UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22148
PowerShares Actively Managed Exchange-Traded Fund Trust
(Exact name of registrant as specified in charter)
3500 Lacey Road
Downers Grove, IL 60515
(Address of principal executive offices) (Zip code)
Andrew Schlossberg
President
3500 Lacey Road
Downers Grove, IL 60515
(Name and address of agent for service)
Registrants telephone number, including area code: 800-983-0903
Date of fiscal year end: October 31
Date of reporting period: October 31, 2014
Item 1. Reports to Stockholders.
The Registrants annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows:
October 31, 2014 |
2014 Annual Report to Shareholders
PSR | PowerShares Active U.S. Real Estate Fund | |
CHNA | PowerShares China A-Share Portfolio | |
LALT | PowerShares Multi-Strategy Alternative Portfolio | |
PHDG | PowerShares S&P 500® Downside Hedged Portfolio |
|
2 |
|
|
3 |
|
PSR | Managers Analysis | |
PowerShares Active U.S. Real Estate Fund (PSR) |
|
4 |
|
PowerShares Active U.S. Real Estate Fund (PSR) (continued)
Growth of a $10,000 Investment Since Inception
Fund Performance History as of October 31, 2014
1 Year | 3 Years Average Annualized |
3 Years Cumulative |
5 Years Average Annualized |
5 Years Cumulative |
Fund Inception | |||||||||||||||||||||||||
Index | Average Annualized |
Cumulative | ||||||||||||||||||||||||||||
FTSE NAREIT All Equity REITs Index | 18.22 | % | 15.33 | % | 53.42 | % | 19.28 | % | 141.42 | % | 26.98 | % | 313.65 | % | ||||||||||||||||
Fund | ||||||||||||||||||||||||||||||
NAV Return | 18.95 | 13.73 | 47.11 | 18.38 | 132.49 | 25.69 | 289.37 | |||||||||||||||||||||||
Market Price Return | 18.86 | 13.68 | 46.92 | 18.34 | 132.12 | 25.81 | 291.65 |
|
5 |
|
CHNA | Managers Analysis | |
PowerShares China A-Share Portfolio (CHNA) |
|
6 |
|
PowerShares China A-Share Portfolio (CHNA) (continued)
Growth of a $10,000 Investment Since Inception
Fund Performance History as of October 31, 2014
1 Year | Fund Inception | |||||||||||||
Index | Average Annualized |
Cumulative | ||||||||||||
FTSE China A50 Index (USD) | 0.62 | % | 0.74 | % | 0.79 | % | ||||||||
Fund | ||||||||||||||
NAV Return | (0.40 | ) | (1.38 | ) | (1.46 | ) | ||||||||
Market Price Return | (0.72 | ) | (1.45 | ) | (1.54 | ) |
|
7 |
|
LALT | Managers Analysis | |
PowerShares Multi-Strategy Alternative Portfolio (LALT) |
|
8 |
|
PowerShares Multi-Strategy Alternative Portfolio (LALT) (continued)
Growth of a $10,000 Investment Since Inception
Fund Performance History as of October 31, 2014
Fund Inception | ||||
Index | Cumulative | |||
Morgan Stanley Multi-Strategy Alternative Index | (1.67 | )% | ||
HFRI Macro (Total) Index | 3.92 | |||
Barclays U.S. Aggregate Index | 1.17 | |||
Fund | ||||
NAV Return | (1.64 | ) | ||
Market Price Return | (1.92 | ) |
|
9 |
|
PHDG | Managers Analysis | |
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) |
|
10 |
|
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) (continued)
Growth of a $10,000 Investment Since Inception
Fund Performance History as of October 31, 2014
1 Year | Fund Inception | |||||||||||||
Index | Average Annualized |
Cumulative | ||||||||||||
S&P 500® Dynamic VEQTOR Index | 11.05 | % | 11.43 | % | 22.84 | % | ||||||||
S&P 500® Index | 17.27 | 23.09 | 48.42 | |||||||||||
HFRX Global Hedge Fund Index | 0.96 | 3.78 | 7.30 | |||||||||||
T-Bill 3 Month Index (Lipper) | 0.04 | 0.05 | 0.09 | |||||||||||
Fund | ||||||||||||||
NAV Return | 10.50 | 10.28 | 20.44 | |||||||||||
Market Price Return | 10.14 | 10.23 | 20.35 |
|
11 |
|
Schedule of Investments(a)
PowerShares Active U.S. Real Estate Fund (PSR)
October 31, 2014
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
12 |
|
Schedule of Investments
PowerShares China A-Share Portfolio (CHNA)
October 31, 2014
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
13 |
|
Schedule of Investments(a)
PowerShares Multi-Strategy Alternative Portfolio (LALT)
October 31, 2014
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
14 |
|
PowerShares Multi-Strategy Alternative Portfolio (LALT) (continued)
October 31, 2014
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
15 |
|
Schedule of Investments(a)
PowerShares S&P 500® Downside Hedged Portfolio (PHDG)
October 31, 2014
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
16 |
|
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) (continued)
October 31, 2014
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
17 |
|
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) (continued)
October 31, 2014
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
18 |
|
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) (continued)
October 31, 2014
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
19 |
|
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) (continued)
October 31, 2014
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
20 |
|
Statements of Assets and Liabilities
October 31, 2014
PowerShares Active U.S. Real Estate Fund (PSR) |
PowerShares China A-Share Portfolio (CHNA) |
PowerShares Multi-Strategy Alternative Portfolio (LALT) |
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) |
|||||||||||||
Assets: | ||||||||||||||||
Unaffiliated investments, at value |
$ | 42,406,098 | $ | | $ | 9,879,458 | $ | 396,351,524 | ||||||||
Affiliated investments, at value |
| 1,800,000 | 11,316,200 | 107,697,379 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investments, at value |
42,406,098 | 1,800,000 | 21,195,658 | 504,048,903 | ||||||||||||
Cash |
| 30,192 | 24,438 | 3,290,899 | ||||||||||||
Cash collateral for futures contracts |
| 580,225 | 871,596 | 23,438,791 | ||||||||||||
Receivables: |
||||||||||||||||
Dividends |
31,548 | 20 | 16,974 | 352,944 | ||||||||||||
Shares sold |
| | | 4,424,429 | ||||||||||||
Investments sold |
| | | 154,653 | ||||||||||||
Forward foreign currency contracts outstanding |
| | 14,360 | | ||||||||||||
Unrealized appreciation on futures contracts |
| 86,138 | 33,920 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Assets |
42,437,646 | 2,496,575 | 22,156,946 | 535,710,619 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: | ||||||||||||||||
Due to custodian |
14,636 | | | | ||||||||||||
Payables: |
||||||||||||||||
Investments purchased |
| | | 3,312,631 | ||||||||||||
Unrealized depreciation on futures contracts |
| | | 2,794,914 | ||||||||||||
Accrued unitary management fees |
27,193 | 884 | 17,017 | 137,754 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Liabilities |
41,829 | 884 | 17,017 | 6,245,299 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Assets | $ | 42,395,817 | $ | 2,495,691 | $ | 22,139,929 | $ | 529,465,320 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Assets Consist of: | ||||||||||||||||
Shares of beneficial interest |
$ | 39,714,727 | $ | 2,537,243 | $ | 22,373,860 | $ | 501,656,341 | ||||||||
Undistributed net investment income (loss) |
174,760 | (7,914 | ) | (14,360 | ) | 782,566 | ||||||||||
Undistributed net realized gain (loss) |
(1,206,503 | ) | (119,776 | ) | (367,164 | ) | 1,044,575 | |||||||||
Net unrealized appreciation |
3,712,833 | 86,138 | 147,593 | 25,981,838 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Assets | $ | 42,395,817 | $ | 2,495,691 | $ | 22,139,929 | $ | 529,465,320 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Shares outstanding (unlimited amount authorized, $0.01 par value) |
600,000 | 100,001 | 900,000 | 17,950,000 | ||||||||||||
Net asset value |
$ | 70.66 | $ | 24.96 | $ | 24.60 | $ | 29.50 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Market price |
$ | 70.63 | $ | 25.00 | $ | 24.55 | $ | 29.49 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Unaffiliated investments, at cost |
$ | 38,693,265 | $ | | $ | 9,780,145 | $ | 367,616,080 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Affiliated investments, at cost |
$ | | $ | 1,800,000 | $ | 11,316,200 | $ | 107,656,071 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total investments, at cost |
$ | 38,693,265 | $ | 1,800,000 | $ | 21,096,345 | $ | 475,272,151 | ||||||||
|
|
|
|
|
|
|
|
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
21 |
|
For the year ended October 31, 2014
PowerShares Active U.S. Real Estate Fund (PSR) |
PowerShares China A-Share Portfolio (CHNA) |
PowerShares Multi-Strategy Alternative Portfolio (LALT)(a) |
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) |
|||||||||||||
Investment Income: | ||||||||||||||||
Unaffiliated dividend income |
$ | 799,321 | $ | | $ | 78,833 | $ | 3,775,581 | ||||||||
Affiliated dividend income |
3 | 99 | 265 | 13,141 | ||||||||||||
Foreign withholding tax |
| | (50 | ) | (410 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Income |
799,324 | 99 | 79,048 | 3,788,312 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Expenses: | ||||||||||||||||
Unitary management fees |
283,478 | 11,696 | 76,375 | 974,729 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Less: Waivers |
(22 | ) | (1,539 | ) | (3,602 | ) | (86,708 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Expenses |
283,456 | 10,157 | 72,773 | 888,021 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net Investment Income (Loss) |
515,868 | (10,058 | ) | 6,275 | 2,900,291 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Realized and Unrealized Gain (Loss): | ||||||||||||||||
Net realized gain (loss) from: |
||||||||||||||||
Investment securities |
(260,631 | ) | | 61,236 | (2,248,108 | ) | ||||||||||
In-kind redemptions |
3,332,731 | | | 7,334,181 | ||||||||||||
Futures contracts |
| (53,874 | ) | (428,400 | ) | 2,851,226 | ||||||||||
Forward foreign currency contracts |
| | (101,833 | ) | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net realized gain (loss) |
3,072,100 | (53,874 | ) | (468,997 | ) | 7,937,299 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Change in net unrealized appreciation (depreciation) on: |
||||||||||||||||
Investment securities |
2,825,687 | | 99,313 | 21,828,184 | ||||||||||||
Futures contracts |
| 54,037 | 33,920 | (2,733,227 | ) | |||||||||||
Forward foreign currency contracts |
| | 14,360 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net change in unrealized appreciation |
2,825,687 | 54,037 | 147,593 | 19,094,957 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net realized and unrealized gain (loss) |
5,897,787 | 163 | (321,404 | ) | 27,032,256 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) in net assets resulting from operations |
$ | 6,413,655 | $ | (9,895 | ) | $ | (315,129 | ) | $ | 29,932,547 | ||||||
|
|
|
|
|
|
|
|
(a) | For the period May 27, 2014 (commencement of investment operations) through October 31, 2014. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
22 |
|
(This Page Intentionally Left Blank)
Statements of Changes in Net Assets
For the years ended October 31, 2014 and 2013
PowerShares Active U.S. Real Estate Fund (PSR) |
PowerShares China A-Share Portfolio (CHNA) |
|||||||||||||||
2014 | 2013 | 2014 | 2013(a) | |||||||||||||
Operations: | ||||||||||||||||
Net investment income (loss) |
$ | 515,868 | $ | 400,012 | $ | (10,058 | ) | $ | (190 | ) | ||||||
Net realized gain (loss) |
3,072,100 | 430,139 | (53,874 | ) | (65,902 | ) | ||||||||||
Net change in unrealized appreciation (depreciation) |
2,825,687 | (106,800 | ) | 54,037 | 32,101 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) in net assets resulting from operations |
6,413,655 | 723,351 | (9,895 | ) | (33,991 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Distributions to Shareholders from: | ||||||||||||||||
Net investment income |
(504,520 | ) | (299,128 | ) | | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total distributions to shareholders |
(504,520 | ) | (299,128 | ) | | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Shareholder Transactions: | ||||||||||||||||
Proceeds from shares sold |
45,857,016 | 27,795,852 | | 2,539,577 | ||||||||||||
Value of shares repurchased |
(42,550,001 | ) | (17,434,445 | ) | | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase in net assets resulting from shares transactions |
3,307,015 | 10,361,407 | | 2,539,577 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Increase (Decrease) in Net Assets |
9,216,150 | 10,785,630 | (9,895 | ) | 2,505,586 | |||||||||||
Net Assets: | ||||||||||||||||
Beginning of period |
33,179,667 | 22,394,037 | 2,505,586 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
End of year |
$ | 42,395,817 | $ | 33,179,667 | $ | 2,495,691 | $ | 2,505,586 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Undistributed net investment income (loss) at end of period |
$ | 174,760 | $ | 163,412 | $ | (7,914 | ) | $ | (190 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||
Changes in Shares Outstanding: | ||||||||||||||||
Shares sold |
700,000 | 450,000 | | 100,001 | ||||||||||||
Shares repurchased |
(650,000 | ) | (300,000 | ) | | | ||||||||||
Shares outstanding, beginning of period |
550,000 | 400,000 | 100,001 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Shares outstanding, end of period |
600,000 | 550,000 | 100,001 | 100,001 | ||||||||||||
|
|
|
|
|
|
|
|
(a) | For the period October 8, 2013 (commencement of investment operations) through October 31, 2013. |
(b) | For the period May 27, 2014 (commencement of investment operations) through October 31, 2014. |
(c) | For the period December 4, 2012 (commencement of investment operations) through October 31, 2013. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
24 |
|
PowerShares Multi-Strategy Alternative Portfolio (LALT) |
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) |
|||||||||
2014(b) | 2014 | 2013(c) | ||||||||
$ | 6,275 | $ | 2,900,291 | $ | 457,287 | |||||
(468,997 | ) | 7,937,299 | (6,177,961 | ) | ||||||
147,593 | 19,094,957 | 6,886,881 | ||||||||
|
|
|
|
|
|
|||||
(315,129 | ) | 29,932,547 | 1,166,207 | |||||||
|
|
|
|
|
|
|||||
| (2,996,245 | ) | (293,585 | ) | ||||||
|
|
|
|
|
|
|||||
| (2,996,245 | ) | (293,585 | ) | ||||||
|
|
|
|
|
|
|||||
22,455,058 | 462,383,150 | 88,709,552 | ||||||||
| (49,436,306 | ) | | |||||||
|
|
|
|
|
|
|||||
22,455,058 | 412,946,844 | 88,709,552 | ||||||||
|
|
|
|
|
|
|||||
22,139,929 | 439,883,146 | 89,582,174 | ||||||||
| 89,582,174 | | ||||||||
|
|
|
|
|
|
|||||
$ | 22,139,929 | $ | 529,465,320 | $ | 89,582,174 | |||||
|
|
|
|
|
|
|||||
$ | (14,360 | ) | $ | 782,566 | $ | 163,757 | ||||
|
|
|
|
|
|
|||||
900,000 | 16,450,000 | 3,300,001 | ||||||||
| (1,800,001 | ) | | |||||||
| 3,300,001 | | ||||||||
|
|
|
|
|
|
|||||
900,000 | 17,950,000 | 3,300,001 | ||||||||
|
|
|
|
|
|
|
25 |
|
PowerShares Active U.S. Real Estate Fund (PSR)
Year Ended October 31, | ||||||||||||||||||||
2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||||
Per Share Operating Performance: | ||||||||||||||||||||
Net asset value at beginning of period |
$ | 60.33 | $ | 55.99 | $ | 50.32 | $ | 45.42 | $ | 33.01 | ||||||||||
Net investment income(a) |
0.92 | 0.93 | 0.77 | 0.54 | 1.07 | |||||||||||||||
Net realized and unrealized gain on investments |
10.33 | 4.20 | 5.82 | 5.15 | 12.06 | |||||||||||||||
Total from investment operations |
11.25 | 5.13 | 6.59 | 5.69 | 13.13 | |||||||||||||||
Distribution to shareholders from: |
||||||||||||||||||||
Net investment income |
(0.92 | ) | (0.79 | ) | (0.84 | ) | (0.79 | ) | (0.72 | ) | ||||||||||
Capital gains |
| | (0.08 | ) | | | ||||||||||||||
Total distributions |
(0.92 | ) | (0.79 | ) | (0.92 | ) | (0.79 | ) | (0.72 | ) | ||||||||||
Net asset value at end of period |
$ | 70.66 | $ | 60.33 | $ | 55.99 | $ | 50.32 | $ | 45.42 | ||||||||||
Market price at end of period(b) |
$ | 70.63 | $ | 60.35 | $ | 55.94 | $ | 50.36 | $ | 45.42 | ||||||||||
Net Asset Value Total Return(c) | 18.95 | % | 9.23 | % | 13.22 | % | 12.77 | % | 40.16 | % | ||||||||||
Market Price Total Return(c) | 18.86 | % | 9.37 | % | 13.03 | % | 12.86 | % | 39.98 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets at end of period (000s omitted) |
$ | 42,396 | $ | 33,180 | $ | 22,394 | $ | 17,612 | $ | 20,438 | ||||||||||
Ratio to average net assets of: |
||||||||||||||||||||
Expenses, after Waivers |
0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | ||||||||||
Expenses, prior to Waivers |
0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | 0.80 | % | ||||||||||
Net investment income |
1.46 | % | 1.56 | % | 1.42 | % | 1.10 | % | 2.65 | % | ||||||||||
Portfolio turnover rate(d) |
169 | % | 131 | % | 33 | % | 37 | % | 20 | % |
(a) | Based on average shares outstanding. |
(b) | The mean between the last bid and ask price. |
(c) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
(d) | Portfolio turnover rate is not annualized and does not include securities received or delivered from processing creations or redemptions. |
PowerShares China A-Share Portfolio (CHNA)
Year Ended October 31, 2014 |
For the Period October 8, 2013(a) Through October 31, 2013 |
|||||||
Per Share Operating Performance: | ||||||||
Net asset value at beginning of period |
$ | 25.06 | $ | 25.40 | ||||
Net investment income(b) |
(0.10 | ) | 0.00 | (c) | ||||
Net realized and unrealized gain on investments |
0.00 | (c) | (0.34 | ) | ||||
Total from investment operations |
(0.10 | ) | (0.34 | ) | ||||
Net asset value at end of period |
$ | 24.96 | $ | 25.06 | ||||
Market price at end of period(d) |
$ | 25.00 | $ | 25.18 | ||||
Net Asset Value Total Return(e) | (0.40 | )% | (1.34 | )%(f) | ||||
Market Price Total Return(e) | (0.72 | )% | (0.87 | )%(f) | ||||
Ratios/Supplemental Data: | ||||||||
Net assets at end of period (000s omitted) |
$ | 2,496 | $ | 2,506 | ||||
Ratio to average net assets of: |
||||||||
Expenses, after Waivers |
0.43 | %(g) | 0.45 | %(h) | ||||
Expenses, prior to Waivers |
0.50 | %(g) | 0.50 | %(h) | ||||
Net investment income (loss), after Waivers |
(0.43 | )% | (0.13 | )%(h) |
(a) | Commencement of Investment Operations. |
(b) | Based on average shares outstanding. |
(c) | Amount represents less than $0.005. |
(d) | The mean between the last bid and ask price. |
(e) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
(f) | The net asset value total return from Fund Inception (October 10, 2013, the first day of trading on the Exchange) to October 31, 2013 was (1.07)%. The market price total return from Fund Inception to October 31, 2013 was (0.83)%. |
(g) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the investment companies in which the Fund invests. Estimated investment company expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the investment companies and are deducted from the value of the funds that the Fund invests in. The effect of the estimated investment company expenses that the Fund bears indirectly is included in the Funds total return |
(h) | Annualized. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
26 |
|
Financial Highlights (continued)
PowerShares Multi-Strategy Alternative Portfolio (LALT)
For the Period May 27, 2014(a) Through October 31, 2014 |
||||
Per Share Operating Performance: | ||||
Net asset value at beginning of period |
$ | 25.00 | ||
Net investment income(b) |
0.01 | |||
Net realized and unrealized gain on investments |
(0.41 | ) | ||
Total from investment operations |
(0.40 | ) | ||
Net asset value at end of period |
$ | 24.60 | ||
Market price at end of period(c) |
$ | 24.55 | ||
Net Asset Value Total Return(d) | (1.60 | )%(e) | ||
Market Price Total Return(d) | (1.80 | )%(e) | ||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000s omitted) |
$ | 22,140 | ||
Ratio to average net assets of: |
||||
Expenses, after Waivers |
0.90 | %(f)(g) | ||
Expenses, prior to Waivers |
0.95 | %(f)(g) | ||
Net investment income |
0.08 | %(f) | ||
Portfolio turnover rate(h) |
63 | % |
(a) | Commencement of Investment Operations. |
(b) | Based on average shares outstanding. |
(c) | The mean between the last bid and ask price. |
(d) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
(e) | The net asset value total return from Fund Inception (May 29, 2014, the first day of trading on the Exchange) to October 31, 2014 was (1.64)%. The market price total return from Fund Inception to October 31, 2014 was (1.92)%. |
(f) | Annualized. |
(g) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the investment companies in which the Fund invests. Estimated investment company expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the investment companies and are deducted from the value of the funds that the Fund invests in. The effect of the estimated investment company expenses that the Fund bears indirectly is included in the Funds total return. |
(h) | Portfolio turnover rate is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
27 |
|
Financial Highlights (continued)
PowerShares S&P 500® Downside Hedged Portfolio (PHDG)
Year Ended October 31, 2014 |
For the
Period December 4, 2012(a) Through October 31, 2013 |
|||||||
Per Share Operating Performance: | ||||||||
Net asset value at beginning of period |
$ | 27.15 | $ | 25.00 | ||||
Net investment income(b) |
0.33 | 0.33 | ||||||
Net realized and unrealized gain on investments |
2.49 | 2.04 | ||||||
Total from investment operations |
2.82 | 2.37 | ||||||
Distribution to shareholders from: |
||||||||
Net investment income |
(0.47 | ) | (0.22 | ) | ||||
Net asset value at end of period |
$ | 29.50 | $ | 27.15 | ||||
Market price at end of period(c) |
$ | 29.49 | $ | 27.23 | ||||
Net Asset Value Total Return(d) | 10.50 | % | 9.51 | %(e) | ||||
Market Price Total Return(d) | 10.14 | % | 9.83 | %(e) | ||||
Ratios/Supplemental Data: | ||||||||
Net assets at end of period (000s omitted) |
$ | 529,465 | $ | 89,582 | ||||
Ratio to average net assets of: |
||||||||
Expenses, after Waivers |
0.36 | %(f) | 0.38 | %(g) | ||||
Expenses, prior to Waivers |
0.39 | %(f) | 0.39 | %(g) | ||||
Net investment income, after Waivers |
1.16 | % | 1.37 | %(g) | ||||
Portfolio turnover rate(h) |
58 | % | 99 | % |
(a) | Commencement of Investment Operations. |
(b) | Based on average shares outstanding. |
(c) | The mean between the last bid and ask price. |
(d) | Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and the redemption on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. Market price total return is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period, and sale at the market price on the last day of the period. Total investment returns calculated for a period of less than one year are not annualized. |
(e) | The net asset value total return from Fund Inception (December 6, 2012, the first day of trading on the Exchange) to October 31, 2013 was 8.99%. The market price total return from Fund Inception to October 31, 2013 was 9.26%. |
(f) | In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the investment companies in which the Fund invests. Estimated investment company expenses are not expenses that are incurred directly by the Fund. They are expenses that are incurred directly by the investment companies and are deducted from the value of the funds that the Fund invests in. The effect of the estimated investment company expenses that the Fund bears indirectly is included in the Funds total return. |
(g) | Annualized. |
(h) | Portfolio turnover rate is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See accompanying Notes to Financial Statements which are an integral part of the financial statements.
|
28 |
|
PowerShares Actively Managed Exchange-Traded Fund Trust
October 31, 2014
Note 1. Organization
PowerShares Actively Managed Exchange-Traded Fund Trust (the Trust) was organized as a Delaware statutory trust on November 6, 2007 and is authorized to have multiple series of portfolios. The Trust is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the 1940 Act). As of October 31, 2014, the Trust offered four portfolios:
Full Name |
Short Name | |
PowerShares Active U.S. Real Estate Fund (PSR) | Active U.S. Real Estate Fund | |
PowerShares China A-Share Portfolio (CHNA) | China A-Share Portfolio | |
PowerShares Multi-Strategy Alternative Portfolio (LALT)* | Multi-Strategy Alternative Portfolio | |
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) | S&P 500® Downside Hedged Portfolio |
* | Commenced operations on May 27, 2014. |
Each portfolio (each, a Fund, and collectively, the Funds) represents a separate series of the Trust. The shares of the Funds are referred to herein as Shares or Funds Shares. Each Funds Shares are listed and traded on NYSE Arca, Inc., except for Multi-Strategy Alternative Portfolio, Shares of which are listed and traded on the NASDAQ Stock Market LLC.
The market prices of each Funds Shares may differ to some degree from the Funds net asset value (NAV). Unlike conventional mutual funds, each Fund issues and redeems Shares on a continuous basis, at NAV, only in a large specified number of Shares, each called a Creation Unit. Creation Units for Active U.S. Real Estate Fund generally are issued and redeemed principally, in exchange for the deposit or delivery of a basket of securities (Deposit Securities). Creation Units for China A-Share Portfolio and Multi-Strategy Alternative Portfolio are issued and redeemed principally in exchange for the deposit or delivery of cash. Creation Units for S&P 500® Downside Hedged Portfolio are issued and redeemed partially in exchange for the deposit or delivery of cash and partially in exchange for Deposit Securities. Except when aggregated in Creation Units by Authorized Participants, the Shares are not individually redeemable securities of the Funds.
The investment objective for Active U.S. Real Estate Fund is high total return through growth of capital and current income. The investment objective for China A-Share Portfolio is to provide long-term capital appreciation. The investment objective for Multi-Strategy Alternative Portfolio is to seek a positive total return that has a low correlation to the broader securities markets. The investment objective for S&P 500® Downside Hedged Portfolio is to achieve positive total returns in rising or falling markets that are not directly correlated to broad equity or fixed income market returns.
Note 2. Significant Accounting Policies
The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements, including estimates and assumptions related to taxation. Actual results could differ from these estimates. In addition, the Funds monitor for material events or transactions that may occur or become known after the period-end date and before the date the financial statements are released to print.
A. Security Valuation
Securities, including restricted securities, are valued according to the following policies:
A security listed or traded on an exchange (except convertible securities) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining NAV per Share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange (NYSE).
Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day NAV per Share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.
|
29 |
|
Debt obligations (including convertible securities) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate (for unlisted equities), yield (for debt obligations), quality, type of issue, coupon rate (for debt obligations), maturity (for debt obligations), individual trading characteristics and other market data. Securities with a demand feature exercisable within one to seven days are valued at par. Debt obligations are subject to interest rate and credit risks. In addition, all debt obligations involve some risk of default with respect to interest and/or principal payments.
Foreign securities (including foreign exchange contracts) prices are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the London world markets. If market quotations are available and reliable for foreign exchange-traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that Invesco PowerShares Capital Management LLC (the Adviser) determines are significant and make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities prices meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, American Depositary Receipts and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economic upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.
Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources. The last bid price may be used to value equity securities. The mean between the last bid and ask prices is used to value debt obligations, including corporate loans.
Securities for which market quotations are not readily available or became unreliable are valued at fair value as determined in good faith following procedures approved by the Board of Trustees. Issuer-specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a securitys fair value.
Each Fund may invest in securities that are subject to interest rate risk, meaning the risk that the prices will generally fall as interest rates rise and, conversely, the prices will generally rise as interest rates fall. Specific securities differ in their sensitivity to changes in interest rates depending on their individual characteristics. Changes in interest rates may result in increased market volatility, which may affect the value and/or liquidity of certain of each Funds investments.
Valuations change in response to many factors, including the historical and prospective earnings of the issuer, the value of the issuers assets, general economic conditions, interest rates, investor perceptions and market liquidity. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
B. Other Risks
Equity Risk. Equity risk is the risk that the value of the securities that each Fund holds will fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities that a Fund holds participate or factors relating to specific companies in which the Funds invest. For example, an adverse event, such as an unfavorable earnings report, may depress the value of securities a Fund holds; the price of securities may be particularly sensitive to general movements in the stock market; or a drop in the stock market may depress the price of most or all of the securities a Fund holds. In addition, securities of an issuer in the Funds portfolio may decline in price if the issuer fails to make anticipated dividend payments because, among other reasons, the issuer of the security experiences a decline in its financial condition.
China Investment Risk. For China A-Share Portfolio there are significant legal requirements that must be resolved before the Fund can invest directly in A-Shares. Currently, the Fund, invests in futures. Investing in futures based on the performance of Chinese companies included in the FTSE China A50 Index involves several risks: The economy of China differs, sometimes unfavorably, from the U.S. economy in such respects as structure, general development, government involvement, wealth distribution, rate of inflation, growth rate, allocation of resources and capital reinvestment, among others; the central government has historically exercised substantial control over virtually every sector of the Chinese economy through administrative regulation and/or state ownership; and actions of the Chinese central and local government authorities continue to have a substantial effect on economic conditions in China. In addition, from time to time the Chinese government has taken actions that influence the prices at which certain goods may be sold,
|
30 |
|
encouraged companies to invest or concentrate in particular industries, induced mergers between companies in certain industries and induced private companies to publicly offer their securities to increase or continue the rate of economic growth, control the rate of inflation or otherwise regulated economic expansion. The regulatory oversight of Chinese companies differs from that in the United States and may not otherwise deter or uncover fraudulent actions by the issuers.
REIT Risk. For Active U.S. Real Estate Fund, although the Fund will not invest in real estate directly, the REITs in which the Fund invests are subject to risks inherent in the direct ownership of real estate. These risks include, but are not limited to, a possible lack of mortgage funds and associated interest rate risks, overbuilding, property vacancies, increases in property taxes and operating expenses, changes in zoning laws, losses due to environmental damages and changes in neighborhood values and appeal to purchasers.
Non-Diversified Fund Risk. Each Fund is non-diversified and can invest a greater portion of its assets in securities of individual issuers than diversified funds. As a result, 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 a Funds volatility and cause the performance of a relatively small number of issuers to have a greater impact on a Funds performance.
Management Risk. The Funds are subject to management risk because they are actively managed portfolios. In managing Active U.S. Real Estate Funds portfolio securities, the Funds sub-adviser, Invesco Advisers, Inc., and in managing China A-Share Portfolios, Multi- Strategy Alternative Portfolios and S&P 500® Downside Hedged Portfolios securities, the Adviser applies investment techniques and risk analyses in making investment decisions, but there can be no guarantee that these will produce the desired results.
Cash Transaction Risk. Unlike most exchange-traded funds (ETFs), China A-Share Portfolio and Multi-Strategy Alternative Portfolio currently effect creations and redemptions principally for cash and S&P 500® Downside Hedged Portfolio currently effects creations and redemptions partially for cash and partially in-kind, rather than primarily in-kind because of the nature of each of these Funds investments. As such, investments in each Funds Shares may be less tax efficient than investments in shares of conventional ETFs that utilize an entirely in-kind redemption process.
VIX Index Risk. For Multi-Strategy Alternative Portfolio and S&P 500® Downside Hedged Portfolio, the Chicago Board Options Exchange (CBOE) can make methodological changes to the calculation of the Chicago Board Options Exchange Volatility Index (VIX Index) that could affect the value of the futures contracts on the VIX Index. There can be no assurance that the CBOE will not change the VIX Index calculation methodology in a way that may affect the value of your investment. Additionally, the CBOE may alter, discontinue or suspend calculation or dissemination of the VIX Index and/or the exercise settlement value. Any of these actions could adversely affect the value of each Funds Shares.
Tax Risk. China A-Share Portfolio may invest in stock index futures contracts that provide exposure to the China A-Shares market. Multi-Strategy Alternative Portfolio may purchase and sell interest rate futures, including Eurodollar interest rate futures or Euro Euribor interest rate futures, and VIX Index futures contracts. S&P 500® Downside Hedged Portfolio will gain most of its exposure to the futures markets by entering into VIX Index futures (and, to a lesser extent, S&P 500® Index futures (E-Mini S&P 500 Futures)). To qualify as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended, the Funds must meet a qualifying income test each taxable year. The S&P 500® Downside Hedged Portfolio has received a private letter ruling from the Internal Revenue Service (IRS) that income it derives from VIX Index futures contracts will constitute qualifying income for purposes of that test. China A-Share Portfolio and Multi-Strategy Alternative Portfolio received an opinion of its counsel which is not binding on the IRS or courts, stating that such income should be qualifying. Failure to comply with the qualifying income test in any taxable year would have significant negative tax consequences to shareholders of the Funds. If the IRS were to determine that the income that the Funds derive from futures did not constitute qualifying income, the Funds likely would be required to reduce their exposure to such investments in order to maintain qualification as a RIC, which may result in difficulty in implementing their investment strategies.
Commodity Pool Risk. China A-Share Portfolio, Multi-Strategy Alternative Portfolio and S&P 500® Downside Hedged Portfolio invest in futures contracts, which cause each to be deemed to be a commodity pool, thereby subjecting each Fund to regulation under the Commodity Exchange Act and rules of the Commodity Futures Trading Commission (CFTC). The Adviser is registered as a Commodity Pool Operator (CPO), and the Funds will be operated in accordance with CFTC rules. Registration as a CPO subjects the Adviser to additional laws, regulations and enforcement policies, all of which could increase compliance costs and may affect the operations and financial performance of these Funds. Registration as a commodity pool may have negative effects on the ability of each of these Funds to engage in their respective planned investment program.
C. Federal Income Taxes
Each Fund intends to comply with the provisions of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), applicable to regulated investment companies and to distribute substantially all of the Funds taxable earnings to its shareholders. As such, the Funds will not be subject to federal income taxes on otherwise taxable income (including net realized gains) that is distributed to the shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.
Each Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed each Funds uncertain tax positions and concluded that no liability for unrecognized tax benefits should be
|
31 |
|
recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.
Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from GAAP. These timing differences are primarily due to differing book and tax treatments for in-kind transactions, losses deferred due to wash sales, and passive foreign investment company adjustments, if any.
The Funds file U.S. federal tax returns and tax returns in certain other jurisdictions. Generally, a Fund is subject to examinations by such taxing authorities for up to three years after the filing of the return for the tax period.
D. Investment Transactions and Investment Income
Investment transactions are accounted for on a trade date basis. Realized gains and losses from the sale or disposition of securities are computed on the specific identified cost basis. Interest income is recorded on the accrual basis. Dividend income (net of withholding tax, if any) is recorded on the ex-dividend date. Realized gains, dividends and interest received by a Fund may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes.
Corporate actions (including cash dividends) are recorded net of non-reclaimable foreign tax withholdings on the ex-date.
E. Expenses
Each Fund has agreed to pay an annual unitary management fee to the Adviser. Out of the unitary management fee, the Adviser has agreed to pay for substantially all expenses of the Funds, including payments to the Sub-Advisers (as defined below) for Active U.S. Real Estate Fund and Multi-Strategy Alternative Portfolio, and the cost of transfer agency, custody, fund administration, legal, audit and other services, except for advisory fees, distribution fees, if any, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses (including acquired fund fees and expenses, if any).
To the extent a Fund invests in other investment companies, the expenses shown in the accompanying financial statements reflect the expenses of the Fund and do not include any expenses of the investment companies in which it invests. The effects of such investment companies expenses are included in the realized and unrealized gain or loss on the investments in the investment companies.
F. Dividends and Distributions to Shareholders
Active U.S. Real Estate Fund and S&P 500® Downside Hedged Portfolio declare and pay dividends from net investment income, if any, to their shareholders quarterly and record such dividends on ex-dividend date. China A-Share Portfolio and Multi-Strategy Alternative Portfolio declare and pay dividends from net investment income, if any, to their shareholders annually and record such dividends on ex-dividend date. Generally, each Fund distributes net realized taxable capital gains, if any, annually in cash and records them on ex-dividend date. Such distributions on a tax basis are determined in conformity with federal income tax regulations which may differ from GAAP. Distributions in excess of tax basis earnings and profits, if any, are reported in such Funds financial statements as a tax return of capital at fiscal year-end.
G. Foreign Currency Translations
Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Funds do not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statements of Operations. Reported net realized foreign currency gains or losses arise from (1) sales of foreign currencies, (2) currency gains or losses realized between the trade and settlement dates on securities transactions, and (3) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on each Funds books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
The Funds may invest in foreign securities, which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Foreign taxes, if any, are recorded based on the tax regulations and rates that exist in the foreign markets in which each Fund invests.
H. Forward Foreign Currency Contracts
Multi-Strategy Alternative Portfolio engaged in foreign currency transactions either on a spot (i.e. for prompt delivery and settlement) basis at the rate prevailing in the currency exchange market at the time or through forward foreign currency contracts to manage or minimize currency or exchange rate risk.
|
32 |
|
The Fund also enters into forward foreign currency contracts for the purchase or sale of a security denominated in a foreign currency in order to lock in the U.S. dollar price of that security, or the Fund also enters into forward foreign currency contracts that do not provide for physical settlement of the two currencies, but instead are settled by a single cash payment calculated as the difference between the agreed upon exchange rate and the spot rate at settlement based upon an agreed upon notional amount (non-deliverable forwards). The Fund sets aside liquid assets in an amount equal to daily mark-to-market obligation for forward foreign currency contracts.
A forward foreign currency contract is an obligation between two parties (Counterparties) to purchase or sell a specific currency for an agreed-upon price at a future date. The use of forward foreign currency contracts does not eliminate fluctuations in the price of the underlying securities the Fund owns or intends to acquire but establishes a rate of exchange in advance. Fluctuations in the value of these contracts are measured by the difference in the contract date and reporting date exchange rates and are recorded as unrealized appreciation (depreciation) until the contracts are closed. When the contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains (losses) on the contracts are included in the Statements of Operations. The primary risks associated with forward foreign currency contracts include failure of the Counterparty to meet the terms of the contract and the value of the foreign currency changing unfavorably. These risks may be in excess of the amounts reflected in the Statements of Assets and Liabilities.
I. Futures Contracts
China A-Share Portfolio, Multi-Strategy Alternative Portfolio and S&P 500® Downside Hedged Portfolio entered into futures contracts to simulate full investment in securities or manage exposure to equity and market price movements and/or currency risks and provide exposure to markets and indexes. China A-Share Portfolio entered into FTSE China A50 Index futures contracts to simulate full investment in the China A-Shares securities. Multi-Strategy Alternative Portfolio entered into currency futures and interest rate futures including Eurodollar interest rate futures or Euro Euribor interest rate futures, and VIX Index futures contracts. S&P 500® Downside Hedged Portfolio entered into U.S. listed futures contracts on the VIX Index and on E-Mini S&P 500 Futures to simulate full investment in the S&P 500® Dynamic VEQTOR Index, to facilitate trading or to reduce transaction costs.
A futures contract is an agreement between two parties to purchase or sell a specified underlying security or index for a specified price at a future date. China A-Share Portfolio will only enter into futures contracts that are traded on the Singapore Exchange; Multi-Strategy Alternative Portfolio and S&P 500® Downside Hedged Portfolio will only enter into futures contracts that are traded on a U.S. exchange and that are standardized as to maturity date and underlying financial instrument. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral at the futures commission merchant broker. During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by recalculating the value of the contracts on a daily basis. Subsequent or variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. These amounts are reflected as a receivable or payable on the Statements of Assets and Liabilities. When the contracts are closed or expire, each Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Funds basis in the contract. The net realized gain (loss) and the change in unrealized gain (loss) on futures contracts held during the period is included on the Statements of Operations.
The primary risks associated with futures contracts are market risk, leverage risk and the absence of a liquid secondary market. If a Fund were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and may be required to continue to maintain the margin deposits on the futures contracts until the position expired or matured. As futures contracts approach expiration, they may be replaced by similar contracts that have a later expiration. This process is referred to as rolling. If the market for these contracts is in contango, meaning that the prices of futures contracts in the nearer months are lower than the price of contracts in the distant months, the sale of the near-term month contract would be at a lower price than the longer-term contract, resulting in a cost to roll the futures contract. The actual realization of a potential roll cost will depend on the difference in price of the near and distant contracts. The contracts included in the VIX Index historically have traded in contango markets, resulting in a roll cost, which could adversely affect the value of Shares of the S&P 500® Downside Hedged Portfolio. China A-Share Portfolio may invest in ETFs that provide exposure to the China A-Share market. Futures have minimal Counterparty Risk since the exchanges clearinghouse, as Counterparty to all exchange-traded futures contracts guarantees the futures against default. Risks may exceed amounts recognized in the Statements of Assets and Liabilities.
Note 3. Investment Advisory Agreement and Other Agreements
The Trust has entered into an Investment Advisory Agreement with the Adviser pursuant to which the Adviser has overall responsibility for the selection and ongoing monitoring of the Funds investments, managing the Funds business affairs, providing certain clerical, bookkeeping and other administrative services, and for Active U.S. Real Estate Fund and Multi-Strategy Alternative Portfolio, oversight of Invesco Advisers, Inc., Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Hong Kong Limited, Invesco Senior Secured Management, Inc. and Invesco Canada Ltd. (collectively, the Sub-Advisers), all of which are affiliates of the Adviser.
As compensation for its services, each Fund has agreed to pay the Adviser an annual unitary management fee. Out of the unitary management fee, the Adviser has agreed to pay for substantially all expenses of the Funds, including for Active U.S. Real Estate Fund
|
33 |
|
and Multi-Strategy Alternative Portfolio, payments to the Sub-Advisers, and for each Fund, the cost of transfer agency, custody, fund administration, legal, audit and other services, except for advisory fees, distribution fees, if any, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses (including acquired fund fees and expenses, if any). The unitary management fee is paid by each Fund to the Adviser at the following annual rates:
% of Average Daily Net Assets |
||||
Active U.S. Real Estate Fund | 0.80 | % | ||
China A-Share Portfolio | 0.50 | % | ||
Multi-Strategy Alternative Portfolio | 0.95 | % | ||
S&P 500® Downside Hedged Portfolio | 0.39 | % |
The Adviser has entered into an Investment Sub-Advisory Agreement with the Sub-Advisers for Active U.S. Real Estate Fund. The sub-advisory fee for these Funds is paid by the Adviser to the Sub-Advisers at 40% of the Advisers compensation of the sub-advised assets of each Fund.
Further, through August 31, 2015, the Adviser has contractually agreed to waive a portion of each Funds management fee in an amount equal to 100% of the net advisory fees an affiliate of the Adviser receives that are attributable to certain of the Funds investments in money market funds managed by that affiliate. The Adviser cannot discontinue this waiver prior to its expiration.
For the fiscal year ended October 31, 2014, the Adviser waived fees for each Fund in the following amounts:
Active U.S. Real Estate Fund | $ | 22 | ||
China A-Share Portfolio | 1,539 | |||
Multi-Strategy Alternative Portfolio | 3,602 | |||
S&P 500® Downside Hedged Portfolio | 86,708 |
The Trust has entered into a Distribution Agreement with Invesco Distributors, Inc. (the Distributor), which serves as the distributor of Creation Units for each Fund. The Distributor does not maintain a secondary market in the Shares. The Funds are not charged any fees pursuant to the Distribution Agreement. The Distributor is an affiliate of the Adviser.
The Trust has entered into service agreements whereby The Bank of New York Mellon, a wholly-owned subsidiary of The Bank of New York Mellon Corporation, serves as the administrator, custodian, fund accountant and transfer agent for each Fund.
Note 4. Investments in Affiliates
Each Funds Adviser is a wholly-owned subsidiary of Invesco Ltd., and therefore Invesco Ltd. is considered to be affiliated with the Funds. The table below shows each Funds transactions in, and earnings from, its investment in Invesco Ltd. for the fiscal year ended October 31, 2014.
S&P 500® Downside Hedged Portfolio
Value October 31, 2013 |
Purchases at Cost |
Proceeds from Sales |
Change in Unrealized Appreciation |
Realized Gain |
Value October 1, 2014 |
Dividend Income |
||||||||||||||||||||||
Invesco Ltd. | $ | 72,596 | $ | 401,681 | $ | (141,743 | ) | $ | 34,208 | $ | 5,501 | $ | 372,243 | $ | 4,246 |
Note 5. Additional Valuation Information
GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investments assigned level:
Level 1 | Prices are determined using quoted prices in an active market for identical assets. |
Level 2 | Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others. |
Level 3 | Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), |
|
34 |
|
unobservable inputs may be used. Unobservable inputs reflect a Funds own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information. |
Except for the Fund listed below, as of October 31, 2014, all of the securities in each Fund were valued based on Level 1 inputs (see the Schedules of Investments for security categories). The appreciation (depreciation) on futures contracts held in China-A Share Portfolio and S&P 500® Downside Hedged Portfolio were based on Level 1 inputs. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon actual sale of those investments.
Investments in Securities | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Multi-Strategy Alternative Portfolio | ||||||||||||||||
Equity Securities |
$ | 21,195,658 | $ | | $ | | $ | 21,195,658 | ||||||||
Forward Foreign Currency Contracts(a) |
| 14,360 | | 14,360 | ||||||||||||
Futures(a) |
33,920 | | | 33,920 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments |
$ | 21,229,578 | $ | 14,360 | $ | | $ | 21,243,938 | ||||||||
|
|
|
|
|
|
|
|
(a) | Unrealized appreciation. |
Note 6. Derivative Investments
China A-Share Portfolio, Multi-Strategy Alternative Portfolio and S&P 500® Downside Hedged Portfolio have implemented required disclosures about derivative instruments and hedging activities in accordance with GAAP. These disclosures are intended to improve financial reporting about the effects of derivative instruments and hedging activities by enabling investors to better understand an entitys financial position and financial performance. The enhanced disclosure has no impact on the results of operations reported in the financial statements.
Value of Derivative Instruments at Year-End
The table below summarizes the value of each Funds derivative instruments, detailed by primary risk exposure, held as of October 31, 2014:
Value | ||||||||||||||||||||||||
China A-Share Portfolio |
Multi-Strategy Alternative Portfolio |
S&P 500® Downside Hedged Portfolio |
||||||||||||||||||||||
Risk Exposure/Derivative Type |
Assets | Liabilities | Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||
Currency risk: | ||||||||||||||||||||||||
Forward foreign currency contracts(b) |
$ | | $ | | $ | 185,048 | $ | (170,688 | ) | $ | | $ | | |||||||||||
Equity risk: | ||||||||||||||||||||||||
Futures contracts(c) |
86,138 | | 58,142 | (193,960 | ) | 3,121,711 | (5,916,625 | ) | ||||||||||||||||
Interest rate risk: | ||||||||||||||||||||||||
Futures contracts(c) |
| | 169,738 | | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 86,138 | | $ | 412,928 | $ | (364,648 | ) | $ | 3,121,711 | $ | (5,916,625 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(b) | Values are disclosed on the Statements of Assets and Liabilities under the caption Forward foreign currency contracts outstanding. |
(c) | Values are disclosed on the Statements of Assets and Liabilities under the caption Unrealized appreciation on futures contracts or Unrealized depreciation on futures contracts. |
|
35 |
|
Effect of Derivative Instruments for the fiscal year ended October 31, 2014
The table below summarizes each Funds gains (losses) on derivative instruments, detailed by primary risk exposure, recognized in earnings during the period:
Location of Gain (Loss) on Statement of Operations | ||||||||||||||||
China A-Share Portfolio |
Multi-Strategy Alternative Portfolio |
S&P 500® Downside Hedged Portfolio |
||||||||||||||
Futures | Futures | Forward Foreign Currency Contracts |
Futures | |||||||||||||
Realized Gain (Loss): | ||||||||||||||||
Currency risk |
$ | | $ | | $ | (101,833 | ) | $ | | |||||||
Equity risk |
(53,874 | ) | (381,178 | ) | | 2,851,226 | ||||||||||
Interest rate risk |
| (47,222 | ) | | | |||||||||||
Change in Unrealized Appreciation (Depreciation): | ||||||||||||||||
Currency risk |
| | 14,360 | | ||||||||||||
Equity risk |
54,037 | (135,818 | ) | | (2,733,227 | ) | ||||||||||
Interest rate risk |
| 169,738 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 163 | $ | (394,480 | ) | $ | (87,473 | ) | $ | 117,999 | ||||||
|
|
|
|
|
|
|
|
The table below summarizes the average notional value of futures contracts and forward foreign currency contracts outstanding during the period.
Average Notional Value | ||||||||||||
China A-Share Portfolio |
Multi-Strategy Alternative Portfolio |
S&P 500® Downside Hedged Portfolio |
||||||||||
Futures contracts | $ | 2,342,239 | $ | 68,688,448 | $ | 64,452,591 | ||||||
Forward foreign currency contracts | | 15,000,983 | |
Multi-Strategy Alternative Portfolio
Open Forward Foreign Currency Contracts | ||||||||||||||||||||||||||
Settlement Date | Counterparty |
Contract to | Notional Value | Unrealized Appreciation (Depreciation) |
||||||||||||||||||||||
Deliver | Receive | |||||||||||||||||||||||||
11/20/2014 | Morgan Stanley | CHF | 45,294 | USD | 47,800 | $ | 47,068 | $ | 732 | |||||||||||||||||
11/20/2014 | Morgan Stanley | CHF | 2,314,560 | USD | 2,452,600 | 2,405,212 | 47,388 | |||||||||||||||||||
11/20/2014 | Morgan Stanley | GBP | 773,236 | USD | 1,247,000 | 1,236,860 | 10,140 | |||||||||||||||||||
11/20/2014 | Morgan Stanley | GBP | 15,128 | USD | 24,400 | 24,199 | 201 | |||||||||||||||||||
11/20/2014 | Morgan Stanley | JPY | 1,077,469 | USD | 10,100 | 9,613 | 487 | |||||||||||||||||||
11/20/2014 | Morgan Stanley | JPY | 55,241,573 | USD | 516,900 | 492,840 | 24,060 | |||||||||||||||||||
11/20/2014 | Morgan Stanley | SEK | 26,097,211 | USD | 3,626,500 | 3,526,683 | 99,817 | |||||||||||||||||||
11/20/2014 | Morgan Stanley | SEK | 511,030 | USD | 70,700 | 69,059 | 1,641 | |||||||||||||||||||
11/20/2014 | Morgan Stanley | USD | 8,200 | AUD | 9,328 | 8,188 | (12 | ) | ||||||||||||||||||
11/20/2014 | Morgan Stanley | USD | 418,000 | AUD | 476,860 | 418,582 | 582 | |||||||||||||||||||
11/20/2014 | Morgan Stanley | USD | 60,400 | EUR | 47,441 | 59,446 | (954 | ) | ||||||||||||||||||
11/20/2014 | Morgan Stanley | USD | 3,098,600 | EUR | 2,424,000 | 3,037,418 | (61,182 | ) | ||||||||||||||||||
11/20/2014 | Morgan Stanley | USD | 2,420,600 | NOK | 15,929,322 | 2,357,928 | (62,672 | ) | ||||||||||||||||||
11/20/2014 | Morgan Stanley | USD | 47,200 | NOK | 310,116 | 45,905 | (1,295 | ) | ||||||||||||||||||
11/20/2014 | Morgan Stanley | USD | 1,905,800 | NZD | 2,398,433 | 1,862,144 | (43,656 | ) | ||||||||||||||||||
11/20/2014 | Morgan Stanley | USD | 37,200 | NZD | 46,732 | 36,283 | (917 | ) | ||||||||||||||||||
|
|
|||||||||||||||||||||||||
Total open forward foreign currency contracts | $ | 14,360 | ||||||||||||||||||||||||
|
|
|
36 |
|
Currency Abbreviations:
AUDAustralian Dollar
CHFSwiss Franc
EUREuro
GBPPound Sterling
JPYJapanese Yen
NOKNorwegian Krone
NZDNew Zealand Dollar
SEKSwedish Krona
USDU.S. Dollar
Open Futures Contracts |
||||||||||||||||
China A-Share Portfolio |
Number of Contracts |
Expiration Date/Commitment |
Value | Unrealized Appreciation |
||||||||||||
SGX FTSE China A50 Index Futures | 334 | November-2014/Long | $ | 2,493,310 | $ | 86,138 |
Multi-Strategy Alternative Portfolio |
Number of Contracts |
Expiration Date/Commitment |
Value | Unrealized Appreciation/ (Depreciation) |
||||||||||
CBOE Volatility Index (VIX) Futures | (26 | ) | December-2014/Short | $ | (417,300 | ) | $ | 58,142 | ||||||
CBOE Volatility Index (VIX) Futures | 41 | January-2015/Long | 688,800 | (75,142 | ) | |||||||||
CBOE Volatility Index (VIX) Futures | 38 | February-2015/Long | 661,200 | (16,506 | ) | |||||||||
Eurodollar Futures | 296 | September-2015/Long | 73,559,700 | 169,738 | ||||||||||
S&P 500 E-Mini Futures | (98 | ) | December-2014/Short | (9,855,860 | ) | (102,312 | ) | |||||||
|
|
|
|
|||||||||||
$ | 64,636,540 | $ | 33,920 | |||||||||||
|
|
|
|
S&P 500® Downside Hedged Portfolio |
Number of Contracts |
Expiration Date/Commitment |
Value | Unrealized Appreciation/ (Depreciation) |
||||||||||
CBOE Volatility Index (VIX) Futures | 2,193 | November-2014/Long | $ | 34,649,400 | $ | (5,402,494 | ) | |||||||
CBOE Volatility Index (VIX) Futures | 1,165 | December-2014/Long | 18,698,250 | (514,131 | ) | |||||||||
S&P 500 E-Mini Futures | 788 | December-2014/Long | 79,249,160 | 3,121,711 | ||||||||||
|
|
|
|
|||||||||||
$ | 132,596,810 | $ | (2,794,914 | ) | ||||||||||
|
|
|
|
Offsetting Assets and Liabilities
Accounting Standards Update (ASU) No. 2011-11, Disclosures about Offsetting Assets and Liabilities, which was subsequently clarified in Financial Accounting Standards Board ASU 2013-01 Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities is intended to enhance disclosures about financial instruments and derivative instruments that are subject to offsetting arrangements on the Statements of Assets and Liabilities and to enable investors to better understand the effect of those arrangements on its financial position. In order for an arrangement to be eligible for netting, the Funds must have a basis to conclude that such netting arrangements are legally enforceable. The Funds enter into netting agreements and collateral agreements in an attempt to reduce the Funds counterparty credit risk by providing for a single net settlement with a counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
There were no derivative instruments subject to a netting agreement for which the Funds are not currently netting. The following tables present derivative instruments that are either subject to an enforceable netting agreement or offset by collateral arrangements as of October 31, 2014.
Multi-Strategy Alternative Portfolio
Assets: |
||||||||||||||||||||||||
Gross amounts presented in Statements of Assets & Liabilities |
Gross amounts offset in Statements of Assets & Liabilities |
Net amounts of assets presented in the Statements of Assets and Liabilities |
Collateral Received | |||||||||||||||||||||
Counterparty |
Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Morgan Stanley | 185,048 | (170,688 | ) | 14,360 | | | 14,360 |
|
37 |
|
Liabilities: |
||||||||||||||||||||||||
Gross amounts presented in Statements of Assets & Liabilities |
Gross amounts offset in Statements of Assets & Liabilities |
Net amounts of liabilities presented in the Statements of Assets and Liabilities |
Collateral Pledged | |||||||||||||||||||||
Counterparty |
Financial Instruments | Cash | Net Amount | |||||||||||||||||||||
Morgan Stanley | 170,688 | (170,688 | ) | | | | |
Note 7. Distributions to Shareholders and Tax Components of Net Assets
Tax Character of Distributions to Shareholders Paid During the Fiscal Years Ended October 31, 2014 and 2013:
2014 | 2013 | |||||||
Ordinary Income |
Ordinary Income |
|||||||
Active U.S. Real Estate Fund | $ | 504,520 | $ | 299,128 | ||||
China A-Share Portfolio | | | ||||||
Multi-Strategy Alternative Portfolio | | | ||||||
S&P 500® Downside Hedged Portfolio | 2,996,245 | 293,585 |
Tax Components of Net Assets at Fiscal Year-End:
Undistributed Ordinary Income |
Undistributed Long-Term Capital Gains |
Net Unrealized Appreciation Investment Securities |
Net Unrealized Appreciation Other Investments |
Capital Loss Carryforward |
Late-Year Ordinary Loss Deferral |
Shares of Beneficial Interest |
Total Net Assets |
|||||||||||||||||||||||||
Active U.S. Real Estate Fund | $ | 174,760 | $ | | $ | 3,481,430 | $ | | $ | (975,100 | ) | $ | | $ | 39,714,727 | $ | 42,395,817 | |||||||||||||||
China A-Share Portfolio | | | | 86,138 | (119,776 | ) | (7,914 | ) | 2,537,243 | 2,495,691 | ||||||||||||||||||||||
Multi-Strategy Alternative Portfolio | | | 92,398 | | (326,329 | ) | | 22,373,860 | 22,139,929 | |||||||||||||||||||||||
S&P 500® Downside Hedged Portfolio | 25,446,914 | 2,362,065 | | | | | 501,656,341 | 529,465,320 |
Capital loss carryforward is calculated and reported as of a specific date. Results of transactions and other activity after that date may affect the amount of capital loss carryforward actually available for the Funds to utilize. Capital losses generated in years beginning after December 22, 2010 can be carried forward for an unlimited period, whereas previous losses expire in eight tax years. Capital losses with an expiration period may not be used to offset capital gains until all net capital losses without an expiration date have been utilized. Capital loss carryforwards with no expiration date will retain their character as either short-term or long-term capital losses instead of as short-term capital losses as under prior law. The ability to utilize capital loss carryforwards in the future may be limited under the Internal Revenue Code and related regulations based on the results of future transactions.
The following Funds have capital loss carryforward as of October 31, 2014:
Post-effectiveno expiration | ||||||||||||
Short-term | Long-term | Total* | ||||||||||
Active U.S. Real Estate Fund | $ | 975,100 | $ | | $ | 975,100 | ||||||
China A-Share Portfolio | 119,776 | | 119,776 | |||||||||
Multi-Strategy Alternative Portfolio | 89,641 | 236,688 | 326,329 | |||||||||
S&P 500® Downside Hedged Portfolio | | | |
* | Capital loss carryforwards as of the date listed above are reduced for limitations, if any, to the extent required by the Internal Revenue Code. |
Note 8. Investment Transactions
For the fiscal year ended October 31, 2014, the cost of securities purchased and proceeds from sales of securities, excluding short-term securities, U.S. Treasury obligations, money market funds and in-kind transactions, were as follows:
Purchases | Sales | |||||||
Active U.S. Real Estate Fund | $ | 60,008,278 | $ | 59,890,396 | ||||
China A-Share Portfolio | | | ||||||
Multi-Strategy Alternative Portfolio | 11,594,458 | 5,163,799 | ||||||
S&P 500® Downside Hedged Portfolio | 118,733,863 | 112,422,588 |
|
38 |
|
For the fiscal year ended October 31, 2014, in-kind transactions associated with creations and redemptions were as follows:
Cost of Securities Received |
Value of Securities Delivered |
|||||||
Active U.S. Real Estate Fund | $ | 45,429,474 | $ | 41,755,408 | ||||
China A-Share Portfolio | | | ||||||
Multi-Strategy Alternative Portfolio | 3,288,275 | | ||||||
S&P 500® Downside Hedged Portfolio | 334,003,196 | 46,900,122 |
Gains (losses) on in-kind transactions are generally not considered taxable gains (losses) for federal income tax purposes.
At October 31, 2014, the aggregate cost and the net unrealized appreciation (depreciation) of investments for tax purposes were as follows:
Cost | Net Unrealized Appreciation (Depreciation) |
Gross Unrealized Appreciation |
Gross Unrealized (Depreciation) |
|||||||||||||
Active U.S. Real Estate Fund | $ | 38,924,668 | $ | 3,481,430 | $ | 3,568,895 | $ | (87,465 | ) | |||||||
China A-Share Portfolio | 1,800,000 | | | | ||||||||||||
Multi-Strategy Alternative Portfolio | 21,103,260 | 92,398 | 501,166 | (408,768 | ) | |||||||||||
S&P 500® Downside Hedged Portfolio | 504,048,903 | | | |
Note 9. Reclassification of Permanent Differences
Primarily as a result of differing book/tax treatment of in-kind transactions on October 31, 2014, amounts were reclassified between undistributed net investment income (loss), undistributed net realized gain (loss) and Shares of beneficial interest. These reclassifications had no effect on the net assets of each Fund. For the fiscal year ended October 31, 2014, the reclassifications were as follows:
Undistributed Net Investment Income (Loss) |
Undistributed Net Realized Gain (Loss) |
Shares of Beneficial Interest |
||||||||||
Active U.S. Real Estate Fund | $ | | $ | (3,176,570 | ) | $ | 3,176,570 | |||||
China A-Share Portfolio | 2,334 | | (2,334 | ) | ||||||||
Multi-Strategy Alternative Portfolio | (20,635 | ) | 101,833 | (81,198 | ) | |||||||
S&P 500® Downside Hedged Portfolio | 714,763 | (714,763 | ) | |
Note 10. Trustees and Officers Fees
Trustees and Officers Fees include amounts accrued by the Funds to pay remuneration to each Trustee who is not an interested person as defined in the 1940 Act (an Independent Trustee) and Officer of the Funds. The Adviser, as a result of each Funds the unitary management fee, pays for such compensation. The Trustee who is an interested person (the Non-Independent Trustee) of the Trust does not receive any Trustees fees.
The Trust has adopted a deferred compensation plan (the Plan). Under the Plan, an Independent Trustee who has executed a Deferred Fee Agreement (a Participating Trustee) may defer receipt of all or a portion of his compensation (Deferral Fees). Such Deferral Fees are deemed to be invested in select PowerShares Funds. The Deferral Fees payable to the Participating Trustee are valued as of the date such Deferral Fees would have been paid to the Participating Trustee. The value increases with contributions or with increases in the value of the Shares selected, and the value decreases with distributions or with declines in the value of the Shares selected. Obligations under the Plan represent unsecured claims against the general assets of the Funds.
Note 11. Capital
Shares are created and redeemed by each Fund only in Creation Units of 50,000 Shares (100,000 Shares for Multi-Strategy Alternative Portfolio). Only Authorized Participants are permitted to purchase or redeem Creation Units from the Funds. For Active U.S. Real Estate Fund, such transactions are generally permitted in exchange for Deposit Securities, with a balancing cash component to equate the transaction to the NAV per Share of the Fund of the Trust on the transaction date. For China A-Share Portfolio and Multi-Strategy Alternative Portfolio, Creation Units are issued and redeemed principally in exchange for the deposit or delivery of cash, and for S&P 500® Downside Hedged Portfolio, Creation Units are issued and redeemed partially in exchange for the deposit or delivery of cash and partially in exchange for Deposit Securities. Cash equivalent to the value of certain securities may be substituted, generally when the securities are not available in sufficient quantity for delivery, not eligible for trading by the Authorized Participant or as a result of other market circumstances.
|
39 |
|
To the extent that the Funds permit transactions in exchange for Deposit Securities, each 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. In accordance with the Trusts Participant Agreement, Creation Units will be issued to an Authorized Participant, notwithstanding the fact that the corresponding Deposit Securities have not been received in part or in whole, in reliance on the undertaking of the Authorized Participant to deliver the missing Deposit Securities as soon as possible, which undertaking shall be secured by the Authorized Participants 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.
Transactions in each Funds Shares are disclosed in detail in the Statements of Changes in Net Assets.
Note 12. Indemnifications
Under the Trusts organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. Each Independent Trustee is also indemnified against certain liabilities arising out of the performance of his duties to the Trust pursuant to an Indemnification Agreement between the Independent Trustee and the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trusts maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred. However, based on experience, the Trust believes the risk of loss to be remote.
|
40 |
|
Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders of PowerShares Actively Managed Exchange-Traded Fund Trust:
In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of PowerShares Active U.S. Real Estate Fund, PowerShares China A-Share Portfolio, PowerShares Multi-Strategy Alternative Portfolio and PowerShares S&P 500® Downside Hedged Portfolio (each an individual portfolio of PowerShares Actively Managed Exchange-Traded Fund Trust, hereafter referred to as the Funds) at October 31, 2014, the results of each of their operations, the changes in each of their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as financial statements) are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at October 31, 2014 by correspondence with the custodian and brokers, and the application of alternative auditing procedures where confirmations of security purchases have not been received, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Chicago, IL
December 23, 2014
|
41 |
|
As a shareholder of a Fund of the PowerShares Actively Managed Exchange-Traded Fund Trust, you incur a unitary management fee. In addition to the unitary management fee, a shareholder may pay distribution fees, if any, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses (including acquired fund fees and expenses, if any). The expense examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended October 31, 2014.
In addition to the fees and expenses which the PowerShares China A-Share Portfolio, PowerShares Multi-Strategy Portfolio and the PowerShares S&P 500® Downside Hedged Portfolio (the Portfolios) each bear directly, the Portfolios indirectly bear a pro rata share of the fees and expenses of the investment companies in which each Portfolio invests. The amount of fees and expenses incurred indirectly by the Portfolios will vary because the investment companies have varied expenses and fee levels and the Portfolios may own different proportions of the investment companies at different times. Estimated investment companies expenses are not expenses that are incurred directly by the Portfolios. They are expenses that are incurred directly by the investment companies and are deducted from the value of the investment companies the Portfolios invest in. The effect of the estimated investment companies expenses that you bear indirectly are included in each Portfolios total returns.
Actual Expenses
The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading Expenses Paid During the Six-Month Period to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Funds actual expense ratio and an assumed annualized rate of return of 5% per year before expenses, which is not the Funds actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges and brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, expenses shown in the table do not include the expenses of the underlying funds, which are borne indirectly by a Fund. If transaction costs and indirect expenses were included, your costs would have been higher.
Beginning Account Value May 1, 2014 |
Ending Account Value October 31, 2014 |
Annualized Expense Ratio Based on the Six-Month Period |
Expenses Paid During the Six-Month Period(1) |
|||||||||||||
PowerShares Active U.S. Real Estate Fund (PSR) | ||||||||||||||||
Actual |
$ | 1,000.00 | $ | 1,113.04 | 0.80 | % | $ | 4.26 | ||||||||
Hypothetical (5% return before expenses) |
1,000.00 | 1,021.17 | 0.80 | 4.08 | ||||||||||||
PowerShares China A-Share Portfolio (CHNA) | ||||||||||||||||
Actual |
1,000.00 | 1,112.29 | 0.43 | 2.29 | ||||||||||||
Hypothetical (5% return before expenses) |
1,000.00 | 1,023.04 | 0.43 | 2.19 | ||||||||||||
PowerShares Multi-Strategy Alternative Portfolio (LALT)(2) | ||||||||||||||||
Actual |
1,000.00 | 984.00 | 0.90 | 3.86 | ||||||||||||
Hypothetical (5% return before expenses) |
1,000.00 | 1,020.67 | 0.90 | 4.58 |
|
42 |
|
Fees and Expenses (continued)
Beginning Account Value May 1, 2014 |
Ending Account Value October 31, 2014 |
Annualized Expense Ratio Based on the Six-Month Period |
Expenses Paid During the Six-Month Period(1) |
|||||||||||||
PowerShares S&P 500® Downside Hedged Portfolio (PHDG) | ||||||||||||||||
Actual |
$ | 1,000.00 | $ | 1,076.25 | 0.35 | % | $ | 1.83 | ||||||||
Hypothetical (5% return before expenses) |
1,000.00 | 1,023.44 | 0.35 | 1.79 |
(1) | Expenses are calculated using the annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the six-month period ended October 31, 2014. Expenses are calculated by multiplying the Funds annualized expense ratio by the average account value for the period, then multiplying the result by 184/365 (to reflect the six month period). Expense ratios for the most recent six-month period may differ from expense ratios based on the annualized data in the Financial Highlights. |
(2) | Expenses are calculated using the annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the period May 27, 2014 (Commencement of Investment Operations) to October 31, 2014. Expenses are calculated by multiplying the Funds annualized expense ratio by the average account value for the period, then multiplying the result by 158/365 (to reflect the period since the Funds commencement of operations). Hypothetical expenses are calculated by multiplying the Funds annualized expense ratio by the average account value for the period, then multiplying the result by 184/365 (to reflect the six month period). |
|
43 |
|
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisers.
The following distribution information is being provided as required by the Internal Revenue Code or to meet a specific states requirement.
Each Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended October 31, 2014:
Qualified Dividend Income* |
Corporate Dividends-Received Deduction* | |||||||||
Active U.S. Real Estate Fund | 3 | % | 3 | % | ||||||
China A-Share Portfolio | 0 | % | 0 | % | ||||||
Multi-Strategy Alternative Portfolio | 0 | % | 0 | % | ||||||
S&P 500® Downside Hedged Portfolio | 0 | % | 0 | % |
* | The above percentages are based on ordinary income dividends paid to shareholders during the Funds fiscal year. |
|
44 |
|
The Trustees and officers information is current as of October 31, 2014.
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 overseen by each Independent Trustee and the other directorships, if any, held by each Independent Trustee are shown below.
Name, Address and Year of Birth of Independent Trustees |
Position(s) Held |
Term of Served* |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex** Overseen by Independent Trustees |
Other Directorships Held by Independent Trustees 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 |
Trustee | Since 2008 | Founder and Principal, YQA Capital Management LLC (1998-Present); formerly Owner/CEO of Electronic Dynamic Balancing Co., Inc. (high-speed rotating equipment service provider). | 116 | 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-Present); 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. | 116 | None | |||||
Marc M. Kole (1960) c/o Invesco PowerShares Capital Management LLC 3500 Lacey Road, Suite 700 Downers Grove, IL 60515 |
Trustee | Since 2008 | Retired. Formerly: Chief Financial Officer, Hope Network (social services) (2008-2012); formerly, Assistant Vice President and Controller, Priority Health (health insurance) (2005-2008); Senior Vice President of Finance, United Healthcare (2004-2005); Senior Vice President of Finance and Chief Accounting Officer, Oxford Health Plans (2000-2004); Audit Partner, Arthur Andersen LLP (1996-2000). | 116 | None | |||||
Yung Bong Lim (1964) c/o Invesco PowerShares Capital Management LLC 3500 Lacey Road, Suite 700 Downers Grove, IL 60515 |
Trustee | Since 2013 | Managing Partner, Residential Dynamics Group LLC (2008-Present); formerly, Managing Director, Citadel Investment Group, L.L.C. (1999-2007). | 116 | None | |||||
Philip M. Nussbaum (1961) c/o Invesco PowerShares |
Trustee | Since 2008 | Chairman, Performance Trust Capital Partners (2004-Present). | 116 | None |
* | This is the date the Independent Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
** | Fund Complex includes all open-end funds 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. At October 31, 2014, the Fund Family consisted of the Trusts four portfolios and three other exchange-traded fund trusts with 112 portfolios advised by the Adviser. |
|
45 |
|
Trustees and Officers (continued)
Name, Address and Year of Birth of Independent Trustees |
Position(s) Held |
Term of Time |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex** Overseen by Independent Trustees |
Other Directorships Held by Independent Trustees 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 of 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). | 116 | 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 2008 | Chairman, President and Chief Executive Officer, Community Financial Shares, Inc. and Community BankWheaton/Glen Ellyn (subsidiary) (2013-Present); Chairman and Chief Executive Officer, Stone Pillar Advisors, Ltd. (2010-Present); formerly, 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). | 116 | None |
* | This is the date the Independent Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
** | Fund Complex includes all open-end funds 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. At October 31, 2014, the Fund Family consisted of the Trusts four portfolios and three other exchange-traded fund trusts with 112 portfolios advised by the Adviser. |
|
46 |
|
Trustees and Officers (continued)
The Non-Independent 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 Non-Independent Trustee and the other directorships, if any, held by the Non-Independent Trustee are shown below.
Name, Address and Year of Birth of Non-Independent Trustee |
Position(s) Held with Trust |
Term of Served* |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex** Overseen by Non-Independent Trustee |
Other Directorships Held by Non-Independent 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. (2006-Present); Director, Invesco Advisers, Inc. (2009-Present); Director, Invesco Finance PLC, INVESCO Funds Group, Inc., and Invesco Holding Company Limited; Director and Executive Vice President, Invesco Finance, Inc., Invesco Group Services, Inc., Invesco Investments (Bermuda) Ltd., Invesco North American Holdings, Inc., and IVZ, Inc.; Director and Secretary, IVZ Bahamas Private Limited; formerly, Senior Vice President, Secretary and General Counsel, Invesco Advisers, Inc. (2003-2005); 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. | 116 | None |
* | This is the date the Non-Independent Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
** | Fund Complex includes all open-end funds 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. At October 31, 2014, the Fund Family consisted of the Trusts four portfolios and three other exchange-traded fund trusts with 112 portfolios advised by the Adviser. |
|
47 |
|
Trustees and Officers (continued)
Name, Address and Year of Birth of Executive Officers |
Position(s) Held |
Length of Served* |
Principal Occupation(s) During Past 5 Years | |||
Andrew Schlossberg (1974) Invesco Management Group, Inc. 11 Greenway Plaza, Suite 1000 |
President | Since 2009 | 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); Director, Invesco Distributors, Inc. (2012-Present); Managing DirectorU.S. Strategy and Marketing, Invesco PowerShares Capital Management LLC (2010-Present); Managing Director, U.S. head of business strategy and chief marketing officer for Invesco Ltd. in the United States (2008-Present); and Senior Vice President, Invesco Advisers, Inc. (formerly known as Invesco Institutional (N.A.), Inc.) (registered investment adviser) (2009-Present); formerly, Mr. Schlossberg served in multiple roles within Invesco, including head of corporate development, as well as global leadership roles in strategy and product development in the companys North American Institutional and Retirement divisions (2002-2007). | |||
Peter Hubbard (1981) Invesco PowerShares Capital Management LLC 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 and PowerShares Actively Managed Exchange-Traded Fund Trust (2009-Present); Vice President and Director of Portfolio Management-Invesco PowerShares Capital Management LLC (2008-Present); formerly, 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). | |||
David Warren (1957) Invesco Canada Ltd. 5140 Yonge Street, Suite 800 |
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); Managing DirectorChief Administrative Officer, Americas, Invesco PowerShares Capital Management LLC; Senior Vice President, Invesco Advisers, Inc. (2009-Present); Director, Executive Vice President and Chief Financial Officer, 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.) and Chief Administrative Officer, North American Retail, Invesco Ltd. (2007-Present); Senior Vice President, Invesco Management Group, Inc. (2007-Present); Director, Invesco Canada Holdings Inc. (2002Present), Invesco Corporate Class Inc., and Invesco Canada Fund Inc.; Director, Executive Vice President and Chief Financial Officer, Invesco, Inc.; formerly, Director, Executive Vice President and Chief Financial Officer, Invesco Canada Ltd. (formerly, Invesco Trimark Ltd.) (2000-2006). | |||
Sheri Morris (1964) Invesco Management Group, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046 |
Vice President | Since 2012 | Vice President, Treasurer and Principal Financial Officer, The Invesco Funds; 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 and PowerShares Actively Managed Exchange-Traded Fund Trust; formerly, 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; 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. |
* | This is the date the officers began serving the Trust. Each officer serves an indefinite term, until his or her successor is elected. |
|
48 |
|
Trustees and Officers (continued)
Name, Address and Year of Birth of Executive Officers |
Position(s) Held |
Length of Served* |
Principal Occupation(s) During Past 5 Years | |||
Rudolf E. Reitmann (1971) Invesco PowerShares Capital Management LLC 3500 Lacey Road, Suite 700 |
Vice President | Since 2013 | 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 (since 2013); Head of Global Exchange Traded Funds Operations, Invesco PowerShares Capital Management LLC (since 2013). | |||
Daniel E. Draper (1968) Invesco PowerShares Capital Management LLC 3500 Lacey Road, Suite 700 |
Vice President | Since 2013 | Senior Vice President, Invesco Distributors, Inc. (since 2014); 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 (since 2013); Managing Director, Invesco PowerShares Global ETFs (since 2013); formerly, Managing Director, Credit Suisse Asset Management (2010-2013) and Lyxor Asset Management/Societe Generale (2007-2010). | |||
Steven M. Hill (1964) Invesco PowerShares Capital Management LLC 3500 Lacey Road, Suite 700 |
Vice President and Treasurer | Since 2013 | Vice President and Treasurer of 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 (since 2013); Head of Global ETF Administration, Invesco PowerShares Capital Management LLC (since 2011); 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). | |||
Christopher Joe (1969) Invesco Management Group, Inc. 11 Greenway Plaza, Suite 1000 Houston, TX 77046 |
Chief Compliance Officer | Since 2012 | Deputy Chief Compliance Officer of Invesco Advisers, Inc. (since 2014); Chief Compliance Officer of 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 (since 2012); U.S. Compliance Director, Invesco, Ltd. (since 2006); formerly, Chief Compliance Officer, Invesco Investment Advisers, LLC (registered investment adviser) (2010-2013); formerly, Assistant Fund Accounting Manager, Invesco, Ltd. (1998-1999). | |||
Anna Paglia (1974) Invesco PowerShares Capital Management LLC 3500 Lacey Road, Suite 700 |
Secretary | Since 2011 | Secretary, 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-present); Head of Legal, 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). |
Availability of Additional Information About the Trustees
The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request at (800) 983-0903.
* | This is the date the officers began serving the Trust. Each officer serves an indefinite term, until his or her successor is elected. |
|
49 |
|
Board Considerations Regarding Approval of Investment Advisory Agreement and Sub-Advisory Agreement for PowerShares Multi-Strategy Alternative Portfolio
At a meeting held on April 17, 2014, the Board of Trustees of the PowerShares Actively Managed Exchange-Traded Fund Trust (the Trust), including the Independent Trustees, approved the Investment Advisory Agreement between Invesco PowerShares Capital Management LLC (the Adviser) and the Trust for PowerShares Multi-Strategy Alternative Portfolio (the Fund), and the Investment Sub-Advisory Agreement between the Adviser and the following eight affiliated sub-advisers (the Sub-Advisory Agreement): Invesco Advisers, Inc.; Invesco Asset Management Deutschland, GmbH; Invesco Asset Management Limited; Invesco Asset Management (Japan) Limited; Invesco Australia Limited; Invesco Hong Kong Limited; Invesco Senior Secured Management, Inc.; and Invesco Canada Ltd. (each, a Sub-Adviser and collectively, the Sub-Advisers).
The Trustees reviewed information from the Adviser describing: (i) the nature, extent and quality of services to be provided, (ii) the costs of services to be provided and estimated profits to be realized by the Adviser, (iii) the extent to which economies of scale may be realized as the Fund grows, (iv) whether the fee levels reflect any possible economies of scale for the benefit of Fund shareholders, (v) comparisons of services rendered and amounts paid to other registered investment companies and (vi) any benefits to be realized by the Adviser from its relationship with the Fund. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined to approve the Investment Advisory Agreement for the Fund. No single factor was determinative in the Boards analysis.
Nature, Extent and Quality of Services. In evaluating the nature, extent and quality of the Advisers services, the Trustees reviewed information concerning the functions to be performed by the Adviser for the Fund, information describing the Advisers current organization and staffing, including operations assistance provided by the Advisers parent organization, Invesco Ltd., and the background and experience of the persons who will be responsible for the day-to-day management of the Fund, and considered the quality of services provided by the Adviser to other exchange-traded funds (ETFs). The Trustees also reviewed information related to the Advisers portfolio transaction policies and procedures.
The Trustees also considered the services to be provided by the Adviser in its oversight of the Funds administrator, custodian and transfer agent. They noted the significant amount of time and effort that had been devoted to this oversight function for the other ETFs and that was expected to be provided for the Fund.
Based on their review, the Trustees concluded that the nature, extent and quality of services to be provided by the Adviser to the Fund under the Investment Advisory Agreement were expected to be appropriate and reasonable.
Fees, Expenses and Profitability. The Trustees reviewed and discussed the information provided by the Adviser on the Funds proposed advisory fee, as compared to information compiled from Lipper Inc. databases on the average and median net expense ratios of comparable ETF peers, as well as the average and median net expense ratios of the Funds Lipper peer group, which includes ETFs and non-ETF funds. The Trustees also noted the information compiled by the Adviser from Lipper Inc. databases on the advisory fees and net expense ratios of various types of ETFs and open-end actively managed funds that they had received in connection with the 2014 contract renewal process for other ETFs for which the Adviser serves as investment adviser. The Trustees noted that the annual advisory fee to be charged to the Fund was a unitary fee, and that the Adviser has agreed to pay all other expenses of the Fund except brokerage commissions and other trading expenses, taxes, interest and extraordinary expenses. The Trustees noted that the Funds unitary advisory fee generally was lower than or within an acceptable range of the average and median net expense ratios of the ETFs in its ETF universe and of the Funds Lipper peer group. The Trustees considered the Funds proposed advisory fee in light of the higher administrative, operational and management oversight costs. The Trustees also noted that the Funds licensing fee was payable out of the unitary fee to be charged to the Fund. The Board concluded that the unitary advisory fee to be charged to the Fund is reasonable and appropriate in light of the services expected to be provided.
In conjunction with their review of the unitary advisory fee, the Trustees also considered information provided by the Adviser on the costs of services for the Fund and the fees to be paid by the Adviser. The Trustees considered information provided by the Adviser on its profitability, as well as any profits or losses realized by the Adviser from its relationship with other ETFs for which it serves as investment adviser. The Trustees concluded that the estimated profits to be realized by the Adviser with respect to the Fund appeared to be reasonable in comparison with the cost of providing investment advisory services to the Fund.
Economies of Scale and Whether Fee Levels Reflect These Economies of Scale. The Trustees reviewed the information provided by the Adviser as to the extent to which economies of scale may be realized as the Fund grows and whether fee levels reflect economies of scale for the benefit of shareholders. The Trustees noted that any reduction in fixed costs associated with the management of the Fund would be enjoyed by the Adviser, but that a unitary fee provides a level of certainty in expenses for the Fund. The Trustees considered whether the advisory fee rate for the Fund is reasonable in relation to the projected asset size of the Fund, and concluded that the flat advisory fee was reasonable and appropriate.
|
50 |
|
Board Considerations Regarding Approval of Investment Advisory Agreement and Sub-Advisory Agreement for PowerShares Multi-Strategy Alternative Portfolio (continued)
The Trustees noted that the Adviser had not identified any further benefits that it would derive from its relationships with the Fund, and had noted that it does not have any soft-dollar arrangements.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined to approve the Investment Advisory Agreement for the Fund. No single factor was determinative in the Boards analysis.
Investment Sub-Advisory Agreement
As noted above, the Board of Trustees of the Trust, including the Independent Trustees, approved the Sub-Advisory Agreement for the Fund at a meeting held on April 17, 2014. The review process followed by the Board is described in detail above. In connection with the review of the Sub-Advisory Agreement, the Board considered the factors described below, among others.
Nature, Extent and Quality of Services. The Trustees considered the nature, extent and quality of services to be provided under the Sub-Advisory Agreement. The Board also considered the benefits described by the Adviser in having multiple affiliated Sub-Advisers. The Board reviewed the qualifications and background of each Sub-Adviser, the investment approach of the Sub-Adviser whose investment personnel are to manage the Funds assets, the experience and skills of the investment personnel responsible for the day-to-day management of the Fund, and the resources made available to such personnel.
Based on their review, the Trustees concluded that the nature, extent and quality of services to be provided by the Sub-Advisers to the Fund under the Sub-Advisory Agreement were expected to be appropriate and reasonable.
Fees, Expenses and Profitability. The Trustees reviewed and discussed the information provided by the Adviser and the Sub-Advisers on the sub-advisory fee rate under the Sub-Advisory Agreement. The Trustees noted that the sub-advisory fee charged by the Sub-Advisers under the Sub-Advisory Agreement is consistent with the compensation structure used throughout Invesco when Invescos affiliates provide sub-advisory services for funds managed by other Invesco affiliates. The Board considered how the sub-advisory fees relate to the overall advisory fee for the Fund and noted that the Adviser compensates the Sub-Advisers from its fee.
The Trustees concluded that the estimated profits to be realized by the Sub-Adviser for the sub-advisory services provided to the Fund appeared to be reasonable.
Economies of Scale and Whether Fee Levels Reflect These Economies of Scale. As part of their review of the Investment Advisory Agreement for the Fund, the Trustees considered the extent to which economies of scale may be realized as the Fund grows and whether fee levels reflect economies of scale for the benefit of shareholders. The Trustees considered whether the sub-advisory fee rate for the Fund was reasonable in relation to the projected asset size of the Fund, and concluded that the flat sub-advisory fee was reasonable and appropriate.
The Trustees noted that the Sub-Advisers had not identified any further benefits that they would derive from their relationships with the Fund.
Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, determined to approve the Sub-Advisory Agreement for the Fund. No single factor was determinative in the Boards analysis.
|
51 |
|
(This Page Intentionally Left Blank)
(This Page Intentionally Left Blank)
(This Page Intentionally Left Blank)
Proxy Voting Policies and Procedures
A description of the Trusts proxy voting policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available, without charge and upon request, by calling (800) 983-0903. This information is also available on the Securities and Exchange Commissions (the Commission) website at www.sec.gov.
Information regarding how each Fund voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended June 30, is available, without charge and upon request, by (i) calling (800) 983-0903; or (ii) accessing the Trusts Form N-PX on the Commissions website at www.sec.gov.
Quarterly Portfolios
The Fund files its complete schedule of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Form N-Qs will be available on the Commissions website at www.sec.gov. The Trusts Form N-Qs may also be reviewed and copied at the Commissions Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
Frequency Distribution of Discounts and Premiums
A table showing the number of days the market price of each Funds shares was greater than the Funds net asset value, and the number of days it was less than the Funds net asset value (i.e., premium or discount) for the most recently completed calendar year, and the calendar quarters since that year end (or the life of the Fund, if shorter) may be found at the Funds website: www.invescopowershares.com.
©2014 Invesco PowerShares Capital Management LLC | P-PS-AR-10 | |||||
3500 Lacey Road, Suite 700 Downers Grove, IL 60515 |
||||||
invescopowershares.com 800.983.0903 |
![]() |
@PowerShares |
Item 2. Code of Ethics.
The Registrant has adopted a Code of Ethics that applies to the Registrants principal executive officer and principal financial officer. This Code is filed as an exhibit to this report on Form N-CSR under Item 12(a)(1). No substantive amendments to this Code were made during the reporting period. There were no waivers for the fiscal year ended October 31, 2014.
Item 3. Audit Committee Financial Expert.
The Registrants Board of Trustees (the Board) has determined that the Registrant has three audit committee financial experts serving on its audit committee: Mr. Marc M. Kole, Mr. Gary R. Wicker, and Mr. Donald H. Wilson. Each of these audit committee members is independent, meaning that he is not an interested person of the Registrant (as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended) and he does not accept any consulting, advisory, or other compensatory fee from the Registrant (except in his capacity as a Board or committee member).
An audit committee financial expert is not an expert for any purpose, including for purposes of Section 11 of the Securities Act of 1933, as a result of being designated as an audit committee financial expert. Further, the designation of a person as an audit committee financial expert does not mean that person has any greater duties, obligations, or liability than those imposed on a person without the audit committee financial expert designation. Similarly, the designation of a person as an audit committee financial expert does not affect the duties, obligations, or liability of any other member of the audit committee or Board of trustees.
Item 4. Principal Accountant Fees and Services.
(a) to (d)
PricewaterhouseCoopers LLP (PwC) billed the Registrant aggregate fees for services rendered to the Registrant for the last two fiscal years as follows:
Fees Billed by PwC for Services Rendered to the Registrant for fiscal year end 2014 |
(e)(2) Percentage of Services Approved for fiscal year end 2014 Pursuant to Waiver of Pre- Approval Requirement(1) |
Fees Billed by PwC for Services Rendered to the Registrant for fiscal year end 2013 |
(e)(2) Percentage of Services Approved for fiscal year end 2013 Pursuant to Waiver of Pre- Approval Requirement(1) | |||||
Audit Fees |
$ 54,368 | N/A | $ 37,030 | N/A | ||||
Audit-Related Fees |
$ 0 | 0% | $ 0 | 0% | ||||
Tax Fees(2) |
$ 43,842 | 0% | $ 27,150 | 0% | ||||
All Other Fees |
$ 0 | 0% | $ 0 | 0% | ||||
Total Fees |
$ 98,210 | 0% | $ 64,180 | 0% |
(1) For the provision of non-audit services, the pre-approval requirement is waived pursuant to a de minimis exception if (i) such services were not recognized as non-audit services by the Registrant at the time of engagement,
(ii) the aggregate amount of all such services provided is no more than 5% of the aggregate audit and non-audit fees paid by the Registrant during the fiscal year in which the services are provided; and (iii) such services are promptly
brought to the attention of the Registrants Audit Committee and approved by the Registrants Audit Committee prior to the completion of the audit.
(2) Tax fees for the fiscal year ended October 31, 2014 include fees billed for reviewing tax returns, 2014 excise tax returns and excise tax distributions calculations, and international tax research in addition to preparing the final tax returns for the two liquidated portfolios of the Registrant. Tax fees for the fiscal year ended October 31, 2013 included fees billed for reviewing tax returns, 2013 excise tax returns and excise tax distribution calculations.
(e) (1) Audit Committee Pre Approval Policies and Procedures
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
POLICIES AND PROCEDURES
As Adopted by the Audit Committee of
the PowerShares Funds (the Funds)
June 26, 2009
Statement of Principles
Under the Sarbanes-Oxley Act of 2002 and rules adopted by the Securities and Exchange Commission (SEC) (Rules), the Audit Committee of the Funds (the Audit Committee) Board of Trustees (the Board) is responsible for the appointment, compensation and oversight of the work of independent accountants (an Auditor). As part of this responsibility and to assure that the Auditors independence is not impaired, the Audit Committee pre-approves the audit and non-audit services provided to the Funds by each Auditor, as well as all non-audit services provided by the Auditor to the Funds investment adviser and to affiliates of the adviser that provide ongoing services to the Funds (Service Affiliates) if the services directly impact the Funds operations or financial reporting. The SEC Rules also specify the types of services that an Auditor may not provide to its audit client. The following policies and procedures comply with the requirements for pre-approval and provide a mechanism by which management of the Funds may request and secure pre-approval of audit and non-audit services in an orderly manner with minimal disruption to normal business operations.
Proposed services either may be pre-approved without consideration of specific case-by-case services by the Audit Committee (general pre-approval) or require the specific pre-approval of the Audit Committee (specific pre-approval). As set forth in these policies and procedures, unless a type of service has received general pre-approval, it will require specific pre-approval by the Audit Committee. Additionally, any fees exceeding 110% of estimated pre-approved fee levels provided at the time the service was pre-approved will also require specific approval by the Audit Committee before payment is made. The Audit Committee will also consider the impact of additional fees on the Auditors independence when determining whether to approve any additional fees for previously pre-approved services.
The Audit Committee will annually review and generally pre-approve the services that may be provided by each Auditor without obtaining specific pre-approval from the Audit Committee. The term of any general pre-approval runs from the date of such pre-approval through June 30th of the following year, unless the Audit Committee considers a different period and states otherwise. The Audit Committee will add to or subtract from the list of general pre-approved services from time to time, based on subsequent determinations.
The purpose of these policies and procedures is to set forth the guidelines to assist the Audit Committee in fulfilling its responsibilities.
Delegation
The Chairman of the Audit Committee (or, in his or her absence, any member of the Audit Committee) may grant specific pre-approval for non-prohibited services for engagements of less than $20,000. All such delegated pre-approvals shall be presented to the Audit Committee no later than the next Audit Committee meeting.
Audit Services
The annual Audit services engagement terms will be subject to specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures such as tax provision work that is required to be performed by the independent auditor to be able to form an opinion on the Funds financial statements. The Audit
Committee will obtain, review and consider sufficient information concerning the proposed Auditor to make a reasonable evaluation of the Auditors qualifications and independence.
In addition to the annual Audit services engagement, the Audit Committee may grant either general or specific pre-approval of other Audit services, which are those services that only the independent auditor reasonably can provide. Other Audit services may include services such as issuing consents for the inclusion of audited financial statements with SEC registration statements, periodic reports and other documents filed with the SEC or other documents issued in connection with securities offerings.
Non-Audit Services
The Audit Committee may provide either general or specific pre-approval of any non-audit services to the Funds and its Service Affiliates if the Audit Committee believes that the provision of the service will not impair the independence of the Auditor, is consistent with the SECs Rules on auditor independence, and otherwise conforms to the Audit Committees general principles and policies as set forth herein.
Audit-Related Services
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Funds financial statements or that are traditionally performed by the independent auditor. Audit-related services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified as Audit services; and assistance with understanding and implementing new accounting and financial reporting guidance from rulemaking authorities.
Tax Services
Tax services include, but are not limited to, the review and signing of the Funds federal tax returns, the review of required distributions by the Funds and consultations regarding tax matters such as the tax treatment of new investments or the impact of new regulations. The Audit Committee will scrutinize carefully the retention of the Auditor in connection with a transaction initially recommended by the Auditor, the major business purpose of which may be tax avoidance or the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee will consult with the Funds Treasurer (or his or her designee) and may consult with outside counsel or advisors as necessary to ensure the consistency of Tax services rendered by the Auditor with the foregoing policy.
No Auditor shall represent any Fund or any Service Affiliate before a tax court, district court or federal court of claims.
Under rules adopted by the Public Company Accounting Oversight Board and approved by the SEC, in connection with seeking Audit Committee pre-approval of permissible Tax services, the Auditor shall:
1. | Describe in writing to the Audit Committee, which writing may be in the form of the proposed engagement letter: |
a. | The scope of the service, the fee structure for the engagement, and any side letter or amendment to the engagement letter, or any other agreement between the Auditor and the Fund, relating to the service; and |
b. | Any compensation arrangement or other agreement, such as a referral agreement, a referral fee or fee-sharing arrangement, between the Auditor and any person (other than the Fund) with respect to the promoting, marketing, or recommending of a transaction covered by the service; |
2. | Discuss with the Audit Committee the potential effects of the services on the independence of the Auditor; and |
3. | Document the substance of its discussion with the Audit Committee. |
All Other Auditor Services
The Audit Committee may pre-approve non-audit services classified as All other services that are not categorically prohibited by the SEC, as listed in Exhibit 1 to this policy.
Pre-Approval Fee Levels or Established Amounts
Pre-approval of estimated fees or established amounts for services to be provided by the Auditor under general or specific pre-approval policies will be set periodically by the Audit Committee. Any proposed fees exceeding 110% of the maximum estimated pre-approved fees or established amounts for pre-approved audit and non-audit services will be reported to the Audit Committee at the quarterly Audit Committee meeting and will require specific approval by the Audit Committee before payment is made. The Audit Committee will always factor in the overall relationship of fees for audit and non-audit services in determining whether to pre-approve any such services and in determining whether to approve any additional fees exceeding 110% of the maximum pre-approved fees or established amounts for previously pre-approved services.
Procedures
On an annual basis, the Auditor will submit to the Audit Committee for general pre-approval, a list of non-audit services that the Funds or Service Affiliates of the Funds may request from the Auditor. The list will describe the non-audit services in reasonable detail and will include an estimated range of fees and such other information as the Audit Committee may request.
Each request for services to be provided by the Auditor under the general pre-approval of the Audit Committee will be submitted to the Funds Treasurer (or his or her designee) and must include a detailed description of the services to be rendered. The Treasurer or his or her designee will ensure that such services are included within the list of services that have received the general pre-approval of the Audit Committee. The Audit Committee will be informed at the next quarterly scheduled Audit Committee meeting of any such services for which the Auditor rendered an invoice and whether such services and fees had been pre-approved and if so, by what means.
Each request to provide services that require specific approval by the Audit Committee shall be submitted to the Audit Committee jointly by the Funds Treasurer or his or her designee and the Auditor, and must include a joint statement that, in their view, such request is consistent with the pre-approval policies and procedures and the SEC Rules.
Each request to provide Tax services under either the general or specific pre-approval of the Audit Committee will describe in writing: (i) the scope of the service, the fee structure for the engagement, and any side letter or amendment to the engagement letter, or any other agreement between the Auditor and the audit client, relating to the service; and (ii) any compensation arrangement or other agreement between the Auditor and any person (other than the audit client) with respect to the promoting, marketing, or recommending of a transaction covered by the service. The Auditor will discuss with the Audit Committee the potential effects of the services on the Auditors independence and will document the substance of the discussion.
Non-audit services pursuant to the de minimis exception provided by the SEC Rules will be promptly brought to the attention of the Audit Committee for approval, including documentation that each of the conditions for this exception, as set forth in the SEC Rules, has been satisfied.
On at least an annual basis, the Auditor will prepare a summary of all the services provided to any entity in the investment company complex as defined in section 2-01(f)(14) of Regulation S-X in sufficient detail as to the nature of the engagement and the fees associated with those services.
The Audit Committee has designated the Funds Treasurer to monitor the performance of all services provided by the Auditor and to ensure such services are in compliance with these policies and procedures. The Funds Treasurer will report to the Audit Committee on a periodic basis as to the results of such monitoring. Both the Funds Treasurer and management will immediately report to the Chairman of the Audit Committee any breach of these policies and procedures that comes to the attention of the Funds Treasurer or senior management.
Exhibit 1 to Pre-Approval of Audit and Non-Audit Services Policies and Procedures
Conditionally Prohibited Non-Audit Services (not prohibited if the Fund can reasonably conclude that the results of the service would not be subject to audit procedures in connection with the audit of the Funds financial statements)
| Bookkeeping or other services related to the accounting records or financial statements of the audit client |
| Financial information systems design and implementation |
| Appraisal or valuation services, fairness opinions, or contribution-in-kind reports |
| Actuarial services |
| Internal audit outsourcing services |
Categorically Prohibited Non-Audit Services
| Management functions |
| Human resources |
| Broker-dealer, investment adviser, or investment banking services |
| Legal services |
| Expert services unrelated to the audit |
| Any service or product provided for a contingent fee or a commission |
| Services related to marketing, planning, or opining in favor of the tax treatment of confidential transactions or aggressive tax position transactions, a significant purpose of which is tax avoidance |
| Tax services for persons in financial reporting oversight roles at the Fund |
| Any other service that the Public Company Oversight Board determines by regulation is impermissible. |
(f) | Not applicable. |
(g) | PwC billed the Registrant aggregate fees of $ 43,842 for the fiscal year ended October 31, 2014 and $27,150 for the fiscal year ended October 31, 2013 for non-audit services rendered to the Registrant. |
PwC did not bill any fees for non-audit services rendered to the Registrants investment adviser (not including any Sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) or any entity controlling, controlled by or under common control with the Registrants investment adviser that provides ongoing services to the Registrant for the fiscal years ended October 31, 2014 and October 31, 2013.
(h) | Not applicable. |
Item 5. Audit Committee of Listed Registrants.
(a) | The Registrant has a separately designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, which consists solely of independent trustees. The Audit Committee members are, Marc M. Kole, Gary R. Wicker, and Donald H. Wilson. |
(b) | Not applicable |
Item 6. Schedule of Investments.
(a) | The Schedules of Investments are included as a part of the report to shareholders filed under Item 1 of this Form N-CSR. |
(b) | Not applicable |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrants Board of Trustees that would require disclosure herein.
Item 11. Controls and Procedures.
(a) | Based on their evaluation of the Registrants disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days of the filing date of this report, the Registrants President (principal executive officer) and Treasurer (principal financial officer) have concluded that such disclosure controls and procedures are effective. |
(b) | There were no changes in the Registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrants internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) | Code of Ethics is attached as Exhibit 99.CODEETH. | |
(a)(2) | Certifications of the Registrants President and Treasurer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached as Exhibit 99.CERT. | |
(a)(3) | Not applicable. | |
(b) | Certifications of the Registrants President and Treasurer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached as Exhibit 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) PowerShares Actively Managed Exchange-Traded Fund Trust
By: /s/ Andrew Schlossberg |
Name: Andrew Schlossberg |
Title: President |
Date: January 5, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Andrew Schlossberg |
Name: Andrew Schlossberg |
Title: President |
Date: January 5, 2015 |
By: /s/ Steven Hill |
Name: Steven Hill |
Title: Treasurer |
Date: December 31, 2014 |
Exhibit 99.CODEETH
EXHIBIT (a)(1)
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
(EACH, A TRUST AND COLLECTIVELY, THE TRUSTS)
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL OFFICERS
I. | PURPOSE |
This Code of Ethics (the Code) for the series of the Trusts (with each series thereof being referred to herein as a Fund, and collectively as the Funds) applies to each Trusts Principal Executive Officer, President, Principal Financial Officer and Treasurer (or persons performing similar functions) (collectively, the Covered Officers, each of whom is set forth in Exhibit A to this Code) for the purpose of promoting:
¨ | honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships. |
¨ | full, fair, accurate, timely and understandable disclosure in reports and documents that a Trust files with, or submits to, the Securities and Exchange Commission (SEC) and in other public communications made by the Trusts; |
¨ | compliance with applicable laws and governmental rules and regulations; |
¨ | prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and |
¨ | accountability for adherence to the Code. |
The Code shall be administered by the chief legal officer of the Trusts (the Chief Legal Officer), or his or her delegate. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.
The Chief Legal Officer is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any waivers1 sought by a Covered Officer must be considered by the Board of the relevant Trust or Trusts. Any question about the application of the Code should be referred to the Trusts Chief Legal Officer.
II. | Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest |
Overview. A conflict of interest occurs when a Covered Officers private interest interferes, or appears to interfere, with the interests of, or his service to, the Trusts. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Trusts.
Certain conflicts of interest arise out of the relationships between Covered Officers and the Trusts and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (Investment Company
1 Item 2 of Form N-CSR defines waiver as the approval by the registrant of a material departure from a provision of the code of ethics.
Act) and the Investment Advisers Act of 1940 (Investment Advisers Act). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with a Fund because of their status as affiliated persons (as defined in the Investment Company Act) of the Trusts or the Trusts investment adviser. The Trusts and their investment advisers and any sub-advisers compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside the parameters of this Code, unless or until the Chief Legal Officer determines that any violation of such programs and procedures is also a violation of this Code.
Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Trusts and their investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Trusts or for the investment adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the Trusts and their investment adviser. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the investment adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Trusts. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Trusts Board of Trustees (Board) that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes.
Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Trusts.
Each Covered Officer must not:
¨ | use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Trusts whereby the Covered Officer would benefit personally (directly or indirectly) to the detriment of the Trusts; |
¨ | cause the Trusts to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Trusts; or |
¨ | use material non-public knowledge of portfolio transactions made or contemplated for, or actions proposed to be taken by, the Trusts to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. |
Each Covered Officer must, at the time of signing this Code, report to the Chief Legal Officer all affiliations or significant business relationships outside of the Trusts and must update the report annually.
Conflict of interest situations should always be approved by the Chief Legal Officer and communicated to the relevant Trust or Trusts Board. Any activity or relationship that would present such a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if an immediate member of the Covered Officers family living in the same household engages in such an activity or has such a relationship. Examples of these include:
¨ | service or significant business relationships as a director on the board of any public or private company; |
¨ | accepting directly or indirectly, anything of value, including gifts and gratuities in excess of $100 per year from any person or entity with which the Trusts has current or prospective business dealings, not including occasional meals or tickets for theatre or sporting events or other similar entertainment; |
provided it is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety;
¨ | any ownership interest in, or any consulting or employment relationship with, any of the Trusts service providers, other than its investment adviser, principal underwriter, or any affiliated person thereof; and |
¨ | a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Trusts for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officers employment, such as compensation or equity ownership. |
III. | Disclosure and Compliance |
Each Covered Officer should:
¨ | familiarize himself/herself with the disclosure and compliance requirements generally applicable to the Trusts; |
¨ | not knowingly misrepresent, or cause others to misrepresent, facts about the Trusts to others, whether within or outside the Trusts, including to the Trusts Trustees and auditors, or to governmental regulators and self-regulatory organizations; |
¨ | to the extent appropriate within his/her area of responsibility, consult with other officers and employees of the Trusts and their investment adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trusts file with, or submit to, the SEC and in other public communications made by the Trusts; and |
¨ | promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. |
IV. | Reporting and Accountability |
Each Covered Officer must:
¨ | upon adoption of the Code (thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Boards that he/she has received, read and understands the Code; |
¨ | annually thereafter affirm to the Board that he/she has complied with the requirements of the Code; |
¨ | not retaliate against any other Covered Officer, other officer or any employee of the Trusts or their affiliated persons for reports of potential violations that are made in good faith; and |
¨ | notify the Chief Legal Officer promptly if he/she knows or suspects of any violation of this Code. Failure to do so is itself a violation of this Code. |
The Chief Legal Officer shall maintain records of all activities related to this Code.
The Trusts will follow these procedures in investigating and enforcing this Code:
¨ | the Chief Legal Officer will take all appropriate action to investigate any potential violations reported to him/her; |
¨ | if, after such investigation, the Chief Legal Officer believes that no violation has occurred, the Chief Legal Officer is not required to take any further action; |
¨ | any matter that the Chief Legal Officer believes is a violation will be reported to the relevant Trusts Audit Committee; |
¨ | if the Independent Trustees of the relevant Trusts concur that a violation has occurred, they will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer or other appropriate disciplinary actions; |
¨ | the Independent Trustees of the relevant Trusts will be responsible for granting waivers of this Code, as appropriate; and |
¨ | any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. |
V. | Other Policies and Procedures |
This Code shall be the sole code of ethics adopted by the Trusts for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Trusts, the Trusts investment adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code unless any provision of this Code conflicts with any applicable federal or state law, in which case the requirements of such law will govern. The Trusts and their investment advisers and principal underwriters codes of ethics under Rule 17j-1 under the Investment Company Act are separate requirements applying to the Covered Officers and others, and are not part of this Code.
VI. | Amendments |
Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board of each Trusts, including a majority of Independent Trustees.
VII. | Confidentiality |
All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Covered Officers, the Chief Legal Officer, Independent Trustees of the relevant Trust or Trusts and the Independent Trustees counsel, the relevant Trust or Trusts and those Trusts counsel and the senior management of the investment adviser and its counsel.
VIII. | Internal Use |
The Code is intended solely for the internal use by the Trusts and does not constitute an admission, by or on behalf of any Trust, as to any fact, circumstance, or legal conclusion
I have read and understand the terms of the above Code. I recognize the responsibilities and obligations incurred by me as a result of my being subject to the Code. I hereby agree to abide by the above Code.
Adopted: | August 22, 2003 | |
Amended: | April 20, 2007 | |
February 22, 2008 | ||
March 20, 2008 | ||
December 17, 2009 | ||
October 1, 2011 | ||
November 3, 2014 | ||
Exhibit A
Persons Covered by this Code of Ethics
President and Principal Executive Officer Andrew Schlossberg
Treasurer and Principal Financial Officer Steven Hill
Exhibit 99.CERT
Exhibit (a)(2)
CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Andrew Schlossberg, certify that:
1. I have reviewed this report on Form N-CSR of PowerShares Actively Managed Exchange-Traded Fund Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report;
4. The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and
5. The Registrants other certifying officer and I have disclosed to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting.
Date: January 5, 2015 | ||||
/s/ Andrew Schlossberg | ||||
Andrew Schlossberg | ||||
President |
Exhibit 99.CERT
Exhibit (a)(2)
CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Steven Hill, certify that:
1. I have reviewed this report on Form N-CSR of PowerShares Actively Managed Exchange-Traded Fund Trust;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report;
4. The Registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the Registrants internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrants internal control over financial reporting; and
5. The Registrants other certifying officer and I have disclosed to the Registrants auditors and the audit committee of the Registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrants ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrants internal control over financial reporting.
Date: December 31, 2014 | ||||
/s/ Steven Hill | ||||
Steven Hill | ||||
Treasurer |
Exhibit 99.906CERT
EXHIBIT (b)
CERTIFICATIONS PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the report of PowerShares Actively Managed Exchange-Traded Fund Trust (the Registrant) on Form N-CSR for the period ended October 31, 2014 (the Report), each of the undersigned officers of the Registrant hereby certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to SS. 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Dated: January 5, 2015 | ||
/s/ Andrew Schlossberg | ||
Name: Andrew Schlossberg | ||
Title: President | ||
Dated: December 31, 2014 | ||
/s/ Steven Hill | ||
Name: Steven Hill | ||
Title: Treasurer |
This certification is being furnished solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Report or as a separate disclosure document.
D!\@'Z`@,"#`(4
M`AT")@(O`C@"00)+`E0"70)G`G$">@*$`HX"F`*B`JP"M@+!`LL"U0+@`NL"
M]0,``PL#%@,A`RT#.`-#`T\#6@-F`W(#?@.*`Y8#H@.N`[H#QP/3`^`#[`/Y
M!`8$$P0@!"T$.P1(!%4$8P1Q!'X$C`2:!*@$M@3$!-,$X03P!/X%#044%]@8&!A8&)P8W!D@&609J!GL&C`:=
M!J\&P`;1!N,&]0<'!QD'*P<]!T\'80=T!X8'F0>L![\'T@?E!_@("P@?"#((
M1@A:"&X(@@B6"*H(O@C2".<(^PD0"24).@E/"60)>0F/":0)N@G/">4)^PH1
M"B<*/0I4"FH*@0J8"JX*Q0K<"O,+"PLB"SD+40MI"X`+F`NP"\@+X0OY#!(,
M*@Q##%P,=0R.#*<,P`S9#/,-#0TF#4`-6@UT#8X-J0W##=X-^`X3#BX.20YD
M#G\.FPZV#M(.[@\)#R4/00]>#WH/E@^S#\\/[!`)$"800Q!A$'X0FQ"Y$-<0
M]1$3$3$13Q%M$8P1JA')$>@2!Q(F$D429!*$$J,2PQ+C$P,3(Q-#$V,3@Q.D
M$\43Y10&%"<4211J%(L4K13.%/`5$A4T%585>!6;%;T5X!8#%B86219L%H\6
MLA;6%OH7'1=!%V47B1>N%](7]Q@;&$`891B*&*\8U1CZ&2`911EK&9$9MQG=
M&@0:*AI1&G<:GAK%&NP;%!L[&V,;BANR&]H<`APJ'%(<>QRC',P<]1T>'4<=
M:AZ4'KX>Z1\3'SX?:1^4'[\?ZB`5($$@;""8(,0@\"$<
M(4@A=2&A( &YXS'DJ>8EYYWI&>J5[!'MC>\)\
M(7R!?.%]07VA?@%^8G["?R-_A'_E@$>`J($*@6N!S8(P@I*"](-7@[J$'82`
MA..%1X6KA@Z& .@9B*>???]Z3Z=>Z![+_P`Y3^6'A-8K/F-U9.T9(*8E=T9YB1_9083;N0UG_6OS[WI;
MTZ]T#.Y_Y^?\M7`R+%A^TM];_=F"K_<;J#L.N1F/T"R9K!X&-KG@$$@GZ'W[
M0W7NFV'^>7T'G(U?87Q=^>O80E_X#2[;^-=>:2IO^EHJJMW)3*R$\7`)']/?
MM!]1U[KD_P#-P[=S`8[#_E3_`,P3G7NN>X_P">#_*_V_B9LI!\H\#NF=(W
M>GP>S]G]AY[/5KH+^"GH(-IQK'(][*9WAC)_M>_:6].O=!7!_.OVGOR%)/CM
M\'/GAWTM0NJ@R6"Z2DV_MNO5N(Y8,W792M*TK/P96@51_C]/?M/S'7NF.C^:
M7\XWM.M6#JS^5_L[JO'5+.(`
M#]?>Z*.+=>Z]+TO_`#Y^TJB2;='RV^)GQVP]=.#)A^K.M*W?.7QE)(0)(::M
MWAMFJ:2:%+Z&_B5R?JP]^JGH>O=.F2_E-][=@4,U-\B/YK?S)WUAZM+YC!['
MK\!T[MVH0D-+']EBYLW3K`+6&M6`'-O?M0\E'6NN6!_DV?RH]H.E7O[%3]KY
M:((U3E>Y>_MU;@K:VI3]=36T=#NC!8Z::1^2GVPC!_2@^GOU7/`=>QZ]&4V%
MT3_*VZ-J(JK874/QGVYD:4%8,G1;&P>XLU!QZC3Y>LQN:RD;/^664%OR3[WI
MD/D>O57UZ,"ORFZ*PBPXK;397)P(H2GH]H[/KUIA8<1T\#TV.CN/Z*MO?O"?
MSQUK4.L_^S+/7#_?O=+]R9J_Z&.U?L8W_H=;U,X13_M0'OWATXN.O:OD>H#]
MS=[Y%BN"^..7I5/^;DW#N2CHR1^#)$U-2^,_X:C_`*_O>A/.3KU6].I*YWY;
M9>$^#9'5VU/(/2^5S=?E*J&_]HICJNHIR1_B#_K>]4B'F3U[N].HW]S_`):Y
M$`5O:^P,(C?J7#[:%8Z@_4*U;B8VN!_M?^Q]^K%_">O48^?4Y>E.WJH"7)?)
M+>"U%KZ,5M[%4%*K_G]L53&1!_0V_P!A[]K7_?8Z]0^O7&3J'O6C6^*^1V4J
M''T3,[.Q,Z_X7D6IE)_Q]'OVM/\`??7J'^+J(-E_+.D'['<&Q,B!]!D-J14Y
M:WTN:;#R$7_US[]6/^$]>[O7K+#3_,#&L3)D.GMPJ#PDL.9HM0M]-4%/0D>_
M?I'U'7N[KE/NOY94`O)U;UQF0/\`G5;HFI6(_P""Y*OBM_O/OU(OXCU[N].H
MO^EKY%T9_P`O^.YJ;?J_A>[:*2Y_.FRU5Q[WIC_CZ]5OX>ID/?G8L"_[F/C?
MV53D?J;%24V73_86I:5C_O/O6A?*0=>J?X>LW^S,0TW_`!=NG.Z,;;AB=G^<
M(?\`$_>0FW^L#[]X?HPZ]J^76"3Y==8TA"Y7$=A85B;%LNMMF[`R.[\_O\`KMJ8.EP]5O/=$S5&X=QR
MT^O5D\O,\U2\E9/J]1,CDV^I]Y,\H[%/RQRULW+]SN\]_/:0"-KB8DRRD5[W
M+,Y+&OFS'U)ZPN]P.:;;G?G3F3FVSY=M-IM;^Z:9;.U`6WMPU/THE"J`BTP`
MH^SH,^Z=M?'W,;NZZ3N'<&+Q.;SV0J=O;=VWE=YU>`Q/944.-R^1;:&Z-M+D
M:7$[XV_32L]:E%7PS4_WL40L681R"05S3H'&GGTX978_2^^\QVIMR@W13_Z1
MMX[4RVT=Y9+;F_GJ^S=J;:R4-/15V/V]+/E,IE.O'4/#,(*&&DI5K?'.8S
M/I?W[(IZ=;Z@U?7'QWE[&S
F.\UZS?W3EMAPE+]L)6DP4T.U&1JW;MCL2-[[.,8=;>4UIUDTE'#E_W5)C
M2V,@BW?G(Z?OE2$<8 W3M5;#KILSLU(VEL9Y8K*]@K'NIG*2]AF=(L=AV=
M>;"M-(5DLZ41;-W;YPBU;=BJ#>_2^KH;26H=8Z>KKET^A-84.JT2,?OO_?9!
MK5X5G#DD790.H4CI_P!T%90I1Y"'.(%X%``SR]74%F8`P!@#`&`,`8`P!@#`
M&`,`8`P!@#`&`,`8`P!@#`&`,`8`P!@#`&`,`8`P!@#`&`,`8`P!@#`&`,`8
M`P!@#`&`,`8`P!@&A[O;/7@FZ ?66M
M8[7&M=O61J=A;Y2?FMU1G69LZY]/&S%:KJ5N_6H.O.I&Y*UG9L/M:
<$JJ5'1KEYWY7HF?-TPT)NF@I"REM@I1J7_EY=A+I%=@J'$2JJ_\`)E+Q
MYAXCV79#^P!#R9GW.V/3L;H__P!?NK*_1B7$Q6&BKY&JN=+=GX6Y2R.V_7UFPD^::LY=8+QDN>^HZ_2
ME6UOO1]^Y^A&Y*LO/^@CP7Q/XEHO'@:FYL/T\*#^8Z8[@8UG2MR5A*,==*_O
MY_E.D5\+U:X<5K%M/:.N6'>D>JWKV=W)V<%$'6H.FD5IIDNLD8G_`):\D8-@
M6KI+D#@422C-NIS=]0Y.'>`?.=RA(XZK8#F`HJM478<3!P`67(Y==&O32DH1$J`%C--4.%0$A3J*`8[6&Aᐿ*#Q4,05!*``(\"E`'-
M+S%$8)_\,7X>\DV.T<='NADTE!(8QV%#BHIR`D,!R\CV+39O$P$0\H%4`#!Y
M!X@(AD\TO,41S6OAC_#ZJ4D25B.D'12KQ+RI^GJ-&VQJF8`,!5"1UJ+,QY52
M<_$IP2YRF`#`("4!!S2\Q1&W]3H=&H3$L71:95*7&%321+'5.NQ%<8E10+RH
M)%:0[-FW!-$OD(7EX%#Y,\DDKP!@#`&`,`8`P!@#`&`,`8`P!@#`&`,`8`P!
M@#`&`,`8`P!@%-W/ITZ?-C=K_<+1.F[YV_-V_MGK"DVCMN;_`#=KZ<@WW: