UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: August 15, 2014
POWERSHARES DB MULTI-SECTOR COMMODITY TRUST
(Registrant)
POWERSHARES DB ENERGY FUND; POWERSHARES DB OIL FUND; POWERSHARES DB PRECIOUS METALS FUND; POWERSHARES DB GOLD FUND; POWERSHARES DB SILVER FUND; POWERSHARES DB BASE METALS FUND; POWERSHARES DB AGRICULTURE FUND
(Co-Registrants)
(Exact Name of each Registrant as Specified in its Charter)
PowerShares DB Multi-Sector Commodity Trust Delaware | 87-0778053 (Trust) | |
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer ID Number(s)) | |
c/o DB Commodity Services LLC 60 Wall Street New York, New York |
10005 | |
(Address of Principal Executive Offices) | (Zip Code) |
001-33229; 001-33240; 001-33242; 001-33244; 001-33231; 001-33234; 001-33236; and 001-33238
(Commission File Number(s))
(212) 250-5883
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrants under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01. | Other Events. |
This current report on Form 8-K relates to the Unaudited Financial Statements of DB Commodity Services LLC (DBCS) for the six-months ended June 30, 2014. DBCS is the Managing Owner of PowerShares DB Multi-Sector Commodity Trust, PowerShares DB Energy Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund, PowerShares DB Gold Fund, PowerShares DB Silver Fund, PowerShares DB Base Metals Fund and PowerShares DB Agriculture Fund. The DBCS Unaudited Financial Statements for the six-months ended June 30, 2014 are attached hereto as Exhibit 99.1 and are being filed herewith.
Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
The following exhibit is filed herewith and this list is intended to constitute the exhibit index:
Number |
Exhibit Title | |
Exhibit 99.1 | Unaudited Financial Statements of DB Commodity Services LLC for the six-months ended June 30, 2014 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PowerShares DB Multi-Sector Commodity Trust | ||
By: | DB Commodity Services LLC, | |
its Managing Owner | ||
By: | /s/ Martin Kremenstein | |
Name: | Martin Kremenstein | |
Title: | Chief Executive Officer | |
By: | /s/ Michael Gilligan | |
Name: | Michael Gilligan | |
Title: | Chief Financial Officer | |
PowerShares DB Energy Fund, a series of PowerShares DB Multi-Sector Commodity Trust | ||
By: | DB Commodity Services LLC, | |
its Managing Owner | ||
By: | /s/ Martin Kremenstein | |
Name: | Martin Kremenstein | |
Title: | Chief Executive Officer | |
By: | /s/ Michael Gilligan | |
Name: | Michael Gilligan | |
Title: | Chief Financial Officer | |
PowerShares DB Oil Fund, a series of | ||
PowerShares DB Multi-Sector Commodity Trust | ||
By: | DB Commodity Services LLC, | |
its Managing Owner | ||
By: | /s/ Martin Kremenstein | |
Name: | Martin Kremenstein | |
Title: | Chief Executive Officer | |
By: | /s/ Michael Gilligan | |
Name: | Michael Gilligan | |
Title: | Chief Financial Officer |
PowerShares DB Precious Metals Fund, a series of PowerShares DB Multi-Sector Commodity Trust | ||
By: | DB Commodity Services LLC, | |
its Managing Owner | ||
By: | /s/ Martin Kremenstein | |
Name: | Martin Kremenstein | |
Title: | Chief Executive Officer | |
By: | /s/ Michael Gilligan | |
Name: | Michael Gilligan | |
Title: | Chief Financial Officer | |
PowerShares DB Gold Fund, a series of | ||
PowerShares DB Multi-Sector Commodity Trust | ||
By: | DB Commodity Services LLC, | |
its Managing Owner | ||
By: | /s/ Martin Kremenstein | |
Name: | Martin Kremenstein | |
Title: | Chief Executive Officer | |
By: | /s/ Michael Gilligan | |
Name: | Michael Gilligan | |
Title: | Chief Financial Officer | |
PowerShares DB Silver Fund, a series of | ||
PowerShares DB Multi-Sector Commodity Trust | ||
By: | DB Commodity Services LLC, | |
its Managing Owner | ||
By: | /s/ Martin Kremenstein | |
Name: | Martin Kremenstein | |
Title: | Chief Executive Officer | |
By: | /s/ Michael Gilligan | |
Name: | Michael Gilligan | |
Title: | Chief Financial Officer |
PowerShares DB Base Metals Fund, a series of PowerShares DB Multi-Sector Commodity Trust | ||
By: | DB Commodity Services LLC, | |
its Managing Owner | ||
By: | /s/ Martin Kremenstein | |
Name: | Martin Kremenstein | |
Title: | Chief Executive Officer | |
By: | /s/ Michael Gilligan | |
Name: | Michael Gilligan | |
Title: | Chief Financial Officer | |
PowerShares DB Agriculture Fund, a series of PowerShares DB Multi-Sector Commodity Trust | ||
By: | DB Commodity Services LLC, | |
its Managing Owner | ||
By: | /s/ Martin Kremenstein | |
Name: | Martin Kremenstein | |
Title: | Chief Executive Officer | |
By: | /s/ Michael Gilligan | |
Name: | Michael Gilligan | |
Title: | Chief Financial Officer |
Date: August 15, 2014
Exhibit 99.1
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Financial Statements
June 30, 2014 (Unaudited)
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Unaudited Statements of Financial Condition
June 30, 2014 and December 31, 2013
2014 | 2013 | |||||||
Assets |
||||||||
Due from DB Exchange Traded Funds |
$ | 6,259,951 | $ | 6,591,593 | ||||
Investment in DB Exchange Traded Funds |
13,161 | 12,371 | ||||||
Prepaid Expense |
| 133,735 | ||||||
Due from affiliate |
162,011,221 | 137,356,980 | ||||||
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|
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Total assets |
$ | 168,284,333 | $ | 144,094,679 | ||||
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Liabilities and Members Capital |
||||||||
Liabilities: |
||||||||
Accrued expenses |
$ | 12,702,234 | $ | 11,810,512 | ||||
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|
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Total liabilities |
12,902,234 | 11,810,512 | ||||||
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Members capital |
155,582,099 | 132,284,167 | ||||||
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Total liabilities and members capital |
$ | 168,284,333 | $ | 144,094,679 | ||||
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See accompanying notes to unaudited financial statements.
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Unaudited Statements of Income and Expenses
For the Six Months ended June 30, 2014 and 2013
2014 | 2013 | |||||||
Income: |
||||||||
Management fees |
$ | 37,767,280 | $ | 45,488,920 | ||||
Equity in share of earnings/(losses) in investment in DB Exchange Traded Funds |
790 | (2,517 | ) | |||||
|
|
|
|
|||||
Total income |
37,768,070 | 45,486,403 | ||||||
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Expenses: |
||||||||
Legal fees |
871,296 | 458,888 | ||||||
Audit fees and tax services |
2,850,000 | 2,779,598 | ||||||
Printing services |
786,387 | 761,427 | ||||||
Administrator and trustee fees |
1,823,498 | 2,147,271 | ||||||
Distribution fees |
6,317,585 | 8,022,400 | ||||||
Registration Fees |
133,735 | 261,354 | ||||||
Intercompany Expenses |
1,678,622 | | ||||||
Other |
9,015 | 229,373 | ||||||
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|
|
|||||
Total expenses |
14,470,138 | 14,660,311 | ||||||
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Net income |
$ | 23,297,932 | $ | 30,826,092 | ||||
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|
See accompanying notes to unaudited financial statements.
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Unaudited Statements of Changes in Members Capital
For the Six Months ended June 30, 2014 and 2013
2014 | 2013 | |||||||
Members capital, January 1 |
$ | 132,284,167 | $ | 72,390,505 | ||||
Net income |
23,297,932 | 30,826,092 | ||||||
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Members capital, June 30 |
$ | 155,582,099 | $ | 103,216,597 | ||||
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See accompanying notes to unaudited financial statements.
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Unaudited Statements of Cash Flows
For the Six Months ended June 30, 2014 and 2013
2014 | 2013 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 23,297,932 | $ | 30,826,092 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Equity in (earnings)/losses in DB Exchange Traded Funds |
(790 | ) | 2,517 | |||||
(Increase) decrease in operating assets: |
||||||||
Due from DB Exchange Traded Funds |
331,642 | 990,525 | ||||||
Due from affiliate |
(24,654,241 | ) | (31,017,885 | ) | ||||
Prepaid Expense |
133,735 | 44,937 | ||||||
Increase (decrease) in operating liabilities: |
||||||||
Accrued expenses |
891,722 | (846,186 | ) | |||||
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Net cash provided by operating activities |
| | ||||||
Cash and cash equivalents at beginning of period |
| | ||||||
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Cash and cash equivalents at end of period |
$ | | $ | | ||||
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|
See accompanying notes to unaudited financial statements.
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
June 30, 2014
(1) | Organization and Basis of Presentation |
DB Commodity Services LLC (the Company), a Delaware limited liability company, was formed on May 23, 2005, and is an indirect wholly owned subsidiary of Deutsche Bank AG (the owner member) and a direct wholly owned subsidiary of DB U.S. Financial Markets Holding Corporation. The Company is registered as a commodity pool operator and commodity trading advisor with the Commodity Futures Trading Commission and is a member of the National Futures Association.
The Company serves as the managing owner, commodity pool operator, and commodity trading advisor to the following funds, the DB Exchange Traded Funds:
| PowerShares DB Commodity Index Tracking Fund (DBC) |
| PowerShares DB G10 Currency Harvest Fund (DBV) |
| PowerShares DB Multi-Sector Commodity Trust in seven separate series or Funds: |
| PowerShares DB Energy Fund (DBE) |
| PowerShares DB Oil Fund (DBO) |
| PowerShares DB Precious Metals Fund (DBP) |
| PowerShares DB Gold Fund (DGL) |
| PowerShares DB Silver Fund (DBS) |
| PowerShares DB Base Metals Fund (DBB) |
| PowerShares DB Agriculture Fund (DBA) |
| PowerShares DB US Dollar Index Trust in two separate series or Funds: |
| PowerShares DB US Dollar Index Bullish Fund (UUP) |
| PowerShares DB US Dollar Index Bearish Fund (UDN) |
(2) | Summary of Significant Accounting Policies |
(a) | Basis of Accounting |
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (the SEC). In the opinion of management, all material adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the interim period financial statements have been made. Interim period results are not necessarily indicative of results for a full-year period. These financial statements and the notes thereto should be read in conjunction with the Companys financial statements included in its Annual Report for the year ended December 31, 2013 as filed with the SEC on March 13, 2014.
In May 2014, the Financial Accounting Standards Board issued new guidance related to Revenue from Contracts with Customers. This guidance supersedes the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Accounting Standards Codification. The guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This guidance is effective for interim and annual reporting periods beginning after December 15, 2016. The Company is currently evaluating this guidance to determine the impact on its statements of financial condition, statements of income and expenses and statements of cash flows.
There were no components of other comprehensive income for the six months ended June 30, 2014 and 2013, and no balances associated with accumulated other comprehensive income at June 30, 2014 and December 31, 2013.
(b) | Use of Estimates |
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income,
6
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
June 30, 2014
expenses, and related disclosure of contingent assets and liabilities during the reporting period of the financial statements and accompanying notes. Actual results could differ from those estimates. There were no significant estimates used in the preparation of these unaudited financial statements.
(c) | Due from DB Exchange Traded Funds |
Due from the DB Exchange Traded Funds represents outstanding management fees for services provided to the DB Exchange Traded Funds as commodity pool operator, commodity trading advisor and managing owner. The fees are recorded at the invoiced amounts and do not bear interest. Management has determined that there was no risk of unrecoverable amounts, and therefore, no allowance for doubtful accounts was provided for as of June 30, 2014 or December 31, 2013.
(d) | Investment in DB Exchange Traded Funds |
The Companys investments in the DB Exchange Traded Funds consist of capital contributions in the general shares of the Funds and are accounted for using the equity method, which the carrying amount of our investment approximates fair value. The Company adjusts the carrying amount of the investments to recognize the Companys share of earnings or losses in the investments. Distributions received from the investments reduce the carrying amount of the respective investments. There were no dividends or distributions received for the periods ended December 31, 2013, June 30, 2013 or June 30, 2014.
(e) | Income Taxes |
The Company is a limited liability company and did not elect to be taxable as a corporation for U.S. income tax purposes. Accordingly, the Company will not incur U.S. income taxes. No provision for federal, state, and local income taxes has been made in the accompanying financial statements, as its owner member is liable for income taxes, if any, on the Companys income, loss, and other items, and there is no tax sharing arrangement between the Company and its owner member. Based on the effective tax rate of the Companys owner member, the Companys pro rata income tax expense would be approximately $7,000,000 and $9,300,000 for the federal tax, $1,500,000 and $2,000,000 for the New York State tax, and $1,700,000 and $2,300,000 for the New York City tax for the quarters ended June 30, 2014 and 2013, respectively. As the Company is not required to separately file its own returns, the following is the major tax jurisdiction for the Companys parent, DB U.S. Financial Markets Holding Corporation, and the earliest tax year subject to examination: United States 2007. The income tax returns of DB U.S. Financial Markets Holding Corporation for 2007 through 2009 are currently under examination by the Internal Revenue Service. We do not expect the results of this examination to have a material effect on our financial condition or results of operations.
(f) | Revenue Recognition |
Fees for management services are recognized on an accrual basis when earned. Fees for management services are accrued for each of the Funds monthly.
(3) | Fair Value Measurement |
ASC 820 (Fair Value Measurements and Disclosures) defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements.
In accordance with ASC 820, the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy
7
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
June 30, 2014
gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Financial assets and liabilities recorded on the Statement of Financial Condition are categorized based on the inputs to the valuation techniques as follows:
Level 1 Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date for identical assets or liabilities.
Level 2 Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:
a. Quoted prices for identical or similar assets or liabilities in active or nonactive markets; and
b. Pricing models whose inputs are observable for substantially the full term of the asset or liability.
Level 3 Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect managements own assumptions about the assumptions a market participant would use in pricing the asset or liability.
As required by ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. Thus, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Gains and losses for such assets and liabilities categorized within Level 3, if any, may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3).
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of certain financial assets or liabilities.
The Companys Investment in DB Exchange Traded Funds is considered a Level 1 asset as its value is based on the published price representing an exchange traded value for each such investment owned.
US GAAP requires disclosure of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate their fair values. Certain financial instruments that are not carried at fair value on the statement of financial condition are carried at amounts that approximate fair value due to their short term nature and generally negligible credit risk. These instruments include receivables from the DB Exchange Traded Funds and affiliates and are considered to be Level 2 assets.
(4) | Related-Party Transactions |
(a) | Management Fees and Due from DB Exchange Traded Funds |
DBA and DBC pay the Company a management fee, monthly in arrears, in an amount equal to 0.85% per annum of their average daily net asset values.
8
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
June 30, 2014
DBO, DBS, DGL, DBB, DBE, DBP, DBV, UDN, and UUP pay the Company a management fee, monthly in arrears, in an amount equal to 0.75% per annum of their average daily net asset values.
During the Six Months Ended June 30, 2014 and 2013, the Company earned management fees of $37,767,280 and $45,488,920, respectively. As of June 30, 2014 and December 31, 2013, Due from DB Exchange Traded Funds was $6,259,951 and $6,591,593, respectively.
Six Months Ended June 30, 2014 Management Fees |
Six Months Ended June 30, 2013 Management Fees |
June 30, 2014 Due from DB Exchange Traded Funds |
December 31, 2013 Due from DB Exchange Traded Funds |
|||||||||||||
DBA |
$ | 5,989,636 | $ | 6,949,088 | $ | 1,007,236 | $ | 933,873 | ||||||||
DBB |
1,061,811 | 1,224,957 | 178,987 | 150,012 | ||||||||||||
DBC |
23,754,347 | 28,085,632 | 3,916,300 | 4,283,621 | ||||||||||||
DBE |
1,089,155 | 724,372 | 225,959 | 171,385 | ||||||||||||
DBO |
1,139,061 | 2,024,096 | 190,125 | 204,317 | ||||||||||||
DBP |
694,523 | 1,046,012 | 112,831 | 117,293 | ||||||||||||
DBS |
123,602 | 191,987 | 20,254 | 20,851 | ||||||||||||
DGL |
565,516 | 1,143,809 | 84,500 | 94,132 | ||||||||||||
DBV |
584,028 | 1,266,972 | 63,755 | 129,205 | ||||||||||||
UDN |
216,916 | 309,047 | 33,222 | 41,265 | ||||||||||||
UUP |
2,548,683 | 2,522,947 | 426,782 | 445,639 | ||||||||||||
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$ | 37,767,280 | $ | 45,488,920 | $ | 6,259,951 | $ | 6,591,593 | |||||||||
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(b) | Organization and Offering Costs |
The Company assumes all organization and offering costs of the Funds. Expenses incurred with the continuous offering of limited shares will also be paid by the Company. Please refer to Note 7 for further details.
(c) | Administration Expenses |
The Company assumes all routine operational, administrative and other ordinary expenses of the Funds, including, but not limited to, computer services, the fees and expenses of the Trustee, legal and accounting fees and expenses, audit and tax preparation expenses, filing fees and printing, mailing and duplication costs. Accordingly, such expenses are recorded in the statement of income and expenses of the Company. Please refer to Note 8 for further details on service agreements.
(d) | Service Agreements |
The Company, in its capacity as the managing owner and on behalf of the Funds, entered into a service agreement with Deutsche Bank AG for services including, but not limited to, trading, accounting, legal, human resources, and other. Please refer to Note 8 for further details on service agreements.
9
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
June 30, 2014
Deutsche Bank Securities Inc., a Delaware corporation, serves as the clearing broker (the Commodity Broker) of the Funds. The Commodity Broker is also an indirect wholly-owned subsidiary of Deutsche Bank AG and is an affiliate of the Company. In its capacity as clearing broker, the Commodity Broker executes and clears the Funds futures transactions and performs certain administrative and custodial services for the Fund. As custodian of the Funds assets, the Commodity Broker is responsible, among other things, for providing periodic accountings of all dealings and actions taken by the Trust on behalf of the Fund during the reporting period, together with an accounting of all securities, cash or other indebtedness or obligations held by it or its nominees for or on behalf of the Fund. The fees related to these services are paid by the Funds.
(e) | Due from Affiliate |
Deutsche Bank AG New York Branch provides the Company with a cash facility to cover its operational expenses and to deposit management fees received from the DB Exchange Traded Funds. This cash management program is noninterest-bearing and there is no expiration date. As of June 30, 2014 and December 31, 2013, the Company had a net receivable from affiliate of $162,011,221 and $137,356,980, respectively. The Company is expecting to declare a dividend during the 2014 fiscal year to reduce this receivable from affiliate.
(f) | Investment Advisory Service Agreement |
The Company, in its capacity as the commodity trading advisor and on behalf of the Funds, entered into an agreement with Deutsche Bank Trust Company Americas for investment advisory services covering collateral management for the Funds. The agreement was terminated on July 31, 2013. The costs of these services are assumed by the Company with no cost allocation to the Funds. During the six months ended June 30, 2013, the Company expensed $25,000 in Other Expenses under this agreement.
(5) | Investments in DB Exchange Traded Funds |
Investments in DB Exchange Traded Funds as of June 30, 2014 and December 31, 2013 amount to $13,161 and $12,371, respectively. The Companys ownership in each of the DB Exchange Traded Funds represents less than 1.0% of the Funds equity.
10
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
June 30, 2014
(6) | Accrued Expenses |
Accrued expenses as of June 30, 2014 and December 31, 2013 consist of the following:
June 30, 2014 |
December 31, 2013 |
|||||||
Audit Fees & Tax Services |
$ | 4,204,535 | $ | 4,865,289 | ||||
Distribution Fees |
5,957,115 | 4,692,834 | ||||||
Administrator & Trustee Fees |
1,878,000 | 1,331,762 | ||||||
Legal Fees |
542,527 | 351,082 | ||||||
Printing Services |
119,413 | 287,820 | ||||||
Other |
644 | 281,725 | ||||||
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$ | 12,702,234 | $ | 11,810,512 | |||||
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(7) | Prepaid Expenses |
In the normal course of business, the Company will prepay certain administration and offering costs on behalf of the DB Exchange Traded Funds. These expenses are amortized to the related expense over a 12 month period. During the six months ended June 30, 2014 and 2013, the Company expensed $133,735 and $261,354 in Registration Fees, respectively. As of December 31, 2013, unamortized prepaid expenses were $133,735.
(8) | Service Agreements |
(a) | Trust Agreement |
Under the Trust Agreement with the Funds, Wilmington Trust Company (the Trustee of the Funds) has delegated to the Company the exclusive management and control of all aspects of the business of the Funds. Trustee fees are a flat fee per Trust and are paid for the Funds by the Company and are included in other expenses.
(b) | Administration Agreement |
The Company, in its capacity as the managing owner and on behalf of each of the Funds, has appointed The Bank of New York Mellon as the administrator (the Administrator), custodian and transfer agent of the Funds and has entered into separate administrative, custodian, transfer agency and service agreements (collectively referred to as the Administration Agreement). The Administrator performs or supervises the performance of services necessary for the operation and administration of each of the Funds (other than making investment decisions), including receiving and processing orders to create and redeem shares of the Funds, net asset value calculations, accounting, and other fund administrative services. The Administrators monthly fees are based upon the average daily net asset values of the DB Exchange Traded Funds and are paid on behalf of the Funds by the Company and are recorded in Administrator and Trustee Fees on the statement of income and expenses. For the six months ended June 30, 2014 and 2013, Administrator and trustee fees were $1,823,498 and $2,147,271, respectively. As of June 30, 2014 and December 31, 2013, accrued Administrator and trustee fees were $1,878,000 and $1,331,762, respectively.
11
DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
June 30, 2014
(c) | Distribution Services Agreement |
ALPS Distributors, Inc. (the Distributor) provides certain distribution services to the Funds. Pursuant to the Distribution Services Agreement between the Company, in its capacity as managing owner of the Funds, and the Distributor, the Distributor assists the Company and the Administrator with certain functions and duties relating to distribution and marketing including reviewing and approving marketing materials. Distribution fees are based upon the average daily net asset values of the DB Exchange Traded Funds and are paid for the Funds by the Company and are recorded in Distribution Fees on the statement of income and expenses. For the six months ended June 30, 2014 and 2013, distribution fees were $150,000 and $150,000, respectively. As of June 30, 2014 and December 31, 2013, accrued fees for the Distributor were $36,182 and $66,325, respectively.
(d) | License Agreement |
Under the License Agreement between Invesco PowerShares Capital Management LLC (the Licensor), and the Company, in its own capacity and in its capacity as the managing owner and on behalf of the Funds, the Licensor granted to the Funds a nonexclusive license to use the PowerShares® trademark (the Trademark) anywhere in the world, solely in connection with the marketing and promotion of the Funds and to use or refer to the Trademark in connection with the issuance and trading of the Funds shares as necessary.
Pursuant to a marketing agreement between Invesco AIM Distributors, Inc., an affiliate of the Licensor, and the Company in its capacity as the managing owner and on behalf of the Funds, Invesco AIM Distributors, Inc. assists the Company and the Administrator with certain functions and duties such as providing various educational and marketing activities regarding each of the Funds, primarily in the secondary trading market. Activities include, but are not limited to, communicating each of the Funds names, characteristics, uses, benefits, and risks, consistent with the prospectus, engagement in public seminars, road shows, conferences, media interviews, fielding incoming telephone 800 number calls, and distributing sales literature and other communications (including electronic media) regarding each of the Funds. Invesco AIM Distributors, Inc. will not open customer accounts or handle orders for the Funds.
License and Marketing fees are based upon the average daily net asset values of the DB Exchange Traded Funds and are paid for the Funds by the Company and are recorded in Distribution Fees on the statement of income and expenses. For the six months ended June 30, 2014 and 2013, license and marketing fees were $6,006,681 and $6,296,418 respectively. As of June 30, 2014 and December 31, 2013, accrued distribution fees were $5,920,933 and $4,583,650, respectively.
(e) | Affiliated Service Providers |
In accordance with the current service level agreement, other bank affiliates provide certain corporate services to the Company, including central areas and support and other expenses. Effective January 1, 2014, costs associated with such services are allocated to the Company based on the amount of employee time spent on the Company relative to total time incurred in accordance with the service level agreements with no retroactive application. Affiliated service provider fees are included in the Intercompany Expense line on the unaudited statement of income and expenses. For the six months ended June 30, 2014, affiliated service provider fees were $1,678,622.
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DB COMMODITY SERVICES LLC
(An Indirect Wholly Owned Subsidiary of Deutsche Bank AG)
Notes to Unaudited Financial Statements
June 30, 2014
(9) | Commitments and Contingencies |
The Company has entered into various service agreements on behalf of the Funds that contain a variety of representations and warranties, or provide indemnification provisions related to certain risks service providers undertake in performing services that are in the best interests of the Funds. While the Companys exposure under such indemnification provisions cannot be estimated until a claim arises, these general business indemnifications are not expected to have a material impact on the Companys financial position.
(10) | Business and Credit Concentration |
The Companys business is to serve as the managing owner, commodity pool operator, and commodity trading advisor to the DB Exchange Traded Funds. The basis for the management fee calculation is the Funds net asset value. Accordingly, factors that may have the effect of causing a decline in the Funds net asset value will affect the Companys income from management fees.
Substantially all of the Companys liquid assets are on deposit with Deutsche Bank AG, as noted in Note 4.
(11) | Subsequent Events |
The Company evaluated the need for disclosures and/or adjustments resulting from subsequent events through August 15, 2014, the date the financial statements were available to be issued. This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments to the Companys financial statements and notes to the financial statements.
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