PowerShares Capital Management shall not seek
satisfaction of any such obligation from the shareholders or any shareholder of the Trust, nor shall Invesco PowerShares Capital Management seek satisfaction of any such obligation from the Trustees or any individual Trustee of the Trust. Invesco
PowerShares Capital Management understands that the rights and obligations of each series of shares of the Trust under the Declaration of Trust are separate and distinct from those of any and all other series.
10.
Duration and Termination
.
(a) This Agreement, with respect to each Fund, was initially approved, and is effective, on the dates set forth in the attached Schedule A;
provided that, with respect to any Fund, this Agreement shall not take effect unless it has first been approved (i) by a vote of a majority of the Independent Board Members cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by vote of a majority of that Fund’s outstanding voting securities.
(b) Unless sooner terminated as provided
herein, this Agreement shall continue in effect with respect to each Fund until the termination date set forth in the attached Schedule A, and shall continue in effect from year to year thereafter, provided that such continuance is specifically
approved at least annually: (i) by a vote of a majority of the Independent Board Members of the Trust, cast in person at a meeting called for the purpose of voting on such approval, and (ii) by the Board or, with respect to any given Fund,
by vote of a majority of the outstanding voting securities of such Fund.
(c) Notwithstanding the foregoing, with respect to any Fund,
this Agreement may be terminated at any time, without the payment of any penalty, by vote of the Board or by a vote of a majority of the outstanding voting securities of such Fund, on sixty days’ written notice to Invesco PowerShares Capital
Management or by Invesco PowerShares Capital Management at any time, without the payment of any penalty, on sixty days’ written notice to the Trust. Termination of this Agreement with respect to any given Fund shall in no way affect the
continued validity of this Agreement or the performance thereunder with respect to any other Fund. This Agreement will automatically terminate in the event of its assignment.
11.
Amendment of this Agreement
. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and no amendment of this Agreement as to any given Fund shall be effective
until approved by vote of a majority of such Fund’s outstanding voting securities.
12.
Governing Law
. This Agreement shall be
construed in accordance with the laws of the State of Illinois, without giving effect to the conflicts of laws principles thereof, and in accordance with the 1940 Act, provided, however, that to the extent that the applicable laws of the State of
Illinois conflict with the applicable provisions of the 1940 Act, the latter shall control.
13.
Miscellaneous
. The captions in
this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors. As used in this
Agreement, the terms “majority of the outstanding voting securities,” “affiliated person,” “interested person,” “assignment,” “broker,” “investment adviser,” “national securities
exchange,” “net assets,” “prospectus,” “sale,” “sell” and “security” shall have the same meaning as such terms have in the 1940 Act, subject to such exemption as may be granted by the Securities
and Exchange Commission by any rule, regulation or order. Where the effect of a requirement of the 1940 Act reflected in any provision of this Agreement is relaxed by a rule, regulation or order of the Securities and Exchange Commission, whether of
special or general application, such provision shall be deemed to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their
officers designated as of the day and year first above written.
|
|
|
|
|
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|
|
|
|
|
|
|
|
Attest:
|
|
|
|
POWERSHARES EXCHANGE-TRADED FUND TRUST II
|
|
|
|
|
|
|
|
By:
|
|
/s/ Bruce Duncan
|
|
|
|
By:
|
|
/s/ Harold Bruce Bond
|
|
|
|
Name:
|
|
Bruce Duncan
|
|
|
|
|
|
Name:
|
|
Harold Bruce Bond
|
|
|
|
Title:
|
|
Secretary and Treasurer
|
|
|
|
|
|
Title:
|
|
Chairman and CEO
|
|
|
|
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PowerShares Exchange-Traded Fund Trust II
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Attest:
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INVESCO POWERSHARES CAPITAL MANAGEMENT LLC
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By:
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/s/ Bruce Duncan
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By:
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/s/ Harold Bruce Bond
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Name:
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Bruce Duncan
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Name:
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Harold Bruce Bond
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Title:
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Vice President
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Title:
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President
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Invesco PowerShares Capital Management LLC
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SCHEDULE A
(as of June 27, 2017)
As consideration for the Adviser’s services to each of the Funds listed below, the Adviser shall receive from each Fund a unitary fee,
accrued daily at the rate of 1/365
th
of the applicable fee rate and payable monthly on the first business day of each month, of the following annual percentages of the Fund’s average daily
net assets during the month.
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Portfolio
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Annual Percentage
of Average Daily
Net Assets (%)
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Initial Board
Approval Date
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Shareholder
Approval Date
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Initial Effective
Date
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Termination Date
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PowerShares
1-30
Laddered Treasury Portfolio
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0.25
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10/02/07
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10/10/07
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10/11/07
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04/20/18
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PowerShares CEF Income Composite Portfolio
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0.50
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12/17/09
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02/18/10
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02/19/10
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04/20/18
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PowerShares Chinese Yuan Dim Sum Bond Portfolio
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0.45
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09/20/11
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09/22/11
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09/23/11
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04/20/18
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PowerShares Contrarian Opportunities Portfolio
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0.35
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12/17/13
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01/14/14
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01/15/14
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04/20/18
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PowerShares Developed EuroPacific Currency Hedged Low Volatility Portfolio
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0.25
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03/12/15
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10/01/15
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10/09/15
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04/20/18
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PowerShares DWA Developed Markets Momentum Portfolio
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0.80
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10/02/07
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12/26/07
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12/27/07
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04/20/18
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PowerShares DWA Emerging Markets Momentum Portfolio
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0.90
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10/02/07
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12/26/07
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12/27/07
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04/20/18
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PowerShares DWA Momentum & Low Volatility Rotation Portfolio
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0.15
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06/21/16
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07/13/16
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07/14/16
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04/20/18
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PowerShares DWA SmallCap Momentum Portfolio
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0.60
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06/26/12
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07/18/12
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07/19/12
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04/20/18
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PowerShares DWA Tactical International Rotation Portfolio
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0.30
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06/21/16
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[ ]
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[ ]
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04/20/18
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PowerShares DWA Tactical Multi-Asset Income Portfolio
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0.25
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03/01/16
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03/03/16
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03/10/16
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04/20/18
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PowerShares DWA Tactical Sector Rotation Portfolio
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0.15
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09/24/15
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10/08/15
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10/09/15
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04/20/18
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PowerShares Emerging Markets Infrastructure Portfolio
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0.75
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10/02/07
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10/14/08
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10/15/08
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04/20/18
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PowerShares Emerging Markets Currency Hedged Low Volatility Portfolio
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0.29
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03/12/15
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[ ]
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[ ]
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04/20/18
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Portfolio
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Annual Percentage
of Average Daily
Net Assets (%)
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Initial Board
Approval Date
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Shareholder
Approval Date
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Initial Effective
Date
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Termination Date
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PowerShares Europe Currency Hedged Low Volatility Portfolio
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0.25
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03/12/15
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05/06/15
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05/07/15
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04/20/18
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PowerShares Emerging Markets Sovereign Debt Portfolio
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0.50
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10/02/07
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10/10/07
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10/11/07
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04/20/18
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PowerShares FTSE RAFI Asia Pacific
ex-Japan
Portfolio
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0.49
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04/20/07
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6/25/07
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06/25/07
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04/20/18
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PowerShares FTSE RAFI Developed Markets
ex-U.S.
Portfolio
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0.45
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04/20/07
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6/22/07
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06/25/07
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04/20/18
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PowerShares FTSE RAFI Developed Markets
ex-U.S.
Small-Mid
Portfolio
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0.49
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04/20/07
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9/26/07
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09/27/07
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04/20/18
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PowerShares FTSE RAFI Emerging Markets Portfolio
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0.49
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04/20/07
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9/26/07
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09/27/07
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04/20/18
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PowerShares FTSE International Low Beta Equal Weight Portfolio
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0.45
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09/24/15
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11/02/15
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11/05/15
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04/20/18
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PowerShares Fundamental High Yield
®
Corporate Bond Portfolio
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0.50
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10/02/07
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11/12/07
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11/13/07
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04/20/18
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PowerShares Fundamental Investment Grade Corporate Bond Portfolio
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0.22
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06/21/11
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09/14/11
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09/15/11
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04/20/18
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PowerShares Global Agriculture Portfolio
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0.75
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06/20/08
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09/15/08
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09/16/08
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04/20/18
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PowerShares Global Clean Energy Portfolio
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0.75
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04/20/07
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6/12/07
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06/13/07
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04/20/18
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PowerShares Global Gold and Precious Metals Portfolio
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0.75
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06/20/08
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09/15/08
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09/16/08
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04/20/18
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PowerShares LadderRite
0-5
Year Corporate Bond
Portfolio
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0.22
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04/18/13
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09/09/14
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09/10/14
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04/20/18
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PowerShares Global Short Term High Yield Bond Portfolio
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0.35
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04/18/13
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06/19/13
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06/20/13
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04/20/18
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PowerShares Global Water Portfolio
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0.75
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04/20/07
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6/12/07
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06/13/07
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04/20/18
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PowerShares California
AMT-Free
Municipal Bond
Portfolio
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0.28
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10/02/07
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10/10/07
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10/11/07
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04/20/18
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Portfolio
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Annual Percentage
of Average Daily
Net Assets (%)
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Initial Board
Approval Date
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Shareholder
Approval Date
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Initial Effective
Date
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Termination Date
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PowerShares National
AMT-Free
Municipal Bond
Portfolio
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0.28
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10/02/07
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10/10/07
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10/11/07
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04/20/18
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PowerShares New York
AMT-Free
Municipal Bond
Portfolio
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0.28
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10/02/07
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10/10/07
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10/11/07
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04/20/18
|
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PowerShares International BuyBack Achievers
TM
Portfolio
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0.55
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12/17/13
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02/26/14
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02/27/14
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04/20/18
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PowerShares International Corporate Bond Portfolio
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0.50
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04/15/10
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06/02/10
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06/03/10
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04/20/18
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PowerShares Japan Currency Hedged Low Volatility Portfolio
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0.25
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03/12/15
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10/01/15
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10/09/15
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04/20/18
|
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PowerShares KBW Bank Portfolio
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0.35
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09/20/11
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10/31/11
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11/01/11
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04/20/18
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PowerShares KBW High Dividend Yield Financial Portfolio
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0.35
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09/23/10
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12/01/10
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12/02/10
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04/20/18
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PowerShares KBW Premium Yield Equity REIT Portfolio
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0.35
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09/23/10
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12/01/10
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12/02/10
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04/20/18
|
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PowerShares KBW Property & Casualty Insurance Portfolio
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0.35
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09/23/10
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12/01/10
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12/02/10
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04/20/18
|
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PowerShares KBW Regional Banking Portfolio
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0.35
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|
09/20/11
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10/31/11
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11/01/11
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|
04/20/18
|
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PowerShares Preferred Portfolio
|
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0.50
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|
10/02/07
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1/25/08
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01/28/08
|
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04/20/18
|
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PowerShares PureBeta MSCI USA Portfolio
|
|
0.04
|
|
06/27/17
|
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[ ]
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[ ]
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04/20/19
|
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PowerShares PureBeta MSCI USA Small Cap Portfolio
|
|
0.06
|
|
06/27/17
|
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[ ]
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[ ]
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|
04/20/19
|
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PowerShares PureBeta FTSE Developed
ex-North
America
Portfolio
|
|
0.07
|
|
06/27/17
|
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[ ]
|
|
[ ]
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|
04/20/19
|
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PowerShares PureBeta FTSE Emerging Markets Portfolio
|
|
0.14
|
|
06/27/17
|
|
[ ]
|
|
[ ]
|
|
04/20/19
|
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PowerShares PureBeta US Aggregate Bond Portfolio
|
|
0.05
|
|
06/27/17
|
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[ ]
|
|
[ ]
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|
04/20/19
|
|
PowerShares PureBeta
0-5
Yr US TIPS Portfolio
|
|
0.07
|
|
06/27/17
|
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[ ]
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[ ]
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04/20/19
|
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|
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Portfolio
|
|
Annual Percentage
of Average Daily
Net Assets (%)
|
|
Initial Board
Approval Date
|
|
Shareholder
Approval Date
|
|
Initial Effective
Date
|
|
Termination Date
|
|
PowerShares Russell 1000 Enhanced Equal Weight Portfolio
|
|
0.29
|
|
06/27/17
|
|
[ ]
|
|
[ ]
|
|
04/20/19
|
|
PowerShares Russell 1000 Equal Weight Portfolio
|
|
0.20
|
|
12/18/14
|
|
12/18/14
|
|
12/19/14
|
|
04/20/18
|
|
PowerShares Russell 1000 Low Beta Equal Weight Portfolio
|
|
0.35
|
|
09/24/15
|
|
11/02/15
|
|
11/05/15
|
|
04/20/18
|
|
PowerShares S&P 500
ex-Rate
Sensitive Low Volatility
Portfolio
|
|
0.25
|
|
03/12/15
|
|
04/08/15
|
|
04/09/15
|
|
04/20/18
|
|
PowerShares S&P 500
®
High Beta
Portfolio
|
|
0.25
|
|
12/16/10
|
|
05/02/11
|
|
05/05/11
|
|
04/20/18
|
|
PowerShares S&P 500
®
High Dividend
Low Volatility Portfolio
|
|
0.30
|
|
09/13/12
|
|
10/17/12
|
|
10/18/12
|
|
04/20/18
|
|
PowerShares S&P 500
®
Low Volatility
Portfolio
|
|
0.25
|
|
12/16/10
|
|
05/02/11
|
|
05/05/11
|
|
04/20/18
|
|
PowerShares S&P 500 Minimum Variance Portfolio
|
|
0.13
|
|
06/27/17
|
|
[ ]
|
|
[ ]
|
|
04/20/19
|
|
PowerShares S&P 500 Momentum Portfolio
|
|
0.25
|
|
06/23/15
|
|
10/01/15
|
|
10/09/15
|
|
04/20/18
|
|
PowerShares S&P 500 Value Portfolio
|
|
0.25
|
|
06/23/15
|
|
10/01/15
|
|
10/09/15
|
|
04/20/18
|
|
PowerShares S&P 500 Value With Momentum Portfolio
|
|
0.30
|
|
03/07/17
|
|
03/30/17
|
|
04/06/17
|
|
04/20/18
|
|
PowerShares S&P Emerging Markets Momentum Portfolio
|
|
0.45
|
|
12/13/11
|
|
02/03/12
|
|
02/06/12
|
|
04/20/18
|
|
PowerShares S&P Emerging Markets Low Volatility Portfolio
|
|
0.45
|
|
12/13/11
|
|
01/12/12
|
|
01/13/12
|
|
04/20/18
|
|
PowerShares S&P International Developed Low Volatility Portfolio
|
|
0.35
|
|
12/13/11
|
|
01/12/12
|
|
01/13/12
|
|
04/20/18
|
|
PowerShares S&P International Developed Momentum Portfolio
|
|
0.35
|
|
12/13/11
|
|
02/03/12
|
|
02/06/12
|
|
04/20/18
|
|
PowerShares S&P International Developed Quality Portfolio
|
|
0.29
|
|
04/20/07
|
|
6/12/07
|
|
06/13/07
|
|
04/20/18
|
|
PowerShares S&P MidCap Low Volatility Portfolio
|
|
0.25
|
|
12/16/10
|
|
2/14/13
|
|
2/15/13
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Consumer
Discretionary Portfolio
|
|
0.29
|
|
03/23/10
|
|
04/06/10
|
|
04/07/10
|
|
04/20/18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
|
|
Annual Percentage
of Average Daily
Net Assets (%)
|
|
Initial Board
Approval Date
|
|
Shareholder
Approval Date
|
|
Initial Effective
Date
|
|
Termination Date
|
|
PowerShares S&P
®
SmallCap Consumer
Staples Portfolio
|
|
0.29
|
|
03/23/10
|
|
04/06/10
|
|
04/07/10
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Energy
Portfolio
|
|
0.29
|
|
03/23/10
|
|
04/06/10
|
|
04/07/10
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Financials
Portfolio
|
|
0.29
|
|
03/23/10
|
|
04/06/10
|
|
04/07/10
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Health Care
Portfolio
|
|
0.29
|
|
03/23/10
|
|
04/06/10
|
|
04/07/10
|
|
04/20/18
|
|
PowerShares S&P SmallCap High Dividend Low Volatility Portfolio
|
|
0.30
|
|
09/29/16
|
|
11/28/16
|
|
12/01/16
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Industrials
Portfolio
|
|
0.29
|
|
03/23/10
|
|
04/06/10
|
|
04/07/10
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Information
Technology Portfolio
|
|
0.29
|
|
03/23/10
|
|
04/06/10
|
|
04/07/10
|
|
04/20/18
|
|
PowerShares S&P International Developed High Dividend Low Volatility Portfolio
|
|
0.30
|
|
09/29/16
|
|
11/28/16
|
|
12/01/16
|
|
04/20/18
|
|
PowerShares S&P SmallCap Low Volatility Portfolio
|
|
0.25
|
|
12/16/10
|
|
2/14/13
|
|
2/15/13
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Materials
Portfolio
|
|
0.29
|
|
03/23/10
|
|
04/06/10
|
|
04/07/10
|
|
04/20/18
|
|
PowerShares S&P SmallCap Quality Portfolio
|
|
0.29
|
|
03/07/17
|
|
03/30/17
|
|
04/06/17
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Utilities
Portfolio
|
|
0.29
|
|
03/23/10
|
|
04/06/10
|
|
04/07/10
|
|
04/20/18
|
|
PowerShares Senior Loan Portfolio
|
|
0.65
|
|
01/18/11
|
|
03/02/11
|
|
03/03/11
|
|
04/20/18
|
|
PowerShares Taxable Municipal Bond Portfolio
|
|
0.28
|
|
09/24/09
|
|
11/16/09
|
|
11/17/09
|
|
04/20/18
|
|
PowerShares Treasury Collateral Portfolio
|
|
0.08
|
|
09/29/16
|
|
01/07/17
|
|
01/12/17
|
|
04/20/18
|
|
PowerShares VRDO
Tax-Free
Weekly Portfolio
|
|
0.25
|
|
10/02/07
|
|
11/13/07
|
|
11/14/07
|
|
04/20/18
|
|
PowerShares Variable Rate Preferred Portfolio
|
|
0.50
|
|
03/04/14
|
|
04/30/14
|
|
05/01/14
|
|
04/20/18
|
|
|
|
|
|
|
|
|
|
|
|
POWERSHARES EXCHANGE-TRADED FUND TRUST II
|
|
|
|
|
|
|
Attest
|
|
|
|
|
|
|
|
|
|
By:
|
|
Name: Peter Davidson
Title: Assistant
Secretary
|
|
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By:
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Name: Dan Draper
Title President
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Attest
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INVESCO POWERSHARES CAPITAL MANAGEMENT LLC
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By:
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Name: Peter Davidson
Title: Assistant
Secretary
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By:
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Name: Dan Draper
Title: Managing
Director
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Exhibit (d)(5)
AMENDED AND RESTATED MEMORANDUM OF AGREEMENT
(Advisory Fee Waivers)
This Memorandum of Agreement is entered into as of the effective date on the attached Exhibit A, between PowerShares Exchange-Traded Fund
Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares Actively Managed Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust (each, a “Trust” and collectively, the “Trusts”), on
behalf of the funds listed on the Exhibit A to this Memorandum of Agreement, as amended from time to time (the “Funds”), and Invesco PowerShares Capital Management LLC (“PowerShares”). PowerShares shall and hereby agrees to waive
fees of the Funds, severally and not jointly, as indicated in the Exhibit A.
For and in consideration of the mutual terms and agreements
set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Trusts and PowerShares agree as follows:
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1.
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PowerShares agrees that until the expiration date, if any, of the commitment set forth on the attached Exhibit A occurs, as such Exhibit A is amended from time to time, PowerShares will waive advisory fees payable by an
Investing Fund (defined below) in an amount equal to 100% of the net advisory fee any of PowerShares’ affiliated persons receives on the Uninvested Cash (defined below) from the Affiliated Money Market Fund (defined below) in which the
Investing Fund invests (the “Waiver”).
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i.
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PowerShares will calculate, and apply, the Waiver monthly, based upon the average investment of Uninvested Cash made by the Investing Fund during the previous month in an Affiliated Money Market Fund.
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ii.
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The Waiver will not apply to those Investing Funds that do not charge an advisory fee, either due to the terms of their advisory agreement, or as a result of contractual or voluntary fee waivers.
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iii.
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The Waiver will not apply to cash collateral for securities lending.
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For purposes of the
paragraph above, the following terms shall have the following meanings:
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(a)
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“Affiliated Money Market Fund”—any existing or future fund that holds itself out as a money market fund and complies with Rule
2a-7
under the Investment Company Act
of 1940, as amended;
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(b)
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“Investing Fund”—any Fund investing Uninvested Cash in an Affiliated Money Market Fund; and
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(c)
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“Uninvested Cash”—cash available and uninvested by a Trust that may result from a variety of sources, including dividends or interest received on portfolio securities, unsettled securities transactions,
strategic reserves, matured investments, proceeds from liquidation of investment securities, dividend payments, or new investor capital.
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2.
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Neither a Trust nor PowerShares may remove or amend the Waiver to a Trust’s detriment prior to requesting and receiving the approval of the Board of Trustees of the applicable Fund’s Trust to remove or amend
such Waiver. PowerShares will not have any right to reimbursement of any amount so waived.
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The Boards of Trustees and
PowerShares may terminate or modify this Memorandum of Agreement prior to the Expiration Date only by mutual written consent, except with respect to adding Funds to Exhibit A, which requires Board approval rather than mutual written consent.
PowerShares will not have any right to reimbursement of any amount so waived.
Subject to the foregoing paragraphs, PowerShares agrees to
review the then-current Waivers for the Funds listed on the Exhibit A on a date prior to the Expiration Date to determine whether such Waivers should be amended, continued or terminated. The Waivers will expire upon the Expiration Date unless the
Trusts and PowerShares have agreed to continue them. The Exhibit A will be amended to reflect any such agreement.
It is expressly agreed that the obligations of the Trusts hereunder shall not be binding upon any
of the Trustees, shareholders, nominees, officers, agents or employees of the Trusts personally, but shall only bind the assets and property of the Funds, as provided in each Trust’s Declaration of Trust. The execution and delivery of this
Memorandum of Agreement have been authorized by the Trustees of each Trust, and this Memorandum of Agreement has been executed and delivered by an authorized officer of each Trust acting as such; neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Funds, as provided in each Trust’s
Declaration of Trust.
IN WITNESS WHEREOF, each of the Trusts, on behalf of itself and its Funds listed in Exhibit A to this Memorandum of
Agreement, and PowerShares have entered into this Memorandum of Agreement as of the Effective Date on the attached Exhibit A.
POWERSHARES EXCHANGE-TRADED
FUND TRUST
POWERSHARES EXCHANGE-TRADED FUND TRUST II
POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED FUND TRUST
POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED COMMODITY FUND TRUST
on behalf of the Funds listed in Exhibit A
to this Memorandum of
Agreement
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By:
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/s/ Andrew Schlossberg
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Name:
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Andrew Schlossberg
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Title:
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President
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INVESCO POWERSHARES
CAPITAL
MANAGEMENT LLC
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By:
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/s/ Andrew Schlossberg
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Name:
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Andrew Schlossberg
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Title:
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Managing Director
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EXHIBIT A
SCHEDULE OF FUNDS
(as
of June 27, 2017)
POWERSHARES EXCHANGE-TRADED FUND TRUST
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PORTFOLIO
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EFFECTIVE DATE
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EXPIRATION DATE
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PowerShares Aerospace & Defense Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares BuyBack Achievers™ Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Cleantech™ Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dividend Achievers™ Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA Basic Materials Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Biotechnology & Genome Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Building & Construction Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA Consumer Cyclicals Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA Consumer Staples Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Energy Exploration & Production Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA Energy Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA Financial Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Food & Beverage Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA Healthcare Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA Industrials Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Large Cap Growth Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Large Cap Value Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Leisure and Entertainment Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Market Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Media Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Networking Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Oil & Gas Services Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA NASDAQ Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Pharmaceuticals Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Retail Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Semiconductors Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Dynamic Software Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA Technology Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares DWA Utilities Momentum Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Financial Preferred Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares FTSE RAFI U.S. 1000 Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares FTSE RAFI U.S. 1500
Small-Mid
Portfolio
|
|
December 19, 2012
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August 31, 2019
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PowerShares Russell Top 200 Equal Weight Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares Russell Top 200 Pure Growth Portfolio
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|
December 19, 2012
|
|
August 31, 2019
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PowerShares Russell Top 200 Pure Value Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
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PowerShares Russell Midcap Equal Weight Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
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PowerShares Russell Midcap Pure Growth Portfolio
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|
December 19, 2012
|
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August 31, 2019
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PowerShares Russell Midcap Pure Value Portfolio
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|
December 19, 2012
|
|
August 31, 2019
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PowerShares Russell 2000 Equal Weight Portfolio
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|
December 19, 2012
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|
August 31, 2019
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PowerShares Russell 2000 Pure Growth Portfolio
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|
December 19, 2012
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August 31, 2019
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PowerShares Russell 2000 Pure Value Portfolio
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|
December 19, 2012
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|
August 31, 2019
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PowerShares Global Listed Private Equity Portfolio
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|
December 19, 2012
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|
August 31, 2019
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PowerShares Golden Dragon China Portfolio
|
|
December 19, 2012
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|
August 31, 2019
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PowerShares High Yield Equity Dividend Achievers™ Portfolio
|
|
December 19, 2012
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|
August 31, 2019
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PowerShares International Dividend Achievers™ Portfolio
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|
December 19, 2012
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August 31, 2019
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PowerShares NASDAQ Internet Portfolio
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December 19, 2012
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August 31, 2019
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PowerShares S&P 500 BuyWrite Portfolio
|
|
December 19, 2012
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|
August 31, 2019
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PowerShares S&P 500
®
Quality
Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
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PowerShares Water Resources Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
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|
PowerShares WilderHill Clean Energy Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
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PowerShares WilderHill Progressive Energy Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
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PowerShares Zacks Micro Cap Portfolio
|
|
December 19, 2012
|
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August 31, 2019
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POWERSHARES EXCHANGE-TRADED FUND TRUST II
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PORTFOLIO
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EFFECTIVE DATE
|
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EXPIRATION DATE
|
|
PowerShares
1-30
Laddered Treasury Portfolio
|
|
December 19, 2012
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|
August 31, 2019
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|
PowerShares CEF Income Composite Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
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|
PowerShares Chinese Yuan Dim Sum Bond Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
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PowerShares Developed EuroPacific Currency Hedged Low Volatility Portfolio
|
|
March 12, 2015
|
|
August 31, 2019
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|
PowerShares DWA Developed Markets Momentum Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
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|
PowerShares DWA Emerging Markets Momentum Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
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|
PowerShares DWA Momentum & Low Volatility Rotation Portfolio
|
|
June 21, 2016
|
|
August 31, 2019
|
|
PowerShares DWA Small Cap Momentum Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares DWA Tactical International Rotation Portfolio
|
|
June 21, 2016
|
|
August 31, 2019
|
|
PowerShares DWA Tactical Multi-Asset Income Portfolio
|
|
March 1, 2016
|
|
August 31, 2019
|
|
PowerShares DWA Tactical Sector Rotation Portfolio
|
|
September 24, 2015
|
|
August 31, 201
|
|
PowerShares Emerging Markets Currency Hedged Low Volatility Portfolio
|
|
March 12, 2015
|
|
August 31, 2019
|
|
PowerShares Emerging Markets Infrastructure Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Emerging Markets Sovereign Debt Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Europe Currency Hedged Low Volatility Portfolio
|
|
March 12, 2015
|
|
August 31, 2019
|
|
PowerShares FTSE RAFI Asia Pacific
ex-Japan
Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares FTSE RAFI Developed Markets
ex-U.S.
Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares FTSE RAFI Developed Markets
ex-U.S.
Small-Mid
Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares FTSE RAFI Emerging Markets Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares FTSE International Low Beta Equal Weight Portfolio
|
|
September 24, 2015
|
|
August 31, 2019
|
|
PowerShares Fundamental High Yield
®
Corporate Bond Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Fundamental Investment Grade Corporate Bond Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Global Agriculture Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Global Clean Energy Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Global Gold and Precious Metals Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares LadderRite
0-5
Year Corporate Bond
Portfolio
|
|
April 18, 2013
|
|
August 31, 2019
|
|
PowerShares Global Short Term High Yield Bond Portfolio
|
|
April 18, 2013
|
|
August 31, 2019
|
|
PowerShares Global Water Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares California
AMT-Free
Municipal Bond
Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares National
AMT-Free
Municipal Bond
Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares New York
AMT-Free
Municipal Bond
Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares International BuyBack Achievers™ Portfolio
|
|
December 17, 2013
|
|
August 31, 2019
|
|
PowerShares International Corporate Bond Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Japan Currency Hedged Low Volatility Portfolio
|
|
March 12, 2015
|
|
August 31, 2019
|
|
PowerShares KBW Bank Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares KBW High Dividend Yield Financial Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares KBW Premium Yield Equity REIT Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares KBW Property & Casualty Insurance Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares KBW Regional Banking Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Contrarian Opportunities Portfolio
|
|
December 17, 2013
|
|
August 31, 2019
|
|
PowerShares Preferred Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares PureBeta FTSE Developed
ex-North
America
Portfolio
|
|
June 27, 2017
|
|
August 31, 2019
|
|
|
|
|
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|
PowerShares PureBeta FTSE Emerging Markets Portfolio
|
|
June 27, 2017
|
|
August 31, 2019
|
|
PowerShares PureBeta MSCI USA Portfolio
|
|
June 27, 2017
|
|
August 31, 2019
|
|
PowerShares PureBeta MSCI USA Small Cap Portfolio
|
|
June 27, 2017
|
|
August 31, 2019
|
|
PowerShares PureBeta US Aggregate Bond Portfolio
|
|
June 27, 2017
|
|
August 31, 2019
|
|
PowerShares PureBeta
0-5
Yr US TIPS Portfolio
|
|
June 27, 2017
|
|
August 31, 2019
|
|
PowerShares S&P 500
ex-Rate
Sensitive Low Volatility
Portfolio
|
|
March 12, 2015
|
|
August 31, 2019
|
|
PowerShares Russell 1000 Enhanced Equal Weight Portfolio
|
|
June 27, 2017
|
|
August 31, 2019
|
|
PowerShares Russell 1000 Equal Weight Portfolio
|
|
December 18, 2014
|
|
August 31, 2019
|
|
PowerShares Russell 1000 Low Beta Equal Weight Portfolio
|
|
September 24, 2015
|
|
August 31, 2019
|
|
PowerShares S&P 500
®
High Beta
Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P 500
®
High Dividend
Low Volatility Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P 500
®
Low Volatility
Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P 500 Minimum Variance Portfolio
|
|
June 27, 2017
|
|
August 31, 2019
|
|
PowerShares S&P 500 Momentum Portfolio
|
|
June 23, 2015
|
|
August 31, 2019
|
|
PowerShares S&P 500 Value Portfolio
|
|
June 23, 2015
|
|
August 31, 2019
|
|
PowerShares S&P 500 Value With Momentum Portfolio
|
|
March 7, 2017
|
|
August 31, 2019
|
|
PowerShares S&P Emerging Markets Momentum Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P Emerging Markets Low Volatility Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P International Developed High Dividend Low Volatility Portfolio
|
|
September 29, 2016
|
|
August 31, 2019
|
|
PowerShares S&P International Developed Low Volatility Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P International Developed Momentum Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P International Developed Quality Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P MidCap Low Volatility Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap Consumer Discretionary Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap Consumer Staples Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap Energy Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap Health Care Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap High Dividend Low Volatility Portfolio
|
|
September 29, 2016
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap Industrials Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap Information Technology Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap Low Volatility Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap Materials Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap Quality Portfolio
|
|
March 7, 2017
|
|
August 31, 2019
|
|
PowerShares S&P SmallCap Utilities Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Senior Loan Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Taxable Municipal Bond Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Treasury Collateral Portfolio
|
|
September 29, 2016
|
|
August 31, 2019
|
|
PowerShares Variable Rate Preferred Portfolio
|
|
March 4, 2014
|
|
August 31, 2019
|
|
PowerShares VRDO
Tax-Free
Weekly Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED FUND TRUST
|
|
|
|
|
|
|
PORTFOLIO
|
|
EFFECTIVE DATE
|
|
EXPIRATION DATE
|
|
PowerShares Active U.S. Real Estate Fund
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Balanced Multi-Asset Allocation Portfolio
|
|
December 15, 2016
|
|
August 31, 2019
|
|
PowerShares Conservative Multi-Asset Allocation Portfolio
|
|
December 15, 2016
|
|
August 31, 2019
|
|
PowerShares Government Collateral Pledge Portfolio
|
|
June 21, 2016
|
|
August 31, 2019
|
|
PowerShares Growth Multi-Asset Allocation Portfolio
|
|
December 15, 2016
|
|
August 31, 2019
|
|
PowerShares Moderately Conservative Multi-Asset Allocation Portfolio
|
|
December 15, 2016
|
|
August 31, 2019
|
|
PowerShares Multi-Strategy Alternative Portfolio
|
|
April 17, 2014
|
|
August 31, 2019
|
|
PowerShares S&P 500
®
Downside Hedged
Portfolio
|
|
December 19, 2012
|
|
August 31, 2019
|
|
PowerShares Variable Rate Investment Grade Portfolio
|
|
December 17, 2015
|
|
August 31, 2019
|
POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED COMMODITY FUND TRUST
|
|
|
|
|
|
|
PORTFOLIO
|
|
EFFECTIVE DATE
|
|
EXPIRATION DATE
|
|
PowerShares Agriculture Commodity Strategy No
K-1
Portfolio
|
|
March 7, 2017
|
|
August 31, 2019
|
|
PowerShares Base Metals Commodity Strategy No
K-1
Portfolio
|
|
March 7, 2017
|
|
August 31, 2019
|
|
PowerShares Bloomberg Commodity Strategy Portfolio
|
|
September 25, 2014
|
|
August 31, 2019
|
|
PowerShares Optimum Yield Diversified Commodity Strategy No
K-1
Portfolio
|
|
September 25, 2014
|
|
August 31, 2019
|
|
PowerShares Energy Commodity Strategy No
K-1
Portfolio
|
|
March 7, 2017
|
|
August 31, 2019
|
POWERSHARES EXCHANGE-TRADED FUND TRUST
POWERSHARES EXCHANGE-TRADED FUND TRUST II
POWERSHARES ACTIVELY
MANAGED EXCHANGE-TRADED FUND TRUST
POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED COMMODITY FUND TRUST
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
Dan Draper
|
|
Title:
|
|
President
|
INVESCO POWERSHARES CAPITAL MANAGEMENT LLC
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
Dan Draper
|
|
Title:
|
|
Managing Director
|
Exhibit (e)
AMENDED AND RESTATED MASTER DISTRIBUTION AGREEMENT
Amended and Restated Master Distribution Agreement made as of the 20
th
day of April,
2009, by and between POWERSHARES EXCHANGE-TRADED FUND TRUST II, a Massachusetts business trust (the “Trust”), on behalf of each of its series of beneficial interest set forth on Schedule A to this Agreement (each individually referred
to as “Fund”, or collectively as “Funds”) and INVESCO AIM DISTRIBUTORS, INC., a Delaware corporation (the “Distributor”).
WHEREAS, the Trust entered into a Master Distribution Agreement with the Distributor dated April 20, 2007, and subsequently amended
thereto, to provide distribution services; and
WHEREAS, as of April 20, 2009, the Master Distribution Agreement was amended and
restated (this “Agreement”) to make ministerial changes designed to facilitate the administration of this Agreement; and
WHEREAS, the Trust intends to create and redeem shares of beneficial interest, par value $.001 per share (“Share”), of each Fund on
a continuous basis at their net asset value only in aggregations constituting a Creation Unit, as such term is defined in the registration statement filed from time to time by the Trust with the Securities and Exchange Commission (the
“Commission”) and effective under the Securities Act of 1933, as amended (the “1933 Act”), and the Investment Company Act of 1940, as amended (the “1940 Act”) (the “Registration Statement”);
WHEREAS, each Fund invests primarily in securities comprising a particular market index and has filed with the Commission a Registration
Statement on Form N-1A under the 1933 Act and the 1940 Act;
WHEREAS, the Shares of each Fund are or will be listed on the stock exchange
set forth in Schedule A and traded under the symbols set forth in Schedule A, attached hereto and incorporated herein by reference;
WHEREAS, the Trust desires to retain Distributor to act as the distributor with respect to the issuance and distribution of Creation Units of
Shares of each Fund, to receive and process orders for such Creation Units in the manner set forth in the Trust’s Prospectus and/or Statement of Additional Information constituting parts of the Registration Statement, as amended and filed with
the Commission (the “Prospectus”), and to enter into arrangements with broker-dealers who may solicit purchases of Shares and with broker-dealers and others to provide for servicing of shareholder accounts and for distribution assistance,
including broker-dealer and shareholder support;
WHEREAS, Distributor is a registered broker-dealer under the Securities Exchange Act of
1934, as amended (the “1934 Act”) and a member of the Financial Industry Regulatory Authority (“FINRA”);
1
NOW THEREFORE:
W I T N E S S E T H:
In
consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt whereof is hereby acknowledged, the parties hereto agree as follows:
FIRST: The Trust hereby appoints the Distributor as the exclusive distributor for Creation Unit aggregations of Shares of each Fund listed in
Schedule A hereto, as may be amended by the parties from time to time, on the terms and for the period set forth in this Agreement and subject to the registration requirements of the 1933 Act and of the laws governing the sale of securities in the
various states, and the Distributor hereby accepts such appointment and agrees to act in such capacity hereunder. The Funds hereby appoint the Distributor as their exclusive agent to receive all orders for purchases of Creation Units of each Fund
from Participating Parties or DTC Participants which have entered into an agreement (a “Participant Agreement”) for book-entry of The Depository Trust Company and the NSCC as described in the Prospectus ( “Authorized
Participant”) and to transmit such orders to the Trust in accordance with the Registration Statement and Prospectus; provided, however, that nothing herein shall affect or limit the right and ability of the Trust to accept Deposit Securities
and related Cash Components, as defined in the Prospectus, all as provided in and in accordance with the Registration Statement and Prospectus. Each Participant Agreement shall provide that the Authorized Participant shall act as a principal, and
not as an agent, of the Trust on behalf of the Funds.
SECOND: The Fund shall not issue or distribute Creation Units except through the
Distributor and under the terms and conditions set forth in this Agreement; provided, however, that:
(A) the Fund may issue Shares to any
other investment company or personal holding company, or to the shareholders thereof, in exchange for all or a majority of the shares or assets of any such company;
(B) the Fund shall have the right to specify minimum amounts for initial and subsequent orders for the purchase of Shares; and
(C) the Trust acknowledges that nothing herein shall prevent the Distributor from entering into like distribution arrangements with other
investment companies.
THIRD: The Distributor hereby accepts appointment as exclusive agent for the issuance and distribution of Creation
Units and agrees that it will use its best efforts to sell such Creation Units; provided, however, that:
(A) the Distributor may, and when
requested by the Fund shall, suspend its efforts to effectuate the issuance and distribution of Creation Units at any time when, in the opinion of the Distributor or of the Fund, no sales should be made because of market or other economic
considerations or abnormal circumstances of any kind;
(B) the Fund may withdraw the offering of the Shares (i) at any time with the
consent of the Distributor, or (ii) without such consent when so required by the provisions of any statute or of any order, rule or regulation of any governmental body having jurisdiction; and
(C) the Distributor, as agent, does not undertake to issue or distribute any specific amount of Creation Units.
FOURTH: The Distributor shall act as agent of the Fund in connection with the issuance and distribution of Creation Units of each Fund
through Authorized Participants. The Distributor shall, at its own expense, execute selected or soliciting dealer agreements (“Soliciting Dealer Agreements”) with registered broker-dealers and other eligible entities providing for the
purchase of Creation Units of Shares of the Funds and related promotional activities, in the forms as approved
2
by the Board of Trustees of the Trust. The Distributor may also enter into Soliciting Dealer Agreements with registered broker-dealers and other eligible entities who may solicit purchases of
Creation Units and with broker-dealers and others to provide for servicing of shareholder accounts and for distribution assistance, including broker-dealer and shareholder support that shall not be inconsistent with the provisions of this Agreement.
FIFTH: The Funds shall bear:
(A) the expenses of qualification of Shares for sale in connection with such public offerings in such jurisdictions as may be applicable as
selected by the Distributor, and of continuing the qualification therein until the Distributor notifies the Fund that it does not wish such qualification continued; and
(B) all legal expenses in connection with the foregoing.
SIXTH: The Distributor shall:
(A) Bear the expenses of (a) printing from the final proof and distributing the Prospectuses for the Shares (including supplements
thereto) relating to public offerings made by the Distributor pursuant to this Agreement (which shall not include those Prospectuses, and supplements thereto, to be distributed to shareholders of each Fund), and any other promotional or sales
literature used by the Distributor or furnished by the Distributor to investment dealers and financial institutions in connection with such public offerings, and expenses of advertising in connection with such public offerings; (b) costs of
processing and maintaining records of Creation Units; (c) costs of maintaining the records required of a broker-dealer registered under the 1934 Act; (d) expenses of maintaining its registration or qualification as a dealer or broker under
federal or state laws; and (e) all other expenses incurred in connection with the distribution services contemplated herein, except as provided in this Agreement.
(B) Instruct broker-dealers with whom it has Soliciting Dealer Agreement that a Prospectus or Product Description, as applicable, must be
distributed in accordance with all rules and regulations made or adopted pursuant to the 1933 Act and the 1940 Act, including FINRA, the NYSE Arca, Inc., the New York Stock Exchange (“NYSE”), the NYSE Amex and any other national stock
exchange on which the Shares may be listed. The Distributor shall not be liable for a broker-dealer’s failure to comply with these requirements. The Distributor shall use commercially reasonable efforts to fulfill all direct requests for
Prospectuses, Statements of Additional of Information, Product Descriptions and periodic fund reports, as applicable. In addition, the Distributor will use commercially reasonable efforts to provide the NYSE Arca, Inc., the NYSE AMEX, the NYSE and
any other national stock exchange on which the Shares may be listed with copies of Prospectuses to be provided to purchasers in the secondary market. The Distributor will use commercially reasonable efforts to make it known in the brokerage
community that prospectuses and statements of additional information are available, including (i) advising the NYSE Arca, Inc., the NYSE, the NYSE Amex and any other national stock exchange on which the Shares may be listed on behalf of their
member firms of the same, (ii) making such disclosure in all marketing and advertising materials prepared and/or filed by the Distributor with the FINRA, and (iii) as may otherwise be required by the Commission.
(C) Accept orders for the purchase of Creation Units only to the extent of purchase orders actually received and not in excess of such orders,
and it will not avail itself of any opportunity of making a profit by expediting or withholding orders. The Fund may reject purchase orders where, in the judgment of the Fund, such rejection is in the best interest of the Fund. The Distributor shall
generate and transmit confirmations of Creation Unit purchase order acceptances to the purchaser. The Distributor shall maintain telephonic, facsimile and/or access to direct computer communications links with the Transfer Agent.
3
(D) Review all sales and marketing materials for compliance with applicable laws and conditions
of any applicable exemptive order, and file such materials with FINRA when necessary or appropriate. All such sales and marketing materials must be approved, in writing, by the Distributor prior to use.
SEVENTH: The Funds and the Distributor shall each comply with all applicable provisions of the 1940 Act and the 1933 Act; all other
federal and state laws, rules and regulations governing the issuance and sale of the Shares; the Registration Statements and Prospectuses of the Funds; and the instructions of the Board of Trustees of the Trust.
EIGHTH: The Trust:
(A) Agrees
to issue Creation Unit aggregations of Shares of each Fund and to request The Depository Trust Company to record on its books the ownership of such Shares in accordance with the book-entry system procedures described in the Prospectus in such
amounts as the Distributor has requested through the Transfer Agent in writing or other means of data transmission, as promptly as practicable after receipt by the Trust of the requisite Deposit Securities and Cash Component (together with any fees)
and acceptance of such order, upon the terms described in the Registration Statement. The Trust may reject any order for Creation Units or stop all receipts of such orders at any time upon reasonable notice to the Distributor, in accordance with the
provisions of the Prospectus;
(B) Agrees that it will take all action necessary to register an indefinite number of Shares under the 1933
Act. The Trust will make available to the Distributor such number of copies of its then current effective Prospectus and/or Product Description as the Distributor may reasonably request. The Trust will furnish to the Distributor copies of all
information, financial statements and other papers, which the Trust shall keep and shall keep the Distributor informed of the jurisdictions in which Shares of the Trust are authorized for sale and shall promptly notify the Distributor of any change
in this information. The Distributor shall not be liable for damages resulting from the sale of Shares in authorized jurisdictions where the Distributor had no information from the Trust that such sale or sales were unauthorized at the time of such
sale or sales;
(C) Represents to the Distributor that the Registration Statement and Prospectus filed by the Trust with the Commission
with respect to the Trust have been prepared in conformity with the requirements of the 1933 Act, the 1940 Act and the rules and regulations of the Commission thereunder. The Trust will notify the Distributor promptly of any amendment to the
Registration Statement or supplement to the Prospectus and any stop order suspending the effectiveness of the Registration Statement.
NINTH:
(A) In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Distributor, the Funds shall indemnify the Distributor against any and all claims, demands, liabilities and expenses which
the Distributor may incur under the 1933 Act, or common law or otherwise, arising out of or based upon any alleged untrue statement of a material fact contained in any registration statement or Prospectus of the Funds, or any omission to state a
material fact therein, the omission of which makes any statement contained therein misleading, unless such statement or omission was made in reliance upon, and in conformity with, information furnished to the Fund in connection therewith by or on
behalf of the Distributor.
4
(B) The Distributor shall indemnify the Funds against any and all claims, demands, liabilities
and expenses which the Fund may incur under the 1933 Act, or common law or otherwise, arising out of or based upon any alleged untrue statement of a material fact contained in any registration statement or Prospectus of the Funds, or any omission to
state a material fact therein if such statement or omission was made in reliance upon, and in conformity with, information furnished to the Fund in connection therewith by or on behalf of the Distributor. The Distributor shall indemnify the Fund and
the Shares against any and all claims, demands, liabilities and expenses which the Fund or the Shares may incur arising out of or based upon any act or deed of the Distributor or its sales representatives which has not been authorized by the Fund in
its Prospectus or in this Agreement.
(C) Notwithstanding any other provision of this Agreement, the Distributor shall not be liable for
any errors of the transfer agent(s) of the Funds, or for any failure of any such transfer agent to perform its duties.
TENTH: Nothing
herein contained shall require the Trust to take any action contrary to any provision of this Agreement and its Declaration of Trust, as amended, or to any applicable statute or regulation.
ELEVENTH: This Agreement, with respect to each Fund, was initially approved, and is effective, on the date set forth in the attached Schedule
A. Unless sooner terminated as provided herein, this Agreement shall continue in effect with respect to each Fund until the termination date set forth in the attached Schedule A, and shall continue automatically for successive periods of twelve
months each, provided that such continuance is specifically approved at least annually: (i) by a vote of a majority of the Independent Board Members of the Trust, cast in person at a meeting called for the purpose of voting on such approval,
and (ii) by the Board or, with respect to any given Fund, by vote of a majority of the outstanding voting securities of such Fund.
TWELFTH:
(A) This Agreement may
be terminated with respect to the Shares of any Fund at any time, without the payment of any penalty, by vote of the Board of Trustees of the Trust or by vote of a majority of the outstanding Shares of such Fund, or by the Distributor, on sixty
(60) days’ written notice to the other party; and
(B) This Agreement shall automatically terminate in the event of its
assignment, the term “assignment” having the meaning set forth in Section 2(a)(4) of the 1940 Act.
THIRTEENTH: Any notice
under this Agreement shall be in writing, addressed and delivered, or mailed postage prepaid, to the other party at such address as the other party may designate for the receipt of notices. Until further notice to the other party, the addresses of
each Fund shall be 301 West Roosevelt Road, Wheaton, Illinois 60187 and the Distributor shall be 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1143.
FOURTEENTH: Notice is hereby given that, as provided by applicable law, the obligations of or arising out of this Agreement are not binding
upon any of the shareholders of the Fund individually, but are binding only upon the assets and property of the Fund and that the shareholders shall be entitled, to the fullest extent permitted by applicable law, to the same limitation on personal
liability as stockholders of private corporations for profit.
5
FIFTEENTH: This Agreement shall be deemed to be a contract made in the State of Delaware and
governed by, construed in accordance with and enforced pursuant to the internal laws of the State of Delaware without reference to its conflicts of laws rules.
SIXTEENTH: It is expressly acknowledged and agreed that the obligations of the Trust hereunder shall not be binding upon any of the
shareholders, Trustees, officers, employees or agents of the Trust, personally, but shall bind only the Trust property of the Trust, as provided in its Declaration of Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the trust property of the Trust as provided in its Declaration of Trust. The Distributor understands that the rights and obligations of each series of shares of the Trust under the
Declaration of Trust are separate and distinct from those of any and all other series.
SEVENTEENTH: The Trust expressly acknowledges that
the Distributor may utilize its affiliate, Invesco Aim Investment Services, Inc. (“IAIS”), a transfer agent registered with the Commission, as a designee to receive and process orders for Creation Units, which designee is to be considered
the Fund’s agent pursuant to the terms of this Agreement. The Distributor shall ensure that IAIS shall comply with all of the duties and responsibilities imposed on the Distributor in this Agreement, to the extent such duties and
responsibilities are delegated to IAIS. Notwithstanding the foregoing, the Distributor shall be fully and wholly liable and responsible to the Trust for all actions or omissions on the part of IAIS. The Distributor and IAIS are each duly registered
to perform any and all services under this Agreement.
6
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed in duplicate on the day
and year first above written.
|
|
|
|
PowerShares Exchange-Traded Fund Trust II
on behalf of each Fund listed on Schedule A
|
|
|
|
|
By:
|
|
/s/ H. Bruce Bond
|
|
|
|
Name: H. Bruce Bond
|
|
|
|
Title: Chairman and CEO
|
|
|
|
Invesco Aim Distributors, Inc.
|
|
|
|
|
By:
|
|
/s/ John Cooper
|
|
|
|
Name: John Cooper
|
|
|
|
Title: President
|
7
SCHEDULE A
(as of June 27, 2017)
|
|
|
|
|
|
|
|
|
|
|
Portfolio
|
|
Initial Board
Approval
Date
|
|
Initial Effective
Date
|
|
Exchange and Ticker
|
|
Termination Date
|
|
PowerShares
1-30
Laddered Treasury Portfolio
|
|
10/02/07
|
|
10/11/07
|
|
The NASDAQ Stock Market LLC
(PLW)
|
|
04/20/18
|
|
PowerShares CEF Income Composite Portfolio
|
|
12/17/10
|
|
2/19/10
|
|
NYSE Arca, Inc. (PCEF)
|
|
04/20/18
|
|
PowerShares Chinese Yuan Dim Sum Bond Portfolio
|
|
09/20/11
|
|
09/23/11
|
|
NYSE Arca, Inc. (DSUM)
|
|
04/20/18
|
|
PowerShares Contrarian Opportunities Portfolio
|
|
12/17/13
|
|
01/15/14
|
|
NYSE Arca, Inc. (CNTR)
|
|
04/20/18
|
|
PowerShares Developed Euro Pacific Currency Hedged Low Volatility Portfolio
|
|
03/12/15
|
|
10/09/15
|
|
NYSE Arca, Inc. (FXEP)
|
|
04/20/18
|
|
PowerShares DWA Developed Markets Momentum Portfolio
|
|
10/02/07
|
|
12/27/07
|
|
The NASDAQ Stock Market LLC
(PIZ)
|
|
04/20/18
|
|
PowerShares DWA Emerging Markets Momentum Portfolio
|
|
10/02/07
|
|
12/27/07
|
|
The NASDAQ Stock Market LLC
(PIE)
|
|
04/20/18
|
|
PowerShares DWA Momentum & Low Volatility Rotation Portfolio
|
|
06/21/16
|
|
07/14/16
|
|
The NASDAQ Stock Market LLC
(DWLV)
|
|
04/20/18
|
|
PowerShares DWA SmallCap Momentum Portfolio
|
|
06/26/12
|
|
07/19/12
|
|
The NASDAQ Stock Market LLC
(DWAS)
|
|
04/20/18
|
|
PowerShares DWA Tactical International Rotation Portfolio
|
|
06/21/16
|
|
[ ]
|
|
The NASDAQ Stock Market LLC
[( )]
|
|
04/20/18
|
|
PowerShares DWA Tactical Multi-Asset Income Portfolio
|
|
03/01/16
|
|
03/10/16
|
|
The NASDAQ Stock Market LLC
(DWIN)
|
|
04/20/18
|
|
PowerShares DWA Tactical Sector Rotation Portfolio
|
|
09/24/15
|
|
07/05/16
|
|
The NASDAQ Stock Market LLC
(DWTR)
|
|
04/20/18
|
|
PowerShares Emerging Markets Infrastructure Portfolio
|
|
10/02/07
|
|
10/15/08
|
|
NYSE Arca, Inc. (PXR)
|
|
04/20/18
|
|
PowerShares Emerging Markets Currency Hedged Low Volatility Portfolio
|
|
03/12/15
|
|
[ ]
|
|
NYSE Arca, Inc. [( )]
|
|
04/20/18
|
|
PowerShares Europe Currency Hedged Low Volatility Portfolio
|
|
03/12/15
|
|
05/07/15
|
|
NYSE Arca, Inc. (FXEU)
|
|
04/20/18
|
|
PowerShares Emerging Markets Sovereign Debt Portfolio
|
|
10/02/07
|
|
10/11/07
|
|
NYSE Arca, Inc. (PCY)
|
|
04/20/18
|
|
PowerShares FTSE RAFI Asia Pacific
ex-Japan
Portfolio
|
|
04/20/07
|
|
06/25/07
|
|
NYSE Arca, Inc. (PAF)
|
|
04/20/18
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
|
|
Initial Board
Approval
Date
|
|
Initial Effective
Date
|
|
Exchange and Ticker
|
|
Termination Date
|
|
PowerShares FTSE RAFI Developed Markets
ex-U.S.
Portfolio
|
|
04/20/07
|
|
06/25/07
|
|
NYSE Arca, Inc. (PXF)
|
|
04/20/18
|
|
PowerShares FTSE RAFI Developed Markets
ex-U.S.
Small-Mid
Portfolio
|
|
04/20/07
|
|
09/27/07
|
|
NYSE Arca, Inc. (PDN)
|
|
04/20/18
|
|
PowerShares FTSE RAFI Emerging Markets Portfolio
|
|
04/20/07
|
|
09/27/07
|
|
NYSE Arca, Inc. (PXH)
|
|
04/20/18
|
|
PowerShares FTSE International Low Beta Equal Weight Portfolio
|
|
09/24/15
|
|
11/05/15
|
|
The NASDAQ Stock Market LLC
(IDLB)
|
|
04/20/18
|
|
PowerShares Fundamental High Yield
®
Corporate Bond Portfolio
|
|
10/02/07
|
|
11/13/07
|
|
NYSE Arca, Inc. (PHB)
|
|
04/20/18
|
|
PowerShares Fundamental Investment Grade Corporate Bond Portfolio
|
|
06/21/11
|
|
09/15/11
|
|
NYSE Arca, Inc. (PFIG)
|
|
04/20/18
|
|
PowerShares Global Agriculture Portfolio
|
|
06/20/08
|
|
09/16/08
|
|
The NASDAQ Stock Market LLC
(PAGG)
|
|
04/20/18
|
|
PowerShares Global Clean Energy Portfolio
|
|
04/20/07
|
|
06/13/07
|
|
NYSE Arca, Inc. (PBD)
|
|
04/20/18
|
|
PowerShares Global Gold and Precious Metals Portfolio
|
|
06/20/08
|
|
09/16/08
|
|
The NASDAQ Stock Market LLC
(PSAU)
|
|
04/20/18
|
|
PowerShares LadderRite
0-5
Year Corporate Bond
Portfolio
|
|
04/18/13
|
|
09/10/14
|
|
The NASDAQ Stock Market LLC
(LDRI)
|
|
04/20/18
|
|
PowerShares Global Short Term High Yield Bond Portfolio
|
|
04/18/13
|
|
06/20/13
|
|
NYSE Arca, Inc. (PGHY)
|
|
04/20/18
|
|
PowerShares Global Water Portfolio
|
|
04/20/07
|
|
06/13/07
|
|
The NASDAQ Stock Market LLC
(PIO)
|
|
04/20/18
|
|
PowerShares California
AMT-Free
Municipal Bond
Portfolio
|
|
10/02/07
|
|
10/11/07
|
|
NYSE Arca, Inc. (PWZ)
|
|
04/20/18
|
|
PowerShares National
AMT-Free
Municipal Bond
Portfolio
|
|
10/02/07
|
|
10/11/07
|
|
NYSE Arca, Inc. (PZA)
|
|
04/20/18
|
|
PowerShares New York
AMT-Free
Municipal Bond
Portfolio
|
|
10/02/07
|
|
10/11/07
|
|
NYSE Arca, Inc. (PZT)
|
|
04/20/18
|
|
PowerShares International BuyBack Achievers
TM
Portfolio
|
|
12/17/13
|
|
02/27/14
|
|
The NASDAQ Stock Market LLC
(IPKW)
|
|
04/20/18
|
|
PowerShares International Corporate Bond Portfolio
|
|
04/15/10
|
|
06/03/10
|
|
NYSE Arca, Inc. (PICB)
|
|
04/20/18
|
|
PowerShares Japan Currency Hedged Low Volatility Portfolio
|
|
03/12/15
|
|
10/09/15
|
|
NYSE Arca, Inc. (FXJP)
|
|
04/20/18
|
|
PowerShares KBW Bank Portfolio
|
|
09/20/11
|
|
11/01/11
|
|
The NASDAQ Stock Market LLC
(KBWB)
|
|
04/20/18
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
|
|
Initial Board
Approval
Date
|
|
Initial Effective
Date
|
|
Exchange and Ticker
|
|
Termination Date
|
|
PowerShares KBW High Dividend Yield Financial Portfolio
|
|
09/23/10
|
|
11/17/10
|
|
The NASDAQ Stock Market LLC
(KBWD)
|
|
04/20/18
|
|
PowerShares KBW Premium Yield Equity REIT Portfolio
|
|
09/23/10
|
|
11/17/10
|
|
The NASDAQ Stock Market LLC
(KBWY)
|
|
04/20/18
|
|
PowerShares KBW Property & Casualty Insurance Portfolio
|
|
09/23/10
|
|
11/17/10
|
|
The NASDAQ Stock Market LLC
(KBWP)
|
|
04/20/18
|
|
PowerShares KBW Regional Banking Portfolio
|
|
09/20/11
|
|
11/01/11
|
|
The NASDAQ Stock Market LLC
(KBWR)
|
|
04/20/18
|
|
PowerShares Preferred Portfolio
|
|
10/02/07
|
|
01/28/08
|
|
NYSE Arca, Inc. (PGX)
|
|
04/20/18
|
|
PowerShares PureBeta MSCI USA Portfolio
|
|
06/27/17
|
|
[ ]
|
|
Bats BZX Exchange, Inc. [ ]
|
|
04/20/19
|
|
PowerShares PureBeta MSCI USA Small Cap Portfolio
|
|
06/27/17
|
|
[ ]
|
|
Bats BZX Exchange, Inc. [ ]
|
|
04/20/19
|
|
PowerShares PureBeta FTSE Developed
ex-North
America
Portfolio
|
|
06/27/17
|
|
[ ]
|
|
Bats BZX Exchange, Inc. [ ]
|
|
04/20/19
|
|
PowerShares PureBeta FTSE Emerging Markets Portfolio
|
|
06/27/17
|
|
[ ]
|
|
Bats BZX Exchange, Inc. [ ]
|
|
04/20/19
|
|
PowerShares PureBeta US Aggregate Bond Portfolio
|
|
06/27/17
|
|
[ ]
|
|
Bats BZX Exchange, Inc. [ ]
|
|
04/20/19
|
|
PowerShares PureBeta
0-5
Yr US TIPS Portfolio
|
|
06/27/17
|
|
[ ]
|
|
Bats BZX Exchange, Inc. [ ]
|
|
04/20/19
|
|
PowerShares Russell 1000 Enhanced Equal Weight Portfolio
|
|
06/27/17
|
|
[ ]
|
|
Bats BZX Exchange, Inc. [ ]
|
|
04/20/19
|
|
PowerShares Russell 1000 Equal Weight Portfolio
|
|
12/18/14
|
|
12/19/14
|
|
NYSE Arca, Inc. (EQAL)
|
|
04/20/18
|
|
PowerShares Russell 1000 Low Beta Equal Weight Portfolio
|
|
09/24/15
|
|
11/05/15
|
|
The NASDAQ Stock Market LLC
(USLB)
|
|
04/20/18
|
|
PowerShares S&P 500
ex-Rate
Sensitive Low Volatility
Portfolio
|
|
03/12/15
|
|
04/09/15
|
|
NYSE Arca, Inc. (XRLV)
|
|
04/20/18
|
|
PowerShares S&P 500
®
High Beta
Portfolio
|
|
12/16/10
|
|
05/05/11
|
|
NYSE Arca, Inc. (SPHB)
|
|
04/20/18
|
|
PowerShares S&P 500 High Dividend Low Volatility Portfolio
|
|
09/13/12
|
|
10/17/12
|
|
NYSE Arca, Inc. (SPHD)
|
|
04/20/18
|
|
PowerShares S&P 500
®
Low Volatility
Portfolio
|
|
12/16/10
|
|
05/05/11
|
|
NYSE Arca, Inc. (SPLV)
|
|
04/20/18
|
|
PowerShares S&P 500 Minimum Variance Portfolio
|
|
06/27/17
|
|
[ ]
|
|
Bats BZX Exchange, Inc. [ ]
|
|
04/20/19
|
|
PowerShares S&P 500 Momentum Portfolio
|
|
06/23/15
|
|
10/09/15
|
|
NYSE Arca, Inc. (SPMO)
|
|
04/20/18
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
|
|
Initial Board
Approval
Date
|
|
Initial Effective
Date
|
|
Exchange and Ticker
|
|
Termination Date
|
|
PowerShares S&P 500 Value Portfolio
|
|
06/23/15
|
|
10/09/15
|
|
NYSE Arca, Inc. (SPVU)
|
|
04/20/18
|
|
PowerShares S&P 500 Value With Momentum Portfolio
|
|
03/07/17
|
|
04/06/17
|
|
Bats BZX Exchange, Inc.
(SPVM)
|
|
04/20/18
|
|
PowerShares S&P
®
Emerging Markets
Momentum Portfolio
|
|
12/13/11
|
|
02/06/12
|
|
NYSE Arca, Inc. (EEHB)
|
|
04/20/18
|
|
PowerShares S&P
®
Emerging Markets Low
Volatility Portfolio
|
|
12/13/11
|
|
01/13/12
|
|
NYSE Arca, Inc. (EELV)
|
|
04/20/18
|
|
PowerShares S&P
®
International
Developed Momentum Portfolio
|
|
12/13/11
|
|
02/06/12
|
|
NYSE Arca, Inc. (IDHB)
|
|
04/20/18
|
|
PowerShares S&P
®
International
Developed Quality Portfolio
|
|
04/20/07
|
|
06/13/07
|
|
NYSE Arca, Inc. (IDHQ)
|
|
04/20/18
|
|
PowerShares S&P
®
International
Developed Low Volatility Portfolio
|
|
12/13/11
|
|
01/13/12
|
|
NYSE Arca, Inc. (IDLV)
|
|
04/20/18
|
|
PowerShares S&P MidCap Low Volatility Portfolio
|
|
12/16/10
|
|
12/15/13
|
|
NYSE Arca, Inc. (XMLV)
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Consumer
Discretionary Portfolio
|
|
03/23/10
|
|
04/07/10
|
|
The NASDAQ Stock Market LLC.
(PSCD)
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Consumer
Staples Portfolio
|
|
03/23/10
|
|
04/07/10
|
|
The NASDAQ Stock Market LLC.
(PSCC)
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Energy
Portfolio
|
|
03/23/10
|
|
04/07/10
|
|
The NASDAQ Stock Market LLC
(PSCE)
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Financials
Portfolio
|
|
03/23/10
|
|
04/07/10
|
|
The NASDAQ Stock Market LLC
(PSCF)
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Health Care
Portfolio
|
|
03/23/10
|
|
04/07/10
|
|
The NASDAQ Stock Market LLC
(PSCH)
|
|
04/20/18
|
|
PowerShares S&P SmallCap High Dividend Low Volatility Portfolio
|
|
09/29/16
|
|
12/01/16
|
|
Bats BZX Exchange, Inc. (XSHD)
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Industrials
Portfolio
|
|
03/23/10
|
|
04/07/10
|
|
The NASDAQ Stock Market LLC
(PSCI)
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Information
Technology Portfolio
|
|
03/23/10
|
|
04/07/10
|
|
The NASDAQ Stock Market LLC
(PSCT)
|
|
04/20/18
|
|
PowerShares S&P International Developed High Dividend Low Volatility Portfolio
|
|
09/29/16
|
|
12/01/16
|
|
Bats BZX Exchange, Inc. (IDHD)
|
|
04/20/18
|
|
PowerShares S&P SmallCap Low Volatility Portfolio
|
|
12/16/10
|
|
12/15/13
|
|
NYSE Arca, Inc. (XSLV)
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Materials
Portfolio
|
|
03/23/10
|
|
04/07/10
|
|
The NASDAQ Stock Market LLC
(PSCM)
|
|
04/20/18
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
|
|
Initial Board
Approval
Date
|
|
Initial Effective
Date
|
|
Exchange and Ticker
|
|
Termination Date
|
|
PowerShares S&P SmallCap Quality Portfolio
|
|
03/07/17
|
|
04/06/17
|
|
Bats BZX Exchange, Inc.
(XSHQ)
|
|
04/20/18
|
|
PowerShares S&P
®
SmallCap Utilities
Portfolio
|
|
03/23/10
|
|
04/07/10
|
|
The NASDAQ Stock Market LLC
(PSCU)
|
|
04/20/18
|
|
PowerShares Senior Loan Portfolio
|
|
01/18/11
|
|
03/03/11
|
|
NYSE Arca, Inc. (BKLN)
|
|
04/20/18
|
|
PowerShares Taxable Municipal Bond Portfolio
|
|
09/24/09
|
|
11/17/09
|
|
NYSE Arca, Inc. (BAB)
|
|
04/20/18
|
|
PowerShares Treasury Collateral Portfolio
|
|
09/29/16
|
|
01/12/17
|
|
NYSE Arca, Inc. (CLTL)
|
|
04/20/18
|
|
PowerShares VRDO
Tax-Free
Weekly Portfolio
|
|
10/02/07
|
|
11/14/07
|
|
NYSE Arca, Inc. (PVI)
|
|
04/20/18
|
|
PowerShares Variable Rate Preferred Portfolio
|
|
03/04/14
|
|
05/01/14
|
|
NYSE Arca, Inc. (VRP)
|
|
04/20/18
|
|
|
|
|
|
POWERSHARES EXCHANGE-TRADED FUND TRUST II
|
|
|
|
|
By:
|
|
|
|
|
|
Name: Dan Draper
|
|
|
|
Title President
|
|
|
|
INVESCO DISTRIBUTORS, INC.
|
|
|
|
|
By:
|
|
|
|
|
|
Name: Brian C. Thorp
|
|
|
|
Title: Vice President
|
Exhibit (g)(1)
AMENDED AND RESTATED CUSTODY AGREEMENT
by and between
POWERSHARES
and
THE BANK OF NEW YORK MELLON
TABLE OF CONTENTS
|
|
|
|
|
|
|
|
|
|
|
SECTION 1 – CUSTODY ACCOUNTS; INSTRUCTIONS
|
|
|
1
|
|
|
|
|
1.1
|
|
Definitions
|
|
|
1
|
|
|
|
|
1.2
|
|
Establishment of Account
|
|
|
3
|
|
|
|
|
1.3
|
|
Representations and Warranties
|
|
|
3
|
|
|
|
|
1.4
|
|
Distributions
|
|
|
5
|
|
|
|
|
1.5
|
|
Authorized Instructions
|
|
|
5
|
|
|
|
|
1.6
|
|
Authentication
|
|
|
5
|
|
|
|
|
1.7
|
|
On-Line Systems
|
|
|
5
|
|
|
|
|
|
SECTION 2 – CUSTODY SERVICES
|
|
|
6
|
|
|
|
|
2.1
|
|
Holding Securities
|
|
|
6
|
|
|
|
|
2.2
|
|
Depositories
|
|
|
7
|
|
|
|
|
2.3
|
|
Agents
|
|
|
7
|
|
|
|
|
2.4
|
|
Custodian Actions without Direction
|
|
|
7
|
|
|
|
|
2.5
|
|
Custodian Actions with Direction
|
|
|
8
|
|
|
|
|
2.6
|
|
Foreign Exchange Transactions
|
|
|
8
|
|
|
|
|
|
SECTION 3 – CORPORATE ACTIONS
|
|
|
8
|
|
|
|
|
3.1
|
|
Custodian Notification
|
|
|
8
|
|
|
|
|
3.2
|
|
Direction
|
|
|
9
|
|
|
|
|
3.3
|
|
Voting Rights
|
|
|
9
|
|
|
|
|
3.4
|
|
Partial Redemptions, Payments, Etc
|
|
|
9
|
|
|
|
|
|
SECTION 4 – SETTLEMENT OF TRADES
|
|
|
9
|
|
|
|
|
4.1
|
|
Payments
|
|
|
9
|
|
|
|
|
4.2
|
|
Contractual Settlement and Income
|
|
|
9
|
|
|
|
|
4.3
|
|
Trade Settlement
|
|
|
10
|
|
|
|
|
|
SECTION 5 – DEPOSITS AND ADVANCES
|
|
|
10
|
|
|
|
|
5.1
|
|
Deposits
|
|
|
10
|
|
|
|
|
5.2
|
|
Sweep and Float
|
|
|
10
|
|
|
|
|
5.3
|
|
Overdrafts and Indebtedness
|
|
|
10
|
|
|
|
|
5.4
|
|
Securing Repayment
|
|
|
10
|
|
|
|
|
5.5
|
|
Setoff
|
|
|
11
|
|
|
|
|
5.6
|
|
Bank Borrowings
|
|
|
11
|
|
|
|
|
|
SECTION 6 – SALE AND REDEMPTION OF SHARES
|
|
|
12
|
|
|
|
|
6.1
|
|
Sale of Shares
|
|
|
12
|
|
|
|
|
6.2
|
|
Redemption of Shares
|
|
|
12
|
|
|
|
|
6.3
|
|
Check Redemptions
|
|
|
12
|
|
|
|
|
|
SECTION 7 – PAYMENT OF DIVIDENDS AND DISTRIBUTIONS
|
|
|
12
|
|
|
|
|
7.1
|
|
Determination to Pay
|
|
|
12
|
|
|
|
|
7.2
|
|
Payment
|
|
|
12
|
|
|
|
|
|
SECTION 8 – TAXES, REPORTS AND RECORDS
|
|
|
12
|
|
|
|
|
8.1
|
|
Tax Obligations
|
|
|
12
|
|
i
|
|
|
|
|
|
|
|
|
|
|
8.2
|
|
Pricing and Other Data
|
|
13
|
|
|
|
8.3
|
|
Statements and Reports
|
|
13
|
|
|
|
8.4
|
|
Review of Reports
|
|
13
|
|
|
|
8.5
|
|
Books and Records
|
|
13
|
|
|
|
8.6
|
|
Required Disclosure
|
|
14
|
|
|
|
8.7
|
|
Tools
|
|
14
|
|
|
|
|
SECTION 9 – PROVISIONS REGARDING THE CUSTODIAN
|
|
15
|
|
|
|
9.1
|
|
Standard of Care
|
|
15
|
|
|
|
9.2
|
|
Limitation of Duties and Liability
|
|
15
|
|
|
|
9.3
|
|
Losses
|
|
16
|
|
|
|
9.4
|
|
Gains
|
|
16
|
|
|
|
9.5
|
|
Force Majeure
|
|
16
|
|
|
|
9.6
|
|
Fees
|
|
16
|
|
|
|
9.7
|
|
Indemnification
|
|
16
|
|
|
|
|
SECTION 10 – AMENDMENT; TERMINATION; ASSIGNMENT
|
|
16
|
|
|
|
10.1
|
|
Amendment
|
|
16
|
|
|
|
10.2
|
|
Termination
|
|
16
|
|
|
|
10.3
|
|
Successors and Assigns
|
|
17
|
|
|
|
|
SECTION 11 – ADDITIONAL PROVISIONS
|
|
17
|
|
|
|
11.1
|
|
Confidentiality
|
|
17
|
|
|
|
11.2
|
|
Non-Custody Assets
|
|
18
|
|
|
|
11.3
|
|
Appropriate Action
|
|
18
|
|
|
|
11.4
|
|
Governing Law
|
|
18
|
|
|
|
11.5
|
|
Representations
|
|
18
|
|
|
|
11.6
|
|
USA PATRIOT Act
|
|
19
|
|
|
|
11.7
|
|
Non-Fiduciary Status
|
|
19
|
|
|
|
11.8
|
|
Fund Obligations
|
|
19
|
|
|
|
11.9
|
|
Notices
|
|
19
|
|
|
|
11.10
|
|
Entire Agreement
|
|
19
|
|
|
|
11.11
|
|
Necessary Parties
|
|
20
|
|
|
|
11.12
|
|
Execution in Counterparts
|
|
20
|
ii
CUSTODY AGREEMENT
CUSTODY AGREEMENT
, dated as of
June 17, 2013
(“Agreement”) between each PowerShares trust listed on Schedule I attached hereto,
each a business trust, having its principal office and place of business at 3500 Lacey Road, Suite 700, Downers Grove, IL 60515 (the “
Fund
”), on behalf of itself and its Series, and The Bank of New York Mellon, a New York
corporation authorized to do a banking business having its principal office and place of business at One Wall Street, New York, New York 10286 (“
Custodian
”).
SECTION 1 – CUSTODY ACCOUNTS; INSTRUCTIONS
1.1
Definitions
.
Whenever used in this Agreement, the following words shall have the meanings set forth below:
“
Account
” or “
Accounts
” shall have the meaning set forth in Section 1.2.
“
Authorized Instructions
” shall have the meaning set forth in Section 1.5.
“
Authorized Person
” shall mean any Person authorized by the Fund to give Oral Instructions or Instructions with respect to one or more
Accounts or with respect to foreign exchange, derivative investments or information and transactional web based services provided by the Custodian or a BNY Mellon Affiliate. Authorized Persons shall include Persons authorized by an Authorized
Person. Authorized Persons, their signatures and the extent of their authority shall be provided by a Certificate. The Custodian may conclusively rely on the authority of such Authorized Persons until it receives Written Instructions to the
contrary.
“
BNY Mellon Affiliate
” shall mean any direct or indirect subsidiary of The Bank of New York Mellon Corporation.
“
Book-Entry System
” shall mean the U.S. Federal Reserve/Treasury
book-entry
system for receiving and
delivering securities, its successors and nominees.
“
Business Day
” shall mean any day on which the Custodian and relevant Depositories
are open for business.
“
Certificate
” shall mean any notice, instruction, or other instrument in writing, authorized or required by this
Agreement to be given to the Custodian, which is actually received by the Custodian by letter or facsimile transmission and signed on behalf of the Fund by two (2) Authorized Persons or persons reasonably believed by the Custodian to be
Authorized Persons.
“
Data Providers
” shall mean pricing vendors, analytics providers, brokers, dealers, investment managers, Authorized
Persons, Subcustodians, Depositories and any other Person providing Market Data to the Custodian.
“
Data Terms Website
” shall mean
http://bnymellon.com/products/assetservicing/vendoragreement.pdf
or any successor website the address of which is provided by the Custodian to the Fund.
“
Depository
” shall include (a) the Book-Entry System, (b) the Depository Trust
Company, (c) any other clearing agency or securities depository registered with the Securities and Exchange Commission identified to the Fund from time to time, and (d) the respective successors and nominees of the foregoing.
“
Foreign Depository
” shall mean (a) Euroclear, (b) Clearstream Banking, societe anonyme, (c) each Eligible Securities
Depository as defined in Rule 17f-7 under the Investment Company Act of 1940, as amended, identified to the Fund prior to the use of such Foreign Depository on Schedule II (as the same may be amended by Custodian from time to time and identified to
the Fund prior to use), and (d) the respective successors and nominees of the foregoing identified to the Fund prior to the use of such successor or nominee.
“
Instructions
shall mean Written Instructions, S.W.I.F.T., on-line communications or other method or system, each as specified by the Custodian as
available for use in connection with the services hereunder.
“
Losses
” shall mean, collectively, losses, costs, expenses (including
reasonable attorneys fees), damages, liabilities and claims.
“
Market Data
” shall mean pricing or other data related to Securities and
other assets. Market data includes but is not limited to security identifiers, valuations, bond ratings, classification data, and other data received from investment managers and others.
“
Non-Custody Assets
” shall have the meaning set forth in Section 11.2.
“
Oral Instructions
” shall mean instructions expressed in spoken words received by the Custodian. Where the Custodian provides recorded lines
for this purpose, such instructions must be given using such lines.
“
Person
” or “
Persons
” shall mean any entity or
individual.
“
Securities
” shall include, without limitation, any common stock and other equity securities, depository receipts, limited
partnership and limited liability company interests, bonds, debentures and other debt securities, notes or other obligations, and any instruments representing rights to receive, purchase, or subscribe for the same, or representing any other rights
or interests therein (whether represented by a certificate or held in a Depository, a Foreign Depository or with a Subcustodian or on the books of the issuer) that are acceptable to the Custodian.
“
Series
” shall mean the various portfolios, if any, of the Fund listed on Schedule I hereto, and if none are listed references to Series
shall be references to the Fund. Series shall also include any future Series added by mutual agreement of the parties, as of the date agreed, to any amended and restated Schedule I.
“
Subcustodian
” shall mean a bank or other financial institution (other than a Foreign Depository) located outside the U.S. which is utilized
by the Custodian or by a Custodian Affiliate, in connection with the purchase, sale or custody of Securities or cash hereunder and is identified to the Fund from time to time, and their respective successors and assigns.
2
“
Tax Obligations
” shall mean taxes, withholding, certification and reporting requirements,
claims for exemptions or refund, interest, penalties, additions to tax and other related expenses.
“
Written Instructions
” shall mean
written communications, including a Certificate, received by the Custodian by overnight delivery, postal services or facsimile transmission.
1.2
Establishment of Account.
(a) The Fund on its behalf and on behalf of each Series, hereby appoints the Custodian as the custodian of all Securities and cash at any time delivered to the Custodian to be held under this Agreement. The
Custodian hereby accepts such appointment and agrees to establish and maintain one or more accounts for each Series in which the Custodian will hold Securities and cash as provided herein, and its records will reflect the segregation of the assets
of a Series from the assets of any other Series. Such accounts (each, an “Account,” and collectively, the “Accounts”) shall be in the name of the Fund, or each Series.
(b) The Custodian may from time to time establish on its books and records such sub-accounts within each Account as the Fund and the Custodian may agree upon
(each a “Special Account”), and the Custodian shall reflect therein such assets as the Fund may specify in Instructions.
(c) The Custodian may
from time to time establish pursuant to a written agreement with and for the benefit of a broker, dealer, futures commission merchant or other third party identified in Instructions such accounts on such terms and conditions as the Fund and the
Custodian shall agree, and the Custodian shall transfer to such account such Securities and money as the Fund may specify in Instructions.
1.3
Representations and Warranties.
The Fund hereby represents and warrants, which representations and warranties shall be continuing and shall be deemed to be reaffirmed upon each giving of Oral Instructions or Instructions by the Fund,
that:
(a) It is duly organized and existing under the laws of the jurisdiction of its organization, with full power to carry on its business as now
conducted, to enter into this Agreement, and to perform its obligations hereunder;
(b) This Agreement has been duly authorized, executed and delivered by
the Fund, approved by a resolution of its board, constitutes a valid and legally binding obligation of the Fund, enforceable in accordance with its terms, and there is no statute, regulation, rule, order or judgment binding on it, and no provision
of its declaration of trust or by-laws, nor of any mortgage, indenture, credit agreement or other contract binding on it or affecting its property, which would prohibit its execution or performance of this Agreement;
(c) It is conducting its business in substantial compliance with all applicable laws and requirements, both state and federal, and has obtained all regulatory
licenses, approvals and consents necessary to carry on its business as now conducted;
3
(d) It will not use the services provided by the Custodian hereunder in any manner that is, or will result in, a
violation of any law, rule or regulation applicable to the Fund;
(e) Its board or its foreign custody manager, as defined in Rule 17f-5 under the
Investment Company Act of 1940, as amended (the “40 Act”), has determined, prior to such use, that use of each Subcustodian (including any Replacement of the Custodian) and each Depository which the Custodian or any Subcustodian is
authorized to utilize in accordance with Section 2.1(a) hereof, satisfies the applicable requirements of the ‘40 Act and Rules 17f-4 or 17f-5 thereunder, as the case may be;
(f) The Fund or its investment adviser has determined, prior to such use, based in part on information provided by the Custodian pursuant to
Section 2.1(d)(i)-(ii) that the custody arrangements of each Foreign Depository provide reasonable safeguards against the custody risks associated with maintaining assets with such Foreign Depository within the meaning of Rule 17f-7 under
the ‘40 Act;
(g) It is fully informed of the protections and risks associated with various methods of transmitting Instructions and Oral
Instructions and delivering Certificates to Custodian; understands that there may be more secure methods of transmitting or delivering the same than the methods selected by the Fund; agrees that the security procedures (if any) to be utilized
provide a commercially reasonable degree of protection in light of its particular needs and circumstances; and acknowledges and agrees that Instructions need not be reviewed by Custodian, may conclusively be presumed by Custodian to have been given
by person(s) duly authorized, and may be acted upon as given;
(h) It shall manage its borrowings, including, without limitation, any advance or overdraft
(including any day-light overdraft) in the Accounts, so that the aggregate of its total borrowings for each Series does not exceed the amount such Series is permitted to borrow under the ‘40 Act;
(i) Its transmission or giving of, and the Custodian acting upon and in reliance on Instructions or Oral Instructions pursuant to this Agreement shall at all
times comply with the ‘40 Act;
(j) It shall impose and maintain restrictions on the destinations to which cash may be disbursed by Instructions to
ensure that each disbursement is for a proper purpose; and
(k) It has the right to make the pledge and grant the security interest and security
entitlement to the Custodian contained in Section 5.4 hereof, free of any right of redemption or prior claim of any other person or entity, such pledge and such grants shall have a first priority subject to no setoffs, counterclaims, or other
liens or grants prior to or on a parity therewith, and it shall take such additional steps as the Custodian may require to assure such priority.
(2) The
Custodian hereby represents and warrants, which representations and warranties shall be continuing and shall be deemed to be reaffirmed each day, that:
4
(a) It is organized and existing under the laws of the jurisdiction of its organization, with full power to carry
on its business as now conducted, to enter into this Agreement, and to perform its obligations hereunder;
(b) This Agreement has been duly authorized,
executed and delivered by the Custodian, constitutes a valid and legally binding obligation of the Custodian, enforceable in accordance with its terms, and there is no statute, regulation, rule, order or judgment binding on it, and no provision of
its charter or by-laws, nor of any mortgage, indenture, credit agreement or other contract binding on it or affecting its property, which would prohibit its execution or performance of this Agreement; and
(c) It has obtained all regulatory licenses, approvals and consents necessary to carry on its business as now conducted.
1.4
Distributions.
The Custodian shall make distributions or transfers out of an Account pursuant to Instructions. In making payments to service
providers pursuant to Instructions, the Fund acknowledges that the Custodian is acting as a paying agent, and not as the payor, for tax information reporting and withholding purposes.
1.5
Authorized Instructions.
The Custodian shall be entitled to rely upon any Oral Instructions or Instructions actually received by the
Custodian and reasonably believed in good faith by the Custodian to be from an Authorized Person (“Authorized Instructions”). Notwithstanding any other provision included in this Agreement, Written Instructions relating to the disbursement
of moneys of the Fund other than in connection with the purchase, sale or settlement of Securities, shall be in the form of a Certificate. The Fund agrees that an Authorized Person shall forward to the Custodian Instructions confirming Oral
Instructions by the close of business of the same day that such Oral Instructions are given to the Custodian. The Fund agrees that the fact Instructions confirming Oral Instructions are not received or that contrary Instructions are received by the
Custodian after the Custodian has effected such Oral Instructions shall in no way affect the validity or enforceability of transactions authorized by such Oral Instructions and effected by the Custodian.
1.6
Authentication
.
If the Custodian receives Instructions that it reasonably believes in good faith to have been transmitted by an Authorized
Person via (i) facsimile or other electronic method that is not secure, or (ii) secure electronic transmission containing applicable authorization codes, passwords or authentication keys, the Fund understands and agrees that the Custodian
cannot determine the identity of the actual sender of such Instructions and that the Custodian shall be entitled to conclusively presume that such Instructions have been sent by an Authorized Person. Custodian shall provide user and authorization
codes, passwords and authentication keys only to an Authorized Person or a person reasonably believed by Custodian to be an Authorized Person.
1.7
On-Line Systems
.
If an Authorized Person elects to transmit Instructions through an on-line communication system offered by the Custodian, the use thereof shall be subject to any terms and conditions contained in a separate written
agreement. If the Fund or an Authorized Person elects, with the Custodian’s prior consent, to transmit Instructions through an on-line communications service owned or operated by a third party, the Fund agrees that the Custodian shall not be
responsible or liable for the reliability or availability of any such service.
5
SECTION 2 – CUSTODY SERVICES
2.1
Holding Securities
.
(a) Subject to the terms hereof, the Fund hereby authorizes the Custodian to hold any Securities in registered form
in the name of the Custodian or one of its nominees. Securities held for the Fund hereunder shall be segregated on the Custodian’s books and records from the Custodian’s own property. The Custodian shall be entitled to utilize, subject to
subsection (c) of this Section 2.1, Subcustodians, Depositories, and subject to subsection (d) of this Section 2.1, Foreign Depositories in connection with its performance hereunder. Securities and cash held through Subcustodians
shall be held subject to the terms and conditions of the Custodian’s or a BNY Mellon Affiliate’s agreements with such Subcustodians. Securities and cash deposited by the Custodian in a Depository or Foreign Depository will be held subject
to the rules, terms and conditions of such entity. Subcustodians may be authorized to hold Securities in Depositories or Foreign Depositories in which such Subcustodians participate. Unless otherwise required by local law or practice or a particular
subcustodian agreement, Securities deposited with Subcustodians, Depositories or Foreign Depositories will be held in a commingled account in the name of the Custodian or a BNY Mellon Affiliate for the Funds. The Custodian shall identify on its
books and records the Securities and cash belonging to the Fund, whether held directly or indirectly through Subcustodians, Depositories or Foreign Depositories. The Custodian shall, directly or indirectly through Subcustodians, Depositories, or
Foreign Depositories, endeavor, to the extent feasible, to hold Securities in the country or other jurisdiction in which the principal trading market for such Securities is located, where such Securities are to be presented for cancellation and/or
payment and/or registration, or where such Securities are acquired. The Custodian at any time may cease utilizing any Subcustodian and/or may replace a Subcustodian with a different Subcustodian (the “Replacement Subcustodian”). In the
event the Custodian selects a Replacement Subcustodian, the Custodian shall not utilize such Replacement Subcustodian until after the Fund’s board or foreign custody manager has determined that utilization of such Replacement Subcustodian
satisfies the requirements of the ‘40 Act and Rule 17f-5 thereunder. Notwithstanding any other provisions hereof, with respect to any Losses incurred by the Fund as a result of the acts or the failure to act by any Subcustodian (other than a
BNY Mellon Affiliate), the Custodian shall take appropriate action to recover such Losses from such Subcustodian. The Custodian shall be liable to the Fund, or any Series, for any Losses caused by or resulting from the acts or omissions of any
Subcustodian to the extent such acts or omissions would be deemed a failure of such Subcustodian to fulfill its obligations under the Subcustody Agreement with Custodian in accordance with its standards of care and in accordance with prevailing
laws, rules, practices and procedures in the relevant market.
(b) Unless the Custodian has received Instructions to the contrary, the
Custodian shall hold Securities indirectly through a Subcustodian only if (i) the Securities are not subject to any right, charge, security interest, lien or claim of any kind in favor of such Subcustodian or its creditors or operators,
including a receiver or trustee in bankruptcy or similar authority, except for a claim of payment for the safe custody or administration of Securities on behalf of the Fund by such Subcustodian, and (ii) beneficial ownership of the Securities
is freely transferable without the payment of money or value other than for safe custody or administration.
6
(c) With respect to each Depository, the Custodian (i) shall exercise due care in accordance with reasonable
commercial standards in discharging its duties as a securities intermediary to obtain and thereafter maintain Securities or financial assets deposited or held in such Depository, and (ii) will provide, promptly upon request by the Fund, such
reports as are available concerning the internal accounting controls and financial strength of the Custodian.
(d) With
respect to each Foreign Depository, the Custodian shall exercise reasonable care, prudence, and diligence (i) to provide the Fund with an analysis of the custody risks associated with maintaining assets with the Foreign Depository, and
(ii) to monitor such custody risks on a continuing basis and promptly notify the Fund of any material change in such risks, all in accordance with Rule 17f-7(a)(1)(i) of the ‘40 Act. The Fund acknowledges and agrees that such analysis and
monitoring shall be made on the basis of, and limited by, information gathered from Subcustodians or through publicly available information otherwise obtained by the Custodian, and shall not include any evaluation of Country Risks. As used herein
the term “Country Risks” shall mean with respect to any Foreign Depository: (a) the financial infrastructure of the country in which it is organized, (b) such country’s prevailing custody and settlement practices,
(c) nationalization, expropriation or other governmental actions, (d) such country’s regulation of the banking or securities industry, (e) currency controls, restrictions, devaluations or fluctuations, and (f) market
conditions which affect the order execution of securities transactions or affect the value of securities.
2.2
Depositories
.
The Custodian
shall have no liability whatsoever for the action or inaction of any Depository or Foreign Depository or for any Losses resulting from the maintenance of Securities or cash with a Depository or a Foreign Depository, except in each case to the extent
such action or inaction is a direct result of the Custodian’s failure to fulfill its obligations hereunder.
2.3
Agents
.
The Custodian may appoint agents, including BNY Mellon Affiliates, on such terms and conditions as it deems appropriate to perform its services hereunder. Except as otherwise specifically provided herein, no such appointment shall discharge the
Custodian from its obligations hereunder.
2.4
Custodian Actions without Direction
.
With respect to Securities held hereunder, the Custodian
shall:
a. Receive all eligible income and other payments due to the Account;
b. Carry out any exchanges of Securities or other corporate actions not requiring discretionary decisions;
c. Facilitate access by the Fund or its designee to ballots or online systems to assist in the voting of proxies received for eligible
positions of Securities held in the Account (excluding bankruptcy matters);
d. Forward to the Fund or its designee information (or
summaries of information) that the Custodian receives from Depositories or Subcustodians concerning Securities in the Account (excluding bankruptcy matters);
7
e. Forward to the Fund or its designee an initial notice of bankruptcy cases relating to
Securities held in the Account and a notice of any required action related to such bankruptcy cases as may be received by the Custodian. No further action or notification related to the bankruptcy case shall be required;
f. Endorse for collection checks, drafts or other negotiable instruments; and
g. Execute and deliver, solely in its custodial capacity, certificates, documents or instruments incidental to the Custodian’s
performance under this Agreement.
2.5
Custodian Actions with Direction
.
The Custodian shall take the following actions in the
administration of the Account only pursuant to Authorized Instructions:
a. Settle purchases and sales of Securities and process other
transactions, including, free receipts and deliveries to a broker, dealer, future commission merchant or other third party specified in Instructions;
b. Take actions necessary to settle transactions in connection with futures or options contracts, short-selling programs, foreign exchange or
foreign exchange contracts, swaps and other derivative investments; and
c. Deliver Securities in the Account if an Authorized Person
advises the Custodian that the Fund has entered into a separate securities lending agreement, provided that the Fund executes such agreements as the Custodian may require in connection with such arrangements.
2.6
Foreign Exchange Transactions
.
(a) For the purpose of settling Securities and foreign exchange transactions, the Fund shall provide the
Custodian with sufficient immediately available funds for all transactions by such time and date as conditions in the relevant market dictate. As used herein, “sufficient immediately available funds” shall mean either (i) sufficient
cash denominated in U.S. dollars to purchase the necessary foreign currency, or (ii) sufficient applicable foreign currency, to settle the transaction. The Custodian shall provide the Fund with immediately available funds each day which result
from the actual settlement of all sale transactions, based upon advices received by the Custodian from Subcustodians, Depositories, and Foreign Depositories. Such funds shall be in U.S. dollars or such other currency as the Fund may specify to the
Custodian.
(b) Any foreign exchange transaction effected by the Custodian in connection with this Agreement may be entered with the Custodian or a BNY
Mellon Affiliate acting as a principal or otherwise through customary channels. The Fund may issue standing Instructions with respect to foreign exchange transactions, but the Custodian may establish rules or limitations concerning any foreign
exchange facility made available to the Fund.
SECTION 3 – CORPORATE ACTIONS
3.1
Custodian Notification
.
The Custodian shall notify the Fund or its designee of rights or discretionary corporate actions as promptly as
practicable under the circumstances, provided that the Custodian has actually received notice of such right or discretionary corporate action from the relevant Subcustodian or Depository. Absent actual receipt of such notice, the Custodian shall
have no liability for failing to so notify the Fund.
8
3.2
Direction
.
Whenever there are voluntary rights that may be exercised or alternate courses of
action that may be taken by reason of the Fund’s ownership of Securities, the Fund or its designee shall be responsible for making any decisions relating thereto and for directing the Custodian to act. In order for the Custodian to act, it must
receive Instructions using the Custodian generated form or clearly marked as instructions for the decision at the Custodian’s offices addressed as the Custodian may from time to time request, by such time as the Custodian shall advise the Fund
or its designee. Absent the Custodian’s receipt of such Instructions by such deadline, the Custodian shall not be liable for failure to take any action relating to or to exercise any rights conferred by such Securities.
3.3
Voting Rights
.
All voting rights with respect to Securities, however registered, shall be exercised by the Fund or its designee. The
Custodian will make available to the Fund proxy voting services upon the request of, and for the jurisdictions selected by, the Fund in accordance with terms and conditions to be mutually agreed upon by the Custodian and the Fund.
3.4
Partial Redemptions, Payments, Etc
.
The Custodian shall promptly advise the Fund or its designee upon its notification of a partial
redemption, partial payment or other action with respect to a Security affecting fewer than all such Securities held within the Account. If the Custodian, any Subcustodian, Depository or Foreign Depository holds any Securities affected by one of the
events described, the Custodian, the Subcustodian, Depository or Foreign Depository may select the Securities to participate in such partial redemption, partial payment or other action in any non-discriminatory manner that it customarily uses to
make such selection.
SECTION 4 – SETTLEMENT OF TRADES
4.1
Payments.
Promptly after each purchase or sale of Securities by the Fund, an Authorized Person shall deliver to the Custodian Instructions
specifying all information necessary for the Custodian to settle such purchase or sale. For the purpose of settling purchases of Securities, the Fund shall provide the Custodian with sufficient immediately available funds for all such transactions
by such time and date as conditions in the relevant market dictate.
4.2
Contractual Settlement and Income
.
The Custodian
may, as a matter of bookkeeping convenience, credit the Account with the proceeds from the sale, redemption or other disposition of Securities or interest, dividends or other distributions payable on Securities prior to its actual receipt of final
payment therefor. All such credits shall be conditional until the Custodian’s actual receipt of final payment and may be reversed by the Custodian to the extent that final payment is not received. Payment with respect to a transaction will not
be “final” until the Custodian shall have received immediately available funds that under applicable local law, rule or practice are irreversible and not subject to any security interest, levy or other encumbrance, and that are
specifically applicable to such transaction.
9
4.3
Trade Settlement
.
Transactions will be settled using practices customary in the jurisdiction or
market where the transaction occurs. The Fund understands that when the Custodian is instructed to deliver Securities against payment, delivery of such Securities and receipt of payment therefor may not be completed simultaneously. Provided that the
Custodian carries out its duties in accordance with its standard of care, the Fund assumes full responsibility for all risks involved in connection with the Custodian’s delivery of Securities pursuant to Authorized Instructions in accordance
with local market practice.
SECTION 5 – DEPOSITS AND ADVANCES
5.1
Deposits.
The Custodian may hold cash in Accounts or may arrange to have such cash held by a BNY Mellon Affiliate, Subcustodian, or with a
Depository or Foreign Depository. Where cash is on deposit with the Custodian, a Subcustodian, or a BNY Mellon Affiliate, it will be subject to the terms of this Agreement and such deposit terms and conditions as may be issued by the Custodian or a
BNY Mellon Affiliate or a Subcustodian, to the extent applicable, from time to time, including rates of interest and deposit account access.
5.2
Sweep and Float.
Cash may be swept as directed by the Fund or its investment manager to investment vehicles offered by the Custodian or to other investment vehicles. Cash may be uninvested when it is received or reconciled to an Account
after the deadline to be swept into a target vehicle, or when held for short periods of time during the course of transaction settlements. The Fund acknowledges that, as part of the Custodian’s compensation, the Custodian will earn interest on
cash balances held by the Custodian, including disbursement balances and balances arising from purchase and sale transactions, as disclosed in the Custodian’s float policy.
5.3
Overdrafts and Indebtedness
.
The Custodian may, in its sole discretion, advance funds in any currency hereunder. If an overdraft occurs in
an Account (including, without limitation, overdrafts incurred in connection with the settlement of securities transactions, funds transfers or foreign exchange transactions) or if the Fund is for any other reason indebted to the Custodian, provided
such indebtedness is not due to Custodian’s failure to carry out its duties in accordance with its standard of care, the Fund agrees to repay the Custodian on demand or upon becoming aware of the amount of the advance, overdraft or
indebtedness, plus accrued interest at a rate then charged by the Custodian to its institutional custody clients in the relevant currency.
5.4
Securing Repayment
.
In order to secure repayment of the Series’ obligations to the Custodian, the Fund, on behalf of each of its Series hereby pledges and grants to the Custodian and agrees the Custodian shall have to the maximum
extent permitted by law, a continuing first lien and security interest in, and right of setoff against: (a) all of the Series’ right, title and interest in and to all Accounts in the Series’ name and the Securities, money and other
property now or hereafter held in such Accounts (including proceeds thereof) and (b) any other property at any time held by the Custodian for the Fund. The Fund, on behalf of each Series, represents that it owns, on behalf of each Series, the
Securities in each respective Series’ Account free and clear of all liens, claims, security interests, and the first lien and security interest granted herein shall be subject to no setoffs, counterclaims, or other liens prior to or on a parity
with it in favor of any other party (other than specific liens granted preferred status by statute). The Fund, on behalf of each Series’ shall take any
10
additional steps required to assure the Custodian of such priority security interest, including notifying third parties or obtaining their consent. The Custodian shall be entitled to collect from
the Accounts sufficient cash for reimbursement, and if such cash is insufficient, to sell the Securities in the Accounts to the extent necessary to obtain reimbursement. In this regard, the Custodian shall be entitled to all the rights and remedies
of a pledgee and secured creditor under applicable laws, rules or regulations as then in effect.
5.5
Setoff
.
The Custodian has the right to
debit any cash in a Series’ Accounts for any amount payable by the Series in connection with any and all obligations of the Fund, on behalf of such Series, to the Custodian whether or not relating to or arising under this Agreement. In addition
to the rights of the Custodian under applicable law and other agreements, at any time when the Series shall not have honored any and all of its obligations to the Custodian, the Custodian shall have the right without notice to the Series to retain
or set-off against such obligations of the Series any cash the Custodian or a BNY Mellon Affiliate may directly or indirectly hold for the Series, and any obligations (whether or not matured) that the Custodian or a BNY Mellon Affiliate may have to
the Series in any currency. Any such asset of, or obligation to, the Series may be transferred to the Custodian and any BNY Mellon Affiliate in order to effect the above rights.
5.6
Bank Borrowings
.
If the Fund borrows money from any bank (including the Custodian if the borrowing is pursuant to a separate agreement) for
investment or for temporary or emergency purposes using Securities held by the Custodian, on behalf of a Series, hereunder as collateral for such borrowings, the Fund, on behalf of that Series, shall deliver to the Custodian Instructions specifying
with respect to each such borrowing: (a) the Series to which such borrowing relates; (b) the name of the bank, (c) the amount of the borrowing, (d) the time and date, if known, on which the loan is to be entered into,
(e) the total amount payable to the Fund on the borrowing date, (f) the Securities to be delivered as collateral for such loan, including the name of the issuer, the title and the number of shares or the principal amount of any particular
Securities, and (g) a statement specifying whether such loan is for investment purposes or for temporary or emergency purposes and that such loan is in conformance with the ‘40 Act and the Fund’s prospectus. The Custodian shall
deliver on the borrowing date specified in Instructions the specified collateral against payment by the lending bank of the total amount of the loan payable, provided that the same conforms to the total amount payable as set forth in the
Instructions. The Custodian may, at the option of the lending bank, keep such collateral in its possession, but such collateral shall be subject to all rights therein given the lending bank by virtue of any promissory note or loan agreement.
The Custodian shall deliver such Securities as additional collateral as may be specified in Instructions to collateralize further any transaction described in this Section. The Fund shall cause all Securities released from collateral status to be
returned directly to the Custodian, and the Custodian shall receive from time to time such return of collateral as may be tendered to it. In the event that the Fund fails to specify in Instructions the Series, the name of the issuer, the title
and number of shares or the principal amount of any particular Securities to be delivered as collateral by the Custodian, the Custodian shall not be under any obligation to deliver any Securities.
11
SECTION 6 – SALE AND REDEMPTION OF SHARES
6.1
Sale of Shares
.
Whenever the Fund shall sell any shares issued by the Fund (“Shares”) it shall deliver to Custodian a Certificate
or Instructions, or cause the Transfer Agent to provide instructions, specifying the amount of money, if any, and/or the particular Securities and the amount of each Security to be received by Custodian for the sale of such Shares and specifically
allocated to an Account for such Series.
6.2
Redemption of Shares.
Upon receipt of such money, if any, and such Securities, Custodian shall
credit such money and/or Securities to an Account in the name of the Series for which such money and/or Securities were received. Except as provided hereinafter, whenever the Fund desires Custodian to make payment, if any, and a delivery of
Securities out of the money and Securities held by Custodian hereunder in connection with a redemption of any Shares, it shall furnish to Custodian a Certificate or Instructions, or cause the Transfer Agent to provide instructions, specifying the
total amount of money, if any, to be paid, and the particular Securities and amount of each Security to be delivered, for the redemption of such Shares. Custodian shall make any such payment and such delivery of Shares, as directed by a Certificate
or Instructions or instructions of the Transfer Agent, out of the money and Securities held in an Account of the appropriate Series.
SECTION 7 – PAYMENT OF DIVIDENDS AND DISTRIBUTIONS
7.1
Determination to Pay.
Whenever the Fund shall determine to pay a dividend or distribution on Shares the Fund or its agent shall furnish to
the Custodian Instructions setting forth with respect to the Series specified therein the date of the declaration of such dividend or distribution, the total amount payable, and the payment date.
7.2
Payment.
Upon the payment date specified in such Instructions, the Custodian shall pay out of the money held for the account of such Series
the total amount payable to the dividend agent of the Fund specified therein.
SECTION 8 – TAXES, REPORTS AND RECORDS
8.1
Tax Obligations.
The Fund shall be liable for all taxes, assessments, duties and other governmental charges, including interest and
penalties, with respect to any cash and Securities held on behalf of the Fund and any transaction related thereto. To the extent that the Custodian has received relevant and necessary information with respect to the Account, the Custodian shall
perform the following services with respect to Tax Obligations:
a. The Custodian shall, upon receipt of sufficient information, file
claims for exemptions or refunds with respect to withheld foreign (non-United States) taxes in instances in which such claims are appropriate;
b. The Custodian shall withhold appropriate amounts, as required by United States tax laws, with respect to amounts received on behalf of
nonresident aliens upon receipt of Instructions; and
12
c. The Custodian shall provide to the Fund such information received by the Custodian that could,
in the Custodian’s reasonable belief (or upon Fund request), assist the Fund or its designee in the submission of any reports or returns with respect to Tax Obligations or reclaims. An Authorized Person shall inform the Custodian in writing as
to which party or parties shall receive information from the Custodian.
8.2
Pricing and Other Data.
In providing Market Data related to the
Account in connection with this Agreement, the Custodian is authorized to use Data Providers reasonably believed by Custodian to be reliable to provide such information. The Custodian may follow Authorized Instructions in providing pricing or other
Market Data, even if such instructions direct the Custodian to override its usual procedures and Market Data sources. The Custodian shall be entitled to rely without inquiry on all Market Data (and all Authorized Instructions related to Market Data)
provided to it, and the Custodian shall not be liable for any Losses incurred as a result of errors or omissions with respect to any Market Data utilized by the Custodian or the Fund hereunder. The Fund acknowledges that certain pricing or valuation
information may be based on calculated amounts rather than actual market transactions and may not reflect actual market values, and that the variance between such calculated amounts and actual market values may be material. The Custodian shall not
be required to inquire into the pricing of any Securities or other assets even though the Custodian may receive different prices for the same Securities or assets. Market Data may be the intellectual property of the Data Providers, which may impose
additional terms and conditions upon the Fund’s use of the Market Data. The additional terms and conditions can be found on the Data Terms Website. The Fund agrees to those terms as they are posted in the Data Terms Website from time to time.
Certain Data Providers may not permit the Fund’s directed price to be used. Performance measurement and analytic services may use different data sources than those used by the Custodian to provide Market Data for the Account, with the result
that different prices and other Market Data may apply.
8.3
Statements and Reports.
The Custodian shall make available to the Fund an advice
of daily transactions and a monthly report of all transfers to or from the Accounts and a statement of all holdings in the Accounts as of the last Business Day of each month. The Fund may elect to receive certain information electronically through
the Internet to an email address specified by it for such purpose. By electing to use the Internet for this purpose, the Fund acknowledges that such transmissions are not encrypted and therefore are not secure. The Fund further acknowledges that
there are other risks inherent in communicating through the Internet such as the possibility of virus contamination and disruptions in service, and agrees that the Custodian shall not be responsible for any loss, damage or expense suffered or
incurred by the Fund or any person claiming by or through the Fund as a result of the use of such methods.
8.4
[RESERVED]
8.5
Books and Records.
The books and records pertaining to the Fund which are in possession of the Custodian shall be the property of the Fund.
Such books and records shall be prepared and maintained as required by the ‘40 Act and the rules thereunder. The Fund, or its authorized representatives, shall have access to such books and records during the Custodian’s normal business
hours. Upon the reasonable request of the Fund, copies of any such books and
13
records shall be provided by the Custodian to the Fund or its authorized representative. Upon the reasonable request of the Fund, the Custodian shall provide in hard copy or on computer disc any
records included in any such delivery which are maintained by the Custodian on a computer disc, or are similarly maintained.
8.6
Required Disclosure.
With respect to Securities issued in the United States, the Shareholders Communications Act of 1985 (the “Act”) requires the Custodian to disclose to issuers, upon their request, the name, address and
securities position of the Custodian’s clients who are “beneficial owners” (as defined in the Act) of the issuer’s Securities, unless the beneficial owner objects to such disclosure. The Act defines a “beneficial owner”
as any person who has or shares the power to vote a security (pursuant to an agreement or otherwise) or who directs the voting of a security. The Fund represents that it is the beneficial owner of the Securities. As beneficial owner it has
designated below whether it objects to the disclosure of its name, address and securities position to any U.S. issuer that requests such information pursuant to the Act for the specific purpose of direct communications between such issuer and the
Fund.
With respect to Securities issued outside the United States, the Custodian shall disclose information required by law, regulation, rules of a stock
exchange or organizational documents of an issuer. The Custodian is also authorized to supply any information regarding the Accounts that is required by any law, regulation or rules now or hereafter in effect. The Fund agrees to supply the Custodian
with any required information if it is not otherwise reasonably available to the Custodian.
Pursuant to this Section 8.6, as Beneficial Owner:
[ ] The Fund OBJECTS to disclosure
[ ] The Fund DOES NOT OBJECT to disclosure
IF NO BOX IS CHECKED, THE CUSTODIAN
SHALL RELEASE
SUCH INFORMATION UNTIL IT RECEIVES A CONTRARY INSTRUCTION FROM THE FUND.
8.7
Tools.
From time to time the Custodian may make available to the Fund or its agent(s) certain computer programs, products, services, reports
or information (including, without limitation, information obtained by the Custodian from third parties and information reflecting the Custodian’s input, evaluation and interpretation (collectively, “Tools”). Tools may allow the Fund
or its agent(s) to perform certain analytic, accounting, compliance, reconciliation and other functions with respect to the Account. By way of example, Tools may assist the Fund or its agent(s) in analyzing the performance of investment managers
appointed by the Fund, determining on a post-trade basis whether transactions for the Account comply with the Fund’s investment guidelines, evaluating assets at risk, and performing account reconciliations. Tools may be used only for the
Fund’s internal purposes, and may not be resold, redistributed or otherwise made available to third parties. Tools are the sole and exclusive property of the Custodian and its suppliers. The Fund may not reverse engineer or decompile any
computer programs provided by the Custodian comprising, or provided as a part of, any Tools. Information supplied by third parties may be incorrect or incomplete, and any information, reports, analytics or other services supplied by the Custodian
that rely on information from third parties may also be incorrect or incomplete. All Tools are provided
14
“AS IS”, whether or not they are modified to meet specific needs of the Fund and regardless of whether the Custodian is compensated by the Fund for providing such Tools. THE CUSTODIAN
DISCLAIMS ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE TOOLS, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, TITLE, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE. ANYTHING IN THIS AGREEMENT TO THE CONTRARY
NOTWITHSTANDING, THE CUSTODIAN AND ITS SUPPLIERS SHALL NOT BE LIABLE FOR ANY LOSS, COST, EXPENSE, DAMAGE, LIABILITY OR CLAIM SUFFERED OR INCURRED BY THE FUND, ITS AGENT(S) OR ANY OTHER PERSON AS A RESULT OF USE OF, INABILITY TO USE, OR RELIANCE UPON
ANY TOOLS.
SECTION 9 – PROVISIONS REGARDING THE CUSTODIAN
9.1
Standard of Care
.
In performing its duties under this Agreement, the Custodian shall exercise the standard of care and diligence that a
professional custodian would observe in these affairs.
9.2
Limitation of Duties and Liability
.
Notwithstanding anything contained elsewhere
in this Agreement, the Custodian’s liability hereunder is limited, in instances where it has fulfilled its obligations hereunder in accordance with its standard of care, as follows:
a. The duties of the Custodian shall only be those specifically undertaken pursuant to this Agreement and shall be subject to such other
limits on liability as are set out herein;
b. The Custodian shall not be liable for any Losses incurred by or asserted against Custodian
except those Losses arising out of the Custodian’s negligence or willful misconduct, but only to the extent such Losses constitute direct money damages and Custodian agrees to indemnify the Fund against any such direct money damages arising as
the result of Custodian’s negligence or willful misconduct;
c. The Custodian shall not be responsible for the title, validity or
genuineness of any Securities or evidence of title thereto received by it or delivered by it pursuant to this Agreement or for Securities held hereunder being freely transferable or deliverable without encumbrance in any relevant market;
d. The Custodian shall not be responsible for the failure to receive payment of, or the late payment of, income or other payments due to the
Account;
e. The Custodian shall have no duty to take any action to collect any amount payable on Securities in default or if payment is
refused after due demand and presentment;
f. The Custodian may obtain the advice of outside counsel and shall be fully protected with
respect to anything done or omitted by it in good faith in conformity with such advice;
15
g. The Custodian shall have no duty or responsibility to inquire into, make recommendations,
supervise, or determine the suitability of any transactions affecting any Account and shall have no liability with respect to the Fund’s or an Authorized Person’s decision to invest in Securities or to hold cash in any currency; and
h. The Custodian shall have no responsibility if the rules or procedures imposed by Depositories or Foreign Depositories, exchange controls,
asset freezes or other laws, rules, regulations or orders at any time prohibit or impose burdens or costs on the transfer to, by or for the account of the Fund of Securities or cash.
9.3
Losses.
Under no circumstances shall a party be liable to, or be required to indemnify, the other party, or in the case of the Custodian any
third party, for indirect, consequential or special damages arising in connection with this Agreement.
9.4
Gains.
Where an error or
omission has occurred under this Agreement, the Custodian may take such remedial action as it considers appropriate under the circumstances and, provided that the Fund is put in the same or equivalent position as it would have been in if the error
or omission had not occurred, any favorable consequences of the Custodian’s remedial action shall be solely for the account of the Custodian, without any duty to report to the Fund any loss assumed or benefit received by it as a result of
taking such action.
9.5
Force Majeure
.
Notwithstanding anything in this Agreement to the contrary, the Custodian shall not be responsible
or liable for any failure to perform under this Agreement or for any Losses to the Account resulting from any event beyond the reasonable control of the Custodian, provided that the Custodian has taken commercially reasonable steps to mitigate such
failure.
9.6
Fees.
The Fund shall pay to the Custodian the fees and charges as may be specifically agreed upon from time to time and such
other fees and charges at the Custodian’s standard rates for such services as may be applicable. The Fund shall also reimburse the Custodian for out-of-pocket expenses that are a normal incident of the services provided hereunder.
9.7
Indemnification
.
The Fund shall indemnify and hold harmless the Custodian from and against all Losses, including reasonable counsel fees and
expenses in third party suits and in a successful defense of claims asserted by the Fund, relating to or arising out of the performance of the Custodian’s obligations under this Agreement, except for the Losses resulting from the
Custodian’s negligence or willful misconduct. This provision shall survive the termination of this Agreement.
SECTION 10 –
AMENDMENT; TERMINATION; ASSIGNMENT
10.1
Amendment
.
This Agreement may be amended only by written agreement between the Fund and
the Custodian.
10.2
Termination
.
Either of the parties hereto may terminate this Agreement by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than ninety (90) days after the date of such notice. In the event such notice is given by the Fund, it
16
shall be accompanied by a copy of a resolution of the board of the Fund, certified by the Secretary or any Assistant Secretary, electing to terminate this Agreement and designating a successor
custodian or custodians, each of which shall be a bank or trust company eligible to serve as a custodian of the Fund under the ‘40 Act. In the event such notice is given by Custodian, the Fund shall, on or before the termination date, deliver
to Custodian a copy of a resolution of the board of the Fund, certified by the Secretary or any Assistant Secretary, designating a successor custodian or custodians. In the absence of such designation by the Fund, Custodian may designate a successor
custodian which shall be a bank or trust company eligible to serve as custodian for the Fund under the ‘40 Act. Upon the date set forth in such notice this Agreement shall terminate, and Custodian shall upon receipt of a notice of acceptance by
the successor custodian on that date deliver directly to the successor custodian all Securities and money then owned by the Fund and held by it as Custodian, after deducting all fees, expenses and other amounts for the payment or reimbursement of
which it shall then be entitled.
10.3
Successors and Assigns
.
Neither the Fund nor the Custodian may assign this Agreement without the
prior written consent of the other, except that (i) the Custodian may assign this Agreement to any BNY Mellon Affiliate. Any entity that shall by merger, consolidation, purchase, or otherwise, succeed to substantially all the institutional
custody business of the Custodian shall, upon such succession and without any appointment or other action by the Fund, be and become successor custodian hereunder. The Custodian agrees to provide notice of such successor custodian to the Fund. This
Agreement shall be binding upon, and inure to the benefit of, the Fund and the Custodian and their respective successors and permitted assigns.
SECTION 11 – ADDITIONAL PROVISIONS
11.1
Confidentiality
.
Each party shall keep confidential any information relating to the other party’s business (“Confidential
Information”). Confidential Information shall include (a) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product plans, marketing
strategies, finances, operations, customer relationships, customer profiles, customer lists, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of the Fund or Custodian and
their respective subsidiaries and affiliated companies; (b) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords the
Fund or Custodian a competitive advantage over its competitors; (c) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions,
know-how, and trade secrets, whether or not patentable or copyrightable; and (d) anything designated by the disclosing party as Confidential Information. Notwithstanding the foregoing, information shall not be Confidential Information and shall
not be subject to such confidentiality obligations if: (i) it is necessary for Custodian to release such information in connection with the provision of services under this Agreement; (ii) it is already known to the receiving party at the
time it is obtained; (iii) it is or becomes publicly known or available through no wrongful act of the receiving party; (iv) it is rightfully received from a third party who, to the best of the receiving party’s knowledge, is not
under a duty of confidentiality; (v) it is released by the protected party to a third party without restriction; (vi) it is requested or required to be disclosed pursuant to a subpoena,
17
applicable law, regulation or judicial or regulatory process (each such disclosure a “Required Disclosure”); (vii) it is relevant to the defense of any claim or cause of action
asserted against the receiving party; (viii) it has been or is independently developed or obtained by the receiving party; or it is necessary for Custodian to release such information to Custodian’s internal or external accountants or
legal counsel who are subject to a duty of confidentiality. Other than with respect to supervisory examinations of Custodian by its regulators, Custodian agrees, where the circumstances reasonably permit, and to the extent permitted by law, to
provide the Fund with prior notice of any Required Disclosure. Custodian acknowledges and agrees that in connection with its services under this Agreement it receives non-public confidential portfolio holdings information (“Portfolio
Information”) with respect to the Fund. Custodian agrees that, subject to the foregoing provisions of and the exceptions set forth in this Section 11.1 (other than the exception set forth above in this Section 11.1 as sub-item (i),
which exception set forth in sub-item (i) shall not be applicable to the Fund’s Portfolio Information), Custodian will keep confidential the Fund’s Portfolio Information and will not disclose the Fund’s Portfolio Information
other than pursuant to a written Certificate or Instructions; provided that without the need for such a written Certification or Instructions and notwithstanding any other provision of this Section 11.1 to the contrary, the Fund’s
Portfolio Information may be disclosed to third party pricing services which are engaged by Custodian in connection with the provision of services under this Agreement and which shall be subject to a duty of confidentiality with respect to such
Portfolio Information and to its regulators. Nothing contained herein shall be deemed to prevent Custodian from including certain information related to Securities holdings and Securities transactions in certain internally compiled blind or
aggregated data, provided that such information is used without any attribution, either directly or indirectly by implication.
11.2
Non-Custody
Assets
.
As an accommodation to the Fund, the Custodian may provide consolidated recordkeeping services pursuant to which the Custodian reflects on statements securities and other assets not held by, or under the control of, the Custodian.
Non-Custody Assets shall be designated on Custodian’s books as “shares not held” or by other similar characterization. The Fund acknowledges and agrees that it shall have no security entitlement against the Custodian with respect to
Non-Custody Assets, that the Custodian shall rely, without independent verification, on information provided by the Fund, its designee or the entity having custody regarding Non-Custody Assets (including but not limited to positions and market
valuations), and that the Custodian shall have no responsibility whatsoever with respect to Non-Custody Assets or the accuracy of any information maintained on the Custodian’s books or set forth on account statements concerning Non-Custody
Assets.
11.3
Appropriate Action
.
The Custodian is hereby authorized and empowered, in its sole discretion, to take any action with respect
to an Account that it deems necessary or appropriate in carrying out the purposes of this Agreement.
11.4
Governing Law
.
This
Agreement shall be construed in accordance with and governed by the substantive laws of the state of New York without regard to its conflicts of law provisions. The parties consent to the jurisdiction of a state or federal court situated in New York
City, New York in connection with any dispute hereunder. The Fund irrevocably waives any objection it may now or hereafter have to venue in such court and any claim that a proceeding
18
brought in such court has been brought in an inconvenient forum. The parties hereby expressly waive, to the full extent permitted by applicable law, any right to trial by jury with respect to any
judicial proceeding arising from or related to this Agreement. The parties agree that the establishment and maintenance of the Accounts, and all interests, duties and obligations with respect thereto, shall be governed by the laws of the state of
New York.
11.5
USA PATRIOT Act.
The Fund hereby acknowledges that the Custodian is subject to federal laws, including the Customer
Identification Program (“CIP”) requirements under the USA PATRIOT Act and its implementing regulations, pursuant to which the Custodian must obtain, verify and record information that allows the Custodian to identify the Fund. Accordingly,
prior to opening an Account hereunder, the Custodian will ask the Fund to provide certain information including, but not limited to, the Fund’s name, physical address, tax identification number and other information that will help the Custodian
to identify and verify the Fund’s identity, such as organizational documents, certificate of good standing, license to do business, or other pertinent identifying information. The Fund agrees that the Custodian cannot open an Account hereunder
unless and until the Custodian verifies the Fund’s identity in accordance with the Custodian’s CIP.
11.6
Non-Fiduciary Status
.
The Fund hereby acknowledges and agrees that the Custodian is not a fiduciary by virtue of accepting and carrying out its obligations under this Agreement, is not acting as a collateral agent and has not accepted any fiduciary duties,
responsibilities or liabilities with respect to its services hereunder.
11.7
Fund Obligations.
(1) It is expressly acknowledged and
agreed that the obligations of the Fund hereunder shall not be binding upon any of the shareholders, trustees, officers, employees or agents of the Fund, in their individual capacity, but solely as an agent for the Fund. The execution and delivery
of this Agreement have been authorized by the trustees of the Fund and signed by an officer of the Fund, acting as such, and neither such authorization by the trustees nor such execution and delivery by such officer shall be deemed to have been made
by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Fund as provided in its organizational documents.
(2) The Custodian acknowledges that obligations or liabilities of a Series refer to obligations or liabilities of that Series only and such obligations or
liabilities shall be satisfied only from the assets of such Series and not from the assets of any other Series.
11.8
Notices
.
Notices shall
be in writing and shall be addressed to the Custodian or the Fund at the address set forth on the signature page or such other address as either party may designate in writing to the other. All notices shall be effective upon receipt.
11.9
Entire Agreement
.
This Agreement and any related fee agreement constitute the entire agreement with respect to the matters dealt with
herein, and supersede all previous agreements, whether oral or written, and documents with respect to such matters.
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11.10
Necessary Parties
.
All of the understandings, agreements, representations and warranties
contained herein are solely for the benefit of the Fund and the Custodian, and there are no other parties who are intended to be benefited by this Agreement.
11.11
Execution in Counterparts
.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an
original, and said counterparts when taken together shall constitute but one and the same instrument and may be sufficiently evidenced by one set of counterparts.
11.12
Customer Right of Access
.
BNY Mellon shall, upon Customer’s request, provide Customer with a summary of the results of its latest
SSAE-16 or equivalent control audit prepared by BNY Mellon’s external auditors. In addition and no more than annually, BNY Mellon will participate in Customer’s reasonable information security questionnaire processes. Upon reasonable
request, BNY Mellon will arrange for its relevant subject matter experts to meet with the relevant subject matter experts of Customer once annually to review BNY Mellon’s security controls and any deficiencies identified in the SSAE-16 audit
report. Customer may view BNY Mellon’s security-related policies and procedures, however, no documentation may be copied, shared, transmitted or removed from BNY Mellon premises, except as mutually agreed. The parties shall mutually agree upon
a convenient time and place for such meeting. Not more than once each year, and subject to BNY Mellon’s reasonable security requirements and availability of personnel, BNY Mellon will at Customer’s request arrange a tour of BNY
Mellon’s data processing facilities for Customer’s subject matter experts. BNY Mellon will also, subject to its reasonable security requirements, permit site visits of its data processing facilities by governmental agencies with regulatory
authority over Customer. In the event that the Customer identifies any control deficiencies, BNY Mellon will discuss such findings with Customer and if appropriate the parties shall work together to develop a mutually agreeable remediation plan. All
nonpublic documentation and information disclosed to Customer in accordance with this Section shall be deemed proprietary and confidential information of BNY Mellon. Customer shall not disclose such documentation or information to any third party or
use it for any purpose other than evaluating BNY Mellon’s security controls, except that Customer may disclose BNY Mellon’s SSAE-16 summary to Customer’s external auditors provided that such external auditors are required to maintain
the confidentiality of the summary and any related information. Customer shall reimburse BNY Mellon for any costs and expenses incurred in connection with any review of BNY Mellon’s security controls.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF
, the parties hereto have executed this Agreement as of the date first set forth above.
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Authorized Signer of:
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Authorized Officer of:
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[POWERSHARES]
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THE BANK OF NEW YORK MELLON
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By:
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/s/ Anna Paglia
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By:
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/s/ Peter D. Holland
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Name:
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Anna Paglia
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Name:
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Peter D. Holland
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Title:
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Secretary
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Title:
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Managing Director
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Date:
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June 17, 2013
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Date:
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Address for Notice:
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Address for Notice:
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The Bank of New York Mellon
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PowerShares Capital Management LLC
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c/o BNY Mellon Asset Servicing
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3500 Lacey Road, Suite 700
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Downers Grove, IL 60515
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Attention:
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Anna Paglia
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Attention:
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21
SCHEDULE I
AMENDED AND RESTATED SCHEDULE OF SERIES
The undersigned hereby certifies that he is an authorized signer of each PowerShares trust listed herein, and that the following funds are included under the
Custody Agreement dated June 17, 2013, by and between the such trusts and the Bank of New York Mellon.
June 27, 2017
PowerShares Exchange-Traded Fund Trust
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1.
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PowerShares Aerospace & Defense Portfolio
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2.
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PowerShares BuyBack Achievers
TM
Portfolio
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3.
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PowerShares Cleantech Portfolio
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4.
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PowerShares Dividend Achievers
TM
Portfolio
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5.
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PowerShares DWA Momentum Portfolio
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6.
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PowerShares DWA Basic Materials Momentum Portfolio
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7.
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PowerShares Dynamic Biotechnology & Genome Portfolio
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8.
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PowerShares Dynamic Building & Construction Portfolio
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9.
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PowerShares DWA Consumer Cyclicals Momentum Portfolio
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10.
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PowerShares DWA Consumer Staples Momentum Portfolio
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11.
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PowerShares Dynamic Energy Exploration & Production Portfolio
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12.
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PowerShares DWA Energy Momentum Portfolio
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13.
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PowerShares DWA Financial Momentum Portfolio
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14.
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PowerShares Dynamic Food & Beverage Portfolio
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15.
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PowerShares DWA Healthcare Momentum Portfolio
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16.
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PowerShares DWA Industrials Momentum Portfolio
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17.
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PowerShares Dynamic Large Cap Growth Portfolio
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18.
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PowerShares Russell Top 200 Equal Weight Portfolio
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19.
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PowerShares Dynamic Large Cap Value Portfolio
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20.
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PowerShares Dynamic Leisure and Entertainment Portfolio
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21.
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PowerShares Dynamic Market Portfolio
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22.
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PowerShares Dynamic Media Portfolio
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23.
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PowerShares Russell Midcap Pure Growth Portfolio
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24.
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PowerShares Russell Midcap Equal Weight Portfolio
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25.
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PowerShares Russell Midcap Pure Value Portfolio
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26.
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PowerShares Dynamic Networking Portfolio
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27.
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PowerShares Dynamic Oil & Gas Services Portfolio
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28.
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PowerShares DWA NASDAQ Momentum Portfolio
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29.
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PowerShares Dynamic Pharmaceuticals Portfolio
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30.
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PowerShares Dynamic Retail Portfolio
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31.
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PowerShares Dynamic Semiconductors Portfolio
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32.
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PowerShares Russell 2000 Pure Growth Portfolio
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33.
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PowerShares Russell 2000 Equal Weight Portfolio
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34.
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PowerShares Russell 2000 Pure Value Portfolio
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35.
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PowerShares Dynamic Software Portfolio
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36.
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PowerShares DWA Technology Momentum Portfolio
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37.
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PowerShares DWA Utilities Momentum Portfolio
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38.
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PowerShares Financial Preferred Portfolio
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39.
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PowerShares FTSE RAFI US 1000 Portfolio
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40.
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PowerShares FTSE RAFI US 1500
Small-Mid
Portfolio
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41.
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PowerShares Russell Top 200 Pure Growth Portfolio
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42.
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PowerShares Russell Top 200 Pure Value Portfolio
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43.
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PowerShares Global Listed Private Equity Portfolio
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44.
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PowerShares Golden Dragon China Portfolio
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45.
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PowerShares High Yield Equity Dividend Achievers Portfolio
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46.
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PowerShares International Dividend Achievers Portfolio
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47.
|
PowerShares NASDAQ Internet Portfolio
|
|
48.
|
PowerShares S&P 500
®
BuyWrite Portfolio
|
|
49.
|
PowerShares S&P 500
®
Quality Portfolio
|
|
50.
|
PowerShares Water Resources Portfolio
|
|
51.
|
PowerShares Wilderhill Clean Energy Portfolio
|
|
52.
|
PowerShares Wilderhill Progressive Energy Portfolio
|
|
53.
|
PowerShares Zacks Micro Cap Portfolio
|
PowerShares Exchange-Traded Fund Trust II
|
1.
|
PowerShares
1-30
Laddered Treasury Portfolio
|
|
2.
|
PowerShares CEF Income Composite Portfolio
|
|
3.
|
PowerShares Contrarian Opportunities Portfolio
|
|
4.
|
PowerShares Chinese Yuan Dim Sum Bond Portfolio
|
|
5.
|
PowerShares Developed EuroPacific Currency Hedged Low Volatility Portfolio
|
|
6.
|
PowerShares DWA Developed Markets Momentum Portfolio
|
|
7.
|
PowerShares DWA Emerging Markets Momentum Portfolio
|
|
8.
|
PowerShares DWA Momentum & Low Volatility Rotation Portfolio
|
|
9.
|
PowerShares DWA SmallCap Momentum Portfolio
|
|
10.
|
PowerShares DWA Tactical International Rotation Portfolio
|
|
11.
|
PowerShares DWA Tactical Multi-Asset Income Portfolio
|
|
12.
|
PowerShares DWA Tactical Sector Rotation Portfolio
|
|
13.
|
PowerShares Emerging Markets Currency Hedged Low Volatility Portfolio
|
|
14.
|
PowerShares Emerging Markets Infrastructure Portfolio
|
|
15.
|
PowerShares Emerging Markets Sovereign Debt Portfolio
|
|
16.
|
PowerShares Europe Currency Hedged Low Volatility Portfolio
|
|
17.
|
PowerShares FTSE RAFI Asia Pacific
ex-Japan
Portfolio
|
|
18.
|
PowerShares FTSE RAFI Developed Markets
ex-U.S.
Portfolio
|
|
19.
|
PowerShares FTSE RAFI Developed Markets
ex-U.S.
Small-Mid
Portfolio
|
|
20.
|
PowerShares FTSE RAFI Emerging Markets Portfolio
|
|
21.
|
PowerShares FTSE International Low Beta Equal Weight Portfolio
|
|
22.
|
PowerShares Fundamental High Yield
®
Corporate Bond Portfolio
|
|
23.
|
PowerShares Fundamental Investment Grade Corporate Bond Portfolio
|
|
24.
|
PowerShares Global Agriculture Portfolio
|
|
25.
|
PowerShares Global Clean Energy Portfolio
|
|
26.
|
PowerShares Global Gold and Precious Metals Portfolio
|
|
27.
|
PowerShares Global Short Term High Yield Bond Portfolio
|
|
28.
|
PowerShares Global Water Portfolio
|
|
29.
|
PowerShares California
AMT-Free
Municipal Bond Portfolio
|
|
30.
|
PowerShares National
AMT-Free
Municipal Bond Portfolio
|
|
31.
|
PowerShares New York
AMT-Free
Municipal Bond Portfolio
|
|
32.
|
PowerShares International BuyBack Achievers
TM
Portfolio
|
|
33.
|
PowerShares International Corporate Bond Portfolio
|
|
34.
|
PowerShares Japan Currency Hedged Low Volatility Portfolio
|
|
35.
|
PowerShares LadderRite
0-5
Year Corporate Bond Portfolio
|
|
36.
|
PowerShares KBW Bank Portfolio
|
|
37.
|
PowerShares KBW High Dividend Yield Financial Portfolio
|
|
38.
|
PowerShares KBW Premium Yield Equity REIT Portfolio
|
|
39.
|
PowerShares KBW Property & Casualty Insurance Portfolio
|
|
40.
|
PowerShares KBW Regional Banking Portfolio
|
|
41.
|
PowerShares Preferred Portfolio
|
|
42.
|
PowerShares PureBeta FTSE Developed
ex-North
America Portfolio
|
|
43.
|
PowerShares PureBeta FTSE Emerging Markets Portfolio
|
|
44.
|
PowerShares PureBeta MSCI USA Portfolio
|
|
45.
|
PowerShares PureBeta MSCI USA Small Cap Portfolio
|
|
46.
|
PowerShares PureBeta US Aggregate Bond Portfolio
|
|
47.
|
PowerShares PureBeta
0-5
Yr US TIPS Portfolio
|
|
48.
|
PowerShares Russell 1000 Enhanced Equal Weight Portfolio
|
|
49.
|
PowerShares Russell 1000 Equal Weight Portfolio
|
|
50.
|
PowerShares Russell 1000 Low Beta Equal Weight Portfolio
|
|
51.
|
PowerShares S&P 500
ex-Rate
Sensitive Low Volatility Portfolio
|
|
52.
|
PowerShares S&P 500
®
High Beta Portfolio
|
|
53.
|
PowerShares S&P 500
®
High Dividend Low Volatility Portfolio
|
|
54.
|
PowerShares S&P 500
®
Low Volatility Portfolio
|
|
55.
|
PowerShares S&P 500 Minimum Variance Portfolio
|
|
56.
|
PowerShares S&P 500 Momentum Portfolio
|
|
57.
|
PowerShares S&P 500 Value Portfolio
|
|
58.
|
PowerShares S&P 500 Value With Momentum Portfolio
|
|
59.
|
PowerShares S&P Emerging Markets Momentum Portfolio
|
|
60.
|
PowerShares S&P Emerging Markets Low Volatility Portfolio
|
|
61.
|
PowerShares S&P International Developed High Dividend Low Volatility Portfolio
|
|
62.
|
PowerShares S&P International Developed Momentum Portfolio
|
|
63.
|
PowerShares S&P International Developed Low Volatility Portfolio
|
|
64.
|
PowerShares S&P International Developed Quality Portfolio
|
|
65.
|
PowerShares S&P MidCap Low Volatility Portfolio
|
|
66.
|
PowerShares S&P SmallCap Consumer Discretionary Portfolio
|
|
67.
|
PowerShares S&P SmallCap Consumer Staples Portfolio
|
|
68.
|
PowerShares S&P SmallCap Energy Portfolio
|
|
69.
|
PowerShares S&P SmallCap Financials Portfolio
|
|
70.
|
PowerShares S&P SmallCap Health Care Portfolio
|
|
71.
|
PowerShares S&P SmallCap High Dividend Low Volatility Portfolio
|
|
72.
|
PowerShares S&P SmallCap Industrials Portfolio
|
|
73.
|
PowerShares S&P SmallCap Information Technology Portfolio
|
|
74.
|
PowerShares S&P SmallCap Low Volatility Portfolio
|
|
75.
|
PowerShares S&P SmallCap Materials Portfolio
|
|
76.
|
PowerShares S&P SmallCap Quality Portfolio
|
|
77.
|
PowerShares S&P SmallCap Utilities Portfolio
|
|
78.
|
PowerShares Senior Loan Portfolio
|
|
79.
|
PowerShares Taxable Municipal Bond Portfolio
|
|
80.
|
PowerShares Treasury Collateral Portfolio
|
|
81.
|
PowerShares Variable Rate Preferred Portfolio
|
|
82.
|
PowerShares VRDO
Tax-Free
Weekly Portfolio
|
PowerShares Actively
Managed Exchange-Traded Fund Trust
|
1.
|
PowerShares Active U.S. Real Estate Fund
|
|
2.
|
PowerShares Balanced Multi-Asset Allocation Portfolio
|
|
3.
|
PowerShares Conservative Multi-Asset Allocation Portfolio
|
|
4.
|
PowerShares Government Collateral Pledge Portfolio
|
|
5.
|
PowerShares Growth Multi-Asset Allocation Portfolio
|
|
6.
|
PowerShares Moderately Conservative Multi-Asset Allocation Portfolio
|
|
7.
|
PowerShares Multi-Strategy Alternative Portfolio
|
|
8.
|
PowerShares S&P 500
®
Downside Hedged Portfolio
|
|
9.
|
PowerShares Variable Rate Investment Grade Portfolio
|
PowerShares Actively Managed Exchange-Traded
Commodity Fund Trust
|
1.
|
PowerShares Agriculture Commodity Strategy No
K-1
Portfolio
|
|
2.
|
PowerShares Base Metals Commodity Strategy No
K-1
Portfolio
|
|
3.
|
PowerShares Bloomberg Commodity Strategy Portfolio
|
|
4.
|
PowerShares Optimum Yield Diversified Commodity Strategy No
K-1Portfolio
|
|
5.
|
PowerShares Energy Commodity Strategy No
K-1
Portfolio
|
|
|
|
|
|
THE BANK OF NEW YORK MELLON
|
|
|
|
|
By:
|
|
|
|
(signature)
|
|
|
|
|
|
(name)
|
|
|
|
|
|
(title)
|
|
|
|
|
|
POWERSHARES EXCHANGE-TRADED FUND TRUST
|
|
|
|
|
By:
|
|
|
|
(signature)
|
|
|
|
Dan Draper
|
|
(name)
|
|
|
|
President
|
|
(title)
|
|
|
|
|
|
POWERSHARES EXCHANGE-TRADED FUND TRUST II
|
|
|
|
|
By:
|
|
|
|
(signature)
|
|
|
|
Dan Draper
|
|
(name)
|
|
|
|
President
|
|
(title)
|
|
|
|
|
|
POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED FUND TRUST
|
|
|
|
|
By:
|
|
|
|
(signature)
|
|
|
|
Dan Draper
|
|
(name)
|
|
|
|
President
|
|
(title)
|
|
|
|
|
|
POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED COMMODITY FUND TRUST
|
|
|
|
|
By:
|
|
|
|
(signature)
|
|
|
|
Dan Draper
|
|
(name)
|
|
|
|
President
|
|
(title)
|
Exhibit (h)(1)
AMENDED AND RESTATED
FUND ADMINISTRATION AND ACCOUNTING AGREEMENT
THIS AGREEMENT is made as of June 17, 2013 by and between PowerShares Exchange-Traded Fund Trust II (the “Trust”, with each series thereof, a
“Fund”) and The Bank of New York Mellon, a New York banking organization (“BNY Mellon”).
W
I
T
N
E
S
S
E
T
H
:
WHEREAS, the Trust is an investment company registered under the Investment Company Act
of 1940, as amended; and
WHEREAS, the Trust desires to retain BNY Mellon to provide for the Funds identified on Exhibit A hereto, as amended from time to
time, the services described herein, and BNY Mellon is willing to provide such services, all as more fully set forth below;
NOW, THEREFORE, in
consideration of the mutual promises and agreements contained herein, the parties hereby agree as follows:
1.
Definitions
.
Whenever used in this Agreement, unless the context otherwise requires, the following words shall have the meanings set forth below:
“
1933 Act
” means the Securities Act of 1933, as amended.
“
1934 Act
” means the Securities Exchange Act of 1934, as amended.
“
1940 Act
” means the Investment Company Act of 1940, as amended.
“
Authorized Person
” shall mean each person, whether or not an officer or an employee of the Trust, duly authorized by the Board to execute
this Agreement and to give Instructions on behalf of the Trust as set forth in Exhibit B hereto and each Authorized Person’s scope of authority may be limited by setting forth such limitation in a written document signed by both parties hereto.
From time to time the Trust may deliver a new Exhibit B to add or delete any person and BNY Mellon shall be entitled to rely on the last Exhibit B actually received by BNY Mellon.
1
“
BNY Mellon Affiliate
” shall mean any office, branch, or subsidiary of The Bank of New York
Mellon Corporation.
“
Board
” shall mean the Trust’s board of trustees.
“
Confidential Information
” shall have the meaning given in Section 20 of this Agreement.
“
Documents
” shall mean such other documents, including, but not limited to, Board resolutions, including resolutions of the Trust’s
Board authorizing the execution, delivery and performance of this Agreement by the Trust, and opinions of outside counsel, as BNY Mellon may reasonably request from time to time, in connection with its provision of services under this Agreement.
“
Instructions
” shall mean Oral Instructions or written communications actually received by BNY Mellon by S.W.I.F.T., tested telex,
letter, facsimile transmission, or other method or system specified by BNY Mellon as available for use in connection with the services hereunder, from an Authorized Person or person believed in good faith to be an Authorized Person.
“
Investment Advisor
” shall mean the entity identified by the Trust to BNY Mellon as the entity having investment responsibility with respect
to the Funds.
“
Net Asset Value
” shall mean the per share value of a Trust, calculated in the manner described in the Trust’s
Offering Materials.
“
Offering Materials
” shall mean the Trust’s currently effective prospectus and most recently filed registration
statement with the SEC relating to shares of the Trust.
2
“
Organizational Documents
” shall mean certified copies of a Trust’s articles of
incorporation, certificate of incorporation, certificate of formation or organization, certificate of limited partnership, declaration of Trust, by-laws, limited partnership agreement, memorandum of association, limited liability company agreement,
operating agreement, confidential offering memorandum, material contracts, Offering Materials, all SEC exemptive orders issued to a Trust, required filings or similar documents of formation or organization, as applicable, delivered to and received
by BNY Mellon.
“
Oral Instructions
” shall mean oral instructions received by BNY Mellon under permissible circumstances specified by BNY
Mellon, in its sole discretion, as being from an Authorized Person or person believed in good faith by BNY Mellon to be an Authorized Person.
“
SEC
” means the United States Securities and Exchange Commission.
“
Securities Laws
” means the 1933 Act, the 1934 Act and the 1940 Act, and the Rules thereunder.
“
Shares
” means the shares of beneficial interest of any series or class of the Trust.
2.
Appointment
.
The Trust hereby appoints BNY Mellon as
its agent for the term of this Agreement to perform the services described herein. BNY Mellon hereby accepts such appointment and agrees to perform the duties hereinafter set forth.
3.
Representations and Warranties
.
The Trust, on behalf
of itself and each Fund, hereby represents and warrants to BNY Mellon, which representations and warranties shall be deemed to be continuing, that:
(a) It is organized and existing under the laws of the jurisdiction of its organization, with full power to carry on its business as now
conducted, to enter into this Agreement and to perform its obligations hereunder;
3
(b) This Agreement has been duly authorized, executed and delivered by the Trust in accordance
with all requisite action of the Board and constitutes a valid and legally binding obligation of the Trust, enforceable in accordance with its terms;
(c) The Trust is conducting its business in compliance with all applicable laws and regulations, both state and federal, has made and will
continue to make all necessary filings including tax filings and has obtained all regulatory licenses, approvals and consents necessary to carry on its business as now conducted; there is no statute, regulation, rule, order or judgment binding on it
and no provision of its Organizational Documents, nor of any mortgage, indenture, credit agreement or other contract binding on it or affecting its property which would prohibit its execution or performance of this Agreement;
(d) The terms of this Agreement, the fees and expenses associated with this Agreement and any benefits accruing to BNY Mellon or to the
Investment Advisor or to a sponsor or any affiliate of the Trust in connection with this Agreement, including but not limited to any fee waivers, conversion cost reimbursements, signing payments or other payments made or to be made by BNY Mellon to
such Investment Advisor or sponsor or any affiliate of the Trust relating to this Agreement have been fully disclosed to the Board of the Trust and that, if required by applicable law, such Board has approved or will approve the terms of this
Agreement, any such fees and expenses and any such benefits;
(e) Each person named on Exhibit B hereto is duly authorized by such Trust
to be an Authorized Person hereunder;
4
(f) To the extent the performance of any services described in Schedule I attached hereto by BNY Mellon in
accordance with the then effective Offering Materials for the Trust would violate any applicable laws or regulations, the Trust shall immediately so notify BNY Mellon in writing and thereafter shall either furnish BNY Mellon with the appropriate
values of securities, Net Asset Value or other computation, as the case may be, or, subject to the prior approval of BNY Mellon, which such approval shall not be unreasonably withheld, instruct BNY Mellon in writing to value securities and/or
compute Net Asset Value or other computations in a manner the Trust specifies in writing, and either the furnishing of such values or the giving of such instructions shall constitute a representation by the Trust that the same is consistent with all
applicable laws and regulations and with its Offering Materials;
(g) The Trusts shall promptly notify BNY Mellon in writing of any and all legal
proceedings or securities investigations filed or commenced against the Trust or any Fund, the Investment Advisor, if related to its advisory services, or the Board; and
(i) The Trust acknowledges for itself and its users that certain information provided by BNY Mellon on its websites may be protected by copyrights,
trademarks, service marks and/or other intellectual property rights, and as such, agrees that all such information provided is for the sole and exclusive use of the Trust and its users. Certain information is supplied to BNY Mellon pursuant to third
party licensing agreements which restrict the use of such information and protect the proprietary rights of the appropriate licensor (“Licensor”) with respect to such information. Therefore, the Trust, on behalf of itself and its users,
further agrees not to disclose, disseminate, reproduce, redistribute or republish information provided by BNY Mellon on its web sites in any way without the express written permission of BNY Mellon and the Licensor (Licensor permission to be
obtained by BNY Mellon prior to BNY Mellon providing its permission).
5
4.
Delivery of Documents
.
The Trust shall promptly provide, deliver, or cause to be delivered from time to time, to BNY Mellon the Trust’s Organizational Documents, Documents and
other materials used in the distribution of Shares and all amendments thereto as may be reasonably necessary for BNY Mellon to perform its duties hereunder. BNY Mellon shall not be deemed to have notice of any information (other than information
supplied by BNY Mellon) contained in such Organizational Documents, Documents or other materials until they are actually received by BNY Mellon.
5.
Duties and Obligations of BNY Mellon
.
(a) Subject to the direction and supervision of the Trust’s Board and the provisions of
this Agreement, BNY Mellon shall provide to the Trust, and to each Fund as applicable, the administrative services and the valuation and computation services listed on Schedule I attached hereto.
(b) In performing hereunder, BNY Mellon shall provide, at its expense, office space, facilities, equipment and personnel.
(c) BNY Mellon shall not provide any services relating to the management, investment advisory or sub-advisory functions of the Trust,
distribution of shares of the Trust, maintenance of the Trust’s financial records (except to the extent specifically set forth herein) or other services normally performed by the Trusts’ respective counselor independent auditors and the
services provided by BNY Mellon do not constitute, nor shall they be construed as constituting, legal advice or the provision of legal services for or on behalf of the Trust or any other person, and the Trust acknowledges that BNY Mellon does not
provide public accounting
6
or auditing services or advice and will not be making any tax filings, or doing any tax reporting on its behalf, other than those specifically agreed to hereunder. The scope of services provided
by BNY Mellon under this Agreement shall not be increased as a result of new or revised regulatory or other requirements that may become applicable with respect to the Trust, unless the parties hereto expressly agree in writing to any such increase
in the scope of services.
(d) The Trust shall cause its officers, advisors, sponsor, distributor, legal counsel, independent auditors and
accountants, current administrator (if any), transfer agent, and any other service provider to cooperate with BNY Mellon and to provide BNY Mellon, upon request, with such information, documents and advice relating to the Trust as is within the
possession or knowledge of such persons, and which in the opinion of BNY Mellon, is necessary in order to enable BNY Mellon to perform its duties hereunder. In connection with its duties hereunder, BNY Mellon shall not be responsible for, under any
duty to inquire into, or be deemed to make any assurances with respect to the accuracy, validity or propriety of any information, documents or advice provided to BNY Mellon by any of the aforementioned persons. BNY Mellon shall not be liable for any
loss, damage or expense resulting from or arising out of the failure of the Trust to cause any information, documents or advice to be provided to BNY Mellon as provided herein and shall be held harmless by the Trust when acting in reliance upon such
information, documents or advice relating to the Trust. All fees or costs charged by such persons shall be borne by the Trust, and BNY Mellon shall have no liability with respect to such fees or charges, including any increases in, or additions to,
such fees or charges related directly or indirectly to the services hereunder or the performance by BNY Mellon of its duties hereunder.
7
(e) Nothing in this Agreement shall limit or restrict BNY Mellon, any BNY Mellon Affiliate or any
officer or employee thereof from acting for or with any third parties, and providing services similar or identical to same or all of the services provided hereunder.
(f) The Trust shall furnish BNY Mellon with any and all instructions, explanations, information, specifications and documentation deemed
necessary by BNY Mellon in the performance of its duties hereunder, including, without limitation, the amounts or written formula for calculating the amounts and times of accrual of Trust liabilities and expenses, and the value of any securities
lending related collateral investment account(s). BNY Mellon shall not be required to include as Trust liabilities and expenses, nor as a reduction of Net Asset Value, any accrual for any federal, state, or foreign income taxes unless the Trust
shall have specified to BNY Mellon in Instructions the precise amount of the same to be included in liabilities and expenses or used to reduce Net Asset Value. The Trust, within the times required hereunder or in accordance with any service level
description, shall also furnish BNY Mellon with bid, offer, or market values of securities if BNY Mellon notifies the Trust that same are not available to BNY Mellon from a security pricing or similar service utilized, or subscribed to, by BNY
Mellon which the Trust directs BNY Mellon to utilize, and which BNY Mellon in its judgment deems reliable at the time such information is required for calculations hereunder. At any time and from time to time, the Trust also may furnish BNY Mellon
with bid, offer, or market values of securities and instruct BNY Mellon in Instructions to use such information in its calculations hereunder. BNY Mellon shall at no time be required or obligated to commence or maintain any utilization of, or
subscriptions to, any securities pricing or similar service. In no event shall BNY Mellon be required to determine, or have any obligations with respect to, whether a market price represents any fair or true value, nor to adjust any price to reflect
any
8
events or announcements, including, without limitation, those with respect to the issuer thereof, it being agreed that all such determinations and considerations shall be solely for the Trust and
its Funds.
(g) BNY Mellon may apply to an Authorized Person of the Trust for Instructions with respect to any matter arising in
connection with BNY Mellon’s performance hereunder for the Trust and its Funds, and BNY Mellon shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with such Instructions. Such application for
Instructions may, at the option of BNY Mellon, set forth in writing any action proposed to be taken or omitted to be taken by BNY Mellon with respect to its duties or obligations under this Agreement and the date on and/or after which such action
shall be taken. BNY Mellon shall not be liable for any action taken or omitted to be taken in accordance with a proposal included in any such application on or after the date specified therein unless, prior to taking or omitting to take any such
action, BNY Mellon has received Instructions from an Authorized Person in response to such application specifying the action to be taken or omitted.
(h) BNY Mellon may consult with counsel to the Trust or its own counsel, at the Trust’s reasonable expense not to exceed $10,000 for any
such consultation, and shall be fully protected with respect to anything done or omitted by it in good faith without negligence or willful misconduct in accordance with the advice or opinion of such counsel.
(i) Notwithstanding any other provision contained in this Agreement or Schedule I attached hereto, BNY Mellon shall have no duty or obligation
with respect to, including, without limitation, any duty or obligation to determine, or advise or notify the Trust of: (i) the taxable nature of any distribution or amount received or deemed received by, or payable to, the Trust, (ii) the
taxable nature or effect on the Trust or its shareholders of any
9
corporate actions, class actions, tax reclaims, tax refunds or similar events, (iii) the taxable nature or taxable amount of any distribution or dividend paid, payable or deemed paid, by the
Trust to its shareholders; or (iv) the effect under any federal, state, or foreign income tax laws of the Trust making or not making any distribution or dividend payment, or any election with respect thereto. Further, BNY Mellon is not
responsible for the identification of securities requiring U.S. tax treatment that differs from treatment under U.S. generally accepted accounting principles. BNY Mellon is solely responsible for processing such securities, as identified by the
Trust or its Authorized Persons, in accordance with U.S. tax laws and regulations.
(j) BNY Mellon shall have no duties or
responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agreement and Schedule I attached hereto, and no covenant or obligation shall be implied against BNY Mellon in connection with this Agreement.
(k) BNY Mellon, in performing the services required of it under the terms of this Agreement, shall be entitled to rely fully on the
accuracy and validity of any and all Instructions, explanations, information, specifications, Documents and documentation furnished to it by any Authorized Person and, unless provided with or otherwise informed by an Authorized Person that such
Instructions, explanations, information, specifications, Documents or documentation have been revised, amended or superceded, shall have no duty or obligation to review the accuracy, validity or propriety of such Instructions, explanations,
information, specifications, Documents or documentation, including, without limitation, evaluations of securities; the amounts or formula for calculating the amounts and times of accrual of the Funds’ liabilities and expenses; the amounts
receivable and the amounts payable on the sale or purchase of securities; and amounts receivable or amounts payable for the sale or redemption of Trust
10
Shares effected by or on behalf of a Trust. In the event BNY Mellon’s computations hereunder rely, in whole or in part, upon information, including, without limitation, bid, offer or market
values of securities or other assets, or accruals of interest or earnings thereon, from a pricing or similar service utilized, or subscribed to, by BNY Mellon which the Trust directs BNY Mellon to utilize, and which BNY Mellon in its reasonable
judgment deems reliable, BNY Mellon shall not be responsible for, under any duty to inquire into, or deemed to make any assurances with respect to, the accuracy or completeness of such information. Without limiting the generality of the foregoing,
BNY Mellon shall not be required to inquire into any valuation of securities or other assets by the Trust or any third party described in this sub-section (k) even though BNY Mellon in performing services similar to the services provided
pursuant to this Agreement for others may receive different valuations of the same or different securities of the same issuers.
(l) BNY
Mellon, in performing the services required of it under the terms of this Agreement, shall not be responsible for determining whether any interest accruable to the Trust is or will be actually paid, but will accrue such interest until otherwise
instructed by the Trust.
(m) BNY Mellon shall not be responsible for damages (including without limitation damages caused by delays,
failure, errors, interruption or loss of data) which occur directly or indirectly by reason of circumstances beyond its reasonable control in the performance of its duties under this Agreement, including, without limitation, labor difficulties
within or without BNY Mellon, mechanical breakdowns, flood or catastrophe, acts of God, failures of transportation, interruptions, loss, or malfunctions of utilities, action or inaction of civil or military authority, national emergencies, public
enemy, war, terrorism, riot, sabotage, non-performance by a third party, failure of the mails, communications, computer (hardware or
11
software) services, or functions or malfunctions of the internet, firewalls, encryption systems or security devices caused by any of the above. Nor shall BNY Mellon be responsible for delays or
failures to supply the information or services specified in this Agreement where such delays or failures are caused by the failure of any person(s) other than BNY Mellon to supply any instructions, explanations, information, specifications or
documentation deemed necessary by BNY Mellon in the performance of its duties under this Agreement. BNY Mellon shall have a duty to mitigate the damages contemplated by this Section 5(m) where it is reasonably able to do so.
(n) BNY Mellon shall provide internally, or shall enter into and shall maintain in effect with appropriate parties one or more agreements
making reasonable provisions for emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, BNY Mellon shall, at no additional expense to the Trust, take reasonable
steps to minimize service interruptions. Provided BNY Mellon has acted with the reasonable care and due diligence of persons acting in a similar capacity, BNY Mellon shall have no liability with respect to the loss of data or service interruptions
caused by equipment failure, provided such loss or interruption is not caused by BNY Mellon’s own intentional misconduct, bad faith or reckless disregard in the performance of its duties under this Agreement.
6.
Allocation of Expenses
.
Except as otherwise provided
herein, all costs and expenses of the Trust, or Funds, arising or incurred in connection with the performance of this Agreement shall be paid by the Trust or the appropriate Fund to which the expense is allocable, including but not limited to,
organizational costs and costs of maintaining corporate existence, taxes, interest, brokerage fees
12
and commissions, insurance premiums, compensation and expenses of the Trust’s trustees, directors, officers or employees, legal, accounting and audit expenses, management, advisory,
sub-advisory, administration and shareholder servicing fees, charges of custodians, transfer and dividend disbursing agents, expenses (including clerical expenses) incident to the Issuance, redemption or repurchase of Trust shares or membership
interests, as applicable, fees and expenses incident to the registration or qualification under the Securities Laws, state or other applicable securities laws of the Trust or its shares or membership interests, as applicable, costs (including
printing and mailing costs) of preparing and distributing Offering Materials, reports, notices and proxy material to the Trust’s shareholders or members, as applicable, all expenses incidental to holding meetings of the Trust’s trustees,
directors and shareholders, and extraordinary expenses as may arise, including litigation affecting the Trust and legal obligations relating thereto for which the Trust may have to indemnify its trustees, directors, and/or officers, as may be
applicable.
7.
Portfolio Compliance Services
.
(a) If Schedule I contains a requirement for BNY Mellon to provide the Trust with portfolio compliance services, such services shall be
provided pursuant to the terms of this Section 7 (the “Portfolio Compliance Services”). The precise compliance review and testing services to be provided shall be as mutually agreed between BNY Mellon and the Trust, and the results of
BNY Mellon’s Portfolio Compliance Services shall be detailed in a portfolio compliance summary report (the “Compliance Summary Report”) prepared on a periodic basis as mutually agreed. Each Compliance Summary Report shall be subject
to review and approval by the Trust. BNY Mellon shall have no responsibility or obligation to provide Portfolio Compliance Services other that those services specifically listed in Schedule I.
13
(b) The Trust will examine each Compliance Summary Report delivered to it by BNY Mellon and
notify BNY Mellon of any error, omission or discrepancy within ten (l0) days of its receipt. The Trust acknowledges that unless it notifies BNY Mellon of any error, omission or discrepancy within 10 days, such Compliance Summary Report shall be
deemed final and shall not be reissued. If the Trust learns of any out-of-compliance condition before receiving a Compliance Summary Report reflecting such condition, the Trust will notify BNY Mellon of such condition within one (1) business
day after discovery thereof.
(c) While BNY Mellon will endeavor to identify out-of-compliance conditions, BNY Mellon does not and could
not for the fees charged, make any guarantees, representations or warranties with respect to its ability to identify all such conditions. In the event of any errors or omissions in the performance of Portfolio Compliance Services not attributable to
BNY Mellon’s negligence or willful misconduct, the Trust’s sole and exclusive remedy and BNY Mellon’s sole liability shall be limited to re-performance by BNY Mellon of the Portfolio Compliance Services affected and in connection
therewith the correction of any error or omission, if practicable and the preparation of a corrected report, at no cost to the Trust.
8.
Standard of
Care; Indemnification
.
(a) Except as otherwise provided herein, BNY Mellon and any BNY Mellon Affiliate shall not be liable for any
costs, expenses, damages, liabilities or claims (including attorneys’ and accountants’ fees) incurred by or asserted against the Trust, except those costs, expenses, damages, liabilities or claims arising out of BNY Mellon’s own bad
faith, negligence or willful misconduct. In no event shall BNY Mellon or any BNY Mellon Affiliate be liable to the Trust or any third party for any special, indirect or consequential damages, or lost profits or loss of business, arising under or in
connection with this Agreement, even if previously informed
14
of the possibility of such damages and regardless of the form of action, but BNY Mellon shall indemnify the Trust against direct money damages arising out of BNY Mellon’s own bad faith,
negligence or willful misconduct. BNY Mellon and any BNY Mellon Affiliate shall 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 hereunder, including its actions or omissions, the incompleteness or inaccuracy of any specifications or other information furnished by the Trust, or for delays caused by circumstances beyond BNY
Mellon’s control, unless such loss, damage or expense arises out of the bad faith, negligence or willful misconduct of BNY Mellon.
(b) The Trust shall indemnify and hold harmless BNY Mellon and any BNY Mellon Affiliate from and against any and all costs, expenses, damages,
liabilities and claims (including claims asserted by the Trust), and reasonable attorneys’ and accountants’ fees relating thereto, which are sustained or incurred or which may be asserted against BNY Mellon or any BNY Mellon Affiliate, by
reason of or as a result of any action taken or omitted to be taken by BNY Mellon or any BNY Mellon Affiliate without bad faith, negligence, or willful misconduct 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 Trust’s Offering Materials or Documents (excluding information provided by BNY Mellon), (iii) any Instructions, or (iv) any opinion of
legal counsel for the Trust or BNY Mellon, or arising out of transactions or other activities of the Trust which occurred prior to the commencement of this Agreement;
provided
, that the Trust shall not indemnify BNY Mellon or any BNY Mellon
Affiliate for costs, expenses, damages, liabilities or claims for which BNY Mellon or any BNY Mellon Affiliate is liable under the preceding sub-section 8(a). This indemnity shall be a continuing obligation of
15
the Trust, its successors and assigns, notwithstanding the termination of this Agreement. Without limiting the generality of the foregoing, the Trust shall indemnify BNY Mellon and any BNY Mellon
Affiliate against and save BNY Mellon and any BNY Mellon Affiliate 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 BNY Mellon by any third party described above or by or on behalf of the Trust;
II. Action or inaction taken or omitted
to be taken by BNY Mellon or any BNY Mellon Affiliate pursuant to Instructions of the Trust or otherwise without negligence or willful misconduct;
III. Any action taken or omitted to be taken by BNY Mellon in good faith in accordance with the advice or opinion of counsel for the Trust or
its own counsel;
IV. Any improper use by the Trust or its agents, distributor or investment advisor of any valuations or computations
supplied by BNY Mellon pursuant to this Agreement;
V. The method of valuation of the securities and the method of computing each
Funds’ Net Asset Value; or
VI. Any valuations of securities, other assets, or the Net Asset Value provided by the Trust.
(c) Actions taken or omitted in reliance on Instructions or upon any information, order, indenture, stock certificate, membership certificate,
power of attorney, assignment, affidavit or other instrument believed by BNY Mellon in good faith to be from an Authorized Person, or upon the opinion of legal counsel for the Trust or its own counsel, shall be conclusively presumed to have been
taken or omitted in good faith.
16
9.
Compensation
.
For the services provided hereunder, the Trust agrees to pay BNY Mellon such compensation as is mutually agreed to in writing by the Trust and BNY Mellon from
time to time and such reasonable out-of-pocket expenses (
e.g.
, telecommunication charges, postage and delivery charges, costs of independent compliance reviews, record retention costs, reproduction charges and transportation and lodging
costs) as are incurred by BNY Mellon in performing its duties hereunder. Except as hereinafter set forth, compensation shall be calculated and accrued daily and paid monthly. The Trust authorizes BNY Mellon to debit the Trust’s custody account
for all amounts due and payable hereunder. BNY Mellon shall deliver to the Trust invoices for services rendered after debiting the Trust’s custody account with an indication that payment has been made. Upon termination of this Agreement before
the end of any month, the compensation for such part of a month shall be prorated according to the proportion which such period bears to the full monthly period and shall be payable upon the effective date of termination of this Agreement. For the
purpose of determining compensation payable to BNY Mellon, the Trust’s Net Asset Value shall be computed at the times and in the manner specified in the Trust’s Offering Materials.
10.
Records; Visits
.
(a) The books and
records pertaining to the Trust and the Trust’s Funds which are in the possession or under the control of BNY Mellon shall be the property of the Trust. The Trust and Authorized Persons shall have access to such books and records at all times
during BNY Mellon’s normal business hours. Upon the reasonable request of the Trust, copies of any such books and records shall be provided by BNY Mellon to the Trust or to an Authorized Person, at the Trust’s expense.
17
(b) BNY Mellon shall keep all books and records with respect to each Fund’s books of
account, records of each Fund’s securities transactions and all other books and records as required pursuant to Rule 31 a-1 of the 1940 Act in connection with the services provided hereunder.
11.
Term of Agreement
.
(a) This
Agreement shall continue until terminated by either BNY Mellon giving to the Trust, or the Trust giving to BNY Mellon, a notice in writing specifying the date of such termination, which date shall be not less than 90 days after the date of the
giving of such notice. Upon termination hereof, the Trust shall pay to BNY Mellon such compensation as may be due as of the date of such termination, and shall reimburse BNY Mellon for any disbursements and expenses reasonably made or incurred by
BNY Mellon and payable or reimbursable hereunder.
(b) Notwithstanding the foregoing, BNY Mellon may terminate this Agreement upon 30 days
prior written notice to the Trust if the Trust shall terminate its custody agreement with The Bank of New York Mellon.
(c) If a party
materially breaches this Agreement (a “Defaulting Party”) the other party (the “Non-Defaulting Party”) may give written notice thereof to the Defaulting Party (“Breach Notice”), and if such material breach shall not
have been remedied within thirty (30) days after the Breach Notice is given, then the Non Defaulting Party may terminate this Agreement by giving written notice of termination to the Defaulting Party (“Breach Termination Notice”), in
which case this Agreement shall terminate as of 11:59 PM EST on the 30th day
18
following the date the Breach Termination Notice is given, or such later date as may be specified in the Breach Termination Notice. In all cases, termination by the Non-Defaulting Party shall not
constitute a waiver by the Non-Defaulting Party of any other rights it might have under this Agreement or otherwise against the Defaulting Party.
(d) Notwithstanding any other provision of this Agreement, BNY Mellon may in its sole discretion terminate this Agreement immediately by
sending notice thereof to the Trust upon the happening of any of the following: (i) the Trust commences as debtor any case or proceeding under any bankruptcy, insolvency or similar law, or there is commenced against the Trust any such case or
proceeding; (ii) the Trust commences as debtor any case or proceeding seeking the appointment of a receiver, conservator, trustee, custodian or similar official for the Trust or any substantial part of its property or there is commenced against
the Trust any such case or proceeding; (iii) the Trust makes a general assignment for the benefit of creditors; or (iv) the Trust admits in any recorded medium, written, electronic or otherwise, its inability to pay its debts as they come
due. BNY Mellon may exercise its termination right under this Section 11(d) at any time after the occurrence of any of the foregoing events notwithstanding that such event may cease to be continuing prior to such exercise, and any delay in
exercising this right shall not be construed as a waiver or other extinguishment of that right. Any exercise by BNY Mellon of its termination right under this Section 11(d) shall be without any prejudice to any other remedies or rights
available to BNY Mellon and shall not be subject to any fee or penalty, whether monetary or equitable. Notwithstanding the provisions of Section 17, notice of termination under this Section 11(d) shall be considered given and effective
when given, not when received.
19
12.
Amendment
.
This Agreement may not be amended, changed or modified in any manner except by a written agreement executed by BNY Mellon and the Trust, and authorized or
approved by the Trust’s Board.
13.
Assignment; Subcontracting
.
(a) This Agreement shall extend to and shall be binding upon the parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable or delegable by the Trust without the written consent of BNY Mellon, or by BNY Mellon without the written consent of the Trust.
(b) Notwithstanding the foregoing: (i) BNY Mellon may assign or transfer this Agreement to any BNY Mellon Affiliate, provided that BNY
Mellon gives the Trust thirty (30) days’ prior written notice of such assignment or transfer and such assignment or transfer does not impair the provision of services under this Agreement in any material respect, and the assignee or
transferee agrees to be bound by all terms of this Agreement in place of BNY Mellon; (ii) BNY Mellon may subcontract with, hire, engage or otherwise outsource to any BNY Mellon Affiliate with respect to the performance of anyone or more of the
functions, services, duties or obligations of BNY Mellon under this Agreement but any such subcontracting, hiring, engaging or outsourcing shall not relieve BNY Mellon of any of its liabilities hereunder; and (iii) BNY Mellon may subcontract
with, hire, engage or otherwise outsource to an unaffiliated third party with respect to the performance of anyone or more of the functions, services, duties or obligations of BNY Mellon under this Agreement but any such subcontracting, hiring,
engaging or outsourcing shall require the prior written consent of the Trust.
20
14.
Governing Law; Consent to Jurisdiction
.
This Agreement shall be construed in accordance with the laws of the State of New York, without regard to conflict of laws principles thereof. The Trust hereby
consents to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder, and waives to the fullest extent permitted by law its right to a trial by jury. To the extent that in any
jurisdiction the Trust may now or hereafter be entitled to claim, for itself or its assets, immunity from suit, execution, attachment (before or after judgment) or other legal process, the Trust irrevocably agrees not to claim, and it hereby waives,
such immunity.
15.
Severability; No Third Party Beneficiaries
.
In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations shall not in any way be affected or impaired thereby, and if any provision is inapplicable to any person or circumstances, it shall nevertheless remain applicable to all other persons and
circumstances. A person who is not a party to this Agreement shall have no rights to enforce any provision of this Agreement. BNY Mellon shall not be responsible for any costs or fees charged to the Trust or an affiliate of the Trust by consultants,
counsel, auditors, public accountants or other service providers retained by the Trust or any such affiliate.
16.
No Waiver
.
Each and every right granted to BNY Mellon hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity,
shall be cumulative and may be exercised from time to time. No failure on the part of BNY Mellon to exercise, and no delay in exercising, any right will operate as a waiver thereof, nor will any single or partial exercise by BNY Mellon of any right
preclude any other or future exercise thereof or the exercise of any other right.
21
17.
Notices
.
All notices, requests, consents and other communications pursuant to this Agreement in writing shall be sent as follows:
if to the Trust, at
PowerShares
Exchange-Traded Fund Trust II
3500 Lacey Road, Suite 700
Downers Grove, IL 60515
Attention: Fund Treasurer
with a
copy to:
Invesco
11
Greenway Plaza, Suite 100
Houston, TX 77046
Attention: Fund Treasurer
if to
BNY Mellon, at
BNY Mellon
100 Colonial Center Pkwy
Lake
Mary, FL 32746
Attention: ETF Services
with a copy to:
The Bank of New
York Mellon
One Wall Street
New York, New York 10286
Attention: Legal Dept. - Asset Servicing
or at
such other place as may from time to time be designated in writing. Notices hereunder shall be effective upon receipt.
22
18.
Counterparts
.
This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original; but such counterparts together shall constitute
only one instrument.
19.
Several Obligations
.
The
parties acknowledge that the obligations of the Funds hereunder are several and not joint, that no Fund or the Trust shall be liable for any amount owing by another Fund or the Trust and that the Trust has executed one instrument for convenience
only.
20.
Confidentiality
.
Each party shall keep
confidential any information relating to the other party’s business (“Confidential Information”). Confidential Information shall include (a) any data or information that is competitively sensitive material, and not generally
known to the public, including, but not limited to, information about product plans, marketing strategies, finances, operations, customer relationships, customer profiles, customer lists, sales estimates, business plans, and internal performance
results relating to the past, present or future business activities of the Trust or BNY Mellon and their respective subsidiaries and affiliated companies; (b) any scientific or technical information, design, process, procedure, formula, or
improvement that is commercially valuable and secret in the sense that its confidentiality affords the Trust or BNY Mellon a competitive advantage over its competitors; (c) all confidential or proprietary concepts, documentation, reports, data,
specifications, computer software, source code, object code, flow charts, databases, inventions, know-how, and trade secrets, whether or not patentable or copyrightable; and (d) anything designated as confidential. Notwithstanding the
foregoing, information shall not be Confidential Information and shall not be subject to such confidentiality obligations if it: (a) is already known to the receiving party at the time it is obtained; (b) is or becomes publicly known
23
or available through no wrongful act of the receiving party; (c) is rightfully received from a third party who, to the best of the receiving party’s knowledge, is not under a duty of
confidentiality; (d) is released by the protected party to a third party without restriction; (e) is requested or required to be disclosed by the receiving party pursuant to a court order, subpoena, governmental or regulatory agency
request or law; (f) is relevant to the defense of any claim or cause of action asserted against the receiving party; (g) is Trust information provided by BNY Mellon in connection with an independent third party compliance or other review;
(h) is released in connection with the provision of services under this Agreement; or (i) has been or is independently developed or obtained by the receiving party. The provisions of this Section 20 shall survive termination of this
Agreement.
21.
Limitation of Liability of the Trustees and Shareholders
.
It is expressly acknowledged and agreed that the obligations of the Trust hereunder shall not be binding upon any of the shareholders, Trustees, officers,
employees or agents of the Trust, personally, but shall bind only the trust property of the Trust, as provided in its Declaration of Trust. The execution and delivery of this Agreement have been authorized by the Trustees of the Trust and signed by
an officer of the Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them
personally, but shall bind only the trust property of the Trust as provided in its Declaration of Trust.
22.
Customer Right of Access
.
BNY Mellon shall, upon Customer’s request, provide Customer with a summary of the results of its latest SSAE-16 or equivalent control audit prepared by
BNY Mellon’s external auditors. In addition and no more than annually, BNY Mellon will participate in Customer’s
24
reasonable information security questionnaire processes. Upon reasonable request, BNY Mellon will arrange for its relevant subject matter experts to meet with the relevant subject matter experts
of Customer once annually to review BNY Mellon’s security controls and any deficiencies identified in the SSAE-16 audit report. Customer may view BNY Mellon’s security-related policies and procedures, however, no documentation may be
copied, shared, transmitted or removed from BNY Mellon premises, except as mutually agreed. The parties shall mutually agree upon a convenient time and place for such meeting. Not more than once each year, and subject to BNY Mellon’s reasonable
security requirements and availability of personnel, BNY Mellon will at Customer’s request arrange a tour of BNY Mellon’s data processing facilities for Customer’s subject matter experts. BNY Mellon will also, subject to its
reasonable security requirements, permit site visits of its data processing facilities by governmental agencies with regulatory authority over Customer. In the event that the Customer identifies any control deficiencies, BNY Mellon will discuss such
findings with Customer and if appropriate the parties shall work together to develop a mutually agreeable remediation plan. All nonpublic documentation and information disclosed to Customer in accordance with this Section shall be deemed proprietary
and confidential information of BNY Mellon. Customer shall not disclose such documentation or information to any third party or use it for any purpose other than evaluating BNY Mellon’s security controls, except that Customer may disclose BNY
Mellon’s SSAE-16 summary to Customer’s external auditors provided that such external auditors are required to maintain the confidentiality of the summary and any related information. Customer shall reimburse BNY Mellon for any costs and
expenses incurred in connection with any review of BNY Mellon’s security controls.
[Signature page follows.]
25
IN WITNESS WHEREOF, the parties hereto have caused the foregoing instrument to be executed by their duly
authorized officers and their seals to be hereunto affixed, all as of the day and year first above written.
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POWERSHARES EXCHANGE-TRADED
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FUND TRUST II
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on behalf of each Fund identified on
Exhibit A attached hereto, as may be
amended from time to time
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By:
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/s/ Anna Paglia
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Name:
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Anna Paglia
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Title:
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Secretary
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THE BANK OF NEW YORK MELLON
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By:
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/s/ Peter D. Holland
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Name:
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Peter D. Holland
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Title:
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Managing Director
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26
AMENDMENT TO EXHIBIT A
SCHEDULE OF SERIES
The undersigned hereby
certifies that he is an authorized signer of the PowerShares Exchange-Traded Fund Trust II (the “Trust”), and that the following funds are included under the Amended and Restated Fund Administration and Accounting Agreement dated
June 17, 2013, and as subsequently amended, by and between the Trust and the Bank of New York Mellon.
June 27, 2017
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1.
|
PowerShares
1-30
Laddered Treasury Portfolio
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|
2.
|
PowerShares CEF Income Composite Portfolio
|
|
3.
|
PowerShares Contrarian Opportunities Portfolio
|
|
4.
|
PowerShares Chinese Yuan Dim Sum Bond Portfolio
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|
5.
|
PowerShares Developed EuroPacific Currency Hedged Low Volatility Portfolio
|
|
6.
|
PowerShares DWA Developed Markets Momentum Portfolio
|
|
7.
|
PowerShares DWA Emerging Markets Momentum Portfolio
|
|
8.
|
PowerShares DWA Momentum & Low Volatility Rotation Portfolio
|
|
9.
|
PowerShares DWA SmallCap Momentum Portfolio
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|
10.
|
PowerShares DWA Tactical International Rotation Portfolio
|
|
11.
|
PowerShares DWA Tactical Multi-Asset Income Portfolio
|
|
12.
|
PowerShares DWA Tactical Sector Rotation Portfolio
|
|
13.
|
PowerShares Emerging Markets Currency Hedged Low Volatility Portfolio
|
|
14.
|
PowerShares Emerging Markets Infrastructure Portfolio
|
|
15.
|
PowerShares Emerging Markets Sovereign Debt Portfolio
|
|
16.
|
PowerShares Europe Currency Hedged Low Volatility Portfolio
|
|
17.
|
PowerShares FTSE RAFI Asia Pacific
ex-Japan
Portfolio
|
|
18.
|
PowerShares FTSE RAFI Developed Markets
ex-U.S.
Portfolio
|
|
19.
|
PowerShares FTSE RAFI Developed Markets
ex-U.S.
Small-Mid
Portfolio
|
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20.
|
PowerShares FTSE RAFI Emerging Markets Portfolio
|
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21.
|
PowerShares FTSE International Low Beta Equal Weight Portfolio
|
|
22.
|
PowerShares Fundamental High Yield
®
Corporate Bond Portfolio
|
|
23.
|
PowerShares Fundamental Investment Grade Corporate Bond Portfolio
|
|
24.
|
PowerShares Global Agriculture Portfolio
|
|
25.
|
PowerShares Global Clean Energy Portfolio
|
|
26.
|
PowerShares Global Gold and Precious Metals Portfolio
|
|
27.
|
PowerShares Global Short Term High Yield Bond Portfolio
|
|
28.
|
PowerShares Global Water Portfolio
|
|
29.
|
PowerShares California
AMT-Free
Municipal Bond Portfolio
|
|
30.
|
PowerShares National
AMT-Free
Municipal Bond Portfolio
|
|
31.
|
PowerShares New York
AMT-Free
Municipal Bond Portfolio
|
|
32.
|
PowerShares International BuyBack AchieversTM Portfolio
|
|
33.
|
PowerShares International Corporate Bond Portfolio
|
|
34.
|
PowerShares Japan Currency Hedged Low Volatility Portfolio
|
|
35.
|
PowerShares LadderRite
0-5
Year Corporate Bond Portfolio
|
|
36.
|
PowerShares KBW Bank Portfolio
|
|
37.
|
PowerShares KBW High Dividend Yield Financial Portfolio
|
|
38.
|
PowerShares KBW Premium Yield Equity REIT Portfolio
|
|
39.
|
PowerShares KBW Property & Casualty Insurance Portfolio
|
|
40.
|
PowerShares KBW Regional Banking Portfolio
|
|
41.
|
PowerShares Preferred Portfolio
|
|
42.
|
PowerShares PureBeta FTSE Developed
ex-North
America Portfolio
|
|
43.
|
PowerShares PureBeta FTSE Emerging Markets Portfolio
|
|
44.
|
PowerShares PureBeta MSCI USA Portfolio
|
|
45.
|
PowerShares PureBeta MSCI USA Small Cap Portfolio
|
|
46.
|
PowerShares PureBeta US Aggregate Bond Portfolio
|
|
47.
|
PowerShares PureBeta
0-5
Yr US TIPS Portfolio
|
|
48.
|
PowerShares Russell 1000 Enhanced Equal Weight Portfolio
|
|
49.
|
PowerShares Russell 1000 Equal Weight Portfolio
|
|
50.
|
PowerShares Russell 1000 Low Beta Equal Weight Portfolio
|
|
51.
|
PowerShares S&P 500
ex-Rate
Sensitive Low Volatility Portfolio
|
|
52.
|
PowerShares S&P 500
®
High Beta Portfolio
|
|
53.
|
PowerShares S&P 500
®
High Dividend Low Volatility Portfolio
|
|
54.
|
PowerShares S&P 500
®
Low Volatility Portfolio
|
|
55.
|
PowerShares S&P 500 Minimum Variance Portfolio
|
|
56.
|
PowerShares S&P 500 Momentum Portfolio
|
|
57.
|
PowerShares S&P 500 Value Portfolio
|
|
58.
|
PowerShares S&P 500 Value With Momentum Portfolio
|
|
59.
|
PowerShares S&P Emerging Markets Momentum Portfolio
|
|
60.
|
PowerShares S&P Emerging Markets Low Volatility Portfolio
|
|
61.
|
PowerShares S&P International Developed High Dividend Low Volatility Portfolio
|
|
62.
|
PowerShares S&P International Developed Momentum Portfolio
|
|
63.
|
PowerShares S&P International Developed Low Volatility Portfolio
|
|
64.
|
PowerShares S&P International Developed Quality Portfolio
|
|
65.
|
PowerShares S&P MidCap Low Volatility Portfolio
|
|
66.
|
PowerShares S&P SmallCap Consumer Discretionary Portfolio
|
|
67.
|
PowerShares S&P SmallCap Consumer Staples Portfolio
|
|
68.
|
PowerShares S&P SmallCap Energy Portfolio
|
|
69.
|
PowerShares S&P SmallCap Financials Portfolio
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70.
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PowerShares S&P SmallCap Health Care Portfolio
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71.
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PowerShares S&P SmallCap High Dividend Low Volatility Portfolio
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72.
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PowerShares S&P SmallCap Industrials Portfolio
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73.
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PowerShares S&P SmallCap Information Technology Portfolio
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74.
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PowerShares S&P SmallCap Low Volatility Portfolio
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75.
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PowerShares S&P SmallCap Materials Portfolio
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76.
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PowerShares S&P SmallCap Quality Portfolio
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77.
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PowerShares S&P SmallCap Utilities Portfolio
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78.
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PowerShares Senior Loan Portfolio
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79.
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PowerShares Taxable Municipal Bond Portfolio
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80.
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PowerShares Treasury Collateral Portfolio
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81.
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PowerShares Variable Rate Preferred Portfolio
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82.
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PowerShares VRDO
Tax-Free
Weekly Portfolio
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POWERSHARES EXCHANGE-TRADED FUND TRUST II
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(signature)
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Dan Draper
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(name)
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President
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(title)
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THE BANK OF NEW YORK MELLON
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(signature)
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(name)
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(title)
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Exhibit (h)(2)
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 17th day of June, 2013 by and between each Trust listed on Exhibit D attached hereto, each having its principal office and place of
business at 3500 Lacey Road, Suite 700, Downers Grove, IL 60515 (the “Trusts” and each a “Trust”) and THE BANK OF NEW YORK MELLON, a New York banking company having its principal office and place of business at One Wall Street,
New York, New York 10286 (the “Bank”).
WHEREAS, each Trust is registered as an open-end management investment company under the Investment
Company Act of 1940, as amended (the “1940 Act”);
WHEREAS, each Trust and designated agents will issue for purchase and redeem shares of the
series of the Trusts (each, a “Fund” and together, “Funds”) only in aggregations of shares known as “Creation Units” (each a “Creation Unit”) principally in kind (see Exhibit D for the Schedule of Funds);
WHEREAS, The Depository Trust Company, a limited purpose trust company organized under the laws of the State of New York
(“DTC”), or its nominee (Cede & Co.), will be the initial record or registered owner (the “Shareholder”) of all shares;
WHEREAS, (i) the PowerShares Exchange-Traded Fund Trust, on behalf of the Funds of the Trust, appointed the Bank as its transfer agent, dividend
disbursing agent, and agent in connection with certain other activities by way of Transfer Agency and Service Agreement made as of the 24th day of April, 2003, as amended; (ii) the PowerShares Exchange-Traded Fund Trust II (formerly known as
the PowerShares Global Exchange-Traded Fund Trust), on behalf of the Funds of the Trust, appointed the Bank as its transfer agent, dividend disbursing agent, and agent in connection with certain other activities by way of Transfer Agency and Service
Agreement made as of the 8th day of June, 2007, as amended; and (iii) the PowerShares Actively Managed Exchange-Traded Fund Trust, on behalf of the Funds of the Trust, appointed the Bank as its transfer agent, dividend disbursing agent, and
agent in connection with certain other activities by way of Transfer Agency and Service Agreement made as of the 28
th
day of March, 2008, as amended (collectively, the “Prior Transfer Agency
Agreements”);
WHEREAS, the Trusts, on behalf of their respective Funds, wish to appoint the Bank as their transfer agent, dividend disbursing agent,
and agent in connection with certain other activities, pursuant to the terms of this Amended and Restated Transfer Agency And Services Agreement, which shall replace and supersede the Prior Transfer Agency Agreements, and the Bank desires to accept
such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
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1.
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Terms of Appointment; Duties of the Bank
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1.1 Subject to the terms and conditions set forth in this Agreement,
each Trust, on behalf of its respective Funds, hereby employs and appoints the Bank to act as, and the Bank agrees to act as, its transfer agent for the authorized and issued shares of beneficial interest, no par value per share of the Funds
(“Shares”), and as the Trust’s dividend disbursing agent.
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1.2 The Bank agrees that it will perform the following services:
(a) In accordance with the terms and conditions of the form of Participant Agreement, attached hereto as Exhibit A, the Bank
shall:
(i) Perform and facilitate the performance of purchases and redemption of Creation Units;
(ii) Prepare and transmit by means of DTC’s book-entry system payments for dividends and distributions declared by each
Trust on behalf of the applicable Fund;
(iii) Maintain the record of the name and address of the Shareholder and the
number of Shares issued by each Trust and held by the Shareholder;
(iv) Record the issuance of Shares of each Trust and
maintain a record of the total number of Shares of the Funds outstanding. The Bank shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or
sale of such Shares, which functions shall be the sole responsibility of each Trust;
(v) Prepare and transmit to each
Trust and any designated administrator and to any applicable securities exchange (as specified to the Bank by the Trust) information with respect to purchases and redemptions of Shares;
(vi) On days that the Trusts may accept orders for purchases or redemptions, calculate and transmit to the Bank and the
Trust’s administrator the number of outstanding Shares for each Fund;
(vii) On days that the Trusts may accept orders
for purchases or redemptions (pursuant to the Participant Agreement), transmit to the Bank, the Trusts and DTC the amount of Shares purchased on such day;
(viii) Confirm to DTC the number of Shares issued to the Shareholder, as DTC may reasonably request;
(ix) Prepare and deliver other reports, information and documents to DTC as DTC may reasonably request;
(x) Extend the voting rights to the Shareholder and/or beneficial owners of Shares in accordance with the policies and
procedures of DTC for book-entry only securities;
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(xi) Maintain those books and records of each Trust specified by the Trusts in
Schedule A attached hereto;
(xii) Prepare a monthly report of all purchases and redemptions during such month on a gross
transaction basis. The monthly report shall show the counterpart and amount of each purchase on a daily basis net number of shares either redeemed or created for such Business Day;
(xiii) Receive from the Distributor (as defined in the Participant Agreement) purchase orders from Authorized Participants (as
defined in the Participant Agreement) for Creation Unit aggregations of Shares received in good form and accepted by or on behalf of each Trust by the Distributor, transmit appropriate trade instructions to the National Securities Clearance
Corporation, if applicable, and pursuant to such orders issue the appropriate number of Shares of the applicable Fund and hold such Shares in the account of the Shareholder for each of the respective Funds of each Trust;
(xiv) Receive from the Authorized Participants (as defined in the Participant Agreement) redemption requests, deliver the
appropriate documentation thereof to The Bank of New York as custodian for each Trust, generate and transmit or cause to be generated and transmitted confirmation of receipt of such redemption requests to the Authorized Participants submitting the
same; transmit appropriate trade instructions to the National Securities Clearance Corporation, if applicable, and redeem the appropriate number of Creation Unit Aggregations of Shares held in the account of the Shareholder;
(xv) Confirm the name, U.S. taxpayer identification number and principal place of business of each Authorized Participant; and
(b) In addition to, and neither in lieu nor in contravention of, the services set forth in the above paragraph (a), the
Bank shall perform the customary services of a transfer agent and dividend disbursing agent, including, but not limited to: maintaining the account of the Shareholder, obtaining a list of DTC participants holding interests in the Global Certificate
at the request of a Trust, mailing proxy materials, shareholder reports and prospectuses to the Shareholder or DTC participants or beneficial owners of Shares at the request of a Trust and those services set forth on Schedule A attached hereto.
(c) The following shall be delivered to DTC for delivery to beneficial owners in accordance with the procedures for book-entry
only securities of DTC:
(i) Annual and semi-annual reports of the Trusts;
(ii) Proxies, proxy statements and other proxy soliciting materials;
(iii) Prospectus and amendments and supplements to the Prospectus, including stickers; and
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(iv) Other communications as may be required by law or reasonably requested by a
Trust.
(d) If the Shares are represented by individual Certificates, the Bank shall perform the services agreed to in
writing by the Bank and the Trusts.
(e) The Bank shall provide additional services (if any) on behalf of a Trust (i.e.,
escheatment services) which may be agreed upon in writing between a Trust and the Bank.
(f) The Bank shall keep records
relating to the services to be performed hereunder, in the form and manner as it may deem advisable. To the extent required by Section 31 of the Investment Company Act of 1940, as amended, and the Rules thereunder, the Bank agrees that all such
records prepared or maintained by the Bank relating to the services to be performed by the Bank hereunder are the property of each respective Trust and will be preserved, maintained and made available in accordance with such Section and Rules, and
will be surrendered promptly to that Trust on and in accordance with its request.
2.1 The Bank shall receive from each Trust such compensation for the Transfer Agent’s
services provided pursuant to this Agreement as may be agreed to from time to time in a written Fee Schedule approved by the parties. The Fee Schedule is attached hereto as Exhibit C. The fees are accrued daily and billed monthly and shall be due
and payable upon receipt of the invoice. Upon the termination of this Agreement before the end of any month, the fee for the part of the month before such termination shall be prorated according to the proportion which such part bears to the full
monthly period and shall be payable upon the date of termination of this Agreement.
2.2 In addition to the fee paid under Section 2.1 above, each
Trust agrees to reimburse the Bank for out-of-pocket expenses, including but not limited to confirmation production, postage, forms, telephone, microfilm, microfiche, tabulating proxies, records storage, or advances incurred by the Bank for the
items set out in the fee schedule attached hereto or relating to dividend distributions and reports (whereas all expenses related to creations and redemptions of Fund securities shall be borne by the relevant authorized participant in such creations
and redemptions). In addition, any other expenses incurred by the Bank at the request or with the consent of a Trust will be reimbursed by that Trust on behalf of the applicable Fund.
2.3 Each Trust agrees to pay all fees and reimbursable expenses within ten (10) business days following the receipt of the respective billing notice
accompanied by supporting documentation, as appropriate. Postage for mailing of dividends, proxies, Trust reports and other mailings to all shareholder accounts shall be advanced to the Bank by a Trust at least seven (7) days prior to the
mailing date of such materials.
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3.
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Representations and Warranties of the Bank
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3.1 The Bank represents and warrants to each Trust that:
It is a banking company duly organized and existing and in good standing under the laws of the State of New York.
It is duly qualified to carry on its business in the State of New York.
It is empowered under applicable laws and by its Charter and By-Laws to act as transfer agent and dividend disbursing agent and to enter into
and perform this Agreement.
All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
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4.
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Representations and Warranties of each Trust
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4.1 Each Trust represents and warrants to the Bank that:
It is a business trust duly organized and existing and in good standing under the laws of its state of formation.
It is empowered under applicable laws and by its Declaration of Trust and By-Laws to enter into and perform this Agreement.
All corporate proceedings required by said Declaration of Trust and By-Laws have been taken to authorize it to enter into and perform this
Agreement.
It is an open-end management investment company registered under the Investment Company Act of 1940, as amended.
A registration statement under the Securities Act of 1933, as amended, on behalf of each of the Funds is currently effective and will remain
effective, and appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Trust being offered for sale.
The Bank shall provide the “Anti-Money Laundering Services” described in
Schedule I attached hereto subject to the terms and conditions of this Agreement and the following additional terms and conditions:
(a) The Bank shall utilize systems and/or software designed, and databases provided, by certain third parties, and shall not be
liable for any loss, damage or expense that occur as a result of the failure of any such systems, software, and/or databases.
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(b) The Bank does not warrant that (x) its performance of the Anti-Money
Laundering Services will achieve any particular intended result, that its performance will satisfy any legal obligations of the Fund, (y) that its performance will be uninterrupted, or (z) that it will detect all possible instances of
money laundering or transactions involving money laundering or other unlawful activities. EXCEPT AS EXPRESSLY SET FORTH HEREIN, THE BANK MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR PARTICULAR PURPOSE.
(c) The Bank shall assume the authenticity and accuracy of any document provided by a
Shareholder or potential Shareholder without verification unless in the sole discretion of the Bank the same on its face appears not to be genuine.
(d) The Bank shall provide prompt notice to a Trust of any potential Shareholder with respect to whom the Bank has anti-money
laundering concerns based on the result of its Anti-Money Laundering Services.
(e) In the event of any failure by the Bank
to provide any of the Anti-Money Laundering Services in accordance with its standard of care and not otherwise, the Bank’s liability shall be limited to the lesser of (x) the actual direct money damages suffered by the Fund as a direct
result of such failure and (y) the amounts paid by the Fund under this Agreement for the providing of such services. Any action brought against the Bank for claims hereunder must be brought within one year following the date on which such claim
accrues.
(f) The Bank is providing the Anti-Money Laundering Services based on the following representations, warranties
and covenants of each Trust, each of which shall be deemed continued and repeated on each day on which the Bank provides such services: (x) the Anti-Money Laundering Services together with the activities of the Trust in accordance with its
internal policies, procedures and anti-money laundering controls shall together satisfy all the requirements of the laws with respect to money laundering applicable to the Trust; (y) the Trust shall provide each Participant Agreement to the
Bank a reasonable time before accepting any initial payment from a Shareholder or potential Shareholder and shall not accept any such payment unless and until the Bank shall have completed its providing of the Anti-Money Laundering Services; and
(z) the Trust shall instruct the Bank not to accept any payment on behalf of the Trust from a Shareholder or potential Shareholder or pay on behalf of the Trust any redemption or repurchase proceeds to a Shareholder or potential Shareholder if
the Trust determines that such acceptance or payment would violate any money laundering laws applicable to the Trust.
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6.1 The Bank shall not be responsible for, and a Trust shall indemnify and hold the Bank
harmless from and against, any and all losses, damages, costs, charges, counsel fees, payments, expenses and liability (“Losses”) arising out of or attributable to:
(a) All actions of the Bank or its agents or subcontractors required to be taken pursuant to this Agreement, provided that such
actions are taken without negligence, or willful misconduct.
(b) The Trust’s negligence or willful misconduct.
(c) The breach of any representation or warranty of the Trust hereunder.
(d) The conclusive reliance on or use by the Bank or its agents or subcontractors of information, records, documents or
services which (i) are received by the Bank or its agents or subcontractors, and (ii) have been prepared, maintained or performed by the Trust or any other person or firm on behalf of the Trust including but not limited to any previous
transfer agent or registrar.
(e) The conclusive reliance on, or the carrying out by the Bank or its agents or
subcontractors of any instructions or requests of a Trust on behalf of that Trust.
(f) 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.
6.2 At any time the Bank may apply to any officer of a Trust
for instructions, and may consult with the Trust’s legal counsel with respect to any matter arising in connection with the services to be performed by the Bank under this Agreement, and the Bank and its agents or subcontractors shall not be
liable and shall be indemnified by the Trust for any action taken or omitted by it in reliance upon such instructions or upon the advice or opinion of the Trust’s counsel and shall promptly advise the Trust of such advice or opinion (except for
actions or omissions by Bank taken with negligence or willful misconduct). The Bank, its agents and subcontractors shall be protected and indemnified in acting upon any paper or document, reasonably believed to be genuine and to have been signed by
the proper person or persons, or upon any instruction, information, data, records or documents provided the Bank or its agents or subcontractors by machine readable input, telex, CRT data entry or other similar means authorized by the Trust, and
shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from the Trust.
6.3 Each Trust shall
not be responsible for, and the Bank shall liable for and shall indemnify the Trust against direct money damages arising out of or attributable to:
(a) The Bank’s own negligence or willful misconduct.
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(b) The breach of any representation or warranty of the Bank hereunder.
6.4 The indemnification set forth in this Section 6 shall apply to actions taken pursuant to this Agreement and the participant agreement entered into
between Invesco Distributors, Inc. and an authorized participant, which will be subject to acceptance by each Trust and the Bank, as the transfer agent.
The Bank shall have no responsibility and shall not be liable for any loss or damage unless
such loss or damage is caused by its own negligence or willful misconduct or that of its employees, or its breach of any of its representations. In no event shall the Bank be liable for special, indirect or consequential damages regardless of the
form of action and even if the same were foreseeable.
8.1 Bank may enter into subcontracts, agreements and understandings with any BNY
affiliate, whenever and on such terms and conditions as it deems necessary or appropriate to perform its services hereunder. No such subcontract, agreement or understanding shall discharge Bank from its obligations hereunder.
8.2 Bank shall be entitled to conclusively rely upon any written or oral instruction actually received by Bank and reasonably believed by Bank to be duly
authorized and delivered. Each Trust agrees to forward to Bank written instructions confirming oral instructions by the close of business of the same day that such oral instructions are given to Bank. Each Trust agrees that the fact that such
confirming written instructions are not received or that contrary written instructions are received by Bank shall in no way affect the validity or enforceability of transactions authorized by such oral instructions and effected by Bank. If a Trust
elects to transmit written instructions through an on-line communication system offered by Bank, the Trust’s use thereof shall be subject to the terms and conditions attached hereto as Appendix A.
8.3 Bank shall establish and maintain a disaster recovery plan and back-up system at all times satisfying the requirements of all applicable law, rules, and
regulations and which is reasonable under the circumstances (the “Disaster Recovery Plan and Back-Up System”). Bank shall not be responsible or liable for any failure or delay in the performance of its obligations under this Agreement
arising out of or caused, directly or indirectly, by circumstances beyond its control which are not a result of its negligence, including without limitation, acts of God; earthquakes; fires; floods; wars; civil or military disturbances; sabotage;
epidemics; riots; interruptions, loss or malfunctions of utilities, transportation, computer (hardware or software) or communications service; accidents; labor disputes; acts of civil or military authority; governmental actions; or inability to
obtain labor, material, equipment or transportation, provided that the Bank has established and is maintaining the Disaster Recovery Plan and Back-Up System, or if not, that such delay or failure would have occurred even if Bank had established and
was maintaining the Disaster Recovery Plan and Back-Up System. Upon the occurrence of any such delay or failure Bank shall use commercially reasonable best efforts to resume performance as soon as practicable under the circumstances.
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8.4 Bank shall have no duties or responsibilities whatsoever except such duties and responsibilities as are
specifically set forth in this Agreement, and no covenant or obligation shall be implied against Bank in connection with this Agreement.
8.5 At any time
the Bank may apply to an officer of a Trust written instructions with respect to any matter arising in connection with the Bank’s duties and obligations under this Agreement, and the Bank shall not be liable for any action taken or omitted to
be taken by the Bank in good faith in accordance with such instructions. Such application by the Bank for instructions from an officer of the Trust may, at the option of the Bank, set forth in writing any action proposed to be taken or omitted to be
taken by the Bank with respect to its duties or obligations under this Agreement and the date on and/or after which such action shall be taken, and the Bank shall not be liable for any action taken or omitted to be taken in accordance with a
proposal included in any such application on or after the date specified therein unless, prior to taking or omitting to take any such action, the Bank has received written instructions in response to such application specifying the action to be
taken or omitted. The Bank may consult with counsel to the Trust and shall be fully protected with respect to anything done or omitted by it in good faith in accordance with the advice or opinion of such counsel.
8.6 Notwithstanding any provisions of this Agreement to the contrary, the Bank shall be under no duty or obligation to inquire into, and shall not be liable
for:
(a) The legality of the issue, sale or transfer of any Shares, the sufficiency of the amount to be received in
connection therewith, or the authority of a Trust to request such issuance, sale or transfer;
(b) The legality of the
purchase of any Shares, the sufficiency of the amount to be paid in connection therewith, or the authority of a Trust to request such purchase;
(c) The legality of the declaration of any dividend by a Trust, or the legality of the issue of any Shares in payment of any
stock dividend; or
(d) The legality of any recapitalization or readjustment of the Shares.
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9.
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Covenants of the Trusts and the Bank
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9.1 Each Trust shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Board of Trustees of the Trust authorizing the appointment of the Bank and the
execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto.
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9.2 Shares will be transferred upon presentation to the Bank of Shares to its electronic account at DTC,
accompanied by such documents as the Bank deems necessary to evidence the authority of the person making such transfer, and bearing satisfactory evidence of the payment of applicable stock transfer taxes, if any. In the case of small estates where
no administration is contemplated, the Bank may, when furnished with an appropriate surety bond, and without further approval of a Trust, transfer Shares registered in the name of the decedent where the current market value of the Shares being
transferred does not exceed such amount as may from time to time be prescribed by the various states. The Bank reserves the right to refuse to transfer Shares until it is satisfied that the endorsements on documents submitted to it are valid and
genuine, and for that purpose it may require, unless otherwise instructed by an officer of a Trust, a guaranty of signature by an “eligible guarantor institution” meeting the requirements of the Bank, which requirements include membership
or participation in STAMP or such other “signature guarantee program” as may be determined by the Bank in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. The Bank also
reserves the right to refuse to transfer Shares until it is satisfied that the requested transfer is legally authorized, and it shall incur no liability for the refusal in good faith to make transfers which the Bank, in its judgment, deems improper
or unauthorized, or until it is satisfied that there is no basis to any claims adverse to such transfer. The Bank may, in effecting transfers of Shares, rely upon those provisions of the Uniform Act for the Simplification of Fiduciary Security
Transfers or the Uniform Commercial Code, as the same may be amended from time to time, applicable to the transfer of securities, and the Trust shall indemnify the Bank for any act done or omitted by it in good faith in reliance upon such laws.
9.3 The Bank assumes no responsibility with respect to:
(a) the transfer of restricted securities where counsel for a Trust advises that such transfer may be properly effected.
(b) the authorization of a Fund to issue additional Shares of the Fund; and
(c) obtaining an order or consent of each governmental or regulatory authority required by law as a prerequisite to the
issuance or reduction Fund Shares, as the case may be.
The Bank agrees that all records prepared or maintained by the Bank relating to the services to be
performed by the Bank hereunder are the property of the relevant Trust and will be preserved, maintained and made available upon reasonable request, and will be surrendered promptly to the relevant Trust on and in accordance with its request.
9.4 In case of any requests or demands for the inspection of the Shareholder records of a Trust, the Bank will endeavor to notify the Trust and to secure
instructions from an authorized officer of the Trust as to such inspection. The Bank reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to
exhibit the Shareholder records to such person.
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9.5 Bank shall file such appropriate information returns concerning the payment and composition of dividends and
capital gain distributions and tax withholding with the proper Federal, State and local authorities as are required by law to be filed by each Trust and shall withhold such sums as are required to be withheld by applicable law.
9.6 Bank shall provide information or reports to the Trust or the Trust’s Chief Compliance Officer as may be reasonably requested.
Each party shall keep confidential any information relating to the other party’s business
(“Confidential Information”). Confidential Information shall include (a) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product
plans, marketing strategies, finances, operations, customer relationships, customer profiles, customer lists, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of a Trust or
the Bank and their respective subsidiaries and affiliated companies; (b) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality
affords a Trust or the Bank a competitive advantage over its competitors; (c) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases,
inventions, know-how, and trade secrets, whether or not patentable or copyrightable; and (d) anything designated as confidential. Notwithstanding the foregoing, information shall not be Confidential Information and shall not be subject to such
confidentiality obligations if it: (a) is already known to the receiving party at the time it is obtained; (b) is or becomes publicly known or available through no wrongful act of the receiving party; (c) is rightfully received from a
third party who, to the best of the receiving party’s knowledge, is not under a duty of confidentiality; (d) is released by the protected party to a third party without restriction; (e) is requested or required to be disclosed by the
receiving party pursuant to a court order, subpoena, governmental or regulatory agency request or law; (f) is relevant to the defense of any claim or cause of action asserted against the receiving party; (g) is Trust information provided
by the Bank in connection with an independent third party compliance or other review; (h) is released in connection with the provision of services under this Agreement; or (i) has been or is independently developed or obtained by the
receiving party. The provisions of this Section 10 shall survive termination of this Agreement.
10.1 Termination of Agreement
10.2 The term of this Agreement shall be one year commencing upon the date hereof (the “Initial Term”) and shall automatically renew for additional
one-year terms unless either party provides written notice of termination at least ninety (90) days prior to the end of any one-year term or, unless earlier terminated as provided below:
(a) Either party hereto may terminate this Agreement prior to the expiration of the Initial Term in the event the other party
breaches any material provision of this Agreement, including, without limitation in the case of a Trust, its obligations under
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Section 2.1, 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.
(b) A Trust may terminate this Agreement prior to the expiration of the Initial Term upon ninety
(90) days’ prior written notice in the event that the Board of that Trust votes to liquidate the Trust and terminate its registration with the Securities and Exchange Commission other than in connection with a merger or acquisition of the
Trust or the Trust’s investment adviser.
10.3 Should a Trust exercise its right to terminate, all out-of-pocket expenses associated with the
movement of records and material will be borne by that Trust. Additionally, the Bank reserves the right to charge for any other reasonable expenses associated with such termination.
10.4 The terms of Article 2 and Article 6 shall survive the termination of this Agreement.
11.1 In the event that a Trust establishes one or more additional Funds with respect to which
it desires to have the Bank render services as transfer agent under the terms hereof, it shall so notify the Bank in writing, and if the Bank agrees in writing to provide such services, such additional issuance shall become Shares hereunder and
Exhibit D shall be appropriately amended.
12.1 Neither this Agreement nor any rights or obligations hereunder may be assigned by either party
without the written consent of the other party.
12.2 This Agreement shall inure to the benefit of and be binding upon the parties and their respective
permitted successors and assigns.
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13.
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Severability and Beneficiaries
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13.1 In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected thereby. This Agreement shall extend to and shall be binding upon the parties hereto, and
their respective successors and assigns; provided, however, that this Agreement shall not be assignable by either party without the written consent of the other.
14.1 This Agreement may be amended or modified by a written agreement executed by both parties and
authorized or approved by a resolution of the Board of Trustees of a Trust.
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15.
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New York Law to Apply
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15.1 This Agreement shall be construed in accordance with the substantive laws of the
State of New York, without regard to conflicts of laws principles thereof. Trusts and Bank hereby consent to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder. Each
Trust hereby irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of venue of any such proceeding brought in such a court and any claim that such proceeding brought in
such a court has been brought in an inconvenient forum. Trusts and Bank each hereby irrevocably waives any and all rights to trial by jury in any legal proceeding arising out of or relating to this Agreement.
16.1 This Agreement constitutes the entire agreement between the parties hereto and
supersedes any prior agreement with respect to the subject matter hereof whether oral or written.
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17.
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Limitations of Liability of the Trustees and Shareholders
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17.1 It is expressly acknowledged and agreed that
the obligations of each Trust hereunder shall not be binding upon any of the shareholders, Trustees, officers, employees or agents of the Trust, personally, but shall bind only the trust property of the Trust, as provided in its Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the Trustees of each Trust and signed by an officer of each Trust, acting as such, and neither such authorization by such Trustees nor such execution and delivery by such
officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the trust property of each Trust as provided in its Declaration of Trust.
18.1 This Agreement may be executed by the parties hereto on any number of counterparts, and all
of said counterparts taken together shall be deemed to constitute one and the same instrument.
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19.
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Customer Right of Access
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19.1 BNY Mellon shall, upon Customer’s request, provide Customer with a summary
of the results of its latest SSAE-16 or equivalent control audit prepared by BNY Mellon’s external auditors. In addition and no more than annually, BNY Mellon will participate in Customer’s reasonable information security questionnaire
processes. Upon reasonable request, BNY Mellon will arrange for its relevant subject matter experts to meet with the relevant subject matter experts of Customer once annually to review BNY Mellon’s security controls and any deficiencies
identified in the SSAE-16 audit report. Customer may view BNY Mellon’s security-related policies and procedures, however, no documentation may be copied, shared, transmitted or removed from BNY Mellon premises, except as mutually agreed. The
parties shall mutually agree upon a convenient time and place for such meeting. Not more than once each year, and
13
subject to BNY Mellon’s reasonable security requirements and availability of personnel, BNY Mellon will at Customer’s request arrange a tour of BNY Mellon’s data processing
facilities for Customer’s subject matter experts. BNY Mellon will also, subject to its reasonable security requirements, permit site visits of its data processing facilities by governmental agencies with regulatory authority over Customer. In
the event that the Customer identifies any control deficiencies, BNY Mellon will discuss such findings with Customer and if appropriate the parties shall work together to develop a mutually agreeable remediation plan. All nonpublic documentation and
information disclosed to Customer in accordance with this Section shall be deemed proprietary and confidential information of BNY Mellon. Customer shall not disclose such documentation or information to any third party or use it for any purpose
other than evaluating BNY Mellon’s security controls, except that Customer may disclose BNY Mellon’s SSAE-16 summary to Customer’s external auditors provided that such external auditors are required to maintain the confidentiality of
the summary and any related information. Customer shall reimburse BNY Mellon for any costs and expenses incurred in connection with any review of BNY Mellon’s security controls.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized
officers, as of the day and year first above written.
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POWERSHARES EXCHANGE-TRADED FUND TRUST
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By:
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/s/ Anna Paglia
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Title:
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Anna Paglia, Secretary
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POWERSHARES EXCHANGE-TRADED FUND TRUST II
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By:
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/s/ Anna Paglia
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Title:
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Anna Paglia, Secretary
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POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED FUND TRUST
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By:
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/s/ Anna Paglia
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Title:
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Anna Paglia, Secretary
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THE BANK OF NEW YORK MELLON
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By:
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/s/ Peter D. Holland
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Title:
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Peter D. Holland, Managing Director
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14
SCHEDULE A
BOOKS AND RECORDS TO BE MAINTAINED BY BANK
Source Documents requesting Creations and Redemptions
Correspondence/AP Inquiries
Reconciliations, bank statements,
copies of canceled checks, cash proofs
Daily/Monthly reconciliation of outstanding units between each Trust and DTC
Net Asset Computation Documentation
Dividend Records
Year-end Statements and Tax Forms
SCHEDULE I
ANTI-MONEY LAUNDERING SERVICES
As part of the
nightly processing cycle, the Bank performs Office of Foreign Assets Control (OFAC) screening processes against broker names maintained on a master file. As it is the policy of the Bank to be in compliance with all applicable global economic
sanctions laws and regulations in all jurisdictions where it conducts business, the Bank monitors account activity and transactions for US sanctions purposes against the OFAC list. All transactions involving the movement of large sums, or other
indicators of possible money laundering must be reviewed. To the extent that employees become aware of or are advised of suspicious transactions or activity through direct observation, receipt and review of periodic transaction reports, on-line
inquiries, customer requests or through notification by any other business or support unit, such information may be reviewed by Division Management, Legal, Compliance, Risk, etc. In the event that a material compliance infraction impacts
PowerShares, the Bank will notify the designated PowerShares officer accordingly.
The Bank compliance program includes, internal written policies and
procedures both company-wide and business specific, a designated Global Sanctions Compliance Officer, risk assessment and controls, including automated scan/name recognition software programs that monitor account activity and transactions for US
sanctions purposes against the OFAC list of Specially Designated Nationals and Blocked Persons, as well as internal training and an audit program.
EXHIBIT A
FORM OF PARTICIPANT AGREEMENT
EXHIBIT B-1
CERTIFICATE OF AUTHORIZED PERSONS
(The Fund — Oral and written Instructions)
The undersigned hereby certifies that he/she is the duly elected and acting
SECRETARY
of PowerShares Exchange-Traded Fund Trust (the
“Trust”), and further certifies that the following persons have been duly authorized in conformity with the Trust’s Declaration of Trust and By-Laws to deliver Certificates and Oral Instructions to The Bank of New York Mellon as
Transfer Agent pursuant to the
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
between the Trust and Transfer Agent dated June 17, 2013 and that the signatures appearing opposite their names are true and correct:
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Name
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Position
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Signature
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Peter Hubbard
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Vice President
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Jeff Kernagis
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Vice President, Portfolio Manager
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Rudolf Reitmann
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Head of Global ETF Operations
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Joshua Betts
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Vice President, Portfolio Manager
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This certificate supersedes any certificate of Authorized Persons you may currently have on file.
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[ seal ]
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By:
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Date: June 17, 2013
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Title:
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Anna Paglia, Secretary
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EXHIBIT B-2
CERTIFICATE OF AUTHORIZED PERSONS
(The Trust — Oral and Written Instructions)
The undersigned hereby certifies that he/she is the duly elected and acting
SECRETARY
of PowerShares Exchange-Traded Fund Trust II (the
“Trust”), and further certifies that the following persons have been duly authorized in conformity with the Trust’s Declaration of Trust and By-Laws to deliver Certificates and Oral Instructions to The Bank of New York Mellon as
Transfer Agent pursuant to the
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
between the Trust and Transfer Agent dated June 17, 2013 and that the signatures appearing opposite their names are true and correct:
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Name
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Position
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Signature
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Peter Hubbard
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Vice President
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Jeff Kernagis
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Vice President, Portfolio Manager
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Rudolf Reitmann
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Head of Global ETF Operations
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Joshua Betts
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Vice President, Portfolio Manager
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This certificate supersedes any certificate of Authorized Persons you may currently have on file.
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[ seal ]
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By:
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Date: June 17, 2013
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Title:
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Anna Paglia, Secretary
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EXHIBIT B-3
CERTIFICATE OF AUTHORIZED PERSONS
(The Trust — Oral and Written Instructions)
The undersigned hereby certifies that he/she is the duly elected and acting
SECRETARY
of PowerShares Actively Managed Exchange-Traded Fund Trust (the
“Trust”), and further certifies that the following persons have been duly authorized in conformity with the Trust’s Declaration of Trust and By-Laws to deliver Certificates and Oral Instructions to The Bank of New York Mellon as
Transfer Agent pursuant to the
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
between the Trust and Transfer Agent dated June 17, 2013 and that the signatures appearing opposite their names are true and correct:
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Name
|
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Position
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Signature
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Peter Hubbard
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Vice President
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|
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Jeff Kernagis
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Vice President, Portfolio Manager
|
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Rudolf Reitmann
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Head of Global ETF Operations
|
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|
|
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|
|
|
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|
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Joshua Betts
|
|
Vice President, Portfolio Manager
|
|
|
|
|
This certificate supersedes any certificate of Authorized Persons you may currently have on file.
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[ seal ]
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By:
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Date: June 17, 2013
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Title:
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Anna Paglia, Secretary
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EXHIBIT C
FEE SCHEDULE
EXHIBIT D
AMENDED AND RESTATED SCHEDULE OF SERIES
The undersigned hereby certifies that he is an authorized signer of each PowerShares trust listed herein, and that the following funds are included under the
Amended and Restated Transfer Agency and Service Agreement dated June 17, 2013, by and between the such trusts and the Bank of New York Mellon.
June 27, 2017
PowerShares Exchange-Traded Fund Trust
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1.
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PowerShares Aerospace & Defense Portfolio
|
|
2.
|
PowerShares BuyBack Achievers
TM
Portfolio
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3.
|
PowerShares Cleantech Portfolio
|
|
4.
|
PowerShares Dividend Achievers
TM
Portfolio
|
|
5.
|
PowerShares DWA Momentum Portfolio
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6.
|
PowerShares DWA Basic Materials Momentum Portfolio
|
|
7.
|
PowerShares Dynamic Biotechnology & Genome Portfolio
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8.
|
PowerShares Dynamic Building & Construction Portfolio
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9.
|
PowerShares DWA Consumer Cyclicals Momentum Portfolio
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|
10.
|
PowerShares DWA Consumer Staples Momentum Portfolio
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11.
|
PowerShares Dynamic Energy Exploration & Production Portfolio
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|
12.
|
PowerShares DWA Energy Momentum Portfolio
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|
13.
|
PowerShares DWA Financial Momentum Portfolio
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14.
|
PowerShares Dynamic Food & Beverage Portfolio
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15.
|
PowerShares DWA Healthcare Momentum Portfolio
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|
16.
|
PowerShares DWA Industrials Momentum Portfolio
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|
17.
|
PowerShares Dynamic Large Cap Growth Portfolio
|
|
18.
|
PowerShares Russell Top 200 Equal Weight Portfolio
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|
19.
|
PowerShares Dynamic Large Cap Value Portfolio
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|
20.
|
PowerShares Dynamic Leisure and Entertainment Portfolio
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|
21.
|
PowerShares Dynamic Market Portfolio
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|
22.
|
PowerShares Dynamic Media Portfolio
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|
23.
|
PowerShares Russell Midcap Pure Growth Portfolio
|
|
24.
|
PowerShares Russell Midcap Equal Weight Portfolio
|
|
25.
|
PowerShares Russell Midcap Pure Value Portfolio
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26.
|
PowerShares Dynamic Networking Portfolio
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27.
|
PowerShares Dynamic Oil & Gas Services Portfolio
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|
28.
|
PowerShares DWA NASDAQ Momentum Portfolio
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29.
|
PowerShares Dynamic Pharmaceuticals Portfolio
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30.
|
PowerShares Dynamic Retail Portfolio
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31.
|
PowerShares Dynamic Semiconductors Portfolio
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|
32.
|
PowerShares Russell 2000 Pure Growth Portfolio
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33.
|
PowerShares Russell 2000 Equal Weight Portfolio
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34.
|
PowerShares Russell 2000 Pure Value Portfolio
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35.
|
PowerShares Dynamic Software Portfolio
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36.
|
PowerShares DWA Technology Momentum Portfolio
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37.
|
PowerShares DWA Utilities Momentum Portfolio
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38.
|
PowerShares Financial Preferred Portfolio
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39.
|
PowerShares FTSE RAFI US 1000 Portfolio
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|
40.
|
PowerShares FTSE RAFI US 1500
Small-Mid
Portfolio
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|
41.
|
PowerShares Russell Top 200 Pure Growth Portfolio
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|
42.
|
PowerShares Russell Top 200 Pure Value Portfolio
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|
43.
|
PowerShares Global Listed Private Equity Portfolio
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|
44.
|
PowerShares Golden Dragon China Portfolio
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|
45.
|
PowerShares High Yield Equity Dividend Achievers Portfolio
|
|
46.
|
PowerShares International Dividend Achievers Portfolio
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|
47.
|
PowerShares NASDAQ Internet Portfolio
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48.
|
PowerShares S&P 500
®
BuyWrite Portfolio
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49.
|
PowerShares S&P 500
®
Quality Portfolio
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50.
|
PowerShares Water Resources Portfolio
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51.
|
PowerShares Wilderhill Clean Energy Portfolio
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52.
|
PowerShares Wilderhill Progressive Energy Portfolio
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53.
|
PowerShares Zacks Micro Cap Portfolio
|
PowerShares Exchange-Traded Fund Trust II
|
1.
|
PowerShares
1-30
Laddered Treasury Portfolio
|
|
2.
|
PowerShares CEF Income Composite Portfolio
|
|
3.
|
PowerShares Contrarian Opportunities Portfolio
|
|
4.
|
PowerShares Chinese Yuan Dim Sum Bond Portfolio
|
|
5.
|
PowerShares Developed EuroPacific Currency Hedged Low Volatility Portfolio
|
|
6.
|
PowerShares DWA Developed Markets Momentum Portfolio
|
|
7.
|
PowerShares DWA Emerging Markets Momentum Portfolio
|
|
8.
|
PowerShares DWA Momentum & Low Volatility Rotation Portfolio
|
|
9.
|
PowerShares DWA SmallCap Momentum Portfolio
|
|
10.
|
PowerShares DWA Tactical International Rotation Portfolio
|
|
11.
|
PowerShares DWA Tactical Multi-Asset Income Portfolio
|
|
12.
|
PowerShares DWA Tactical Sector Rotation Portfolio
|
|
13.
|
PowerShares Emerging Markets Currency Hedged Low Volatility Portfolio
|
|
14.
|
PowerShares Emerging Markets Infrastructure Portfolio
|
|
15.
|
PowerShares Emerging Markets Sovereign Debt Portfolio
|
|
16.
|
PowerShares Europe Currency Hedged Low Volatility Portfolio
|
|
17.
|
PowerShares FTSE RAFI Asia Pacific
ex-Japan
Portfolio
|
|
18.
|
PowerShares FTSE RAFI Developed Markets
ex-U.S.
Portfolio
|
|
19.
|
PowerShares FTSE RAFI Developed Markets
ex-U.S.
Small-Mid
Portfolio
|
|
20.
|
PowerShares FTSE RAFI Emerging Markets Portfolio
|
|
21.
|
PowerShares FTSE International Low Beta Equal Weight Portfolio
|
|
22.
|
PowerShares Fundamental High Yield
®
Corporate Bond Portfolio
|
|
23.
|
PowerShares Fundamental Investment Grade Corporate Bond Portfolio
|
|
24.
|
PowerShares Global Agriculture Portfolio
|
|
25.
|
PowerShares Global Clean Energy Portfolio
|
|
26.
|
PowerShares Global Gold and Precious Metals Portfolio
|
|
27.
|
PowerShares Global Short Term High Yield Bond Portfolio
|
|
28.
|
PowerShares Global Water Portfolio
|
|
29.
|
PowerShares California
AMT-Free
Municipal Bond Portfolio
|
|
30.
|
PowerShares National
AMT-Free
Municipal Bond Portfolio
|
|
31.
|
PowerShares New York
AMT-Free
Municipal Bond Portfolio
|
|
32.
|
PowerShares International BuyBack AchieversTM Portfolio
|
|
33.
|
PowerShares International Corporate Bond Portfolio
|
|
34.
|
PowerShares Japan Currency Hedged Low Volatility Portfolio
|
|
35.
|
PowerShares LadderRite
0-5
Year Corporate Bond Portfolio
|
|
36.
|
PowerShares KBW Bank Portfolio
|
|
37.
|
PowerShares KBW High Dividend Yield Financial Portfolio
|
|
38.
|
PowerShares KBW Premium Yield Equity REIT Portfolio
|
|
39.
|
PowerShares KBW Property & Casualty Insurance Portfolio
|
|
40.
|
PowerShares KBW Regional Banking Portfolio
|
|
41.
|
PowerShares Preferred Portfolio
|
|
42.
|
PowerShares PureBeta FTSE Developed
ex-North
America Portfolio
|
|
43.
|
PowerShares PureBeta FTSE Emerging Markets Portfolio
|
|
44.
|
PowerShares PureBeta MSCI USA Portfolio
|
|
45.
|
PowerShares PureBeta MSCI USA Small Cap Portfolio
|
|
46.
|
PowerShares PureBeta US Aggregate Bond Portfolio
|
|
47.
|
PowerShares PureBeta
0-5
Yr US TIPS Portfolio
|
|
48.
|
PowerShares Russell 1000 Enhanced Equal Weight Portfolio
|
|
49.
|
PowerShares Russell 1000 Equal Weight Portfolio
|
|
50.
|
PowerShares Russell 1000 Low Beta Equal Weight Portfolio
|
|
51.
|
PowerShares S&P 500
ex-Rate
Sensitive Low Volatility Portfolio
|
|
52.
|
PowerShares S&P 500
®
High Beta Portfolio
|
|
53.
|
PowerShares S&P 500
®
High Dividend Low Volatility Portfolio
|
|
54.
|
PowerShares S&P 500
®
Low Volatility Portfolio
|
|
55.
|
PowerShares S&P 500 Minimum Variance Portfolio
|
|
56.
|
PowerShares S&P 500 Momentum Portfolio
|
|
57.
|
PowerShares S&P 500 Value Portfolio
|
|
58.
|
PowerShares S&P 500 Value With Momentum Portfolio
|
|
59.
|
PowerShares S&P Emerging Markets Momentum Portfolio
|
|
60.
|
PowerShares S&P Emerging Markets Low Volatility Portfolio
|
|
61.
|
PowerShares S&P International Developed High Dividend Low Volatility Portfolio
|
|
62.
|
PowerShares S&P International Developed Momentum Portfolio
|
|
63.
|
PowerShares S&P International Developed Low Volatility Portfolio
|
|
64.
|
PowerShares S&P International Developed Quality Portfolio
|
|
65.
|
PowerShares S&P MidCap Low Volatility Portfolio
|
|
66.
|
PowerShares S&P SmallCap Consumer Discretionary Portfolio
|
|
67.
|
PowerShares S&P SmallCap Consumer Staples Portfolio
|
|
68.
|
PowerShares S&P SmallCap Energy Portfolio
|
|
69.
|
PowerShares S&P SmallCap Financials Portfolio
|
|
70.
|
PowerShares S&P SmallCap Health Care Portfolio
|
|
71.
|
PowerShares S&P SmallCap High Dividend Low Volatility Portfolio
|
|
72.
|
PowerShares S&P SmallCap Industrials Portfolio
|
|
73.
|
PowerShares S&P SmallCap Information Technology Portfolio
|
|
74.
|
PowerShares S&P SmallCap Low Volatility Portfolio
|
|
75.
|
PowerShares S&P SmallCap Materials Portfolio
|
|
76.
|
PowerShares S&P SmallCap Quality Portfolio
|
|
77.
|
PowerShares S&P SmallCap Utilities Portfolio
|
|
78.
|
PowerShares Senior Loan Portfolio
|
|
79.
|
PowerShares Taxable Municipal Bond Portfolio
|
|
80.
|
PowerShares Treasury Collateral Portfolio
|
|
81.
|
PowerShares Variable Rate Preferred Portfolio
|
|
82.
|
PowerShares VRDO
Tax-Free
Weekly Portfolio
|
PowerShares Actively
Managed Exchange-Traded Fund Trust
|
1.
|
PowerShares Active U.S. Real Estate Fund
|
|
2.
|
PowerShares Balanced Multi-Asset Allocation Portfolio
|
|
3.
|
PowerShares Conservative Multi-Asset Allocation Portfolio
|
|
4.
|
PowerShares Government Collateral Pledge Portfolio
|
|
5.
|
PowerShares Growth Multi-Asset Allocation Portfolio
|
|
6.
|
PowerShares Moderately Conservative Multi-Asset Allocation Portfolio
|
|
7.
|
PowerShares Multi-Strategy Alternative Portfolio
|
|
8.
|
PowerShares S&P 500
®
Downside Hedged Portfolio
|
|
9.
|
PowerShares Variable Rate Investment Grade Portfolio
|
PowerShares Actively Managed Exchange-Traded
Commodity Fund Trust
|
1.
|
PowerShares Agriculture Commodity Strategy No
K-1
Portfolio
|
|
2.
|
PowerShares Base Metals Commodity Strategy No
K-1
Portfolio
|
|
3.
|
PowerShares Bloomberg Commodity Strategy Portfolio
|
|
4.
|
PowerShares Optimum Yield Diversified Commodity Strategy No
K-1
Portfolio
|
|
5.
|
PowerShares Energy Commodity Strategy No
K-1
Portfolio
|
|
|
|
|
|
THE BANK OF NEW YORK MELLON
|
|
|
|
|
By:
|
|
|
|
(signature)
|
|
|
|
(name)
|
|
|
|
(title)
|
|
|
|
POWERSHARES EXCHANGE-TRADED FUND TRUST
|
|
|
|
|
By:
|
|
|
|
(signature)
|
|
|
|
Dan Draper
(name)
|
|
|
|
President
(title)
|
|
|
|
POWERSHARES EXCHANGE-TRADED FUND TRUST II
|
|
|
|
|
By:
|
|
|
|
(signature)
|
|
|
|
Dan Draper
(name)
|
|
|
|
President
(title)
|
|
|
|
POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED FUND TRUST
|
|
|
|
|
By:
|
|
|
|
(signature)
|
|
|
|
Dan Draper
(name)
|
|
|
|
President
(title)
|
|
|
|
POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED COMMODITY FUND TRUST
|
|
|
|
|
By:
|
|
|
|
(signature)
|
|
|
|
Dan Draper
(name)
|
|
|
|
President
(title)
|
Exhibit (h)(3)
PARTICIPANT AGREEMENT
PowerShares Exchange-Traded Fund Trust
PowerShares Exchange-Traded Fund Trust II
PowerShares Actively Managed Exchange-Traded Fund Trust
PowerShares Actively Managed Exchange-Traded Commodity Fund Trust
This Participant Agreement (this “Agreement”) is entered into between Invesco Distributors, Inc. (the “Distributor”),
(the “Participant”), and is subject to acceptance by PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares Actively
Managed Exchange-Traded Fund Trust, PowerShares Actively Managed Exchange-Traded Commodity Fund Trust (collectively, the “Trust”) and The Bank of New York Mellon (the “Transfer Agent”). The Transfer Agent serves as the transfer
agent of the Trust and is an Index Receipt Agent as that term is defined in the rules of the National Securities Clearing Corporation (“NSCC”). The Distributor and the Participant acknowledge and agree that the Trust shall be a third-party
beneficiary of the Agreement and shall receive the benefits contemplated by the Agreement to the extent specified herein. The Distributor has been retained to provide certain services with respect to acting as principal underwriter of the Trust in
connection with the creation and distribution of shares (“Shares”) of the series of the Trust (each a “Fund”). As specified in the Trust’s Prospectuses and Statements of Additional Information incorporated therein (together,
the “Prospectus”) included as part of the Registration Statements, as amended, on Form N-1A, Shares may be created or redeemed only in aggregations of shares, as identified in the Prospectus for each Fund, referred to therein and herein as
a “Creation Unit.” Capitalized terms not otherwise defined herein are used herein as defined in the Prospectus.
This Agreement is intended to
set forth certain premises and the procedures by which the Participant may create and/or redeem Creation Units (i) through the Continuous Net Settlement (“CNS”) clearing processes of NSCC as such processes have been enhanced to effect
creations and redemptions of Creation Units, such processes being referred to herein as the “Trust’s Clearing Process,” (ii) through the facilities of the Depository Trust Company (“DTC”) and (iii) through the
Federal Reserve/Treasury Automated Debt Entry System maintained at the Federal Reserve Bank of New York (the “Fed Book Entry System”). The parties hereto in consideration of the premises and of the agreements contained herein agree as
follows:
1.
STATUS OF PARTICIPANT
. The Participant hereby represents, covenants and warrants that (i) with respect to orders for the creation
or redemption of Creation Units by means of the Trust’s Clearing Process, it is a member of NSCC and a participant in the CNS System of NSCC (as defined in the Trust’s Prospectus, a “Participating Party”); and (ii) with
respect to orders for the creation or redemption of Creation Units by means of the Fed Book Entry System or DTC, it is eligible to utilize the Fed Book Entry System and/or DTC and it is a DTC Participant (as defined in the Trust’s Prospectus, a
“DTC Participant”). The Participant may place orders for the creation or redemption of Creation Units through the Trust’s Clearing Process, the Fed
Book-Entry
System and/or DTC or Euroclear,
subject to the procedures for creation and redemption referred to in Sections 2 and 3 of this Agreement and the procedures described in Attachments A and A-1 hereto. Any change in the foregoing status of the Participant shall terminate this
Agreement, and the Participant shall give prompt notice to the Distributor and the Transfer Agent of such change. Transfers of securities settling through Euroclear or other foreign depositories may require Participant access to such facilities.
The Participant further represents that it is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of
the Financial Industry Regulatory Authority (“FINRA”) or is exempt from or otherwise not required to be licensed as a broker-dealer or a member of FINRA. The Participant is qualified, registered and/or licensed to act as a broker or
dealer, or is
otherwise exempt, as required according to all applicable laws of the state(s) in which the Participant conducts its activities as defined hereunder. The Participant is a qualified institutional
buyer as defined in Rule 144A under the U.S. Securities Act of 1933, as amended (the “1933 Act”). The Participant agrees to conform to the rules of FINRA (if it is a member of FINRA) and the securities laws of any jurisdiction to the
extent such laws, rules and regulations relate to the Participant’s transactions in, and activities with respect to, the Shares.
2.
EXECUTION OF
ORDERS
. All orders for the creation or redemption of Creation Units shall be handled in accordance with the terms of the Prospectus, and the procedures described in Attachments A and A-1 to this Agreement. In the event the procedures include the
use of recorded telephone lines, the Participant hereby consents to such use. The Trust reserves the right to issue additional or other procedures relating to the manner of creating or redeeming Creation Units, and the Participant, and the
Distributor agree to comply with such procedures as may be issued from time to time, upon reasonable notice thereof.
The Participant understands and
acknowledges that the Transfer Agent will not effect a creation or redemption until it has received confirmation of receipt of the Participant’s incoming security transfer and/or cash through the Trust’s Clearing Process, Fed
Book-Entry
System, Euroclear and/or DTC in the case of a creation, and through the Trust’s Clearing Process, Euroclear and/or DTC in the case of a redemption.
With respect to any order for the creation or redemption of Creation Units, the Participant acknowledges and agrees on behalf of itself and any party for
which it is acting (regardless of its capacity) to return to the Trust any dividend, distribution or other corporate action paid to it or to the party for which it is acting in respect of any Deposit Security that is transferred to the Participant
or any party for which it is acting that, based on the valuation of such Deposit Security at the time of transfer should have been paid to the Trust. With respect to any orders for the creation or redemption of Creation Units, the Participant also
acknowledges and agrees on behalf of itself and any party for which it is acting (regardless of its capacity) that the Transfer Agent is entitled to reduce the amount of money or other proceeds due to the Participant or any party for which it is
acting that, based on the valuation of such Deposit Security at the time of transfer, should be paid to the Fund. With respect to any order for the creation or redemption of Creation Units, the Trust acknowledges and agrees to return to the
Participant or any party for which it is acting any dividend, distribution or other corporate action paid to the Trust in respect of any Deposit Security that is transferred to the Trust that, based on the valuation of such Deposit Security at the
time of transfer, should have been paid to the Participant or any party for which it is acting.
3.
NSCC
. Solely with respect to orders for the
creation or redemption of Creation Units through the Trust’s Clearing Process, the Participant as a Participating Party hereby authorizes the Transfer Agent to transmit to NSCC on behalf of the Participant such instructions, including share and
cash amounts as are necessary with respect to the creation and redemption of Creation Units consistent with the instructions issued by the Participant to the Trust telephone representative identified in Attachments A and A-1 hereto (the “Trust
Representative”). The Participant agrees to be bound by the terms of such instructions issued by the Transfer Agent and reported to NSCC as though such instructions were issued by the Participant directly to NSCC.
4.
DEPOSIT SECURITIES
. The Participant understands that the number and names of the designated portfolio of Deposit Securities and relevant cash
amounts to be included in the current Portfolio Deposit for each Fund will be made available each day that the New York Stock Exchange (the “NYSE”) is open for trading through the facilities of the NSCC.
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5.
ROLE OF PARTICIPANT
. The Participant acknowledges and agrees that for all purposes of this Agreement,
the Participant shall have no authority in any matter or in any respect to act as agent of the Distributor, the Transfer Agent or the Trust.
(a) In executing this Agreement, the Participant agrees, in connection with any purchase or redemption transactions in which it
acts for a customer or for any other DTC Participant or indirect participant, or any other beneficial owner of Shares (each a “Beneficial Owner”), that it shall extend to any such party all of the rights, and shall be bound by all of the
obligations, of a DTC Participant in addition to any obligations that it undertakes hereunder or in accordance with the Prospectus.
(b) The Participant agrees (i) subject to any privacy obligations or other obligations arising under the federal or state
securities laws it may have to its customers, to assist the Distributor in ascertaining certain information regarding sales of Shares made by or through Participant upon the request of the Trust or the Distributor necessary for the Funds to comply
with their obligations to distribute information to its shareholders as may be required from time to time under applicable state or federal securities laws, and (ii) to deliver prospectuses, as may be amended or supplemented from time to time,
proxy material, annual and other reports of the Funds or other similar information that the Funds are obligated to deliver to their shareholders to the Participant’s customers that custody Shares with the Participant, after receipt from the
Funds or the Distributor of sufficient quantities to allow mailing thereof to such customers. None of the Distributor, the Trust or any of their respective affiliates shall use the names, addresses and other information concerning Participant’s
customers for any purpose except in connection with the performance of their duties and responsibilities hereunder and except for servicing and informational mailings described in this clause (b) of Section 5, or as may otherwise be
required by applicable law.
(c) The Participant affirms that it has procedures in place reasonably designed to protect the
privacy of non-public personal consumer/customer financial information to the extent required by applicable law, rule and regulation.
(d) The Participant further represents that its Anti-Money Laundering Program, at a minimum, (i) designates a compliance
officer to administer and oversee the AML Program, (ii) provides ongoing employee training, (iii) includes an independent audit function to test the effectiveness of the AML Program, (iv) establishes internal policies, procedures and
controls that are tailored to its particular business, (v) includes a customer identification program consistent with the rules under Sec. 326 of the USA Patriot Act, (vi) provides for the filing of all necessary anti-money laundering
reports including, but not limited to, currency transaction reports and suspicious activity reports, (vii) provides for screening all new and existing customers against the Office of Foreign Asset Control list and any other government list that
is or becomes required under the Act and (viii) allows for appropriate regulators to examine its AML books and records.
(e) The Participant represents that from time to time it may be a Beneficial Owner (as that term is defined in Rule 16a-1(a)(2)
of the Securities Exchange Act of 1934 (the “Exchange Act”)) of Shares. To the extent that it is a Beneficial Owner of Shares, the Participant agrees to irrevocably appoint the Distributor as its attorney and proxy with full authorization
and power to vote (or abstain from voting) its beneficially owned Shares. The Distributor, as attorney and proxy for the Participant under this Section 5(e), (i) is hereby given full power of substitution and revocation; (ii) may act
through such agents, nominees or attorneys as it may appoint from time to time; and (iii) may provide voting instructions to such agents, nominees or substitute attorneys.
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6.
PARTICIPANT REPRESENTATIONS
.
(a) The Participant represents, warrants and agrees that it will not make any representations concerning the Funds, the
Creation Units or the Shares other than those consistent with the then current Prospectus or any promotional or sales literature furnished to the Participant by the Distributor or the Trust, or any such materials permitted by clause (b) of this
Section 6.
(b) The Participant agrees not to furnish or cause to be furnished by Participant or its employees to any
person or display or publish any information or materials relating to the Funds (including, without limitation, promotional materials and sales literature, advertisements, press releases, announcements, statements, posters, signs or other similar
materials, but not including any materials prepared and used for Participant’s internal use only or brokerage communications prepared by the Participant in the normal course of its business and consistent with the Trust’s then current
Prospectus and in accordance with applicable laws and regulations) (“Marketing Materials”), except such Marketing Materials as may be furnished to the Participant by the Distributor or the Trust and such other Marketing Materials as are
consistent with the Trust’s then current Prospectus and have been approved by the Distributor in writing prior to use; provided that such Marketing Materials clearly indicate that such Marketing Materials are prepared and distributed by
Participant. All Marketing Materials prepared by the Participant shall be filed with FINRA or the SEC, as applicable, by the Participant, and shall comply with all applicable rules and regulations of FINRA and the SEC.
(c) The Participant understands that the Trust will not be advertised or marketed as an open-end investment company,
i.e.,
as a mutual fund, which offers redeemable securities, and that any advertising materials will prominently disclose that Shares are redeemable only in Creation Unit size by or through a Participant and on an in-kind basis, as applicable, as
described in the Prospectus. In addition, the Participant understands that any advertising material that addresses redemptions of Shares, including the Prospectus, will disclose that the owners of Shares may acquire Shares and tender Shares for
redemption to the Fund in Creation Unit aggregations only.
(d) Notwithstanding anything to the contrary in this Agreement,
the Participant and its affiliates may prepare and circulate in the regular course of their businesses research reports that include information, opinions or recommendations relating to Shares (i) for public dissemination;
provided
that
such research reports compare the relative merits and benefits of Shares with other products and are not used for the purpose of marketing shares and comply with all applicable rules and regulations of FINRA or the SEC, or (ii) for internal use
by the Participant and other materials that include information, opinions or recommendations relating to Shares.
7.
SUB-CUSTODIAN ACCOUNT
. The
Participant understands and agrees that, in the case of each Fund, as applicable, the Trust has caused the Trust’s custodian (the “Custodian”) to maintain with a sub-custodian for such Fund an account in each relevant jurisdiction to
which the Participant shall, when applicable, deliver or cause to be delivered in connection with the creation of a Creation Unit aggregation the Deposit Securities not subject to settlement in the United States and any other applicable cash amounts
(or the cash value of all or a part of such securities, in the case of a permitted or required cash purchase or “cash-in-lieu” amount) on behalf of itself or any other party for which it is acting (regardless of its capacity), with any
appropriate adjustments as advised by the Trust, in accordance with the terms and conditions applicable to such account in such jurisdiction.
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8.
TITLE TO SECURITIES; RESTRICTED SECURITIES
. The Participant represents on behalf of itself and any
party for which it acts that, upon delivery of a portfolio of Deposit Securities to the Custodian and/or the relevant sub-custodian, when applicable, the Trust will acquire good and unencumbered title to such securities, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims, including, without limitation, any restriction upon the sale or transfer of such securities imposed by (i) any agreement or arrangement entered into by the
Participant or any party for which it is acting in connection with a transaction to purchase Shares or (ii) any provision of the 1933 Act, and any regulations thereunder (except that portfolio securities of issuers other than U.S. issuers shall
not be required to have been registered under the 1933 Act if exempt from such registration), or of the applicable laws or regulations of any other applicable jurisdiction and (iii) no such securities are “restricted securities” as
such term is used in Rule 144(a)(3)(i) promulgated under the 1933 Act.
9.
FEES
. In connection with the creation or redemption of Creation Units,
the Transfer Agent shall charge, and the Participant agrees to pay, the Transaction Fee prescribed in the Prospectus applicable to creations or redemptions, or, when applicable, the Transaction Fee and such additional amounts as may be prescribed
pursuant to the Prospectus. The Transaction Fee and such additional amounts may be waived or otherwise adjusted from time to time subject to the provisions relating thereto and any limitations as prescribed in the Prospectus.
10.
AUTHORIZED PERSONS
. Concurrently with the execution of this Agreement and as requested from time to time thereafter, the Participant shall deliver
to the Distributor and the Transfer Agent, duly certified as appropriate by its secretary or other duly authorized officer, a certificate setting forth the names and signatures of all persons authorized to give instructions relating to activity
contemplated hereby or any other notice, request or instruction on behalf of the Participant (each, an “Authorized Person”). Such certificate may be accepted and relied upon by the Distributor and the Transfer Agent as conclusive evidence
of the facts set forth therein and shall be considered to be in full force and effect until receipt by the Distributor and the Transfer Agent of a superseding certificate bearing a subsequent date. The Transfer Agent shall issue to each Authorized
Person a unique personal identification number (“PIN Number”) by which such Authorized Person and the Participant shall be identified and instructions issued by the Participant hereunder shall be authenticated. Upon the termination or
revocation of authority of such Authorized Person by the Participant, the Participant shall give prompt written notice of such fact to the Distributor and the Transfer Agent and such notice shall be effective upon receipt by both the Distributor and
the Transfer Agent.
11.
REDEMPTION
. The Participant represents and warrants that it will not obtain a Submission Number (as defined in Attachments
A and A-1) from the Transfer Agent for the purpose of redeeming a Creation Unit unless it first ascertains that (a) it or its customer, as the case may be, owns outright or has full legal authority and legal beneficial right to tender for
redemption the requisite number of Shares of any Fund to be redeemed, and the entire proceeds of a redemption and (b) such Shares have not been loaned or pledged to another party nor are the subject of a repurchase agreement, securities lending
agreement or such other arrangement which would preclude the delivery of such Shares to the Transfer Agent in accordance with the Prospectus or as otherwise required by the Trust.
12.
BENEFICIAL OWNERSHIP
. The Participant represents and warrants to the Distributor, the Transfer Agent and the Trust that it does not hold for the
account of any single Beneficial Owner of Shares, 80 percent (80%) or more of outstanding Shares so as to cause the Trust to have a basis in the Deposit Securities deposited with the Trust different from the market value of such Deposit
Securities on the date of such deposit, pursuant to Section 351 of the Internal Revenue Code of 1986, as amended. The Transfer Agent may request information from the Participant regarding Trust Share ownership to the extent necessary to make a
determination regarding ownership of 80 percent (80%) or more of outstanding Shares by a Beneficial Owner as a condition to the acceptance of a Portfolio Deposit.
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13.
INDEMNIFICATION
. This Section 13 shall survive the termination of this Agreement.
(a) The Participant hereby agrees to indemnify and hold harmless the Distributor in its capacity as principal underwriter, the
Trust its respective affiliates, directors, officers, employees and agents, and each person, if any, who controls such persons within the meaning of Section 15 of the 1933 Act (each a “Distributor Indemnified Party”) from and against
any loss, liability, cost and expense (including reasonable attorneys’ fees) incurred by such Distributor Indemnified Party as a result of (i) any breach by the Participant of any provision of this Agreement that relates to the
Participant; (ii) any failure on the part of the Participant to perform any of its obligations set forth in the Agreement; (iii) any failure by the Participant to comply with applicable laws, including rules and regulations of
self-regulatory organizations in relation to its role as the Participant, except that the Participant shall not be required to indemnify a Distributor Indemnified Party to the extent that such failure was caused by the Participant’s adherence
to instructions given or representations made by the Distributor, or any Distributor Indemnified Party, as applicable; (iv) any breach by the Participant of any representation provided in this Agreement or provided pursuant to Attachments A and
A-1 attached hereto; or (v) actions of such Distributor Indemnified Party in reliance upon any instructions issued and reasonably believed by the Distributor or the Transfer Agent, as applicable, to be genuine and to have been given by the
Participant except to the extent that the Participant had previously revoked a PIN Number used in giving such instructions or representations (where applicable) and such revocation was given by the Participant and received by the Distributor and the
Transfer Agent in accordance with the terms of Section 10 hereto. The Participant and the Distributor understand and agree that the Trust is entitled and intends to proceed directly against the Participant in the event that the Participant
fails to honor any of its obligations pursuant to this Agreement that benefit the Trust. The foregoing shall not apply to any loss, damage, charge, liability, cost, expense, cause of action, obligation, judgment or fee incurred by such Distributor
Indemnified Party arising out of Distributor Indemnified Party’s gross negligence or reckless or willful acts or omissions or the Distributor Indemnified Party’s failure to perform any of its obligations or responsibilities under this
Agreement. With respect to (i) through (iii) above, Distributor Indemnified Party’s failure to promptly acknowledge the Participant’s breach of, failure to perform or failure to comply with, the terms of this Agreement shall not
negate the foregoing indemnification.
(b) The Distributor hereby agrees to indemnify and hold harmless the Participant,
its respective subsidiaries, affiliates, directors, officers, employees and agents, and each person, if any, who controls such persons within the meaning of Section 15 of the 1933 Act (each a “Participant Indemnified Party”) from and
against any loss, liability, cost and expense (including reasonable attorneys’ fees) incurred by such Participant Indemnified Party as a result of (i) any breach by the Distributor of any provision of this Agreement that relates to the
Distributor; (ii) any failure on the part of the Distributor to perform any of its obligations set forth in this Agreement; (iii) any failure by the Distributor to comply with applicable laws, including rules and regulations of
self-regulatory organizations in relation to its role as Distributor of the Funds, or (iv) actions of such Participant Indemnified Party in reliance upon any instructions issued or representations made in accordance with Attachments A and A-1
(as they may be amended from time to time) reasonably believed by the Participant to be genuine and to have been given by the Distributor, in connection with the Participant’s acting in its capacity as an authorized participant. The foregoing
shall not apply to any loss, damage, charge, liability, cost, expense, cause of action, obligation, judgment or fee incurred by such Participant Indemnified Party arising out of Participant Indemnified Party’s gross negligence or reckless or
willful acts or omissions or the Participant Indemnified Party’s failure to perform any of its obligations or responsibilities under this Agreement. With respect to (i) through (iv) above, Participant Indemnified Party’s failure
to
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promptly acknowledge Distributor’s breach of, failure to perform or failure to comply with, the terms of this Agreement shall not negate the foregoing indemnification.
(c) No party to this Agreement shall be liable to the other party or to any other person for any damages arising out of
mistakes or errors in data provided to such Distributor Indemnified Party or Participant Indemnified Party, as the case may be, by a third party, or out of interruptions or delays of electronic means of communications with the Distributor
Indemnified Party or Participant Indemnified Party.
14.
ACKNOWLEDGEMENT
. The Participant acknowledges receipt of the Prospectus and represents
that it has reviewed such document and understands the terms thereof.
15.
NOTICES
. Except as otherwise specifically provided in this Agreement,
all notices required or permitted to be given pursuant to this Agreement shall be given in writing and delivered by personal delivery or by postage prepaid registered or certified U.S. first class mail, return receipt requested, or by telex,
telegram or facsimile or similar means of same day delivery (with a confirming copy by mail as provided herein). Unless otherwise notified in writing, all notices to the Transfer Agent shall be given or sent as follows: The Bank of New York Mellon,
101 Barclay Street, New York, New York 10286, Attn: ETF Services Group. All notices to the Trust shall be given or sent as follows: PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II, PowerShares Actively Managed
Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust, as applicable, in care of The Bank of New York Mellon, 101 Barclay Street, New York, New York 10286, Attn: ETF Services Group with a copy to
PowerShares Exchange-Traded Fund Trust, PowerShares Exchange-Traded Fund Trust II PowerShares Actively Managed Exchange-Traded Fund Trust and PowerShares Actively Managed Exchange-Traded Commodity Fund Trust, as applicable, 3500 Lacey Road, Suite
700, Downers Grove, Illinois 60515, Attn: Head of Legal. All notices to the Participant, the Transfer Agent, and the Distributor shall be directed to the address or telephone, facsimile or telex numbers indicated below the signature line of such
party,
except
in the case of communications by the Distributor or Transfer Agent to the Participant during, or as part of, the order creation or redemption process as detailed in Attachments A and A-1 to this Agreement, especially the
Distributor’s or Transfer Agent’s attempt to contact an Authorized Person of the Participant with respect to, among other things, ambiguous instructions, the suspension or cancellation of an order as discussed in Attachments A and A-1, the
Distributor and the Transfer Agent agree to contact a representative of the ETF Trading Desk of the Participant.
16.
TERMINATION AND AMENDMENT
.
This Agreement shall become effective in this form as of the date accepted by the Transfer Agent and may be terminated at any time by any party upon thirty (30) days’ prior notice to the other parties (i) unless earlier terminated by
the Transfer Agent in the event of a breach of this Agreement or the procedures described herein by the Participant or (ii) in the event that the Trust is terminated pursuant to the Trust Agreement. This Agreement supersedes any prior agreement
between the parties with respect to the subject matter contained herein. This Agreement may be amended by the Transfer Agent from time to time upon ten (10) days’ prior written notice (unless such notice is otherwise waived) by the
following procedure. The Transfer Agent will mail a copy of the amendment to the Distributor and the Participant. For the purposes of this Agreement, mail will be deemed received when actually received by the recipient thereof upon the date that
appears on a reasonably acceptable proof of receipt. Titles and section headings are included solely for convenient reference and are not a part of this Agreement. This Agreement and Attachments A and A-1 hereto, which is hereby incorporated herein
by reference, constitute the entire agreement between the parties regarding the matters contained herein and may be amended or modified only by a written document signed by an authorized representative of each party.
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17.
PROSPECTUS
. The Distributor will provide to the Participant copies of the then current Prospectus and
any printed supplemental information in reasonable quantities upon request. The Participant shall, upon request of the Trust, provide the Trust with sufficient documentation and other evidence that the Participant is providing prospectuses and,
where applicable, any printed supplemental information, to the purchasers of any Shares. The Distributor represents, warrants and agrees that it will notify the Participant when a revised, supplemented or amended prospectus for any Shares is
available and deliver or otherwise make available to the Participant copies of such revised, supplemented or amended prospectus at such time and in such numbers as to enable the Participant to comply with any obligation it may have to deliver such
prospectus to customers. The Distributor will make such revised, supplemented or amended prospectus available to the Participant no later than its effective date. The Distributor shall be deemed to have complied with this Section 17 when the
Participant has received such revised, supplemented or amended prospectus by email at [
@
.
com], in printable form, with such number of hard copies as may be agreed from time to time by the parties promptly thereafter.
18.
NO PROMOTION
.
Each of the Trust and the Distributor agrees that it will not, without the prior written consent of the Participant in each instance, (i) use in advertising, publicity, or otherwise the name of the Participant or any affiliate of the
Participant, or any partner or employee of the Participant, nor any trade name, trademark, trade device, service mark, symbol or any abbreviation, contraction or simulation thereof owned by the Participant or its affiliates, or (ii) represent,
directly or indirectly, that any product or any service provided by the Trust or Distributor has been approved or endorsed by the Participant. Furthermore, the Distributor and the Participant agree that they will not, without the prior written
consent of the other party in each such instance, disclose the terms of this Agreement, except for use in accordance with this Agreement or to the parties’ respective officers, directors, employees, agents and representatives for use in
accordance with this Agreement or as required by any applicable law or regulatory body. This provision shall survive termination or expiration of this Agreement.
19.
COUNTERPARTS
. This Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all shall constitute
but one and the same instrument.
20.
GOVERNING LAW
. This Agreement shall be governed by and interpreted in accordance with the laws of the State
of Illinois without regard to the conflicts of laws provisions thereof. The parties irrevocably submit to the personal jurisdiction and service and venue of any federal or state court within the State of Illinois having subject matter jurisdiction,
for the purpose of any action, suit or proceeding arising out of or relating to this Agreement.
21.
ASSIGNMENT
. Neither party may assign its
rights or obligations under this Agreement (in whole or in part) without the prior written consent of the other party, which shall not be unreasonably withheld;
provided
, that either party may assign its rights and obligations hereunder (in
whole, but not in part) without such consent to an entity acquiring all, or substantially all, of its assets or business. Notwithstanding the aforementioned termination provisions, in the event that an entity acquires all or substantially all of the
Participant’s assets or business, the Distributor may elect within a limited period of time not to exceed thirty (30) days from the date upon which such acquisition was publicly announced to immediately terminate this Agreement.
22. SEVERANCE. If any provision of this Agreement is held by any court pursuant to any Act, Regulation, Rule or decision or by any other governmental or
supranational body or authority or regulatory or
self-regulatory
organization to be invalid, illegal or unenforceable for any reason, it shall be invalid, illegal or unenforceable only to the extent so held
and all parties shall remain responsible for all actions or omissions not relating to such provision and the invalidity, illegality or unenforceability of such
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provisions shall not affect the validity, legality or enforceability of the other provisions of this Agreement, so long as this Agreement, as so modified, continues to express, without material
change, the original intentions of the parties as to the subject matter of this Agreement and the deletion of such portion of this Agreement will not substantially impair the respective benefits, obligations or expectations of the parties to this
Agreement.
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IN WITNESS WHEREOF
, the duly authorized representatives of the below parties hereto have executed this
Agreement the effective date of which shall be date of the last dated signature below (the “Effective Date”).
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INVESCO DISTRIBUTORS, INC.
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BY:
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NAME:
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TITLE:
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Address:
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11 Greenway Plaza, Suite 100
Houston, Texas
77046-1173
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Telephone:
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Facsimile:
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DATE:
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With a copy to:
Invesco Distributors, Inc.
Attn: General Counsel
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
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[PARTICIPANT]
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BY:
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NAME:
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TITLE:
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Address:
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Telephone:
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Facsimile:
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DATE:
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Accepted by:
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POWERSHARES EXCHANGE-
TRADED FUND TRUST
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BY:
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NAME:
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TITLE:
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3500 Lacey Road, Suite 700 Downers Grove, IL 60515
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630.933.9600
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Facsimile:
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630.933.9699
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POWERSHARES EXCHANGE-TRADED FUND TRUST II
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BY:
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NAME:
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TITLE:
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Address:
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3500 Lacey Road, Suite 700 Downers Grove, IL 60515
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Telephone:
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630.933.9600
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Facsimile:
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630.933.9699
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DATE:
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POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED FUND TRUST
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BY:
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- 11 -
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Address:
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3500 Lacey Road, Suite 700
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Downers Grove, IL 60515
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Telephone:
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630.933.9600
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Facsimile:
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630.933.9699
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DATE:
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POWERSHARES ACTIVELY MANAGED EXCHANGE-TRADED COMMODITY FUND TRUST
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BY:
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NAME:
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TITLE:
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Address:
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3500 Lacey Road, Suite 700
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Downers Grove, IL 60515
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630.933.9600
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Facsimile:
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630.933.9699
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THE BANK OF NEW YORK MELLON,
AS
TRANSFER AGENT
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BY:
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NAME:
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TITLE:
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Telephone:
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- 12 -
ATTACHMENT A
Equity Funds
This document is an
attachment to the Participant Agreement with respect to the procedures to be used by (i) the Distributor and the Transfer Agent in processing an order for the creation of Shares, (ii) the Distributor and the Transfer Agent in processing a
request for the redemption of Shares and (iii) the Participant and the Transfer Agent in delivering or arranging for the delivery of requisite cash payments, Portfolio Deposits or Shares, as the case may be, in connection with the submission of
orders for creation or requests for redemption.
The Participant is first required to have signed the Participant Agreement. Upon acceptance of the
Participant Agreement by the Distributor and the Transfer Agent, the Transfer Agent will assign a PIN Number to each Authorized Person authorized to act for the Participant. This will allow the Participant through its Authorized Person(s) to place
an order with respect to Shares.
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I.
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TO PLACE AN ORDER FOR CREATION OR REDEMPTION OF SHARES
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The Authorized Participant
(“AP”) submitting an order to create
or
redeem, shall submit such orders containing the information required to the Transfer Agent in the following manner: (a) by telephone to the Transfer Agent Representative followed up with
the faxed order form (within 15 minutes of the verbal phone order) according to the procedures set forth below,
or
(b) through Transfer Agent’s electronic order entry system, as such may be made available and constituted from time
to time, the use of which shall be subject to the terms and conditions of the Electronic Services Agreement. The order so transmitted (either orally and in writing, or electronic form) is hereinafter referred to as the “Submission” or the
“Purchase Order” / “Redemption Order” (as applicable), and the Business Day on which a Submission is made is hereinafter referred to as the “Transmittal Date”. NOTE THAT WHEN THE TELEPHONIC METHOD OF SUBMITTING ORDERS
IS USED, THE TELEPHONE CALL IN WHICH THE ORDER NUMBER IS ISSUED INITIATES THE ORDER PROCESS BUT DOES
NOT
ALONE CONSTITUTE THE ORDER. A PHONE ORDER IS COMPLETED AND PROCESSED ONLY UPON RECEIPT OF THE FAXED ORDER FORM.
1.
Call to Receive a Submission Number
. An Authorized Person for the Participant will call the Trust Representative at (718) 315-7500 not later
than the closing time of the regular trading session on the New York Stock Exchange (the “NYSE Closing Time”) (ordinarily 4:00 p.m., Eastern time) to receive a Submission Number. In the case of custom orders, the order must be received by
the Transfer Agent no later than 3:00 p.m., Eastern time on the trade date. Upon verifying the authenticity of the caller (as determined by the use of the appropriate PIN Number) and the terms of the order for creation or request for redemption, the
Trust Representative will issue a unique Submission Number. All orders with respect to the creation or redemption of Shares are required to be in writing and accompanied by the designated Submission Number. Incoming telephone calls are queued and
will be handled in the sequence received.
The Participant must receive a Submission Number prior to NYSE Closing Time for its order to be processed that Business Day.
INCOMING CALLS THAT ARE ATTEMPTED LATER THAN THE NYSE CLOSING TIME
WILL NOT BE ACCEPTED.
- i -
PLEASE NOTE: A PURCHASE ORDER REQUEST IS NOT COMPLETE UNTIL THE CONFIRMATION NUMBER IS ISSUED BY THE BNYM ETF
ADMINISTRATOR AND THE ORDER IS ACKNOWLEDGED AS “APPROVED” BY BNYM OR THE DISTRIBUTOR. WITH RESPECT TO EACH FUND, AN ORDER FOR FUND SHARES CAN NOT BE CANCELED BY THE AP AFTER THE FUND’S MARKET CUTT-OFF TIME. INCOMING TELEPHONE CALLS
ARE QUEUED AND WILL BE HANDLED IN THE SEQUENCE RECEIVED. ACCORDINGLY, THE AP SHOULD NOT HANG UP AND REDIAL. CALLS THAT ARE IN PROGRESS AT THE CUTOFF TIME ARE VALID AND THE ORDER WILL BE TAKEN. PLEASE NOTE THAT “IN PROGRESS” IS DEFINED AS
AN AP ACTUALLY SPEAKING WITH A BNYM ETF ADMINISTRATOR . FOR CALLS THAT ARE PLACED BEFORE THE CUTOFF TIME THAT ARE IN THE HOLDING QUEUE UNANSWERED AT OR AFTER THE CUTOFF TIME, WILL BE VERBALLY DENIED. INCOMING CALLS THAT ARE RECEIVED AFTER THE CUTOFF
TIME WILL NOT BE ANSWERED BY THE BNYM ETF ADMINISTRATOR. ALL TELEPHONE CALLS WILL BE RECORDED.
2.
Assemble the Submission
. The Authorized
Person submitting an order to create or a request to redeem shall assemble (a) written instructions regarding such creation order or redemption request, (b) the designated Submission Number and (c) transmit such document by facsimile
to the Trust Representative and the Distributor, as applicable, according to the procedures set forth below in Section 3. The document so transmitted is hereinafter referred to as the “Submission,” and the Business Day on which a
Submission is made is hereinafter referred to as the “Transmittal Date.” NOTE THAT THE TELEPHONE CALL IN WHICH THE SUBMISSION NUMBER IS ISSUED INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE ORDER. AN ORDER OR REQUEST IS ONLY
COMPLETED AND PROCESSED UPON RECEIPT OF THE SUBMISSION.
3.
Transmit the Submission
. A Submission Number is only valid for a limited time. The
Submission for either creations or redemptions of Shares must be sent by facsimile or to the Trust Representative within 15 minutes of the issuance of the Submission Number. In the event that the Submission is not received within such time period,
the Trust Representative will attempt to contact the Participant to request immediate transmission of the Submission.
(a)
In the case of a Submission for creation, unless the Submission is received by the Trust Representative upon the earlier of within (i) 15 minutes of contact with the Participant or (ii) 15 minutes after the NYSE Closing Time, the
Submission will be deemed invalid.
(b) In the case of a Submission for redemption, unless such Submission is received by
the Trust Representative within (i) 15 minutes of contact with the Participant or (ii) 15 minutes after the NYSE Closing Time, whichever is earlier, such order for redemption contained therein shall be received in proper form (as described
in the Prospectus) by the Transfer Agent on the Business Day following such Transmittal Date in accordance with the procedures set forth below or in the Fund’s Prospectus as the case may be.
4.
Await Receipt of Confirmation
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(a)
Trust’s Clearing Process—Creation Orders
. The Transfer Agent shall issue to the Participating Party a
confirmation of acceptance of an order to create Shares in Creation Unit size aggregations within 15 minutes of its receipt of a Submission received in good form. In the event the Participating Party does not receive a timely confirmation from the
Transfer Agent, it should contact the Distributor and the Trust Representative at the business numbers indicated. A creation order is deemed to be irrevocable upon the delivery of the confirmation of acceptance.
- ii -
(b)
Trust’s Clearing Process—Requests for Redemptions
. The
Transfer Agent shall issue to the Participating Party a confirmation of acceptance of a request to redeem Shares in Creation Unit size aggregations within 15 minutes of its receipt of a Submission received in good form. In the event the
Participating Party does not receive a timely confirmation from the Transfer Agent, it should contact the Transfer Agent directly at the business number indicated. A redemption order is deemed to be irrevocable upon the delivery of the confirmation
of acceptance.
(c)
Outside the Trust’s Clearing Process—Creation Orders
. The Distributor shall issue to
the DTC Participant an acknowledgement of receipt of an order to create Shares in Creation Unit size aggregations within 15 minutes of its receipt of a Submission received in good form. In the event the DTC Participant does not receive a timely
acknowledgement from the Transfer Agent, it should contact the Distributor and Transfer Agent at the business numbers indicated. A creation order is deemed to be irrevocable upon the delivery of the acknowledgement of receipt of an order.
(d)
Outside the Trust’s Clearing Process—Requests for Redemption
. The Transfer Agent shall issue to the DTC
Participant an acknowledgement of receipt of an order to redeem Shares in Creation Unit size aggregations within 15 minutes of its receipt of a Submission received in good form. In the event the DTC Participant does not receive a timely
acknowledgement from the Transfer Agent, it should contact the Transfer Agent directly at the business number indicated. A redemption order is deemed to be irrevocable upon the delivery of the acknowledgement of receipt of an order.
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II.
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PARTICIPANT’S RESPONSIBILITY FOR DELIVERING OR EFFECTING THE DELIVERY OF REQUISITE PORTFOLIO DEPOSITS OR SHARES AND CASH PAYMENTS IN CONNECTION WITH ORDERS FOR CREATION OR REQUESTS FOR REDEMPTION.
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1.
Trust’s Clearing Process—Creation Orders
. The Participating Party notified of confirmation of an order to create Shares
through the Trust’s Clearing Process shall be required to transfer or arrange for the transfer of (a) the requisite Deposit Securities (or contracts to purchase such Deposit Securities expected to be delivered through NSCC by the
“regular way” settlement date) and (b) the Cash Component, if any, to the Transfer Agent by means of the Trust’s Clearing Process so as to be received no later than on the “regular way” settlement date (as described in
the Prospectus) by the Transfer Agent as set forth below.
2.
Trust’s Clearing Process—Redemption Requests
. The Participating Party
notified of confirmation of a request to redeem Shares through the Trust’s Clearing Process shall be required to transfer or arrange for the transfer of the requisite Shares and the Cash Redemption Amount, if any, to the Transfer Agent by means
of the Trust’s Clearing Process so as to be received no later than on the “regular way” settlement date (as described in the Prospectus) by the Transfer Agent as set forth below.
3.
Outside the Trust’s Clearing Process—Creation Orders
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Domestic.
The DTC Participant notified of acknowledgement of an order to create Shares outside the Trust’s Clearing Process shall be required to
effect a transfer to the Transfer Agent of (a) the requisite Deposit Securities through DTC so as to be received by the Transfer Agent by the “regular way” settlement date, on which the order is received in proper form (as described
in the Prospectus) by the Distributor, in such a way as to replicate the Portfolio Deposit established on the Transmittal Date by the Transfer Agent and (b) the Cash Component, if any, through the Federal Reserve Bank wire system so as to be
received by the Transfer Agent by 2:00 p.m., Eastern time by the “regular way” settlement date (as
- iii -
described in the Prospectus). If the Transfer Agent does not receive the Deposit Securities by 11:00 a.m., Eastern time, and the Cash Component, if any, by 2:00 p.m., Eastern time by the
“regular way” settlement date. (as described in the Prospectus), the creation order contained in such Submission shall be canceled. Upon written notice to the Transfer Agent, the DTC Participant may resubmit such canceled order on the
following Business Day using a Portfolio Deposit as newly constituted.
Foreign
. Deposit Securities must be delivered to an account maintained at
the applicable local sub-custodian of the Trust on or before 11 a.m Eastern time, on the Contractual Settlement Date (defined below). Participant must also make available on or before the Contractual Settlement Date, by means satisfactory to the
Trust, immediately available or same day funds estimated by the Trust to be sufficient to pay the Cash Component next determined after acceptance of an order, together with the applicable Transaction Fee. Any excess funds will be returned following
settlement of the issue of the Creation Unit of Shares. The “Contractual Settlement Date” is the earlier of (i) the date upon which all of the required Deposit Securities, the Cash Component and any other cash amounts which may be due
are delivered to the Trust and (ii) the latest day for settlement on the customary settlement cycle in the jurisdiction where any of the securities of the relevant Fund are customarily traded.
A Creation Unit of Shares will not be issued until the transfer of good title to the Trust of the portfolio of Deposit Securities and the payment of the Cash
Component and the applicable Transaction Fee have been completed. When the sub-custodian confirms to the Custodian that the required securities included in the Portfolio Deposit (or, when permitted in the sole discretion of the Trust, the cash value
thereof) have been delivered to the account of the relevant sub-custodian, the Custodian shall notify the Distributor and Transfer Agent, and the Trust will issue and cause the delivery of the Creation Unit of Shares via DTC.
4. Purchase of Creation Unit Aggregations Prior to Receipt of Deposit Securities. Creation Unit Aggregations may be created in advance of receipt by the Trust
of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the net asset value of the Fund Shares on the date the order is placed in proper form since, in
addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component, plus (ii) 105% of the market value of the undelivered Deposit Securities (the “Additional Cash Deposit”).
The order shall be deemed to be received on the Business Day on which the order is placed in proper form prior to 4:00 p.m., Eastern time, If the order is not placed in proper form by 4:00 p.m., Eastern time, or federal funds in the appropriate
amount are not received by 11:00 a.m., Eastern time, on the contractual settlement date, then the order may be deemed to be canceled and the Participant shall be liable to the Fund for losses, if any, resulting therefrom. An additional amount of
cash shall be required to be deposited with the Trust, pending delivery of the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with the Trust in an amount at least equal to 105% of the daily marked to
market value of the missing Deposit Securities.
5.
Outside the Trust’s Clearing Process—Redemption Requests
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Domestic
. The DTC Participant notified of acknowledgement of a request to redeem Shares outside the Trust’s Clearing Process shall be required to
effect a transfer to the Transfer Agent (a) the requisite number of Shares through DTC on the contractual settlement date (as described in the Prospectus) by the Transfer Agent and (b) the Cash Redemption Amount, if any, through the
Federal Reserve Bank wire system by no later than 11 a.m., Eastern time on the contractual settlement date (as described in the Prospectus) by the Transfer Agent.
In the event that the number of Shares is insufficient on contractual settlement date for Creation Unit(s) of Shares, the Trust may deliver the Deposit
Securities notwithstanding such deficiency in reliance on the
- iv -
undertaking of the AP to deliver the missing Shares as soon as possible, which undertaking shall be secured by such the AP’s delivery on Settlement Date and subsequent maintenance of
collateral consisting of cash having a value at least equal to 105 % of the value of the missing Shares. The parties hereto further agree that the Trust, acting in good faith, may purchase the missing Shares at any time and the AP agrees to
accept liability for any shortfall between the cost to the Trust of purchasing such shares and the value of the collateral, which may be sold by the Trust at such time, and in such manner, as the Trust may determine in its sole discretion.
Foreign
. Deliveries of in-kind redemption proceeds generally will be made within three Business Days. Due to holidays in certain countries, delivery to
redeeming Participants may take longer than three Business Days after the day on which the Transfer Agent receives the participant’s redemption order in proper form. A redeeming Beneficial Owner or Participant acting on behalf of such
Beneficial Owner must maintain appropriate securities broker-dealer, bank or other custody arrangements to which account such in-kind redemption proceeds will be delivered. If neither the redeeming Beneficial Owner nor the Participant acting on
behalf of the redeeming Beneficial Owner has appropriate arrangements to take delivery of the Deposit Securities in the applicable jurisdiction and it is not possible to make other such arrangements, or if it is not possible to effect deliveries of
the Deposit Securities in such jurisdiction, the Beneficial Owner will be required to receive its redemption proceeds in cash. In such case, the investor will receive a cash payment equal to the net asset value of its Shares less the applicable
Transaction Fee.
Arrangements satisfactory to the Trust must be in place for the Participant to transfer Creation Units through DTC on or before the
settlement date. Redemptions of Shares for Fund Securities will be subject to compliance with applicable U.S. federal and state securities laws and the Funds (whether or not it otherwise permits cash redemptions) reserve the right to redeem Creation
Units for cash to the extent that the Funds could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Deposit Securities under such laws.
In the event that the number of Shares is insufficient on trade date plus one for Creation Unit(s) of Shares, the Trust may deliver the Deposit Securities
notwithstanding such deficiency in reliance on the undertaking of the AP to deliver the missing Shares as soon as possible, which undertaking shall be secured by such the AP’s delivery on Settlement Date and subsequent maintenance of collateral
consisting of cash having a value at least equal to 105 % of the value of the missing Shares. The parties hereto further agree that the Trust, acting in good faith, may purchase the missing Shares at any time and the AP agrees to accept
liability for any shortfall between the cost to the Trust of purchasing such shares and the value of the collateral, which may be sold by the Trust at such time, and in such manner, as the Trust may determine in its sole discretion.
6.
Transaction Fee
. In connection with the creation or redemption of Creation Units, the Transfer Agent shall charge, and the Participant agrees to pay,
the Transaction Fee prescribed in the Prospectus and such additional amounts as may be prescribed pursuant to the Prospectus. Such Transaction Fee and additional amounts, if any, shall be included in the calculation of the Cash Component or Cash
Redemption Amount payable or to be received, as the case may be, by the Participant in connection with the creation or redemption order.
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III.
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TRANSFER AGENT’S RESPONSIBILITY FOR EFFECTING DELIVERY OF REQUISITE SHARES OR SECURITIES AND CASH PAYMENTS IN CONNECTION WITH ORDERS FOR CREATION OR REQUESTS FOR REDEMPTION.
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- v -
1.
Trust’s Clearing Process—Creation Order
. After the Transfer Agent has received notification
of a Submission from the Participant for a creation order for Shares through the Trust’s Clearing Process which has been received in proper form (as described in the Prospectus) by the Transfer Agent, the Transfer Agent shall initiate
procedures to transfer the requisite Shares and the Cash Component, if any, through the Trust’s Clearing Process so as to be received by the creator no later than on the “regular way” settlement date (as described in the Prospectus)
by the Transfer Agent.
2.
Trust’s Clearing Process—Redemption Requests
. After the Transfer Agent has received a Submission for a
redemption request for Shares through the Trust’s Clearing Process which has been received in proper form (as described in the Prospectus), the Transfer Agent shall initiate procedures to transfer the requisite securities (or contracts to
purchase such securities expected to be delivered through NSCC by the “regular way” settlement date) and the Cash Redemption Amount, if any, through the Trust’s Clearing Process so as to be received by the Beneficial Owner no later
than on the “regular way” settlement date (as described in the Prospectus) by the Transfer Agent.
3.
Outside the Trust’s Clearing
Process—Creation Orders
. After the Transfer Agent has received notification of a Submission from the Participant for a creation order for Shares outside the Trust’s Clearing Process which has been received in proper form (as described
in the Prospectus) by the Transfer Agent, the Transfer Agent shall initiate procedures to transfer the requisite Shares through DTC and the DTC Participants and the Cash Component, if any, through the Federal Reserve Bank wire system so as to be
received by the creator no later than on the third (3rd) Business Day following the Business Day on which the Submission is received in proper form (as described in the Prospectus) by the Transfer Agent.
4.
Outside the Trust’s Clearing Process—Redemption Requests
. After the Transfer Agent has received a Submission for a redemption request for
Shares outside the Trust’s Clearing Process which has been received in proper form (as described in the Prospectus), the Transfer Agent shall initiate procedures to transfer the requisite securities (or contracts to purchase such securities
expected to be delivered within three Business Days) through DTC and the global sub-custodian network and the Cash Redemption Amount, if any, through the Federal Reserve Bank wire system so as to be received by the Beneficial Owner no later than on
the third (3rd) Business Day (or longer for certain foreign countries) following the Business Day on which the Submission is received in proper form (as described in the Prospectus) by the Transfer Agent.
5.
Ambiguous Instructions
. In the event that a Submission contains terms that differ from the information provided in the telephone call at the time of
issuance of the Submission Number, the Trust Representative will attempt to contact the Participant to request confirmation of the terms of the order. If an Authorized Person confirms the terms as they appear in the Submission, the Submission will
be accepted and processed. If an Authorized Person contradicts its terms, the Submission will be deemed invalid, and a corrected Submission must be received by the Transfer Agent, as applicable, not later than the earlier of (i) within 15
minutes of such contact with the Participant or (ii) 15 minutes after the NYSE Closing Time. If the Trust Representative is not able to contact an Authorized Person, then the Submission shall be accepted and processed in accordance with its
terms notwithstanding any inconsistency from the terms of the telephone information. In the event that a Submission contains terms that are illegible, the Submission will be deemed invalid and the Trust Representative will attempt to contact the
Participant to request retransmission of the Submission. A corrected Submission must be received by the Transfer Agent, as applicable, not later than the earlier of (i) within 15 minutes of such contact with the Participant or (ii) 15
minutes after the NYSE Closing Time.
6.
Suspension or Rejection of an Order
. The Distributor or Transfer Agent reserves the right to suspend a
Submission in the event that its acceptance would appear to result in the Participant or a
- vi -
Beneficial Owner owning 80 percent (80%) or more of all outstanding Shares and if pursuant to Section 351 of the Internal Revenue Code of 1986, as amended, such a circumstance would
result in the Trust having a basis in the securities deposited different from the market value of such securities on the date of deposit. In such event, the Distributor or the Trust Representative will attempt to contact an Authorized Person for
purposes of confirmation of the fact that, with respect to such Participant, no Beneficial Owner would own 80 percent (80%) or more of all outstanding Shares upon execution of the Submission or that such a circumstance would not result in the
Trust having a basis in the securities deposited different from the market value of such securities on the date of deposit. In the event that (i) the Distributor or the Trust Representative is unable to contact an Authorized Person or
(ii) the Participant fails to transmit an identical Submission containing a representation and warranty as to such fact, then the Submission shall be deemed invalid.
The Trust reserves the absolute right to reject a creation order transmitted to it by the Distributor in respect of a Fund if: (i) the order is not in
proper form; (ii) the investor(s), upon obtaining the Shares ordered, would own 80% or more of the currently outstanding shares of any Fund; (iii) the Deposit Securities delivered are not as disseminated for that date by the Custodian, as
described above; (iv) acceptance of the Deposit Securities would have certain adverse tax consequences to the Fund; (v) acceptance of the Portfolio Deposit would, in the opinion of counsel, be unlawful; (vi) acceptance of the
Portfolio Deposit would otherwise, in the discretion of the Trust or the Trust’s adviser (the “Adviser”), have an adverse effect on the Trust or the rights of beneficial owners; or (vii) in the event that circumstances outside
the control of the Trust, the Transfer Agent, the Distributor and the Adviser make it for all practical purposes impossible to process creation orders. Examples of such circumstances include acts of God; public service or utility problems such as
fires, floods, extreme weather conditions and power outages resulting in telephone, telecopy and computer failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting the
Trust, the Adviser, the Distributor, DTC, NSCC, the Transfer Agent, the Custodian or sub-custodian or any other participant in the creation process, and similar extraordinary events. The Transfer Agent shall notify immediately a prospective creator
of a Creation Unit and/or the Participant acting on behalf of such prospective creator of its rejection of the order of such person. The Trust, the Custodian, any sub-custodian and the Distributor are under no duty, however, to give notification of
any defects or irregularities in the delivery of Portfolio Deposits nor shall any of them incur any liability for the failure to give any such notification.
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IV.
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PROCEDURES SPECIFIC TO CUSTOM BASKETS
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The Fund has developed custom creation, redemption and other
non-typical baskets (the “Custom Baskets”). Custom Baskets are intended to allow the Participant to transact in a Fund and other non-standard baskets using the Custom Basket process. The Custom Basket process allows for cash-in-lieu for
certain securities as well as non-typical baskets and continues to settle through the standard CNS process at NSCC. It is the responsibility of the Participant to apply to the NSCC by contacting DTCC Participant Services at 212-855-4155 and the
Transfer Agent at 718-315-7500 to allow them to receive Custom Baskets as well as the regular daily standard baskets (the “Standard Baskets”). To ensure proper tracking of a Fund to its benchmark index the following guidelines must be
followed when transacting Custom Baskets:
1. On or before T-1, the Participant must request a Custom Basket from the Adviser by emailing a custom basket
request to the Advisor at PowerSharesResearchandTrading@PowerShares.com. The Adviser must identify the securities to be added to or omitted from the creation or redemption basket (the “Added Issues” or the “Omitted Issues”). In
the case of an Omitted Issue, cash-in-lieu is defined as the net asset value of the Fund times the number of units in one creation block minus the value of the Omitted Issues. The Participant will also be responsible for any costs associated with
the conversion of
- vii -
cash into the Omitted Issues to be purchased. The Participant may request that the Custom Basket be available for creations and redemptions for a one-time transaction, a specific period or
indefinitely. The Adviser will advise the Transfer Agent who will review the Custom Basket request and, if approved, will deliver a confirmation back to the Advisor and the Participant The Advisor will notify the Transfer Agent of Custom Basket
requests and will deliver a confirmation to the Participant and the Advisor Transfer Agent, if approved. In the event subsequent additions and/or deletions to Added Issues or Omitted Issues are required to change the custom basket already approved,
the Adviser is responsible for advising both the Participant and the Transfer Agent.
2. On trade date minus 1 day, prior to the opening of the NYSE, the
Fund through Transfer Agent will notify NSCC as to the components of the approved Custom Baskets available that day along with the components of the Standard Basket. Each Custom Basket will be identified by a separate NSCC assigned instruction
CUSIP.
3. On trade date, the Participant will follow the directions regarding placing orders outlined in Attachment A. A Participant wishing to create or
redeem a Custom Basket must identify the custom CUSIP on the order form in the blank provided. Orders received without a custom CUSIP indicated will be processed as orders for Standard Baskets. Participants placing orders for Custom Baskets must
note that the cut- off- time to create and redeem a Custom Basket will be 3:00 p.m., Eastern time. Orders for Custom Baskets will not be processed if received by the Transfer Agent after 3:00 p.m., Eastern time. The Participant may transact on the
Standard Basket at any time during the trade date.
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V.
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TELEPHONE, FACSIMILE AND NUMBERS
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TRUST REPRESENTATIVE:
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TELEPHONE:
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FACSIMILE:
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TRUSTEE:
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TELEPHONE:
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FACSIMILE:
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PARTICIPANT:
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ATTACHMENT A-1
Fixed Income Funds
This document is an
attachment to the Participant Agreement with respect to the procedures to be used by (i) the Distributor and the Transfer Agent in processing an order for the creation of Shares, (ii) the Distributor and the Transfer Agent in processing a
request for the redemption of Shares and (iii) the Participant and the Transfer Agent in delivering or arranging for the delivery of requisite cash payments, Portfolio Deposits or Shares, as the case may be, in connection with the submission of
orders for creation or requests for redemption.
The Participant is first required to have signed the Participant Agreement. Upon acceptance of the
Participant Agreement by the Distributor and the Transfer Agent, the Transfer Agent will assign a PIN Number to each Authorized Person authorized to act for the Participant. This will allow the Participant through its Authorized Person(s) to place
an order with respect to Shares.
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I.
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TO PLACE AN ORDER FOR CREATION OR REDEMPTION OF SHARES
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The Authorized Participant (“AP”)
submitting an order to create
or
redeem, shall submit such orders containing the information required to the Transfer Agent in the following manner: (a) by telephone to the Transfer Agent Representative followed up with the faxed order
form (within 15 minutes of the verbal phone order) according to the procedures set forth below,
or
(b) through Transfer Agent’s electronic order entry system, as such may be made available and constituted from time to time, the use
of which shall be subject to the terms and conditions of the Electronic Services Agreement. The order so transmitted (either orally and in writing, or electronic form) is hereinafter referred to as the “Submission” or the “Purchase
Order” / “Redemption Order” (as applicable), and the Business Day on which a Submission is made is hereinafter referred to as the “Transmittal Date”. NOTE THAT WHEN THE TELEPHONIC METHOD OF SUBMITTING ORDERS IS USED, THE
TELEPHONE CALL IN WHICH THE ORDER NUMBER IS ISSUED INITIATES THE ORDER PROCESS BUT DOES
NOT
ALONE CONSTITUTE THE ORDER. A PHONE ORDER IS COMPLETED AND PROCESSED ONLY UPON RECEIPT OF THE FAXED ORDER FORM.
1.
Call to Receive a Submission Number
. An Authorized Person for the Participant will call the Trust Representative at (718) 315-7500 not later
than the closing time of the regular trading session on the New York Stock Exchange (the “NYSE Closing Time”) (ordinarily 4:00 p.m., Eastern time) to receive a Submission Number. In the case of custom orders, the order must be
received by the Transfer Agent no later than 3:00 p.m., Eastern time on the trade date. Upon verifying the authenticity of the caller (as determined by the use of the appropriate PIN Number) and the terms of the order for creation or request
for redemption, the Trust Representative will issue a unique Submission Number. All orders with respect to the creation or redemption of Shares are required to be in writing and accompanied by the designated Submission Number. Incoming telephone
calls are queued and will be handled in the sequence received.
The Participant must receive a Submission Number prior to NYSE Closing Time for its order to be processed that Business Day
. INCOMING CALLS THAT ARE ATTEMPTED LATER THAN
THE NYSE CLOSING TIME WILL NOT BE ACCEPTED.
- ix -
PLEASE NOTE: A PURCHASE ORDER REQUEST IS NOT COMPLETE UNTIL THE CONFIRMATION NUMBER IS ISSUED BY THE BNYM ETF
ADMINISTRATOR AND THE ORDER IS ACKNOWLEDGED AS “APPROVED” BY BNYM OR THE DISTRIBUTOR. WITH RESPECT TO EACH FUND, AN ORDER FOR FUND SHARES CAN NOT BE CANCELED BY THE AP AFTER THE FUND’S MARKET CUT-OFF TIME. INCOMING TELEPHONE CALLS ARE
QUEUED AND WILL BE HANDLED IN THE SEQUENCE RECEIVED. ACCORDINGLY, THE AP SHOULD NOT HANG UP AND REDIAL. CALLS THAT ARE IN PROGRESS AT THE CUTOFF TIME ARE VALID AND THE ORDER WILL BE TAKEN. PLEASE NOTE THAT “IN PROGRESS” IS DEFINED AS AN AP
ACTUALLY SPEAKING WITH A BNYM ETF ADMINISTRATOR . FOR CALLS THAT ARE PLACED BEFORE THE CUTOFF TIME THAT ARE IN THE HOLDING QUEUE UNANSWERED AT OR AFTER THE CUTOFF TIME, WILL BE VERBALLY DENIED. INCOMING CALLS THAT ARE RECEIVED AFTER THE CUTOFF TIME
WILL NOT BE ANSWERED BY THE BNYM ETF ADMINISTRATOR. ALL TELEPHONE CALLS WILL BE RECORDED.
2.
Assemble the Submission.
The Authorized Person
submitting an order to create or a request to redeem shall assemble (a) written instructions regarding such creation order or redemption request, (b) the designated Submission Number and (c) transmit such document by facsimile to the
Trust Representative and the Distributor, as applicable, according to the procedures set forth below in Section 3. The document so transmitted is hereinafter referred to as the “Submission,” and the Business Day on which a Submission
is made is hereinafter referred to as the “Transmittal Date.” NOTE THAT THE TELEPHONE CALL IN WHICH THE SUBMISSION NUMBER IS ISSUED INITIATES THE ORDER PROCESS BUT DOES NOT ALONE CONSTITUTE THE ORDER. AN ORDER OR REQUEST IS ONLY COMPLETED
AND PROCESSED UPON RECEIPT OF THE SUBMISSION.
3.
Transmit the Submission
. A Submission Number is only valid for a limited time. The Submission for
either creations or redemptions of Shares must be sent by facsimile to the Trust Representative within 15 minutes of the issuance of the Submission Number. In the event that the Submission is not received within such time period, the Trust
Representative will attempt to contact the Participant to request immediate transmission of the Submission.
(a) In the
case of a Submission for creation, unless the Submission is received by the Trust Representative upon the earlier of within (i) 15 minutes of contact with the Participant or (ii) 15 minutes after the NYSE Closing Time, the Submission will
be deemed invalid.
(b) In the case of a Submission for redemption, unless such Submission is received by the Trust
Representative within (i) 15 minutes of contact with the Participant or (ii) 15 minutes after the NYSE Closing Time, whichever is earlier, such order for redemption contained therein shall be received in proper form (as described in the
Prospectus) by the Transfer Agent on the Business Day following such Transmittal Date in accordance with the procedures set forth below or in the Fund’s Prospectus as the case may be.
4.
Await Receipt of Confirmation
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(a)
Creation Orders
. The Transfer Agent shall issue to the DTC Participant an acknowledgement of receipt of an order to
create Shares in Creation Unit size aggregations within 15 minutes of its receipt of a Submission received in good form. In the event the DTC Participant does not receive a timely acknowledgement from the Transfer Agent, it should contact the
Distributor and the Trust Representative at the business numbers indicated. A creation order is deemed to be irrevocable upon the delivery of the acknowledgement of receipt of an order.
(b)
Requests for Redemption
. The Transfer Agent shall issue to the DTC Participant an acknowledgement of receipt of an
order to redeem Shares in Creation Unit size aggregations
- x -
within 15 minutes of its receipt of a Submission received in good form. In the event the DTC Participant does not receive a timely confirmation from the Transfer Agent, it should contact the
Transfer Agent directly at the business number indicated. A redemption order is deemed to be irrevocable upon the delivery of the acknowledgement of receipt of an order.
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II.
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PARTICIPANT’S RESPONSIBILITY FOR DELIVERING OR EFFECTING THE DELIVERY OF REQUISITE PORTFOLIO DEPOSITS OR SHARES AND CASH PAYMENTS IN CONNECTION WITH ORDERS FOR CREATION OR REQUESTS FOR REDEMPTION.
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1.
Creation Orders
. The DTC Participant notified of acknowledgement of an order to create Shares shall be required to effect a
transfer to the Transfer Agent of (a) the requisite Deposit Securities through Euroclear, DTC and/or Fed
Book-Entry
so as to be received by the Transfer Agent no later than 11:00 a.m., Eastern time
on the contractual settlement date of which such order is Deemed Received by the Transfer Agent as set forth below in Section IV, in such a way as to replicate the Portfolio Deposit established on the Transmittal Date by the Transfer Agent and
(b) the Cash Component, if any, through the Federal Reserve Bank wire system so as to be received by the Transfer Agent by 11 a.m., Eastern time on the contractual settlement date of which such order is Deemed Received. If the Transfer Agent
does not receive the Deposit Securities by 11:00 a.m., Eastern time and the Cash Component, if any, by 11 a.m., Eastern time on the contractual settlement date, the creation order contained in such Submission shall be canceled. Upon written
notice to the Transfer Agent, the DTC/Euroclear Participant may resubmit such canceled order on the following Business Day using a Portfolio Deposit as newly constituted.
2.
Purchase of Creation Unit Aggregations Prior to Receipt of Deposit Securities
. Creation Unit Aggregations may be created in advance of receipt by
the Trust of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the net asset value of the Fund Shares on the date the order is placed in proper form
since, in addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component, plus (ii) 105% of the market value of the undelivered Deposit Securities (the “Additional Cash
Deposit”). The order shall be deemed to be received on the Business Day on which the order is placed in proper form prior to 4:00 p.m., Eastern time, on such date, and federal funds in the appropriate amount are deposited with the Transfer
Agent by 2 p.m., Eastern time, on the contractual settlement date. If the order is not placed in proper form by 4:00 p.m., Eastern time, or federal funds in the appropriate amount are not received by 2 p.m., Eastern time, on the contractual
settlement date, then the order may be deemed to be canceled and the Participant shall be liable to the Fund for losses, if any, resulting therefrom. An additional amount of cash shall be required to be deposited with the Trust, pending delivery of
the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with the Trust in an amount at least equal to 105% of the daily marked to market value of the missing Deposit Securities.
3.
Redemption Requests
. The DTC/Euroclear Participant notified of acknowledgement of a request to redeem Shares shall be required to effect a transfer
to the Transfer Agent (a) the requisite number of Shares through DTC or Euroclear on the contractual settlement date (b) the Cash Redemption Amount, if any, through the Federal Reserve Bank wire system by no later than 2:00 p.m,
Eastern time on contractual settlement date.
In the event that the number of Shares is insufficient on
contractual settlement date
for Creation
Unit(s) of Shares, the Trust may deliver the Deposit Securities notwithstanding such deficiency in reliance on the undertaking of the AP to deliver the missing Shares as soon as possible, which undertaking shall be secured by such the AP’s
delivery on Settlement Date and subsequent maintenance of collateral consisting of cash having a value at least equal to 105 % of the value of the missing Shares. The parties hereto further agree that the Trust, acting in good faith, may
purchase the missing Shares at any time and the AP agrees to accept liability for any shortfall between the cost to the Trust of purchasing
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such shares and the value of the collateral, which may be sold by the Trust at such time, and in such manner, as the Trust may determine in its sole discretion.
4.
Creation Orders—Foreign Securities
. Deposit Securities, when applicable, must be delivered to an account maintained at the applicable local
sub-custodian
of the Trust on or before 11:00 a.m., New York time, on the Contractual Settlement Date (defined below). Participant must also make available on or before the Contractual Settlement Date, by means
mutually agreed upon by the Trust and the Participant, immediately available or same day funds estimated by the Trust to be sufficient to pay the Cash Component next determined after acceptance of an order, together with the applicable Transaction
Fee, if any. Any excess funds will be promptly returned to the Participant following settlement of the issue of the Creation Unit of Shares. The “Contractual Settlement Date” is the earlier of (i) the date upon which all of the
required Deposit Securities, the Cash Component and any other cash amounts which may be due are delivered to the Trust and (ii) the latest day for settlement on the customary settlement cycle in the jurisdiction where any of the securities of
the relevant Fund are customarily traded.
A Creation Unit of Shares will not be issued until the transfer of good title to the Trust of the portfolio of
Deposit Securities and the payment of the Cash Component and the applicable Transaction Fee have been completed. When the
sub-custodian
confirms to the Custodian that the required securities included in the
Portfolio Deposit (or, when permitted in the sole discretion of the Trust, the cash value thereof) have been delivered to the account of the relevant
sub-custodian,
which confirmation shall be done promptly
after such delivery, the Custodian shall notify the Distributor and Transfer Agent, and the Trust will issue and cause the delivery of the Creation Unit of Shares via DTC.
5.
Redemption Orders—Foreign Securities
. Deliveries of
in-kind
redemption proceeds generally will be made
within three Business Days. Due to holidays in certain countries, delivery to redeeming Participants may take longer than three Business Days after the day on which the Transfer Agent receives the Participant’s redemption order in proper form.
A redeeming Beneficial Owner or Participant acting on behalf of such Beneficial Owner must maintain appropriate securities
broker-dealer,
bank or other custody arrangements to which account such
in-kind
redemption proceeds will be delivered. If neither the redeeming Beneficial Owner nor the Participant acting on behalf of the redeeming Beneficial Owner has appropriate arrangements to take delivery of the
Deposit Securities in the applicable jurisdiction and it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Deposit Securities in such jurisdiction, the Beneficial Owner will be required to receive
its redemption proceeds in cash. In such case, the investor will receive a cash payment equal to the net asset value of its Shares less the applicable Transaction Fee.
Arrangements satisfactory to the Trust must be in place for the Participant to transfer Creation Units through DTC on or before the settlement date.
Redemptions of Shares for Fund Securities will be subject to compliance with applicable U.S. federal and state securities laws and the Funds (whether or not it otherwise permits cash redemptions) reserve the right to redeem Creation Units for cash
to the extent that the Funds could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Deposit Securities under such laws.
In the event that the number of Shares is insufficient on
trade date plus one
for Creation Unit(s) of Shares, the Trust may deliver the Deposit
Securities notwithstanding such deficiency in reliance on the undertaking of the AP to deliver the missing Shares as soon as possible, which undertaking shall be secured by such the AP’s delivery on Settlement Date and subsequent maintenance of
collateral consisting of cash having a value at least equal to 105 % of the value of the missing Shares. The parties hereto further agree that the Trust, acting in good faith, may purchase the missing Shares at any time and the AP agrees to
accept liability for any shortfall between the cost to the Trust of purchasing such shares and the value of the collateral, which may be sold by the Trust at such time, and in such manner, as the Trust may determine in its sole discretion.
- xii -
6.
Transaction Fee
. In connection with the creation or redemption of Creation Units, the Transfer Agent
shall charge, and the Participant agrees to pay to the Transfer Agent, the Transaction Fee prescribed in the Prospectus and such additional amounts as may be prescribed pursuant to the Prospectus. Such Transaction Fee and additional amounts, if any,
shall be included in the calculation of the Cash Component or Cash Redemption Amount payable or to be received, as the case may be, by the Participant in connection with the creation or redemption order.
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III.
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RESPONSIBILITY FOR EFFECTING DELIVERY OF REQUISITE SHARES OR SECURITIES AND CASH PAYMENTS IN CONNECTION WITH ORDERS FOR CREATION OR REQUESTS FOR REDEMPTION
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1.
Creation Orders
. After the Transfer Agent has received notification of a Submission from the Participant for a creation order for Shares which has
been Deemed Received by the Transfer Agent as set forth below in Section IV, the Transfer Agent shall initiate procedures to transfer the requisite Shares through DTC and the DTC Participant and the Cash Component, if any, through the Federal
Reserve Bank wire system so as to be received by the creator no later than on the third (3rd) Business Day following the Business Day on which the Submission is Deemed Received by the Transfer Agent.
2.
Redemption Requests
. After the Transfer Agent has received a Submission for a redemption request for Shares and Deemed Received such submission as
set forth below in Section IV, the Transfer Agent shall initiate procedures to transfer the requisite securities (or contracts to purchase such securities expected to be delivered within three Business Days) through DTC and the DTC Participant
and the Cash Redemption Amount, if any, through the Federal Reserve Bank wire system so as to be received by the Beneficial Owner no later than on the third (3rd) Business Day (or longer for certain foreign countries) following the Business Day
on which the Submission is Deemed Received by the Transfer Agent.
IV.
PROCEDURES BY WHICH AN ORDER TO CREATE OR A REQUEST TO REDEEM SHALL BE
“DEEMED RECEIVED”
1.
Creation Orders
. An order to create Shares shall be Deemed Received by the Transfer Agent on the Transmittal
Date only if: (a) the Submission containing such order is in proper form, (b) such Submission is received by the Transfer Agent no later than the time on such Transmittal Date as set forth in Section I(3)(a) hereof, (c) when
applicable, the requisite number of Deposit Securities is transferred through Euroclear, DTC and/or Fed
Book-Entry
to the account of the Trust no later than 11:00 a.m., Eastern time on the contractual
settlement date and (d) the cash equal to the Cash Component, if any, is transferred via the Federal Reserve Bank wire system to the account of the Trust by no later than 2:00 p.m., Eastern time on the contractual settlement date. If
either the Submission, the requisite Deposit Securities (when applicable) or the cash equal to the Cash Component is not received by the Trustee within the time periods set forth above, such order shall be deemed invalid.
2.
Redemption Requests
. A request to redeem Shares shall be Deemed Received by the Transfer Agent on the Transmittal Date only if (a) the
Submission containing such request is in proper form, (b) such Submission is received by the Trust no later than the time as set forth in Section I(3)(b) hereof, (c) the requisite number of Shares is transferred via DTC or Euroclear
to the account of the Transfer Agent by the NYSE Closing Time on such Transmittal Date and (d) the Cash Redemption Amount owed to the Trust, if any, is received by the Transfer Agent no later than 11 a.m., Eastern time on the contractual
settlement date. If either the Submission, the Shares or cash equal to the Cash Redemption Amount, if any, is not received by the Trust within the time periods set forth above, such redemption request shall be Deemed Received by the Transfer Agent
on the Business Day on which both the Submission and the requisite number of Shares are delivered to the Transfer Agent within the proper
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time periods as set forth above; provided that the Cash Redemption Amount, if any, is then paid on the next Business Day within the time period set forth above.
3.
Ambiguous Instructions
. In the event that a Submission contains terms that differ from the information provided in the telephone call at the time of
issuance of the Submission Number, the Trust Representative will attempt to contact the Participant to request confirmation of the terms of the order. If an Authorized Person confirms the terms as they appear in the Submission, the Submission will
be accepted and processed. If an Authorized Person contradicts its terms, the Submission will be deemed invalid, and a corrected Submission must be received by the Transfer Agent, as applicable, not later than the earlier of (i) within 15
minutes of such contact with the Participant or (ii) 15 minutes after the NYSE Closing Time. If the Trust Representative is not able to contact an Authorized Person, then the Submission shall be accepted and processed in accordance with its
terms notwithstanding any inconsistency from the terms of the telephone information. In the event that a Submission contains terms that are illegible, the Submission will be deemed invalid and the Trust Representative will attempt to contact the
Participant to request retransmission of the Submission. A corrected Submission must be received by the Transfer Agent, as applicable, not later than the earlier of (i) within 15 minutes of such contact with the Participant or (ii) 15
minutes after the NYSE Closing Time.
4.
Suspension or Rejection of an Order
. The Distributor or Transfer Agent reserves the right to suspend a
Submission in the event that its acceptance would appear to result in the Participant or a Beneficial Owner owning 80 percent (80%) or more of all outstanding Shares and if pursuant to Section 351 of the Internal Revenue Code of 1986,
as amended, such a circumstance would result in the Trust having a basis in the securities deposited different from the market value of such securities on the date of deposit. In such event, the Distributor or the Trust Representative will attempt
to contact an Authorized Person for purposes of confirmation of the fact that with respect to such Participant no Beneficial Owner would own 80 percent (80%) or more of all outstanding Shares upon execution of the Submission or that such a
circumstance would not result in the Trust having a basis in the securities deposited different from the market value of such securities on the date of deposit. In the event that (i) the Distributor or the Trust Representative is unable to
contact an Authorized Person or (ii) the Participant fails to transmit an identical Submission containing a representation and warranty as to such fact, then the Submission shall be deemed invalid.
The Trust reserves the absolute right to reject a creation order transmitted to it by the Distributor in respect of a Fund if: (i) the order is not in
proper form; (ii) the investor(s), upon obtaining the Shares ordered, would own 80% or more of the currently outstanding shares of any Fund; (iii) the Deposit Securities delivered are not as disseminated for that date by the Custodian, as
described above; (iv) acceptance of the Deposit Securities would have certain adverse tax consequences to the Fund; (v) acceptance of the Portfolio Deposit would, in the opinion of counsel, be unlawful; (vi) acceptance of the
Portfolio Deposit would otherwise, in the discretion of the Trust or the Adviser, have an adverse effect on the Trust or the rights of beneficial owners; or (vii) in the event that circumstances outside the control of the Trust, the Transfer
Agent, the Distributor and the Trust’s adviser (the “Adviser”) make it for all practical purposes impossible to process creation orders. Examples of such circumstances include acts of God; public service or utility problems such as
fires, floods, extreme weather conditions and power outages resulting in telephone, telecopy and computer failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting the
Trust, the Adviser, the Distributor, DTC, NSCC, Euroclear, the Transfer Agent, the Custodian or
sub-custodian
or any other participant in the creation process, and similar extraordinary events. The Transfer
Agent shall notify immediately a prospective creator of a Creation Unit and/or the Participant acting on behalf of such prospective creator of its rejection of the order of such person. The Trust, the Custodian, any
sub-custodian
and the Distributor are under no duty, however, to give notification of any defects or irregularities in the delivery of Portfolio Deposits nor shall any of them incur any liability for the
failure to give any such notification.
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V.
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PROCEDURES SPECIFIC TO CUSTOM BASKETS
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As fixed income instruments are characterized by minimum and
incremental trading lots, the Fund has developed custom creation, redemption and other
non-typical
baskets (the “Custom Baskets”). Custom Baskets are intended to allow the Participant to transact in
that Fund and other
non-standard
baskets using the Custom Basket process. The Custom Basket process allows for
cash-in-lieu
for
certain securities as well as
non-typical
baskets and
broker-to-broker
settlements. Baskets will usually be created with
constituent security allocations at variance from what is published in NSCC. To ensure proper tracking of the Fund to its benchmark index, Standard Baskets will be compiled and used for index indicative value (“IOPV”) calculation only. The
following guidelines must be followed when transacting Custom Baskets:
1. On or before
T-1,
the Participant must
request a Custom Basket from the Adviser at
212-278-9429
for creations and redemptions. The Adviser must identify the securities to be added to or omitted from the
creation or redemption basket (the “Added Issues” or the “Omitted Issues”). In the case of an Omitted Issue, cash-in-lieu is defined as the net asset value of the Fund times the number of units in one creation block minus the
value of the Omitted Issues. The Participant will also be responsible for any costs associated with the conversion of cash into the Omitted Issues to be purchased. The Participant may request that the Custom Basket be available for creations and
redemptions for a
one-time
transaction, a specific period or indefinitely. The Advisor will notify the Transfer Agent of Custom Basket requests and will deliver a confirmation to the Participant and the
Transfer Agent, if approved. In the event subsequent additions and/or deletions to Added Issues or Omitted Issues are required to change the custom basket already approved, the Adviser is responsible for advising both the Participant and the
Transfer Agent. For subscriptions made entirely in cash, Participants must deposit funds by trade date plus 1 day (T+1) for Treasuries, and trade date plus 3 days (T+3) for Municipals, other Government Debt, Preferreds and Corporate debt
obligations reflecting the trade settlement cycle for the foregoing.
2. For Funds holding only securities which clear through NSCC’s Continuous Net
Settlement process, on trade date minus 1 day, prior to the opening of the NYSE, the Fund through Transfer Agent will notify NSCC as to the components of the approved Custom Baskets available that day along with the components of the Standard
Basket. Each Custom Basket will be identified by a separate NSCC assigned instruction CUSIP. NSCC will also be advised by the Transfer Agent of Standard Baskets, solely for the purpose of calculating IOPV during the trading hours. For Funds holding
securities settled through Euroclear or other foreign depositories, the Transfer Agent will notify Euroclear or a local depository participant, generally a subcustodian of the Transfer Agent, of securities to be received.
3. On trade date, the Participant will follow the directions regarding placing orders outlined in Attachment A. A Participant wishing to create or redeem a
Custom Basket must identify the custom CUSIP on the order form in the blank provided. Participants placing orders for Custom Baskets must note that the
cut-off-time
to
create and redeem a Custom Basket will be 3:00 p.m., Eastern time. Orders for Custom Baskets will not be processed if received by the Transfer Agent after 3:00 p.m., Eastern time.
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VI.
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TELEPHONE, FACSIMILE, AND NUMBERS
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TRUST REPRESENTATIVE:
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TELEPHONE:
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FACSIMILE:
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TRUSTEE:
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TELEPHONE:
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FACSIMILE:
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PARTICIPANT:
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TELEPHONE:
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FACSIMILE:
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- xv -
IN WITNESS WHEREOF, the Participant acknowledges that he or she has read the procedures relating to Custom
Baskets and agrees to comply with all such procedures. Failure to comply with the Custom Basket procedures will require the transaction to be effected in the Standard Basket.
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[PARTICIPANT]
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By:
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Title:
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Address:
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Telephone:
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Facsimile:
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Date:
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THE BANK OF NEW YORK MELLON,
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AS TRANSFER AGENT
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By:
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Name:
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Title:
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Address:
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- xvi -
SUPPLEMENT TO PARTICIPANT AGREEMENT
The following Trade Date minus 1 (“T-1”) procedures relate only to Submissions for creation and redemption orders submitted between 4:00 p.m., New
York time and 5:00 p.m., New York time (a “T-1 Purchase Order” with respect to creations and a “T-1 Redemption Order” with respect to redemptions). These procedures only apply to the series (the “Funds”) of the Trust
that are listed on Appendix I hereto. Except as modified herein, all of the procedures set forth in Attachments A and A-1 to the Participant Agreement for the Trust (the “Agreement”) apply to T-1 Purchase Orders and T-1 Redemption Orders.
The parties to the Agreement, in addition to the consideration of the premises and the agreements contained in the Agreement, agree as follows:
An Authorized Person for the Participant may call the Trust Telephone Representative at (
718) 315-7501
at or after the Listing
Exchange Closing Time (ordinarily 4:00 p.m., New York time) and before 5:00 p.m., New York time to receive a Submission Number (also referred to as an “Order Number”). Upon verifying the authenticity of the caller (as determined by the use
of the appropriate PIN Number) and the terms of the order for creation or redemption, the Trust Telephone Representative will issue a unique Order Number. All T-1 Purchase Orders and T-1 Redemption Orders are required to be confirmed in writing via
faxed Order Form to Transfer Agent, fax number (732) 667-9478, and accompanied by the designated Order Number. PLEASE NOTE:
T-1
PURCHASE ORDER REQUESTS AND
T-1
REDEMPTION ORDER REQUESTS ARE NOT COMPLETE UNTIL AN ORDER NUMBER IS ISSUED. ONCE AN ORDER NUMBER IS ISSUED, A T-1 PURCHASE ORDER OR A
T-1
REDEMPTION ORDER CANNOT BE CANCELED BY THE AP REPRESENTATIVE AFTER THE
T-1 WINDOW CUTT-OFF TIME.
Participants must contact the Distributor prior to submitting a T-1 Purchase Order or a T-1 Redemption Order in order to obtain approval to submit such an Order
.
Unless the faxed Order Form confirming a T-1 Purchase Order or a T-1 Redemption Order is received by the Trust Telephone Representative within
15 minutes of contact with the Participant, the Submission will be deemed invalid. All Order Forms respecting a T-1 Purchase Order or a T-1 Redemption Order shall be deemed received by the Transfer Agent on the Business Day that the Order is placed,
or T-1. All T-1 Purchase Orders and T-1 Redemption Orders will receive the net asset value of the Fund as determined on the Business Day following the date that such Order is deemed received.
Except as otherwise indicated, capitalized terms used herein have the meanings given to them in the Agreement.
[
signatures to follow
]
i
IN WITNESS WHEREOF, the undersigned causes this Supplement to the Participant Agreement to be executed as of this
day of
, 2013.
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INVESCO DISTRIBUTORS, INC.
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By:
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Name:
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Title:
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Address:
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THE BANK OF NEW YORK MELLON
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As Transfer Agent
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By:
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Name:
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Title:
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Address:
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[PARTICIPANT]
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By:
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Name:
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Title:
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Address:
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ii
APPENDIX I TO T-1 SUPPLEMENT
PowerShares Global Water Portfolio
PowerShares
Global Clean Energy Portfolio
PowerShares S&P International Developed Quality Portfolio
PowerShares FTSE RAFI Developed Markets ex-U.S. Portfolio
PowerShares FTSE RAFI Asia Pacific ex-Japan Portfolio
PowerShares FTSE RAFI Developed Markets ex-U.S. Small-Mid Portfolio
PowerShares FTSE RAFI Emerging Markets Portfolio
PowerShares DWA Developed Markets Momentum Portfolio
PowerShares DWA Emerging Markets Momentum Portfolio
PowerShares Cleantech Portfolio
PowerShares Global
Agriculture Portfolio
PowerShares Global Gold and Precious Metals Portfolio
PowerShares Global Listed Private Equity Portfolio
PowerShares Emerging Markets Infrastructure Portfolio
PowerShares S&P International Developed Low Volatility Portfolio
PowerShares S&P Emerging Markets Low Volatility Portfolio
PowerShares S&P International Developed Momentum Portfolio
PowerShares S&P Emerging Markets Momentum Portfolio
PowerShares International BuyBack Achievers Portfolio
PowerShares International Corporate Bond Portfolio
PowerShares Chinese Yuan Dim Sum Bond Portfolio
PowerShares Fundamental Emerging Markets Local Debt Portfolio
PowerShares Global Short Term High Yield Bond Portfolio
PowerShares Multi-Strategy Alternative Portfolio
PowerShares Bloomberg Commodity Strategy Portfolio
PowerShares DB Optimum Yield Diversified Commodity Strategy Portfolio
iii
[On AP’s Firm Letterhead]
CERTIFICATE OF AUTHORIZED PERSONS
(of Authorized Participant)
The
undersigned officer, who is not an Authorized Person, hereby certifies that (i) he/she is the duly elected and acting
(title) of
(the “Participant”), and (ii) that the following officers or employees (each, an “Authorized Person”) of the Participant are duly authorized to
deliver oral or written instructions to The Bank of New York Mellon (“Transfer Agent”) pursuant to the Participant Agreement by and between the Participant, the Transfer Agent and the Distributor, and that the signatures appearing opposite
their names are true and correct:
The below shall be the Participant list of Authorized Persons:
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Name
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Signature
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Name
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Signature
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Name
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Signature
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Name
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Signature
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Signature
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Signature
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Signature
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This Certificate supersedes any prior certificate of Authorized Persons the Transfer Agent may have on file. Any updates to
the above list of Authorized Persons will be provided by the Participant as changes occur.
iv
Exhibit (h)(4)
SUBLICENSE AGREEMENT
This Sublicense Agreement (“AGREEMENT”) is entered into as of
by and between Invesco PowerShares Capital Management, LLC, a Delaware corporation with offices at 3500 Lacey Road, Suite 700,
Downers Grove, IL 60515 (“POWERSHARES”), and PowerShares Exchange-Traded Fund Trust II (“LICENSEE”).
WHEREAS,
PowerShares, through licenses with index providers (each an “Index Provider”), has the right to license the Indexes and Marks listed in Exhibit A, for use in connection with the financial products listed in Exhibit A
(“PRODUCTS”);
WHEREAS, Licensee desires to use the Indexes and Marks in connection with the distribution of Products and
PowerShares is willing to grant Licensee a license for such use.
NOW, THEREFORE, in consideration of the premises and the mutual promises
hereinafter set forth, and for good and valuable consideration set forth in the Agreement, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF LICENSE. PowerShares grants Licensee a non-exclusive, non-transferrable right and license to use and refer to the Indexes and
Marks in connection with the creation, issuance, trading and marketing of Products pursuant to the terms and conditions of this Agreement.
2. OWNERSHIP AND VALIDITY. Licensee acknowledges Index Providers’ ownership of the entire right, title and interest in and to the
Indexes and Marks and Licensee’s use shall inure to the sole benefit of the applicable Index Provider.
3. QUALITY CONTROL.
PowerShares shall have the right to monitor the quality of the Products offered by Licensee pursuant to this Agreement. Licensee agrees that the nature and quality of the Products using the Indexes and Marks shall meet or exceed the standards set by
PowerShares or Index Provider. Licensee’s failure to conform to such quality controls may result in the termination of this Agreement.
Licensee shall include, unless a substitute is approved by PowerShares, in which case such substitute shall be included, the
following notice in all informational materials relating to the licensed Indexes and Marks, and agrees upon request to furnish a copy (copies) thereof to PowerShares:
The [Specification of applicable Index] Indexes ( the “Indexes”) are trademarks of [Specification of applicable Index Provider] (the
“Index Provider”) which are licensed for use by [Licensee] in connection with [specification of applicable Products] (the “Products”). The Products are not sponsored or endorsed by the Index Provider and the Index Provider makes
no warranty or representation as to the accuracy and/or completeness of the Indexes or the results to be obtained by any person from the use of the Indexes or the trading of the Products.
4. TERM. This Agreement shall become effective upon signatures of both parties and remain in
effect unless terminated by either party as provided herein.
5. TERMINATION. Licensee may terminate this Agreement upon sixty
(60) days prior written notice. PowerShares may terminate this Agreement upon sixty (60) days prior written notice or immediately upon Licensee’s breach of this Agreement.
6. FEES. Licensee shall pay PowerShares a license fee for each product as set forth in Exhibit A. The fee shall be equal to or less
than the license cost paid by PowerShares to the Index Provider. The fee shall be paid based on the schedule as set forth below:
Licensee shall calculate
the fees payable to PowerShares under this Agreement on a calendar quarterly basis and remit to PowerShares the amount due within thirty (30) days following the close of each quarter, with a statement of account signed by a duly authorized
officer. Each payment shall be accompanied by a full accounting of the basis for the calculation of the fee. Licensee shall keep accurate books and records of such account as are necessary to document all amounts due to PowerShares hereunder and
PowerShares, or its authorized agent, shall have the right at its own expense and not more frequently than twice a year, to examine such books of account and records to verify the payment due hereunder, provided, however, if PowerShares determines
that it has been underpaid by five percent (5%) or more with respect to the payments being audited, the cost of the audit shall be paid by Licensee. If such examination discloses an overpayment or underpayment of the amounts due hereunder, an
adjusting payment shall be made within thirty (30) business days to correct such overpayment or underpayment. Such audit right shall continue for twelve (12) months following termination of this Agreement.
7. ENTIRE AGREEMENT. This Agreement sets forth the entire Agreement and the understanding between the parties. No modification or
amendment of this Agreement shall be valid or binding unless made in writing and signed on behalf of the parties by their duly authorized officers or representatives.
8. EXECUTION. This Agreement may be executed simultaneously with any number of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
9. GENERAL PROVISIONS.
(a) A party may not assign this Agreement and/or any of its rights and/or obligations hereunder, except to an affiliate or successor in
interest, without the prior written consent of the other party, and any attempted assignment by a party requiring the consent of the other party which is made by the assigning party without the other party’s prior consent shall be null and
void.
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(b) No change in, addition to, or waiver of any of the provisions of this Agreement shall be
binding upon either Party unless in writing signed by an authorized representative of such party. No waiver by either Party of any breach by the other party of any of the provisions of this Agreement shall be construed as a waiver of that or any
other provision on any other occasion.
(c) This Agreement shall be governed by, and construed and interpreted in accordance with,
the laws of the State of Illinois, without regard to its conflict of law provisions.
(d) In the event any one or more of the
provisions of this Agreement shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, the remaining provisions of this Agreement shall remain in effect and the Agreement shall be read as though the offending
provision had not been written or as the provision shall be determined by such court to be read.
IN WITNESS WHEREOF, PowerShares and
Licensee have caused this Agreement to be duly executed on their behalf in the manner legally binding upon them.
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INVESCO POWERSHARES CAPITAL
MANAGEMENT, LLC
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Signature:
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By:
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Title:
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POWERSHARES EXCHANGE-TRADED
FUND TRUST II
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Signature:
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By:
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Title:
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3
Exhibit (i)
[STRADLEY RONON STEVENS & YOUNG, LLP LETTERHEAD]
June 30, 2017
PowerShares Exchange-Traded Fund Trust II
3500 Lacey Road
Downers Grove, Illinois 60515
Ladies and Gentlemen:
We have acted as counsel
to PowerShares Exchange-Traded Fund Trust II, a business trust formed under the laws of the Commonwealth of Massachusetts (the “
Trust
”), in connection with Post-Effective Amendment No. 612 (the
“
Post-Effective
Amendment
”) to the Trust’s registration statement on Form
N-1A
(File Nos.
333-138490
and
811-21977)
(the “
Registration Statement
”), to be filed with the U. S. Securities and Exchange Commission (the “
Commission
”) on or about June 30, 2017, registering an unlimited
number of shares of beneficial interest of PowerShares Russell 1000 Enhanced Equal Weight Portfolio (the “
Portfolio
”), a series of the Trust, (the “
Shares
”) under the Securities Act of 1933, as amended (the
“
Securities Act
”).
This opinion letter is being delivered at your request in accordance with the requirements of
paragraph 29 of Schedule A of the Securities Act and Item 28(i) of Form
N-1A
under the Securities Act and the Investment Company Act of 1940, as amended (the “
Investment Company Act
”).
For purposes of this opinion letter, we have examined originals or copies, certified or otherwise identified to our satisfaction, of:
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(i)
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the Post-Effective Amendment;
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(ii)
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The exemptive order applicable to the Trust issued by the Commission under the Investment Company Act permitting the Trust to operate as an exchange-traded fund (the “
Exemptive Order
”);
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(iii)
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the declaration of trust and bylaws of the Trust in effect on the date of this opinion letter; and
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(iv)
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the resolutions adopted by the trustees of the Trust relating to the Post-Effective Amendment, the establishment and designation of the Portfolio and the Shares, and the authorization for issuance and sale of
the Shares.
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We also have examined and relied upon certificates of public officials and, as to certain matters of fact that are material to
our opinions, we have relied on a certificate of an officer of the Trust. We have not independently established any of the facts on which we have so relied.
For purposes of this opinion letter, we have assumed the accuracy and completeness of each document submitted to us, the genuineness of all
signatures on original documents, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as facsimile, electronic, certified, conformed, or photostatic copies thereof,
and the due execution and delivery of all documents where due execution and delivery are prerequisites to the effectiveness thereof. We have further assumed the legal capacity of natural persons, that persons identified to us as
officers of the Trust are actually serving in such capacity, and that the representations of officers of the Trust are correct as to matters of fact. We have also assumed compliance by the
applicants with each of the conditions contained in the application for the Exemptive Order. We have not independently verified any of these assumptions.
The opinions expressed in this opinion letter are based on the facts in existence and the laws in effect on the date hereof and are limited to
the laws of the Commonwealth of Massachusetts and the provisions of the Investment Company Act that are applicable to equity securities issued by registered
open-end
investment companies. We are not opining
on, and we assume no responsibility for, the applicability to or effect on any of the matters covered herein of any other laws.
Based
upon and subject to the foregoing, it is our opinion that (1) the Shares to be issued pursuant to the Post-Effective Amendment, when issued and paid for by the purchasers upon the terms described in the Post-Effective Amendment and
the Prospectus, will be validly issued, and (2) purchasers of Shares will have no obligation to make further payments for their purchase of Shares or contributions to the Trust or its creditors solely by reason of their ownership of Shares. In
this regard, however, we note that the Trust is a Massachusetts business trust and, under certain circumstances, shareholders of a Massachusetts business trust could be held personally liable for the obligations of the trust.
This opinion is rendered solely in connection with the filing of the Post-Effective Amendment and supersedes any previous opinions of this
firm in connection with the issuance of Shares. We hereby consent to the filing of this opinion with the Commission in connection with the Post-Effective Amendment. In giving this consent, we do not thereby admit that we are experts with respect to
any part of the Registration Statement or Prospectus within the meaning of the term “expert” as used in Section 11 of the Securities Act or the rules and regulations promulgated thereunder by the Commission, nor do we admit that we
are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.
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Very truly yours,
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/s/ Stradley Ronon Stevens & Young LLP
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