POWERSHARES XTF
xchange traded funds


              SUPPLEMENT DATED AUGUST 25, 2005 TO THE PROSPECTUS OF

                     POWERSHARES EXCHANGE-TRADED FUND TRUST

                      POWERSHARES ZACKS MICRO CAP PORTFOLIO

                              dated August 18, 2005


The following  paragraph  hereby replaces the second paragraph under the section
titled PowerShares Zacks Micro Cap Portfolio--Investment  Objective,  Strategies
and Risks--Principal Investment Strategies:

     Because of the practical  difficulties and expense of purchasing 300 to 500
     stocks, the Fund does not purchase all of the stocks in the Zacks Micro Cap
     Index. Instead, the Fund utilities a "sampling"  methodology in seeking its
     objective.  Sampling means that the Adviser uses  quantitative  analysis to
     select  stocks  from  the  Zacks  Micro  Cap  Index  universe  to  obtain a
     representative  sample of stocks that resemble the Zacks Micro Cap Index in
     terms   of   key   risk   factors,   performance   attributes   and   other
     characteristics.  These include industry weightings,  market capitalization
     and other financial  characteristics of stocks. The quantity of holdings in
     the Fund will be based on a number of factors,  including asset size of the
     Fund.  The Adviser  generally  expects the Fund to hold less than the total
     number of stocks in the Zacks Micro Cap Index,  but  reserves  the right to
     hold  as many  stocks  as it  believes  necessary  to  achieve  the  Fund's
     investment  objective.  The Adviser seeks a  correlation  of 0.95 or better
     between the Fund's  performance  and the performance of the Zacks Micro Cap
     Index; a figure of 1.00 would represent perfect correlation.












            PLEASE RETAIN THIS SUPPLEMENT FOR YOUR FUTURE REFERENCE.